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jasper-xian

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tevatron_fiqa_qrel_test

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[ { "docid": "129364", "title": "", "text": "\"So my read on the question is \"\"How do I invest 300k such that it earns me a 'living wage' without the ongoing grind inherent in most formal employment?\"\" Reading the other answers to date it looks like most of them are thinking in terms of investment accounts and trying to live off of the earnings from such. I wanted to throw out a couple of alternative choices that may be worth considering... The first is real-estate investing. $300k should allow you to pick up 2 or 3 single family dwellings with little or no mortgage. Turning them into rentals placed with a good property management company should easily pay their expenses and provide a consistent income with minimal effort/attention from you. Similar story with buying into multifamily housing or commercial real-estate. Your key concern here is picking the right market in which to buy and finding a reputable manager to handle the day to day issues on your behalf. Note that you are not overly concerned with the potential resale value of the property(s), but the probable rental income they can generate, these are separate concerns that may not align with each other. Second is buying/founding a business that has a general manager other than yourself. Franchise ownership may be a potential option for you under the circumstances. The key concern here is picking the business, location, and manager that make you comfortable in terms of the risk involved. You need the place to make enough money to pay for itself and the salary of everyone working there, with enough left over for you to live on. Sounds easy enough, but not so much in practice. Generally you can expect at least a few years of being hands on and watching things very closely to make sure it is going the way you want it to. Finding a mentor who has done this type of transition before to walk you through it would be strongly advised. So would preparing yourself for a failure or two before you work out the exact combination of factors that work for you.\"" } ]

[ { "docid": "268914", "title": "", "text": "> The racial angle at the end cheapens your argument, though. Thanks for pointing that out. Removed race and replaced with 'low income families' > The principles behind creating and keeping those entities are reasonable, civilized, and economically sound I disagree 100%. If banks did not have a big brother to bail them out of loans that went bust whenever they wanted, they would be a lot more careful in who they loaned money too. No one is promised a house and a lawn in this life. Some of us will be renters in apartments for life, and there is nothing wrong with that." }, { "docid": "441523", "title": "", "text": "I think you're being inexact with your comment about healthcare. Japanese healthcare outcomes are - by and large - not due to medical services or quality of clinical environments/hospitals. For example, Japanese who live in Japan have a lower incidence of cardiovascular diseases (especially those related to life style and diet) than Japanese who move to the USA, or Americans generally. There are other areas - lung cancer, for example - where outcomes are better as well despite more Japanese who smoke (though relative amount of smoking per smoker may differ - I'm not sure how much). The point is, Japanese health outcomes are largely better than US outcomes due to healthier lifestyles. I would go so far as to say it is the primary cause of comparatively better health outcomes." }, { "docid": "350154", "title": "", "text": "\"This is the best tl;dr I could make, [original](https://www.bloomberg.com/news/articles/2017-08-29/is-the-midlife-crisis-real-economists-and-psychologists-can-t-agree) reduced by 90%. (I'm a bot) ***** > "I've been doing research for pretty much my whole career on adult development, and I've never found age linked definitively to anything psychological about a person. You can call it a midlife crisis. A quarter-life crisis. But whatever's going on with you personally, you can't blame it on age.\"\" > The National Institute of Aging finds that only a third of Americans over age 50 claim to have experienced a mid-life crisis. > "People do go through periods of self-evaluation, but it's not tied to age. If someone close to you dies and you start to think about how life is limited, is that a mid-life crisis? Or is it just a healthy reevaluation of your priorities?". ***** [**Extended Summary**](http://np.reddit.com/r/autotldr/comments/6xqxt7/is_the_midlife_crisis_real_economists_and/) | [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ \"\"Version 1.65, ~203281 tl;drs so far.\"\") | [Feedback](http://np.reddit.com/message/compose?to=%23autotldr \"\"PM's and comments are monitored, constructive feedback is welcome.\"\") | *Top* *keywords*: **age**^#1 **people**^#2 **Oswald**^#3 **crisis**^#4 **Blanchflower**^#5\"" }, { "docid": "570004", "title": "", "text": "So you dislike Unions? Why were unions necessary in the first place? Is that problem resolved, or will it crop up again if they go away? My belief is that Unions (or rather, the problems they solved) are still necessary. But their methods need oversight just as much as businesses need to be held accountable for how they treat their employees. Government paying their employees well shouldn’t be an issue. We should be paying all employees well. But we are on a race to the bottom, when it comes to employee wages. When we can outsource our work to other countries (by building American businesses their), and get rewarded for it, we have broadened the field our own employees have to compete against. When those businesses pay pennies on the dollar that they have to pay here, our employees CAN’T compete." }, { "docid": "343349", "title": "", "text": "You ever think it's Americans and not the workers? Hard to give up your 1gb speed to go to 2mb and no signal on your phone in bumpkinville for $5 over min wage breaking your back outside. To top it off not many people have the money to uproot their life and move out to the country for shit wages." }, { "docid": "345601", "title": "", "text": "Its not Israel the country that has existed since 1200BC, its the rat plague of Jews that has plagued humanity since the dawn of money and shiny things, and the Jews have spent most of their existence being chased around the world because they killed Jesus and are habitually a parasite on which ever society they infest with their greed, avarice and corruption, since ancient Egypt to modern America. As history repeats itself once more and Jews have tried to take control of American society and destroy its values so they can suck the American people dry of every coin, with bank fraud and scams and schemes and interest, all the while spewing poison and hatred against other nations and people and dragging America and its sons into fake wars while you grow fat like a tick at its throat. This time no one is coming to help and no one will listen to your cries for help. You are the criminally insane that the world regrets saving and will not miss when you are gone, as mankind progresses in peace, serenity and harmony in your absence." }, { "docid": "480213", "title": "", "text": "Sigh... this is what irritates me about democrats. They say that they are scared that African Americans are not going to have good enough access to healthier foods and they want to impede on the market. African Americans have just the same opportunities as any other race, so why is that an issue? So then they go further saying that a higher percentage of minorities are at the lower income range. My answer is free market competition. The more competition, the higher output of innovation and value the market produces. This lowers prices while increasing value. Not trying to get too political, but I really think we should keep the chains off of business and let them innovate" }, { "docid": "461803", "title": "", "text": "I think living in a city where you can't take care of yourself. Has led many people to become unable of ever taking care of themselves. I personally would be happy with a few acres of land a house and some solar. But what makes me happy doesn't make other's happy. So I wont even try to force my opinion of what is good in life on them. The only thing stopping me from living my dream and being left alone is you and your taxes. Which no matter how self sufficient I am and how little I need or want the rest of society. I will always be a slave to paying those taxes so your life can be easier and my life can be harder. Take from those who want to share your dream and leave the rest of us alone. You don't think about that, though, do you? Edit...[What do you want?](http://www.youtube.com/watch?v=fGHfaYY_1jk)" }, { "docid": "475736", "title": "", "text": "> 73% of Americans were in the ‘top 20%’ for at least a year Well, sure. [The top 20% currently begins at $92,000](https://en.wikipedia.org/wiki/Income_in_the_United_States). All an American needs to do to qualify for that 73% is sell their house with ~50% equity at some point in their life since the IRS considers that income. Great logic of this article: liquidate your primary investment and \\*poof\\* you're wealthy. Even [the authors of the study cited in this article say](http://news.cornell.edu/stories/2015/01/hirschl-research-finds-many-join-1-percent-few-stay-long): *“It would be misguided to presume that top-level income attainment is solely a function of hard work, diligence and equality of opportunity,” they write. “A more nuanced interpretation includes the proposition that access to top-level income is influenced by historic patterns of race and class inequality.”*" }, { "docid": "599558", "title": "", "text": "I don't get it. Are most redditors in this thread the children of rich people? Did you all grow up with central air? You're first place to live outside of your parents' place is probably gonna suck. That's life." }, { "docid": "239368", "title": "", "text": "\"This is the best tl;dr I could make, [original](https://www.vox.com/policy-and-politics/2017/8/10/16118620/how-much-is-pain-worth) reduced by 85%. (I'm a bot) ***** > The researchers, using a massive government survey of Americans over age 50, estimated in a new working paper published by the National Bureau of Economic Research that living with chronic pain makes people so unhappy that they'd need to earn between $20,000 and $50,000 per year more to be as happy as they would be otherwise with no pain. > The economists who did this study say it's important so that policymakers can decide how much money they should assign to pain treatment versus other spending priorities. > That's actually lower than values determined in previous research - a 2014 study of Australian data found people in pain would need $645 per day, or more than $235,000 per year, to make up the lost life satisfaction. ***** [**Extended Summary**](http://np.reddit.com/r/autotldr/comments/6stes2/how_much_is_living_a_painfree_life_worth/) | [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ \"\"Version 1.65, ~187749 tl;drs so far.\"\") | [Feedback](http://np.reddit.com/message/compose?to=%23autotldr \"\"PM's and comments are monitored, constructive feedback is welcome.\"\") | *Top* *keywords*: **pain**^#1 **people**^#2 **research**^#3 **chronic**^#4 **opioid**^#5\"" }, { "docid": "17488", "title": "", "text": "Absolutely. The overhead for a product based business like that is particularly high. Service based businesses tend to have much better profit margins. But if she was running a plant nursery she has to pay huge heating costs, renting the area she operates in, not to mention inventory and employees. That $300k vanishes pretty fast. This article talking about disappearing middle class is a bad argument. This sounds much more about how the recession hurts a small business. Assuming of course it is the recession. I know a coffee shop near me that isn't doing that great and says the economy is hurting them bad. They apparently don't realize that being blatantly rude to their customers drives them away. There are often other sides to the story besides the economy, whether the fault of the business owner or some other factor outside their control that may not be covered in these kinds of posts." }, { "docid": "198394", "title": "", "text": "\"I find this very hard to believe Believe it. The bottom quarter of American households have negative net worth, and the bottom three quarters have no more than a tiny amount saved up. https://en.wikipedia.org/wiki/Wealth_in_the_United_States#/media/File:MeanNetWorth2007.png In an emergency, 63% of Americans would not be able to come up with $500 without going into debt. http://www.forbes.com/sites/maggiemcgrath/2016/01/06/63-of-americans-dont-have-enough-savings-to-cover-a-500-emergency/ Nobody can retire with 5k in the U.S. The money will be gone within a year. Is it possible? Now you begin to see why the long-term stability of Social Security and Medicare are at present hot topics in American political life. Without them, a great many more Americans would die in poverty. What is the actual figure? The $5000 figure is accurate but irrelevant; that median includes people who are thirty years from retirement and people who are two days from retirement. The more relevant statistics are those restricted to people at or close to retirement age, and they can be found lower down in the article you cite, or in numerous other studies. Here's one from the GAO for example: http://www.gao.gov/products/GAO-15-419 The figures here are, unfortunately, no less terrifying: Now $104K is a lot better than $5K, but it's still not much to retire on. Why we believe that it is reasonable to throw out all the zeros before taking the median, I do not know. That seems like bad math to me. UPDATE: There is some discussion of this point in the comments; all I'm saying here is that this is a clumsy and possibly misleading way to characterize the situation. The linked report has the actual data, but let's try to summarize it here in a more meaningful way. Let's suppose that we make buckets for how dependent on SS is a retirement-age household to avoid starving to death, being homeless, and so on? Maybe these buckets are not ideal, and we could move them around a bit. The takeaways here are that the ratios of nothing:inadequate:barely adequate:comfortable is about 40:30:20:10. That only the top decile of retirement-age households can fund a comfortable retirement without help illustrates just how dependent on SS American households are. how do 50% of old Americans survive in their old age? Social Security and Medicare. As the cited GAO report indicates: \"\"Social Security provides most of the income for about half of households age 65 and older.\"\" Do most old Americans rely on their children for financial support? One day I met a woman at a party and we were making small talk about her kids. She had a couple already and one more was on the way. \"\"I want to have lots of children to support me in my old age\"\", she said. \"\"Do you support your parents?\"\" I asked, which frankly seemed like an entirely reasonable question. \"\"Of course not! I can't afford it. I've got a baby on the way and two more kids at home!\"\" I left her to draw her own conclusions as to the viability of her retirement plan.\"" }, { "docid": "192894", "title": "", "text": "This isn't new. In the mid 80s rules were established by the IRS to differentiate life insurance from Modified Endowment Contracts, placing upper limits on how much money could be placed in life insurance accounts relative to the coverage provided and how quickly (fastest a policy can become paid-in-full is 7 years). None of this closes the fundamental loophole, but it exists for a reason, taxation of life insurance is probably unwise and would result in less people using life insurance as a risk mitigation technique, despite the fact that it's very appropriate for that in some situations. The problem here is that once you get out of everyday-people numbers and into very large sums the vehicle can be clearly abused to avoid taxes on investment gains while living, and possibly avoid them altogether depending on how the estate is structured, and this is bad for the average person who'd like the megarich to pay their percent towards the public needs the same way the average guy does." }, { "docid": "20323", "title": "", "text": "If you invest in a 401(k), the shares in that plan are yours for as long as you live, or until you pull them out. So, if the employer is offering any sort of matching and those matched funds remain yours after you leave, then definitely contribute; that's an immediate return on your money. If the employer is NOT matching funds, then usually it is better to contribute to an IRA instead; you get the same income tax benefits from the deduction, without the headaches of going through your company (or the company from 3 jobs ago or whoever bought them) to get to your money. If I were in your position, the most I personally would do after I quit the company (which I'm assuming you'd be doing if you were going back to your country of origin) would be to have the 401k shares rolled over into a traditional IRA; that way I'd have more control over it from outside the country. Just keep the bank holding your IRA apprised of your movements around the world and how they can get ahold of you (it may be wise to grant a limited power of attorney to someone who will be staying in the U.S. if you don't want the bank mailing your statements all around the world), and the money can stay in an American account while you do whatever you have to outside it. As long as you don't take the money out in cash before you're 59 1/2 years old, you don't need to pay taxes or penalties on it. If you were to need it to cover unexpected expenses (perhaps relating to the aforementioned family emergency), then that decision can be made at that time. If you think that's even remotely likely, you may consider a Roth IRA. With a Roth, you pay the income taxes on your contributions, but the money is then yours; you can withdraw anything up to the total amount of your contributions without any additional taxes or penalties, and once you hit 59 and a half the interest also becomes available, also tax- and penalty- free. So if you had to leave the country and take a lot of cash with you, you could get out everything you actually put into a Roth with only minor if any transaction fees, and the interest will still be there compounding." }, { "docid": "93323", "title": "", "text": "One overarching thing to keep in mind is that wherever you go with Finance if you work hard enough and climb the ladder, you can make decent money. I know CIO's, Market Stragesits and even CFO's, Portfolio Managers and CPA's that all live extremely comfortably, and all of them work outside of the IB industry, basically, IB isn't the end-all for making large sums of money. The main reason why it pays so much upfront is that of the hours you have to work if you look at their salary at an hourly rate, it's around 10-12 bucks an hour. Definitely think about the Double major thing though, or potentially just doing a minor. It would definitely look good on a resume, especially if it's something you also enjoy, but you've gotta keep that GPA high, and getting a 4.0 in CS is quite a challenge, to begin with. Pretty much any of the Series certifications can help you depending on where you want to go career-wise, obviously for some positions have certain series certifications won't be useful at all. It's also worth looking into the CFA program if you plan on doing Financial Analysis, but you'll need a sponsor for this, just like the Series certifications. Happy to help man, if you've got any other questions feel free to reach out. I'm in the same boat just trying to figure out what I want to do with my life to make decent money so I can take care of my friends and family, and live life to the fullest." }, { "docid": "259227", "title": "", "text": "\"To summarize your starting situation: You want to: Possible paths: No small business Get a job. Invest the 300K in safe liquid investments then move the maximum amount each year into your retirement accounts. Depending on which company you work for that could include 401K (Regular or Roth), deductible IRA, Roth IRA. The amount of money you can transfer is a function of the options they give you, how much they match, and the amount of income you earn. For the 401K you will invest from your paycheck, but pull an equal amount from the remainder of the 300K. If you are married you can use the same procedure for your spouse's account. You current income funds any vacations or splurges, because you will not need to put additional funds into your retirement plan. By your late 30's the 300K will now be fully invested in retirement account. Unfortunately you can't touch much of it without paying penalties until you are closer to age 60. Each year before semi-retirement, you will have to invest some of your salary into non-retirement accounts to cushion you between age 40 and age 60. Invest/start a business: Take a chunk of the 300K, and decide that in X years you will use it to start a small business. This chunk of money must be liquid and invested safely so that you can use it when you want to. You also don't want to invest it in investments that have a risk of loss. Take the remaining funds and invest it as described in the no small business section. You will completely convert funds to retirement funds earlier because of a smaller starting amount. Hopefully the small business creates enough income to allow you to continue to fund retirement or semi-retirement. But it might not. Comment regarding 5 year \"\"rules\"\": Roth IRA: you have to remain invested in the Roth IRA for 5 years otherwise your withdrawal is penalized. Investing in stocks: If your time horizon is short, then stocks are too volatile. If it drops just before you need the money, it might not recover in time. Final Advice: Get a financial adviser that will lay out a complete plan for a fixed fee. They will discuss investment options, types not particular funds. They will also explain the tax implications of investing in various retirement accounts, and how that will impact your semi-retirement plans. Review the plan every few years as tax laws change.\"" }, { "docid": "336140", "title": "", "text": "It's important to note that the US is also the country that taxes its expats when they live abroad, and forces foreign banks to disclose assets of US citizens. Americans are literally the property of their government. America is a tax farm and its citizens can't leave the farm. Wherever you go, you are owned. And that now appears to be true of your Bitcoin as well. Even if you spend 50 years outside the USA, your masters want a piece of what you earn. Land of the Free." }, { "docid": "235708", "title": "", "text": "\"Yeah the biggest problem with this is that it far more heavily taxes the poor than the rich. Poor people spend *all of their income.* Month-to-month, living paycheck-to-paycheck, poor people have no choice but to spend their entire incomes on basic necessities, utilities, etc. Rich people on the other hand spend very little of their incomes. Most of it gets stashed in hedgefunds and overseas holdings and doesn't really \"\"change hands\"\" in a way that allows it to be taxed under this style of tax structure. So your tax continuously hits 100% of the wealth of the bottom 75%(ish) of households while largely bypassing the rich folks who have more money than they can *spend*. In short, this kind of tax structure is really bad for anyone who doesn't make $300k+ a year and store most of their wealth in stocks and so forth. If you want to help the general public (households making less than $300k/year), you need to generate more tax revenue from *investments* and *capital gains*. A 2% tax, say, on stock trades valued over $10,000 obviously wouldn't hurt poor people at all, and also wouldn't really hurt the rich. Cuz if you've got 10 grand (or a hundred, or thousand, or whatever) to stash in shares of Amazon or whatever, you're really not gonna miss the $200 that comes off the top of your trade. But this *would* generate huge tax revenue, as there are thousands of such transfers a day.\"" } ]

[ { "docid": "183869", "title": "", "text": "\"The title of your question is quite different then the content. The term \"\"Rat Race\"\" was coined in the 70's and refers to the endless cycle of working hard to consume more. Fortunately it is very easy not to participate in the cycle and probably will lead to more happiness. Just because one \"\"works\"\" does not mean they are participating in the \"\"rat race\"\", and I would recommend the following: When I think of \"\"rat race\"\" I picture a a bumper-to-bumper freeway of people struggling to get to work. For others it might be different, but that kind of rat race is easily avoided by the multitude of remote work opportunities. Some jobs allow you to work anywhere in the world. Avoiding the rugged consumerism also helps avoid the feelings of being a rat on the wheel. Sure one can like nice things, but do we have to have everything that Madison Ave is trying to sell us? No. Pick some nice things and pay cash. Debt, especially consumer debt, causes a person (in effect) to work for a bank. Avoiding debt will remove those feelings. Saving and investing also helps avoid those feelings. There is profound satisfaction in watching ones account balances grow. Once you see that your investment earnings can outpace your expenses, and then your salary you really feel like you are getting ahead. Above all else giving is a paramount and often overlooked part of a person's financial life. It causes one to be humble and recognize that most people, in this world, are less fortunate that us. It avoids runaway provide that justifies purchases that we cannot afford. So yea you can avoid the \"\"Rat Race\"\" and still work.\"" } ]

[ { "docid": "93323", "title": "", "text": "One overarching thing to keep in mind is that wherever you go with Finance if you work hard enough and climb the ladder, you can make decent money. I know CIO's, Market Stragesits and even CFO's, Portfolio Managers and CPA's that all live extremely comfortably, and all of them work outside of the IB industry, basically, IB isn't the end-all for making large sums of money. The main reason why it pays so much upfront is that of the hours you have to work if you look at their salary at an hourly rate, it's around 10-12 bucks an hour. Definitely think about the Double major thing though, or potentially just doing a minor. It would definitely look good on a resume, especially if it's something you also enjoy, but you've gotta keep that GPA high, and getting a 4.0 in CS is quite a challenge, to begin with. Pretty much any of the Series certifications can help you depending on where you want to go career-wise, obviously for some positions have certain series certifications won't be useful at all. It's also worth looking into the CFA program if you plan on doing Financial Analysis, but you'll need a sponsor for this, just like the Series certifications. Happy to help man, if you've got any other questions feel free to reach out. I'm in the same boat just trying to figure out what I want to do with my life to make decent money so I can take care of my friends and family, and live life to the fullest." }, { "docid": "461382", "title": "", "text": "By numbers I assume you mean monetary amounts... the article doesn't define the separation that way... >In one of these countries live members of what Temin calls the “FTE sector” (named for finance, technology, and electronics, the industries which largely support its growth). These are the 20 percent of Americans who enjoy college educations, have good jobs, and sleep soundly knowing that they have not only enough money to meet life’s challenges, but also social networks to bolster their success." }, { "docid": "589863", "title": "", "text": "\"Don't go bashing white Christian American's too hard, bub. They're the only reason you life a free life (if you live in the USA), see WW1, WW2. I don't just take my news from Fox. In fact, lately, they seem to be getting taken over by CNN fucking crazy commies. But I take in the news from over a dozen sites and do my own cross checking/thinking. If you're a Bernie guy, although it's a whole lot better than an obama guy, you're still a moron, relatively speaking. And sticking your head in the sand about the muslim invasion is just going to get it cut off by them. Hey, check it out, more from your buddies just in from jolly ol' London, mate! \"\"Nursery worker is left with broken ribs and needing stitches after she was punched and kicked to the ground and slashed with a Stanley knife by three girls shouting 'Allah will get you'\"\"\"" }, { "docid": "259227", "title": "", "text": "\"To summarize your starting situation: You want to: Possible paths: No small business Get a job. Invest the 300K in safe liquid investments then move the maximum amount each year into your retirement accounts. Depending on which company you work for that could include 401K (Regular or Roth), deductible IRA, Roth IRA. The amount of money you can transfer is a function of the options they give you, how much they match, and the amount of income you earn. For the 401K you will invest from your paycheck, but pull an equal amount from the remainder of the 300K. If you are married you can use the same procedure for your spouse's account. You current income funds any vacations or splurges, because you will not need to put additional funds into your retirement plan. By your late 30's the 300K will now be fully invested in retirement account. Unfortunately you can't touch much of it without paying penalties until you are closer to age 60. Each year before semi-retirement, you will have to invest some of your salary into non-retirement accounts to cushion you between age 40 and age 60. Invest/start a business: Take a chunk of the 300K, and decide that in X years you will use it to start a small business. This chunk of money must be liquid and invested safely so that you can use it when you want to. You also don't want to invest it in investments that have a risk of loss. Take the remaining funds and invest it as described in the no small business section. You will completely convert funds to retirement funds earlier because of a smaller starting amount. Hopefully the small business creates enough income to allow you to continue to fund retirement or semi-retirement. But it might not. Comment regarding 5 year \"\"rules\"\": Roth IRA: you have to remain invested in the Roth IRA for 5 years otherwise your withdrawal is penalized. Investing in stocks: If your time horizon is short, then stocks are too volatile. If it drops just before you need the money, it might not recover in time. Final Advice: Get a financial adviser that will lay out a complete plan for a fixed fee. They will discuss investment options, types not particular funds. They will also explain the tax implications of investing in various retirement accounts, and how that will impact your semi-retirement plans. Review the plan every few years as tax laws change.\"" }, { "docid": "467833", "title": "", "text": "> outside of Germany, you have abysmal unemployment rates Europe has a higher unemployment rate, but that's OK - they have a strong social safety net. Unemployed people still get excellent free healthcare, unemployment benefits, university is still free. Europe does not optimize for full employment. > The US unemployment rate during the Great Recession peaked at 10% [Factually incorrect. 25%](https://en.wikipedia.org/wiki/Great_Depression) > You can have labor that is controlled like you mention and high unemployment or lower controls and less unemployment. Is it better to have high unemployment but workers that are better off or lower unemployment and workers that aren't as well off? Life is better in Europe. You know The State has got your back. You cannot lose your pension because your company went bankrupt (the pension funds are independent of the employer), healthcare is great and free at point of consumption, your kids will go to the best collage they can get into, because all collages are free. > The Euro zone is forgetting how to be competitive. We live in an economy where price matters. The price of labor determines the prices of goods and services. And supply and demand of products and services are determined by prices. Its a cold hard truth. You are optimizing for the wrong target. If you push price of labor down, you push standards of living down. That's not good. That's missing the point of having a State and an economy. We build our society to make out life better, not to generate shareholder value." }, { "docid": "118667", "title": "", "text": "\"> Outside of money, the biggest thing I think we will leave to our kids is what we have learned... I would argue even money is less important, but continue. > ...you are acting like a totally responsible young adult according to societal norms and people who are supposed to give you advice, and you are totally fucking yourself. Totally agree. FYI, your example seems fitting for someone born into a middle class home and their choices are bad but not destructive. If it were someone from a poor household then the 25 year old doesn't know about the American Heart Association, doesn't know about credit to get a card or house, invests nothing, often gets payday loans, gets a car from a used car auto-lender, drinks and watches a lot of TV, has probably been involved in a pregnancy, and plays the lottery in the hopes of a better life. > Is that your fault? I would say, \"\"no\"\". Society has effectively set you up to fail. > What if you've concluded generational wealth is simply luck... > You may dismiss your opportunity as bullshit, and remained trapped in the standard American day to day wage/debt slavery. You almost certainly will dismiss the opportunity. Even if you can realize the AHA, financial advisor, or payday loan guy gave you bad advice, there are better looking opportunities. Put away money for a rainy day? Fuck that! If I listen to the auto-loan guy I get a car *today*. I'm not sure I understand where your contention was. Are you thinking that people shouldn't be cynical of the system and be able to recognize an opportunity to better their life? I'm heading out for the evening. I'll look for your replay later tonight and maybe respond. Thanks for the thoughtful discussion.\"" }, { "docid": "192894", "title": "", "text": "This isn't new. In the mid 80s rules were established by the IRS to differentiate life insurance from Modified Endowment Contracts, placing upper limits on how much money could be placed in life insurance accounts relative to the coverage provided and how quickly (fastest a policy can become paid-in-full is 7 years). None of this closes the fundamental loophole, but it exists for a reason, taxation of life insurance is probably unwise and would result in less people using life insurance as a risk mitigation technique, despite the fact that it's very appropriate for that in some situations. The problem here is that once you get out of everyday-people numbers and into very large sums the vehicle can be clearly abused to avoid taxes on investment gains while living, and possibly avoid them altogether depending on how the estate is structured, and this is bad for the average person who'd like the megarich to pay their percent towards the public needs the same way the average guy does." }, { "docid": "260255", "title": "", "text": "\"While I agree with the overarching narrative regarding the car industry, self driving cars, and how people will use transportation in the future, I deeply disagree with his timeframe and reject that his clearly large city centric thinking will effect all parts of the country and all parts of the world. There is no way this happens as quickly as he says it will for the following reasons: On his claim that electric cars will be all anyone will buy: 1. We lack the road or electrical grid infrastructure to support tens of millions of electric vehicles throughout the US, this will take far more than just 5-10 years, especially in the more rural parts of the country. 2. We lack the production capacity to create the batteries for 17 million of yearly sales of automobiles for the few years between 2021-2025 when everyone is presumably just buying only electric self driving cars. 3. The used market for combustion engine cars will \"\"tank\"\" so strongly that it will actually create demand for people to buy combustion cars, as the costs will now outweigh the savings of buying a new car with lower running costs, thus pushing his timeline out into the future by several years. 4. Cars, even electric cars, are much more complicated, durable, expensive, and prone to damage and accidents than most software and disposable consumer electronics he cites in his examples. Of course Nokia went from 50% of the market to 5% over one product cycle! People completely replaced their phones every 2-3 years back then! Wireless carriers built a system where even if your phone worked, you had little to no reason not to lock in another contract and get the next best phone. Of course people would dump their Nokia bricks for an iPhone, it was the next best thing. Cars have a much longer life cycle, and inefficient older models will be around for decades in some cases because they will be a sunk cost for those who bought them. On his claim that no one will own a car anymore and everyone will ride share: 1. How does one decide to take a road trip somewhere? What about people who travel for a living or as an integral part of doing their job? 2. I personally think a ride sharing transportation network represents a limiting of freedom. (Though I can see why people might make the opposite point) People identify with owning their own cars, keeping their own belongings in them, having them for use whenever they so need or desire. People who don't live in dense urban cores (I.e, a huge group of Americans, and especially a huge group of Americans who are older, have money, and are set in their ways.) aren't going to see this as nearly as attractive as someone who lives in New York or San Fransisco might, and those people hardly buy cars anyway. 3. People are fucking stubborn. It's going to take a lot for people to decide to change up such an integral part of their daily lives. This will not happen over a 3-4 year cycle. 4. Where is the infrastructure to park, charge, and perform maintenance on all these autonomous vehicles? We will need more cars available during rush hour than at 3pm or 3am for that matter. Where do the cars go then? 5. This simply won't work quickly in countries outside the very top of the first world. They won't have the infrastructure or capital to invest to bring it up to speed fast enough to derail oil demand as quickly as he claims. 5. This theory implies a central government that is in complete control to implement rules in support of autonomous cars. I believe most of this will be done at the state and municipality level at first, with some cities hopping on board and others banning the practice. 6. This theory also implies that the technology will be flawless. The first completely computer aided pedestrian disaster or multi car pile up will undoubtedly cause massive backlash (regardless of the statistics showing general reduction in accidents) and might clog this entire concept up in bureaucracy for decades as the government forces stricter and stricter safety and quality requirements on the software. I'm not saying his view isn't the long run eventually for mobility in the US and the world in general, but applying personal electronic technology cycle rules to large scale durable goods that work in real space instead of cyber space, represents a whole different set of challenges and could easily take 25-50 years to really pull off. Over that time, oil markets will right size themselves, and the automotive manufacturers will consolidate and cater their product lineups to meet demand/service the fleet. TL:DR - this will take much longer to accomplish than he surmises. Infrastructure takes time to build, cars are a different technology than consumer electronics, people are stubborn.\"" }, { "docid": "548635", "title": "", "text": "Thank for the response, honestly I appreciate the well thought out reply but I don't see how this necessarily can be attributed to our discussion. Biases or ignorance held by a successful race doesn't mean they aren't successful, and the fact he hasn't or at least you aren't aware that he or others have studied the same in other races and/or third world nations would just add to the point that it doesn't contradict that one race can be (although certainly flawed) superior than another." }, { "docid": "521646", "title": "", "text": "Australia is not really comparable. Where she lives in the US, there are 2-3 bedroom homes to rent for $125 per week. An apartment at the luxury end of the spectrum could be had for $250 per week (which is not viable for a minimum wage earner). Expenses in the US are far lower than Australia in most areas (outside of healthcare and higher education). Her life on $1700 per month in Kansas, is probably closer to the life of someone on $40k per year in Sydney. Not easy, and necessary to be frugal, but not at homeless levels." }, { "docid": "583666", "title": "", "text": "Wikipedia has a nice definition of financial literacy (emphasis below is mine): [...] refers to an individual's ability to make informed judgments and effective decisions about the use and management of their money. Raising interest in personal finance is now a focus of state-run programs in countries including Australia, Japan, the United States and the UK. [...] As for how you can become financially literate, here are some suggestions: Learn about how basic financial products works: bank accounts, mortgages, credit cards, investment accounts, insurance (home, car, life, disability, medical.) Free printed & online materials should be available from your existing financial service providers to help you with your existing products. In particular, learn about the fees, interest, or other charges you may incur with these products. Becoming fee-aware is a step towards financial literacy, since financially literate people compare costs. Seek out additional information on each type of product from unbiased sources (i.e. sources not trying to sell you something.) Get out of debt and stay out of debt. This may take a while. Focus on your highest-interest loans first. Learn the difference between good debt and bad debt. Learn about compound interest. Once you understand compound interest, you'll understand why being in debt is bad for your financial well-being. If you aren't already saving money for retirement, start now. Investigate whether your employer offers an advantageous matched 401(k) plan (or group RRSP/DC plan for Canadians) or a pension plan. If your employer offers a good plan, sign up. If you get to choose your own investments, keep it simple and favor low-cost balanced index funds until you understand the different types of investments. Read the material provided by the plan sponsor, try online tools provided, and seek out additional information from unbiased sources. If your employer doesn't offer an advantageous retirement plan, open an individual retirement account or IRA (or personal RRSP for Canadians.) If your employer does offer a plan, you can set one of these up to save even more. You could start with access to a family of low-cost mutual funds (examples: Vanguard for Americans, or TD eFunds for Canadians) or earn advanced credit by learning about discount brokers and self-directed accounts. Understand how income taxes and other taxes work. If you have an accountant prepare your taxes, ask questions. If you prepare your taxes yourself, understand what you're doing and don't file blind. Seek help if necessary. There are many good books on how income tax works. Software packages that help you self-file often have online help worth reading – read it. Learn about life insurance, medical insurance, disability insurance, wills, living wills & powers of attorney, and estate planning. Death and illness can derail your family's finances. Learn how these things can help. Seek out and read key books on personal finance topics. e.g. Your Money Or Your Life, Why Smart People Make Big Money Mistakes, The Four Pillars of Investing, The Random Walk Guide to Investing, and many more. Seek out and read good personal finance blogs. There's a wealth of information available for free on the Internet, but do check facts and assumptions. Here are some suggested blogs for American readers and some suggested blogs for Canadian readers. Subscribe to a personal finance periodical and read it. Good ones to start with are Kiplinger's Personal Finance Magazine in the U.S. and MoneySense Magazine in Canada. The business section in your local newspaper may sometimes have personal finance articles worth reading, too. Shameless plug: Ask more questions on this site. The Personal Finance & Money Stack Exchange is here to help you learn about money & finance, so you can make better financial decisions. We're all here to learn and help others learn about money. Keep learning!" }, { "docid": "381081", "title": "", "text": "The American taxpayer absolutely is subsidizing their business model. We are offsetting the cost of getting their employees in the door every morning. We're supplementing their workers' food budgets and medical budgets. That is money that ought to be coming out of Walmart's pocket. Listen, everybody who doesn't come from money is forced to work. Unless you don't mind living outside without medical care, fresh food or family. If you happen to have poor access to education or failed to achieve for some reason then you're forced to take what you can get. If that job doesn't offer a living wage than you'll have to pick up a few extra shifts or another job altogether. You want to talk about child-like world views? Let's talk about the one that you espouse where high school dropouts get to negotiate with corporations for a living wage and if it doesn't work out that's just fine -- after all nobody is forcing them to take a job. We have a social contract in our country. People shouldn't have to work more than 40 hours a week just to put food on the table or pay their medical bills. When that happens it's an indication that something is seriously wrong." }, { "docid": "513886", "title": "", "text": "Sure, but what percent of Americans from outside the PNW make a vacation to Seattle/San Juan Islands in their lifetime (and particularly in their youth)? 1%? And what percent then get on the water and actually see an Orca? I took a week long vacation to Seattle recently and never saw a single Orca or even reference to one, and I went to the Seattle Aquarium. Fact is, a lot more people are exposed to wild life and educated about them at places like SeaWorld, zoos, aquariums, etc than they are in the actual wild. And exposure to animals has been shown to have a large affect on people's feelings toward them (particularly children). SeaWorld's treatment of some of their animals obviously isn't great, but it's hard to argue that SeaWorld doesn't have a positive impact on people's feelings towards sealife, possibly, even probably, having a positive net-benefit on their well being." }, { "docid": "61319", "title": "", "text": "We live in a community, and as citizens we all have the right to shop in public shops and eat in public restaurants. If that right is abridged, then freedom is abridged. And the freedom to enjoy the public services of one's community is far more important than the freedom to deny services due to one's prejudice. Either way someone loses a bit of freedom. Which is more important? According to you the freedom to do what you will with your property outweighs any and all possible consequences of exercising that freedom. This is a very extreme viewpoint. I know because I once held it. >Go start a business and get back to us Yeah I did that. 15 years ago and still going. And I actually hire people. You may not want to make too many assumptions about the person you are debating. As a business owner I would happily choose a world in which I had to hire the best qualified candidate regardless of my prejudices over one in which other business owners could arbitrarily refuse me services that are offered to the general public just because of who I am. >If a person is refused service for any reason, they can find another store, shop, or vendor. And what if all the stores in your town have similar policies? Am I to drive to the next town every time I need to go shopping? What if all the shops within 1000 miles have discriminatory policies? How am I to live? The only reason you can make this argument is because of the success of the civil rights act. If it was repealed today you would likely be able to avoid racist restaurants and shops by going elsewhere. If it had never existed that would not be the case. >THERE IS NO EQUAL OPPORTUNITY IN LIFE FOR SUCCESS That is why I very specifically said that all citizens must have a REALISTIC opportunity for success, and NOT that there should be EQUAL opportunity (impossible) or equal outcomes (ridiculous and counter-productive). What must be avoided is the creation of an economic status quo that ensures the poor remain poor and the rich remain rich. Such a status quo is just slavery without the whips. Even if the government is not enforcing the status quo, it can be just as hard to break free from. >Forceful acts by government are ALWAYS far worse than forceful acts in the private sector It is the results of the act of force that matters, not its source or methodology. This once again is an argument from pure ideology. Because you believe that government force is always worse than the private sector, you are unable to see examples of how the private sector can limit our freedoms in even worse ways. Simply stating that government acts of force are always worse does not prove it so. >that's exactly where your collectivist sewer leads I would argue that the centers of poverty you listed are much more a symptom of the systematic undercutting of education, social services and other support systems that once gave the underprivileged a realistic way to improve their lot in life. Now, with blue-collar wages on the decline and public education gutted, poverty gets more entrenched and harder to overcome. You really think it's going to get better for these people if we take away the minimum wage? Do away with public schools? Food stamps? Medicaid? Is there any point at which lack of social mobility becomes a more damaging than minor economic regulations? Is it OK to effectively return to the feudal system if it means nobody will ever have one penny taxed from them and given to someone who wasn't born rich? Nobody made you get born poor so there's no force and therefore everything is right and good? Such a shallow view of our moral obligations as members of a society. We live in a society. Extreme individualism will lead only to self-destruction just as fast as extreme collectivism. The only rational view is to analyze the facts, weigh the benefits and consequences to any given policy, and make decisions without any preconceived notion of what the solution should look like. In the case at hand, I, and the vast majority of people, think the minor inconvenience of not being able to make discriminatory hiring decisions is far outweighted by the benefits of not having large segments of the population chronically unemployed and impoverished because their race. The only effective argument against this would be to posit a way in which the benefits of this policy could be achieved (or bettered) without the use of government coercion, and that I haven't seen. >You'd better grow up fast on this one Remember, you are talking to someone who thought and argued exactly the same viewpoint you are now espousing for 10 years. I was even a delegate to the national Libertarian convention once. I was a true believer. I did grow up." }, { "docid": "321361", "title": "", "text": "\"As others have said, congratulations on saving up 75K in cash while seemingly not neglecting other areas of personal finance. Considering that only 15% of Americans have more than 10K saved this is quite a feat. source If you sell your old house, and buy the new one you will still be in really good financial shape. No need to comment further. Renting your current home and buying a new home introduces a great amount of risk into your life. The risk in this case is mitigated by cash. As others have pointed out, you will need to save a lot more to remove an acceptable amount of risk. Here is what I see: So without paying off your existing house I would see a minimum savings account balance of about double of what you have now. Once you purchase the new house, the amount would be reduced by the down payment, so you will only have about 50K sitting around. The rental emergency fund may be a little light depending on how friendly your state is to landlords. Water heaters break, renters don't pay, and properties can sit vacant. Also anytime you move into a new business there will be mistakes made that are solved by writing checks. Do you have experience running rentals? You might be better off to sell your existing home, and move into a more expensive home than what you are suggesting. You can continue to win at money without introducing a new factor into your life. Alternatively, if you are \"\"bitten by the real estate bug\"\" you could mitigate a lot risk by buying a property that is of similar value to your current home or even less expensive. You can then choose which home to live in that makes the most financial sense. For example some choose to live in the more dilapidated home so they can do repairs as time permits. To me upgrading the home you live in, and renting an expensivish home for a rental is too much to do in such a short time frame. It is assuming far too much risk far to quickly for a person with your discipline. You will get there.\"" }, { "docid": "570004", "title": "", "text": "So you dislike Unions? Why were unions necessary in the first place? Is that problem resolved, or will it crop up again if they go away? My belief is that Unions (or rather, the problems they solved) are still necessary. But their methods need oversight just as much as businesses need to be held accountable for how they treat their employees. Government paying their employees well shouldn’t be an issue. We should be paying all employees well. But we are on a race to the bottom, when it comes to employee wages. When we can outsource our work to other countries (by building American businesses their), and get rewarded for it, we have broadened the field our own employees have to compete against. When those businesses pay pennies on the dollar that they have to pay here, our employees CAN’T compete." }, { "docid": "229611", "title": "", "text": "Cancer has long been among the world’s catalog of most serious and life-changing diseases, affecting various parts of the body. In the United States alone, about 13 to 14 million Americans are living with cancer as of 2014. Caring for a friend or a loved one with cancer can initially be difficult." }, { "docid": "345601", "title": "", "text": "Its not Israel the country that has existed since 1200BC, its the rat plague of Jews that has plagued humanity since the dawn of money and shiny things, and the Jews have spent most of their existence being chased around the world because they killed Jesus and are habitually a parasite on which ever society they infest with their greed, avarice and corruption, since ancient Egypt to modern America. As history repeats itself once more and Jews have tried to take control of American society and destroy its values so they can suck the American people dry of every coin, with bank fraud and scams and schemes and interest, all the while spewing poison and hatred against other nations and people and dragging America and its sons into fake wars while you grow fat like a tick at its throat. This time no one is coming to help and no one will listen to your cries for help. You are the criminally insane that the world regrets saving and will not miss when you are gone, as mankind progresses in peace, serenity and harmony in your absence." }, { "docid": "592598", "title": "", "text": ">Labor isn't that interchangeable and markets are far from perfect. Yes, it is if it's manual labor which is what these Walmart workers is. Labor can even be replaced by robots/technologies. As technologies advanced at current rate. Manual labors can and will cease to exist. >What is the other option other than government help? Education! Seriously, a god damn good education that isn't today's education system. No welfare from the govrt. A good education from our govrt. is 100x better than welfare. >Let these people starve and live on the street because they can't afford anything else? That is a great way to ruin a society. Look, No one cried when Car replaced Horse carriage. Just look at the entire Human history. A lot of job die when technology changed and each time a new technology rise. There are dozen of far better paying jobs that come with it. Can you imagine back in 1950 that someone can just do Vlog on YoutTube and make great living doing it. There are hundred of YouTube partners making a good living just making videos and post them on YouTube! Unless you're retarded, your brain will always worth way more than your strength. Human race is a creative race. We are born to think and to create. I believe our society and its people will be better off in a society where we are not bored at our jobs doing manual and repetitive tasks. From personal experiences, I got a co-worker who used to building house for a living. When we work together, he was a tech support and now he does SharePoint support. He told me when he was building house, he was hook on drug/weed/cocaine...etc. You named it and he had tried it beaus the pain from doing manual labors was unbearable that he rely on drugs to take pain away. He told me not one person who work in the house building wasn't hook on alcohol, weed or drug and working in tech support and writing script is great for him because he get to use his brain and no body pain from manual labor. All this have to start with EDUCATION! Which sadly our govrt. suck balls at it!" } ]

[ { "docid": "234950", "title": "", "text": "\"An endowment is a large chunk of capital (i.e. money) held by a university or other nonprofit. It is meant to hold its value forever against inflation, and invested to generate income: from interest, dividends and appreciation. They seem like a contradiction: closely scrutinized by Boards of Directors, managed to a high and accountable standard, closely regulated -- and yet, invested aggressively for growth: ignoring short-term volatility to get the highest growth long-term. The law, UPMIFA (P for Prudent), requires growth investment, and says taking up to 7% of current value per year is prudent, even in down times when total value is shrinking. On average, this lets the endowment grow with inflation. 7% is the high end of \"\"prudent\"\". An endowment is watched, and the taken income is adjusted to keep the endowment healthy. 5% is very safe, assuming the endowment must pace inflation until the heat death of the universe. If you plan to die someday, drawing an extra 1-2% is appropriate. There you go. Invest like a university endowment, and count on up to 7% per year of income. That's $21,000 a year. There'll be taxes, but the long-term capital gain rate at $21,000/year is pretty low. That's pretty tight, but possible if your idea of entertaining is Netflix. It would work very effectively for #VanLife, or the British version, living on a Narrowboat.\"" } ]

[ { "docid": "111174", "title": "", "text": "\"Is your mother still paying the premiums, or are you? If you're paying the premiums, then just contact the company and say you are no longer willing to pay and want to cancel the policy. If she's paying the premiums, why do you care? If the issue is the non-smoking declaration, and you are a smoker or want to take up smoking ... I don't know what country you live in, but I'd be surprised if there's a law anywhere that gives your mother the legal authority to forbid you from smoking when you are over 18. If you are paying the premiums, then contact the insurance company and tell them that you are no longer a non-smoker. The premiums may go up. If she is paying the premiums, tell her that you are now a smoker and that she should contact the insurance company about changing this clause in the policy if she wants to be sure it remains valid. If she declines to do this, that's between her and the insurance company. As you're not a party to the contract, it really has nothing to do with you. If, as you say, your mother is not fully capable of managing her affairs, you could contact the insurance company for her. I don't see how you could get the policy \"\"invalidated\"\". Unless there is some evidence that the life insurance company made false claims, or somehow tricked your mother into buying the policy, or that the policy violates local law, there is nothing \"\"invalid\"\" about it. Just because you've decided you don't want the policy doesn't make it invalid. Likewise I don't see how you could get the premiums refunded. The whole point of life insurance is that you pay a monthly premium, and if and when you die, they pay the beneficiary the face value of the policy. Life insurance is often described as a kind of gambling game: The insurance company is betting that you will live long enough to pay more in premiums than they pay out in benefits. You are betting that you will get more in benefits than you pay in premiums. If you die young, you win! If you could wait and see if you die within some time period, and if not demand your premiums back, well, that would be like saying that you want to bet on a spin of the roulette wheel, and if you win you take your winnings, and if you lose you want to get your original bet back. What casino would agree to that? You should be able to cancel the policy at any time. I suppose there might be some specific commitment in the contract, like you pledge not to cancel within X years. If you never signed it, I don't see how you could be obligated to pay for it, regardless of what commitments your mother made. I don't know where you live or your country's laws, but I doubt your mother can sign a contract legally committing you to pay for something for the rest of your life. You say it's a \"\"whole life\"\" policy, which means it should have some cash value if you cancel it, i.e. you get SOME money back. Not everything you and/or your mother paid in, but something.\"" }, { "docid": "475736", "title": "", "text": "> 73% of Americans were in the ‘top 20%’ for at least a year Well, sure. [The top 20% currently begins at $92,000](https://en.wikipedia.org/wiki/Income_in_the_United_States). All an American needs to do to qualify for that 73% is sell their house with ~50% equity at some point in their life since the IRS considers that income. Great logic of this article: liquidate your primary investment and \\*poof\\* you're wealthy. Even [the authors of the study cited in this article say](http://news.cornell.edu/stories/2015/01/hirschl-research-finds-many-join-1-percent-few-stay-long): *“It would be misguided to presume that top-level income attainment is solely a function of hard work, diligence and equality of opportunity,” they write. “A more nuanced interpretation includes the proposition that access to top-level income is influenced by historic patterns of race and class inequality.”*" }, { "docid": "336140", "title": "", "text": "It's important to note that the US is also the country that taxes its expats when they live abroad, and forces foreign banks to disclose assets of US citizens. Americans are literally the property of their government. America is a tax farm and its citizens can't leave the farm. Wherever you go, you are owned. And that now appears to be true of your Bitcoin as well. Even if you spend 50 years outside the USA, your masters want a piece of what you earn. Land of the Free." }, { "docid": "451849", "title": "", "text": "\"The general answer is: \"\"it depends on how long you want to live there\"\". Here is a good calculator to figure it out: http://www.nytimes.com/interactive/business/buy-rent-calculator.html Basically, if you plan to move in a few years, then renting makes more sense. It is a lot easier to move from an apartment when your lease is up versus selling a house, which can be subject to fluctuations in the real-estate market. As an example, during the real estate bubble, a lot of \"\"young professional\"\" types bought condos and town homes instead of renting. Now these people are married with kids, need to move somewhere bigger, but they can't get rid of their old place because they can't sell it for what they still owe. If these people had rented for a few years, they would be in a better position financially. (Many people fell for the mantra \"\"If you are renting, you are throwing your money away\"\", without looking at the long-term implications.) However, your question is a little unique, because you mentioned renting for the rest of your life, and putting the savings into an investment, which is a cool idea. (Thinking outside the box, I like it.) I'm going to assume you mean \"\"rent the same place for many years\"\" versus \"\"moving around the country every few years\"\". If you are staying in one place for a long time, I am going to say that buying a house is probably a better option. Here's why: So what about investing? Let's look at some numbers: So, based on the above, I say that buying a house is the way to go (as long as you plan to live in the same place for several years). However, if you could find a better investment than the Dow, or if mortgage interest rates change drastically, things could tip in another direction. Addendum: CrimsonX brought up a good point about the costs of owning a house (upkeep and property taxes), which I didn't mention above. However, I don't think they change my answer. If you rent, you are still paying those costs. They are just hidden from you. Your landlord pays the contractor or the tax man, and then you pay the landlord as part of your rent.\"" }, { "docid": "537611", "title": "", "text": "\"If Trump really wanted to get Americans back to work, he would demolish the H1-B program. If I was president, it would be the first thing I went after. Cut H1-B visas by 60% over 4 years, and impart a penalty on companies who have x% of workers on this visa. It's not a race to the bottom. We have capable people here who get laid off because of this program. But \"\"something, something coal\"\" because he needed those idiots votes.\"" }, { "docid": "197526", "title": "", "text": "\"you can relate everything on a credit report, and how things are calculated, to life scenarios. thats a 100% fact, and thats what people need to go by when designing their credit dicipline/diet. utilization: any kind of resource in life. water, food, energy, and etc. who would you want to live with more, the guy that just eats way too much, uses way too much energy than they need, and wastes way more water than they need? assuming there was no water cycle. payment history: speaks for itself derogatory remarks: s*** happens. thats what makes life life, but when given chances to fix your mistakes and own up to them, like i and every other responsible adult have done, and you dont, thats living up to the exact definition of derogatory. disrespecting and not caring. who wants to lend to someone who doesnt care? so if youre not gonna care, we will just put this special little remark in the derogatory section and show that you dont care about when you make mistakes. f*** it right? lol. well, thats what that section is for. showing you wont try to fix things when they go sour. if i had a guy who was fixing my roof, and did a bad job, but did everything he could to fix it, i wouldnt give him a bad rep at all. if a guy messed up my roof, and just said cya thanks for your money, hes getting a derogatory remark. credit age: just like life. showing the ability to maintain EVERY other aspect of a report for X amount of time. its like getting old as a person. after X amount of years, a lot of people will be able to say more about you as a person. whether youre a real male reproductive organ or an amazing guy. total accounts: is like taking on jobs as a self employed person or any business. if you have a lot of jobs, people must want you to do their work. it shows how people \"\"like you.\"\" hard inquiries: this is the one category of them all i dont fully agree on, can go either way, and i hate it. i really cant think of a life scenario to relate it to, so i kind of think its a prevention mechanism/keep a person in check kind of thing. like to save them from themself and save the lenders. for example, if a guy has great utilization, and just goes insane applying for credit cards, hell get everyone of them because hes showing almost no utilization. then said guy goes and looses his job, but since he racked up 50 cards at 1k each, now he can destroy 50k in credit. thats just my take, but thats EXACTLY how i look at it from TU/EX/EQs point of view.\"" }, { "docid": "467833", "title": "", "text": "> outside of Germany, you have abysmal unemployment rates Europe has a higher unemployment rate, but that's OK - they have a strong social safety net. Unemployed people still get excellent free healthcare, unemployment benefits, university is still free. Europe does not optimize for full employment. > The US unemployment rate during the Great Recession peaked at 10% [Factually incorrect. 25%](https://en.wikipedia.org/wiki/Great_Depression) > You can have labor that is controlled like you mention and high unemployment or lower controls and less unemployment. Is it better to have high unemployment but workers that are better off or lower unemployment and workers that aren't as well off? Life is better in Europe. You know The State has got your back. You cannot lose your pension because your company went bankrupt (the pension funds are independent of the employer), healthcare is great and free at point of consumption, your kids will go to the best collage they can get into, because all collages are free. > The Euro zone is forgetting how to be competitive. We live in an economy where price matters. The price of labor determines the prices of goods and services. And supply and demand of products and services are determined by prices. Its a cold hard truth. You are optimizing for the wrong target. If you push price of labor down, you push standards of living down. That's not good. That's missing the point of having a State and an economy. We build our society to make out life better, not to generate shareholder value." }, { "docid": "175019", "title": "", "text": "You are neglecting a few very important things around real estate transactions in Belgium So in the end a 300K building may cost you more than 340K, let's take some unexpected costs into account and use 350K for remainder of calculation. Even worse if it's newly built (which I doubt) the first percentage is 21% (VAT) instead of 10%. All these costs can be checked on the useful site www.hoeveelkostmijnhuis.be Now, aside from that most banks will and actually have to demand you pay part of all this yourself. So you can't do 5*60K (or 5*70K now). Mostly banks will only finance up to about 90% of the value of the building, so 90% of 300K, which is 270K (5*54K), the other 80K (5*16K) you have to pay yourselves. But it could be the bank goes as low as 80%. Another part to complicate the loan is how much you can pay a month. Since the mortgage crisis they're very strict on this. There are lots of banks that will not allow you to make monthly payments of more than 33% of your monthly income when you are going to live there. This is a nuisance even when buying one house, you want to buy 2. Odds seem low they'll accept high monthly payments because you either need an additional loan or need to pay rent, so don't count on a 5y deal. Now this is all based on a single loan, it will probably be a bit different with multiple loans. However, it is unlikely any bank will accept this, even if all loans are with the same bank. You need to consider the basics of a real-estate loan: A bank trusts you can pay it off and if not they can seize the real-estate hoping to regain their initial investment. It's very hard to seize a complete asset if only one out of 5 loan-takers defected. You could maybe do this with another less restrictive/higher risk type of loan but rates will be a lot higher (think 5-6% instead of 1.5%). And don't underestimate the running costs: for that price and 5 rooms in that city you're likely looking at an older building. Expect lots of cost for maintenance and keeping the building according to code. Also expect costs for repairs (you rent to students...). You'll also have to pay quite a bit of money on insurances and of course on real estate taxes (which are average in Ghent). Also factor in that currently there is not a housing shortage for Ghent students so you might not always have a guaranteed occupation. Also take into account responsibility: if a fire breaks out or the house collapses or a gas leak occurs, you might be sued. It doesn't matter if you're at fault, it's costly and a big nuisance. Simply because you didn't think of any of this: don't do this. It's better to invest in real estate funds. But if you still think you can do better then all the landlords Ghent is riddled with, don't do it as a personal investment. Create a BVBA, put some investment in here (like 10-20K each), approach a bank with a serious business plan to get the rest of the money as a loan (towards a single entity - your BVBA) and get things going. When the money comes in you can either give yourselves a salary or pay out profits on the shares. You may be confused about how rich you can become because we as a nation tend to overestimate the profitability of real estate. It's really not that much better than other investments (otherwise everybody would only invest in real estate funds). There are a few things that skew our vision however:" }, { "docid": "327026", "title": "", "text": "I know the difference between a rat and an opossum. This was a very large rat. And you're right, it wasn't as big as a rabbit, but I'll bet it was upwards of 16oz. Biggest rat I've ever seen, and I grew up around dairy farms." }, { "docid": "441523", "title": "", "text": "I think you're being inexact with your comment about healthcare. Japanese healthcare outcomes are - by and large - not due to medical services or quality of clinical environments/hospitals. For example, Japanese who live in Japan have a lower incidence of cardiovascular diseases (especially those related to life style and diet) than Japanese who move to the USA, or Americans generally. There are other areas - lung cancer, for example - where outcomes are better as well despite more Japanese who smoke (though relative amount of smoking per smoker may differ - I'm not sure how much). The point is, Japanese health outcomes are largely better than US outcomes due to healthier lifestyles. I would go so far as to say it is the primary cause of comparatively better health outcomes." }, { "docid": "87480", "title": "", "text": "I agree but... ( i didn't read the article in its entirety!) but if her business was grossing $300k per year... and for her to fall so hard in such a short time, tells me that even with such a large income, she was still living beyond her means." }, { "docid": "11659", "title": "", "text": "\"You are not required to contribute to a TFSA or an RRSP. Nobody contributes to OAS, it's a program to provide benefits to old people for them to be \"\"secure\"\". The only fund you MAY contribute to is CPP. If you're being paid a salary by a Canadian employer they will deduct some money from your salary (and add more money of their own) as CPP contributions. Ignore the getting of CPP early or late, since that's just a 5 year shift not related to \"\"ok, I'm leaving the country, send me my pension.\"\" Your issue is more \"\"can I collect when I no longer live there?\"\" Plenty of Canadians retire outside of Canada (the warmth of Florida lures many of us) and collect their CPP. There is even a page about the mechanics of getting your pension in another currency. That said, CPP is a very small pension. If you work for 40 years at more than $50,000 a year and wait till age 70 to collect you will still get less than $1000/month. Working for less time, less than that salary, or taking it before you're 70 will all reduce it substantially. Probably more relevant to you, you can have your Canadian years counted as American ones thanks to a Social Security Agreement between the two countries.\"" }, { "docid": "192894", "title": "", "text": "This isn't new. In the mid 80s rules were established by the IRS to differentiate life insurance from Modified Endowment Contracts, placing upper limits on how much money could be placed in life insurance accounts relative to the coverage provided and how quickly (fastest a policy can become paid-in-full is 7 years). None of this closes the fundamental loophole, but it exists for a reason, taxation of life insurance is probably unwise and would result in less people using life insurance as a risk mitigation technique, despite the fact that it's very appropriate for that in some situations. The problem here is that once you get out of everyday-people numbers and into very large sums the vehicle can be clearly abused to avoid taxes on investment gains while living, and possibly avoid them altogether depending on how the estate is structured, and this is bad for the average person who'd like the megarich to pay their percent towards the public needs the same way the average guy does." }, { "docid": "345601", "title": "", "text": "Its not Israel the country that has existed since 1200BC, its the rat plague of Jews that has plagued humanity since the dawn of money and shiny things, and the Jews have spent most of their existence being chased around the world because they killed Jesus and are habitually a parasite on which ever society they infest with their greed, avarice and corruption, since ancient Egypt to modern America. As history repeats itself once more and Jews have tried to take control of American society and destroy its values so they can suck the American people dry of every coin, with bank fraud and scams and schemes and interest, all the while spewing poison and hatred against other nations and people and dragging America and its sons into fake wars while you grow fat like a tick at its throat. This time no one is coming to help and no one will listen to your cries for help. You are the criminally insane that the world regrets saving and will not miss when you are gone, as mankind progresses in peace, serenity and harmony in your absence." }, { "docid": "132601", "title": "", "text": "\"There are broadly two kinds of pension: final salary / defined benefit, and money purchase. The text you quote above, where it talks about \"\"pension\"\" it is referring to a final salary / defined benefit scheme. In this type of scheme you earn a salary of £X during your working life, and you are then entitled to a proportion of £X (the proportion depends on how long you worked there) as a pension. These types of scheme are relatively rare now (outside the public sector) because the employer is liable for making enough investments into a pot to have enough money to pay everyone's pension entitlements, and when the investments do poorly the liability for the shortfall ends up on the employer's plate. You might have heard about the \"\"black hole in public sector pensions\"\" which is what this refers to - the investments that the government have made to pay public sector workers' pensions has not in fact been sufficient. The other type of scheme is a money purchase scheme. In this scheme, you and/or your employer make payments into an investment pot which is locked away until you retire. Once you retire, that pot is yours but there are restrictions on what you can do with it - you can use it to purchase an annuity (I will give you my £X,000 pension pot in return for you giving me an annual income of £Y, say) and you can take some of it as a lump sum. The onus is on you to make sure that you (and/or your employer) have contributed enough to make a large enough pot to give you the income you want to live on, and to make a sensible decision about what to do with the pot when you retire and what to use it as income. With either type of scheme, you can claim this pension after you reach retirement age, whether or not you are still working. In some schemes you are also permitted to claim the pension earlier than retirement age if you have stopped working - it will depend on the rules of the scheme. What counts as \"\"retirement age\"\" depends on how old you are now (and whether you are male or female) as the government has been pushing this age out as people have been living longer. In addition to both schemes, there is also a \"\"state pension\"\" which is a fixed, non-means-tested, weekly amount paid from government funds. Again you are entitled to receive this after you pass retirement age, whether or not you are still working.\"" }, { "docid": "20323", "title": "", "text": "If you invest in a 401(k), the shares in that plan are yours for as long as you live, or until you pull them out. So, if the employer is offering any sort of matching and those matched funds remain yours after you leave, then definitely contribute; that's an immediate return on your money. If the employer is NOT matching funds, then usually it is better to contribute to an IRA instead; you get the same income tax benefits from the deduction, without the headaches of going through your company (or the company from 3 jobs ago or whoever bought them) to get to your money. If I were in your position, the most I personally would do after I quit the company (which I'm assuming you'd be doing if you were going back to your country of origin) would be to have the 401k shares rolled over into a traditional IRA; that way I'd have more control over it from outside the country. Just keep the bank holding your IRA apprised of your movements around the world and how they can get ahold of you (it may be wise to grant a limited power of attorney to someone who will be staying in the U.S. if you don't want the bank mailing your statements all around the world), and the money can stay in an American account while you do whatever you have to outside it. As long as you don't take the money out in cash before you're 59 1/2 years old, you don't need to pay taxes or penalties on it. If you were to need it to cover unexpected expenses (perhaps relating to the aforementioned family emergency), then that decision can be made at that time. If you think that's even remotely likely, you may consider a Roth IRA. With a Roth, you pay the income taxes on your contributions, but the money is then yours; you can withdraw anything up to the total amount of your contributions without any additional taxes or penalties, and once you hit 59 and a half the interest also becomes available, also tax- and penalty- free. So if you had to leave the country and take a lot of cash with you, you could get out everything you actually put into a Roth with only minor if any transaction fees, and the interest will still be there compounding." }, { "docid": "125640", "title": "", "text": "Hypnosis is a blessing for the human race as it can help is a lot of things. One of the greatest thing is that we can use hypnotherapy to stop smoking. At Transformations Coaching & Hypnotherapy, our expert hypnotherapists help their patients in quitting the life threatening habit of smoking." }, { "docid": "63406", "title": "", "text": "Yeshiva University & all the High Schools connected to them, my boys former Yeshiva - Yeshiva Derech Hatorah, Yeshiva Chofetz Chaim, Yeshiva Chaim Berlin, and plenty of girls schools. I mean there are many many many more Yeshivas/Jewish Orthadox schools that teach what you are calling 'modern concepts'. You are right that there are many that have an 'elitist' attitude there are many who are absolutely not like that. I also find the elitist attitude is more about the fact that many Orthadox Jews dont have to have any interaction outside of the Jewish community. They can go to Jewish Universities, work at Jewish Companies, live in predominantly Jewish neighborhood, and mostly don't need to interact with anything outside of the Jewish community. I do find it wrong because while you can live a life of Torah Values we are supposed to be a light upon other nations and that requires some form of interaction. Also this is fucking America. We need to be a part of this nation. Doesn't mean we need to not be Orthadox, but Jews need to show that they are invested in the communities, in politics, and the like. But then again you gets whats happening with that school board (which I'm on the side that the state is really screwing with that school district with funding from what I have read up on the case) so it is a catch 22. As as for not embracing modern ways, there is much about political correctness and progressive attitudes that are going far over the top. I find that Orthodox Judaism viewpoint on men & women are actually pretty slanted towards women (and always have been), that Jewish religious law only applies to Jews and not non-Jews (so all that stuff that the Christians keep saying oh the old testament says this and blah blah blah) according to Jews it doesn't apply to non-Jews (only the 7 Laws of Noah apply to the Gentiles of the World according to Judaism). Also by following the Torah, sorry but that doesn't mean we are a part of the modern civilization. If one doesn't like following Orthodox Judaism then don't do so - no one is forcing you with a gun to your head. Most Orthodox Jews I know are respectful of Conservative & Reform Jews. I know where we live it is very much like that. Two of my kids are best friends with kids whose parents belong to a Conservative Synagogue. Orthodox Jews are a part of every type of career that is out there, they don't force their ideology onto others, don't try to convince people to convert, don't tell you that you are going to hell if you don't follow their teachings, and the biggest things that set Jews apart are dietary laws, following the sabbath, and all of our holidays - and how does that hurt anyone or make us not 'modern'? Yes there are many who are not like what I wrote above but the majority are not like what you wrote" }, { "docid": "178306", "title": "", "text": "Possibly living beyond her means but I assume that was the business gross and 300K in Utah is not that great. I have no idea what the margin is in the plant nursery business or how many employee's she had but I bet her personal income was closer to 100K. Once people stopped buying plants to fix up their homes to flip it was all over for her I'm sure. The bigger problem is that this is playing out for millions of other people that relied on housing for an income from real estate sales people, loan brokers, builders, construction workers simply everything downstream of housing has been hit hard and many many people are in this same boat or soon will be. The really bad thing is there is no quick fix for all these people as housing is not coming back for years if not decades. So basically we have a whole segment of the economy that has been decimated and these people have no where to turn. It's not going to be pretty any way you look at it." } ]

[ { "docid": "389028", "title": "", "text": "Even with a good investment strategy, you cannot expect more than 8-10% per year in average. Reducing this by a 3% inflation ratio leaves you with 5 - 7%, which means 15k$ - 21k$. Consider seriously if you could live from that amount as annual income, longterm. If you think so, there is a second hurdle - the words in average. A good year could increase your capital a bit, but a bad year can devastate it, and you would not have the time to wait for the good years to average it out. For example, if your second year gives you a 10% loss, and you still draw 15k$ (and inflation eats another 3%), you have only 247k$ left effectively, and future years will have to go with 12k$ - 17k$. Imagine a second bad year. As a consequence, you either need to be prepared to go back to work in that situation (tough after being without job for years), or you can live on less to begin with: if you can make it on 10k$ to begin with (and do, even in good years), you have a pretty good chance to get through your life with it. Note that 'make it with x' always includes taxes, health care, etc. - nothing is free. I think it's possible, as people live on 10k$ a year. But you need to be sure you can trust yourself to stay within the limit and not give in and spent more - not easy for many people." } ]

[ { "docid": "454287", "title": "", "text": "\"None of what I say is advice directed to you. It is how I would continue to analyse the situation you have, were it mine. First off, I prefer to work in certainties more than possibilities. Saying that, paying down the mortgage makes sense as I can calculate the amount I will save. I also believe that rate rises are coming in the future, based on the talk from the BofE, so any money I pay off now means guaranteed less interest to pay in the future. Also, the lower my loan-to-value ratio, the better/lower interest rates I can receive in the mortgage market. If I do not want to work until retirement age, it'd be nice to have as few bills as possible in the decade or so prior to retirement age. I could then do early-retirement or part-time work in the run-up to retirement. I could use my savings to fund life until retirement pays out. I'd be aiming to put 15% of my gross income into \"\"future investing\"\" - using ISAs to build up a savings pot, taking advantage of retirement products. That way all the money is not tied to a normal retirement age before it can accessed. And it's not touchable by future greedy Government taxation... Any income leftover above the 15%, I'd be throwing at the mortgage - taking advantage of the 10% overpay window, remortgaging as LTV comes down. In theory, overpaid mortgage equity is money that could still be accessed (provided house prices don't decline and remortgaging is a possibility). So, in short, I'd follow a plan along these lines of logic. 1) Make sure I have 4-6 months of living expenses as a Rainy Day Fund. Insulate myself from fluctuations in my financial situation. 2) Put away 15% of annual gross income towards \"\"future saving\"\". ISAs first, pension second. 3) Overpay the mortgage and look to remortgage as LTV drops. When LTV nears 60%, look to lock in to a longer-term fix. eg. 2 year fixes at 90% LTV, 5 year fixes at 60%. 4) Reassess steps 2 & 3 as life happens, circumstances change, work fluctuates, etc. 5) Once the mortgage is paid off, build as much wealth as possible - ISAs first, then non-tax efficient savings products. Aim for keeping expenses down and raising my savings % rate as much as possible. [Your analysis was thorough and shows you are thinking through consequences. Never forget to factor in the risk of carrying debt. Having no/low debt as you get older means there's more income left to build wealth. Ignore the American view of carrying debt for life and trusting investments to outperform the debt. You have to pay monthly to keep that debt around - and it ain't a pet!]\"" }, { "docid": "125640", "title": "", "text": "Hypnosis is a blessing for the human race as it can help is a lot of things. One of the greatest thing is that we can use hypnotherapy to stop smoking. At Transformations Coaching & Hypnotherapy, our expert hypnotherapists help their patients in quitting the life threatening habit of smoking." }, { "docid": "20323", "title": "", "text": "If you invest in a 401(k), the shares in that plan are yours for as long as you live, or until you pull them out. So, if the employer is offering any sort of matching and those matched funds remain yours after you leave, then definitely contribute; that's an immediate return on your money. If the employer is NOT matching funds, then usually it is better to contribute to an IRA instead; you get the same income tax benefits from the deduction, without the headaches of going through your company (or the company from 3 jobs ago or whoever bought them) to get to your money. If I were in your position, the most I personally would do after I quit the company (which I'm assuming you'd be doing if you were going back to your country of origin) would be to have the 401k shares rolled over into a traditional IRA; that way I'd have more control over it from outside the country. Just keep the bank holding your IRA apprised of your movements around the world and how they can get ahold of you (it may be wise to grant a limited power of attorney to someone who will be staying in the U.S. if you don't want the bank mailing your statements all around the world), and the money can stay in an American account while you do whatever you have to outside it. As long as you don't take the money out in cash before you're 59 1/2 years old, you don't need to pay taxes or penalties on it. If you were to need it to cover unexpected expenses (perhaps relating to the aforementioned family emergency), then that decision can be made at that time. If you think that's even remotely likely, you may consider a Roth IRA. With a Roth, you pay the income taxes on your contributions, but the money is then yours; you can withdraw anything up to the total amount of your contributions without any additional taxes or penalties, and once you hit 59 and a half the interest also becomes available, also tax- and penalty- free. So if you had to leave the country and take a lot of cash with you, you could get out everything you actually put into a Roth with only minor if any transaction fees, and the interest will still be there compounding." }, { "docid": "311490", "title": "", "text": "\"I know something about this issue, so maybe I can put it into context from my world. One problem is that dairy farmers - like any small/mid-sized business - can only afford to pay so much in wages (especially factoring in the fact that the cost per employee is higher b/c employment taxes, maybe insurance, etc.). As a commodity, milk and feed (to make the milk) prices are set and any fluctuation is passed to the farmer, so it isn't like the costs of paying a higher wage can be passed directly on to the consumer. Also, the kind of work involved is not what most Americans are willing to do. There are 4 trailer parks within 5-15 minutes of the dairy farm here - and very seldom - if ever - has an American come asking for a job - when they did, they got a chance - at $12/hour and housing if needed. They never last long: drug/alcohol use, warrants, bad attitudes, absenteeism, mistreatment of the animals. Local workers simply are not dependable to show up on time, for every scheduled shift, and do a good job. Hispanic workers are paid the same wages. It isn't like 10-15 years ago when some jerk farmer thought he could cut his labor cost by paying half-wages to \"\"illegals\"\". Hispanics here have social networks, and know the value of their work. If they're not happy, underpaid, whatever - they will leave - and will instigate all the other Hispanics into leaving as well. Dairy farming is a hard, dangerous, smelly job that puts you out in the heat of summer, cold of winter, pouring rain, day and night, 24/7. If you paid a wage that compensates for that, there would be no dairy industry and if there were, its products would not be affordable. So the Hispanic workers get an ok wage to do a job that no American is willing to touch. And robots? They don't work that great either: expensive, constantly needing service - and the rats eat the power cables!\"" }, { "docid": "537611", "title": "", "text": "\"If Trump really wanted to get Americans back to work, he would demolish the H1-B program. If I was president, it would be the first thing I went after. Cut H1-B visas by 60% over 4 years, and impart a penalty on companies who have x% of workers on this visa. It's not a race to the bottom. We have capable people here who get laid off because of this program. But \"\"something, something coal\"\" because he needed those idiots votes.\"" }, { "docid": "467833", "title": "", "text": "> outside of Germany, you have abysmal unemployment rates Europe has a higher unemployment rate, but that's OK - they have a strong social safety net. Unemployed people still get excellent free healthcare, unemployment benefits, university is still free. Europe does not optimize for full employment. > The US unemployment rate during the Great Recession peaked at 10% [Factually incorrect. 25%](https://en.wikipedia.org/wiki/Great_Depression) > You can have labor that is controlled like you mention and high unemployment or lower controls and less unemployment. Is it better to have high unemployment but workers that are better off or lower unemployment and workers that aren't as well off? Life is better in Europe. You know The State has got your back. You cannot lose your pension because your company went bankrupt (the pension funds are independent of the employer), healthcare is great and free at point of consumption, your kids will go to the best collage they can get into, because all collages are free. > The Euro zone is forgetting how to be competitive. We live in an economy where price matters. The price of labor determines the prices of goods and services. And supply and demand of products and services are determined by prices. Its a cold hard truth. You are optimizing for the wrong target. If you push price of labor down, you push standards of living down. That's not good. That's missing the point of having a State and an economy. We build our society to make out life better, not to generate shareholder value." }, { "docid": "175019", "title": "", "text": "You are neglecting a few very important things around real estate transactions in Belgium So in the end a 300K building may cost you more than 340K, let's take some unexpected costs into account and use 350K for remainder of calculation. Even worse if it's newly built (which I doubt) the first percentage is 21% (VAT) instead of 10%. All these costs can be checked on the useful site www.hoeveelkostmijnhuis.be Now, aside from that most banks will and actually have to demand you pay part of all this yourself. So you can't do 5*60K (or 5*70K now). Mostly banks will only finance up to about 90% of the value of the building, so 90% of 300K, which is 270K (5*54K), the other 80K (5*16K) you have to pay yourselves. But it could be the bank goes as low as 80%. Another part to complicate the loan is how much you can pay a month. Since the mortgage crisis they're very strict on this. There are lots of banks that will not allow you to make monthly payments of more than 33% of your monthly income when you are going to live there. This is a nuisance even when buying one house, you want to buy 2. Odds seem low they'll accept high monthly payments because you either need an additional loan or need to pay rent, so don't count on a 5y deal. Now this is all based on a single loan, it will probably be a bit different with multiple loans. However, it is unlikely any bank will accept this, even if all loans are with the same bank. You need to consider the basics of a real-estate loan: A bank trusts you can pay it off and if not they can seize the real-estate hoping to regain their initial investment. It's very hard to seize a complete asset if only one out of 5 loan-takers defected. You could maybe do this with another less restrictive/higher risk type of loan but rates will be a lot higher (think 5-6% instead of 1.5%). And don't underestimate the running costs: for that price and 5 rooms in that city you're likely looking at an older building. Expect lots of cost for maintenance and keeping the building according to code. Also expect costs for repairs (you rent to students...). You'll also have to pay quite a bit of money on insurances and of course on real estate taxes (which are average in Ghent). Also factor in that currently there is not a housing shortage for Ghent students so you might not always have a guaranteed occupation. Also take into account responsibility: if a fire breaks out or the house collapses or a gas leak occurs, you might be sued. It doesn't matter if you're at fault, it's costly and a big nuisance. Simply because you didn't think of any of this: don't do this. It's better to invest in real estate funds. But if you still think you can do better then all the landlords Ghent is riddled with, don't do it as a personal investment. Create a BVBA, put some investment in here (like 10-20K each), approach a bank with a serious business plan to get the rest of the money as a loan (towards a single entity - your BVBA) and get things going. When the money comes in you can either give yourselves a salary or pay out profits on the shares. You may be confused about how rich you can become because we as a nation tend to overestimate the profitability of real estate. It's really not that much better than other investments (otherwise everybody would only invest in real estate funds). There are a few things that skew our vision however:" }, { "docid": "340384", "title": "", "text": "That's crazy! And I completely sympathize with working moms, it's a rough life. I worry about this when my wife and I have kids how we'll manage, more how she'll manage with her teaching job. If I can ask an admittedly loaded question with some assumptions, do you think if society wasn't so fiercely competitive and dual income wasn't as necessary to live a comfortable life, we'd be better off? What I'm really getting at is are we using technology to attempt to solve problems that shouldn't exist in the first place?" }, { "docid": "93323", "title": "", "text": "One overarching thing to keep in mind is that wherever you go with Finance if you work hard enough and climb the ladder, you can make decent money. I know CIO's, Market Stragesits and even CFO's, Portfolio Managers and CPA's that all live extremely comfortably, and all of them work outside of the IB industry, basically, IB isn't the end-all for making large sums of money. The main reason why it pays so much upfront is that of the hours you have to work if you look at their salary at an hourly rate, it's around 10-12 bucks an hour. Definitely think about the Double major thing though, or potentially just doing a minor. It would definitely look good on a resume, especially if it's something you also enjoy, but you've gotta keep that GPA high, and getting a 4.0 in CS is quite a challenge, to begin with. Pretty much any of the Series certifications can help you depending on where you want to go career-wise, obviously for some positions have certain series certifications won't be useful at all. It's also worth looking into the CFA program if you plan on doing Financial Analysis, but you'll need a sponsor for this, just like the Series certifications. Happy to help man, if you've got any other questions feel free to reach out. I'm in the same boat just trying to figure out what I want to do with my life to make decent money so I can take care of my friends and family, and live life to the fullest." }, { "docid": "336869", "title": "", "text": "\"I wouldn't call adderall an outside substance. Anyone can take adderall who has ADHD right? Nobody is \"\"allowed\"\" to take whatever Armstrong took, or is that not right? I guess older men or people with cancer or HIV, but I never saw those people win races like the kinds Armstrong was able to win. Oh wait he actually did have cancer, maybe he can say it was part of his \"\"treatment\"\"?\"" }, { "docid": "461382", "title": "", "text": "By numbers I assume you mean monetary amounts... the article doesn't define the separation that way... >In one of these countries live members of what Temin calls the “FTE sector” (named for finance, technology, and electronics, the industries which largely support its growth). These are the 20 percent of Americans who enjoy college educations, have good jobs, and sleep soundly knowing that they have not only enough money to meet life’s challenges, but also social networks to bolster their success." }, { "docid": "243910", "title": "", "text": "\"Bad plan. This seems like a recipe for having your money taken away from you by CBP. Let me explain the biases which make it so. US banking is reliable enough for the common citizen, that everyone simply uses banks. To elaborate, Americans who are unbanked either can't produce simple identity paperwork; or they got an account but then got blacklisted for overdrawing it. These are problems of the poor, not millionaires. Outside of determined \"\"off the grid\"\" folks with political reasons to not be in the banking and credit systsm, anyone with money uses the banking system. Who's not a criminal, anyway. We also have strong laws against money laundering: turning cash (of questionable origin) into \"\"sanitized\"\" cash on deposit in a bank. The most obvious trick is deposit $5000/day for 200 days. Nope, that's Structuring: yeah, we have a word for that. A guy with $1 million cash, it is presumed he has no choice: he can't convert it into a bank deposit, as in this problem - note where she says she can't launder it. If it's normal for people in your country to haul around cash, due to a defective banking system, you're not the only one with that problem, and nearby there'll be a country with a good banking system who understands your situation. Deposit it there. Then retain a US lawyer who specializes in this, and follow his advice about moving the money to the US via funds transfer. Even then, you may have some explaining to do; but far less than with cash. (And keep in mind for those politically motivated off-the-financial-grid types, they're a bit crazy but definitely not stupid, live a cash life everyday, and know the law better than anybody. They would definitely consider using banks and funds transfers for the border crossing proper, because of Customs. Then they'll turn it into cash domestically and close the accounts.)\"" }, { "docid": "260255", "title": "", "text": "\"While I agree with the overarching narrative regarding the car industry, self driving cars, and how people will use transportation in the future, I deeply disagree with his timeframe and reject that his clearly large city centric thinking will effect all parts of the country and all parts of the world. There is no way this happens as quickly as he says it will for the following reasons: On his claim that electric cars will be all anyone will buy: 1. We lack the road or electrical grid infrastructure to support tens of millions of electric vehicles throughout the US, this will take far more than just 5-10 years, especially in the more rural parts of the country. 2. We lack the production capacity to create the batteries for 17 million of yearly sales of automobiles for the few years between 2021-2025 when everyone is presumably just buying only electric self driving cars. 3. The used market for combustion engine cars will \"\"tank\"\" so strongly that it will actually create demand for people to buy combustion cars, as the costs will now outweigh the savings of buying a new car with lower running costs, thus pushing his timeline out into the future by several years. 4. Cars, even electric cars, are much more complicated, durable, expensive, and prone to damage and accidents than most software and disposable consumer electronics he cites in his examples. Of course Nokia went from 50% of the market to 5% over one product cycle! People completely replaced their phones every 2-3 years back then! Wireless carriers built a system where even if your phone worked, you had little to no reason not to lock in another contract and get the next best phone. Of course people would dump their Nokia bricks for an iPhone, it was the next best thing. Cars have a much longer life cycle, and inefficient older models will be around for decades in some cases because they will be a sunk cost for those who bought them. On his claim that no one will own a car anymore and everyone will ride share: 1. How does one decide to take a road trip somewhere? What about people who travel for a living or as an integral part of doing their job? 2. I personally think a ride sharing transportation network represents a limiting of freedom. (Though I can see why people might make the opposite point) People identify with owning their own cars, keeping their own belongings in them, having them for use whenever they so need or desire. People who don't live in dense urban cores (I.e, a huge group of Americans, and especially a huge group of Americans who are older, have money, and are set in their ways.) aren't going to see this as nearly as attractive as someone who lives in New York or San Fransisco might, and those people hardly buy cars anyway. 3. People are fucking stubborn. It's going to take a lot for people to decide to change up such an integral part of their daily lives. This will not happen over a 3-4 year cycle. 4. Where is the infrastructure to park, charge, and perform maintenance on all these autonomous vehicles? We will need more cars available during rush hour than at 3pm or 3am for that matter. Where do the cars go then? 5. This simply won't work quickly in countries outside the very top of the first world. They won't have the infrastructure or capital to invest to bring it up to speed fast enough to derail oil demand as quickly as he claims. 5. This theory implies a central government that is in complete control to implement rules in support of autonomous cars. I believe most of this will be done at the state and municipality level at first, with some cities hopping on board and others banning the practice. 6. This theory also implies that the technology will be flawless. The first completely computer aided pedestrian disaster or multi car pile up will undoubtedly cause massive backlash (regardless of the statistics showing general reduction in accidents) and might clog this entire concept up in bureaucracy for decades as the government forces stricter and stricter safety and quality requirements on the software. I'm not saying his view isn't the long run eventually for mobility in the US and the world in general, but applying personal electronic technology cycle rules to large scale durable goods that work in real space instead of cyber space, represents a whole different set of challenges and could easily take 25-50 years to really pull off. Over that time, oil markets will right size themselves, and the automotive manufacturers will consolidate and cater their product lineups to meet demand/service the fleet. TL:DR - this will take much longer to accomplish than he surmises. Infrastructure takes time to build, cars are a different technology than consumer electronics, people are stubborn.\"" }, { "docid": "61936", "title": "", "text": "Sure! Started working since I was 12, used that money to buy a car, and was working full time starting at 15 years old. By 17 had two full time jobs and banked all that money, besides buying a car. At 18 fulfilled my dream and was hired as a police officer. Did the academy for 6 months, saving all of that money to buy a trailer to live in for cheap. Max out pay for my department was 5 years, so by 23 years old I was making 68,000 a year. With overtime and details included( I basically worked anytime I could, 8 hour shift with either an 8 hour detail or double shift) usually kept one day off, working my other day off. My take home for the year after taxes was somewhere around 90k give or take, with my living expenses barely passing 25k a year. Banked all that money for years. When I hit 25ish I got together with my now wife, also an officer making the same amount. She also received about 300k from a settlement. So with both of our salaries plus money invested since I was about 14, annual take home was about 200k. Saved for 2 more years and at 28, used the 300k to buy a house and pay off any vehicles and credit card debt. Paid cash for the house so no mortgage, no car payments, just utilities and taxes for the year. With the budget set we were able to retire living just like we were. There is a lot more to it but that's the quick summary!" }, { "docid": "350154", "title": "", "text": "\"This is the best tl;dr I could make, [original](https://www.bloomberg.com/news/articles/2017-08-29/is-the-midlife-crisis-real-economists-and-psychologists-can-t-agree) reduced by 90%. (I'm a bot) ***** > "I've been doing research for pretty much my whole career on adult development, and I've never found age linked definitively to anything psychological about a person. You can call it a midlife crisis. A quarter-life crisis. But whatever's going on with you personally, you can't blame it on age.\"\" > The National Institute of Aging finds that only a third of Americans over age 50 claim to have experienced a mid-life crisis. > "People do go through periods of self-evaluation, but it's not tied to age. If someone close to you dies and you start to think about how life is limited, is that a mid-life crisis? Or is it just a healthy reevaluation of your priorities?". ***** [**Extended Summary**](http://np.reddit.com/r/autotldr/comments/6xqxt7/is_the_midlife_crisis_real_economists_and/) | [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ \"\"Version 1.65, ~203281 tl;drs so far.\"\") | [Feedback](http://np.reddit.com/message/compose?to=%23autotldr \"\"PM's and comments are monitored, constructive feedback is welcome.\"\") | *Top* *keywords*: **age**^#1 **people**^#2 **Oswald**^#3 **crisis**^#4 **Blanchflower**^#5\"" }, { "docid": "72578", "title": "", "text": "\"You are in your mid 30's and have 250,000 to put aside for investments- that is a fantastic position to be in. First, let's evaluate all the options you listed. Option 1 I could buy two studio apartments in the center of a European capital city and rent out one apartment on short-term rental and live in the other. Occasionally I could Airbnb the apartment I live in to allow me to travel more (one of my life goals). To say \"\"European capital city\"\" is such a massive generalization, I would disregard this point based on that alone. Athens is a European capital city and so is Berlin but they have very different economies at this point. Let's put that aside for now. You have to beware of the following costs when using property as an investment (this list is non-exhaustive): The positive: you have someone paying the mortgage or allowing you to recoup what you paid for the apartment. But can you guarantee an ROI of 10-15% ? Far from it. If investing in real estate yielded guaranteed results, everyone would do it. This is where we go back to my initial point about \"\"European capital city\"\" being a massive generalization. Option 2 Take a loan at very low interest rate (probably 2-2.5% fixed for 15 years) and buy something a little nicer and bigger. This would be incase I decide to have a family in say, 5 years time. I would need to service the loan at up to EUR 800 / USD 1100 per month. If your life plan is taking you down the path of having a family and needed the larger space for your family, then you need the space to live in and you shouldn't be looking at it as an investment that will give you at least 10% returns. Buying property you intend to live in is as much a life choice as it is an investment. You will treat the property much different from the way something you rent out gets treated. It means you'll be in a better position when you decide to sell but don't go in to this because you think a return is guaranteed. Do it if you think it is what you need to achieve your life goals. Option 3 Buy bonds and shares. But I haven't the faintest idea about how to do that and/or manage a portfolio. If I was to go down that route how do I proceed with some confidence I won't lose all the money? Let's say you are 35 years old. The general rule is that 100 minus your age is what you should put in to equities and the rest in something more conservative. Consider this: This strategy is long term and the finer details are beyond the scope of an answer like this. You have quite some money to invest so you would get preferential treatment at many financial institutions. I want to address your point of having a goal of 10-15% return. Since you mentioned Europe, take a look at this chart for FTSE 100 (one of the more prominent indexes in Europe). You can do the math- the return is no where close to your goals. My objective in mentioning this: your goals might warrant going to much riskier markets (emerging markets). Again, it is beyond the scope of this answer.\"" }, { "docid": "321361", "title": "", "text": "\"As others have said, congratulations on saving up 75K in cash while seemingly not neglecting other areas of personal finance. Considering that only 15% of Americans have more than 10K saved this is quite a feat. source If you sell your old house, and buy the new one you will still be in really good financial shape. No need to comment further. Renting your current home and buying a new home introduces a great amount of risk into your life. The risk in this case is mitigated by cash. As others have pointed out, you will need to save a lot more to remove an acceptable amount of risk. Here is what I see: So without paying off your existing house I would see a minimum savings account balance of about double of what you have now. Once you purchase the new house, the amount would be reduced by the down payment, so you will only have about 50K sitting around. The rental emergency fund may be a little light depending on how friendly your state is to landlords. Water heaters break, renters don't pay, and properties can sit vacant. Also anytime you move into a new business there will be mistakes made that are solved by writing checks. Do you have experience running rentals? You might be better off to sell your existing home, and move into a more expensive home than what you are suggesting. You can continue to win at money without introducing a new factor into your life. Alternatively, if you are \"\"bitten by the real estate bug\"\" you could mitigate a lot risk by buying a property that is of similar value to your current home or even less expensive. You can then choose which home to live in that makes the most financial sense. For example some choose to live in the more dilapidated home so they can do repairs as time permits. To me upgrading the home you live in, and renting an expensivish home for a rental is too much to do in such a short time frame. It is assuming far too much risk far to quickly for a person with your discipline. You will get there.\"" }, { "docid": "17488", "title": "", "text": "Absolutely. The overhead for a product based business like that is particularly high. Service based businesses tend to have much better profit margins. But if she was running a plant nursery she has to pay huge heating costs, renting the area she operates in, not to mention inventory and employees. That $300k vanishes pretty fast. This article talking about disappearing middle class is a bad argument. This sounds much more about how the recession hurts a small business. Assuming of course it is the recession. I know a coffee shop near me that isn't doing that great and says the economy is hurting them bad. They apparently don't realize that being blatantly rude to their customers drives them away. There are often other sides to the story besides the economy, whether the fault of the business owner or some other factor outside their control that may not be covered in these kinds of posts." }, { "docid": "212471", "title": "", "text": "Interesting, I know a fair few doctors and lawyers (heck my fiance is a doctor) and it's not that common to earn more than $300k at 30 years old. Maybe it's more common at 50+? I know for doctors it's all dependent on your specialty, for example it's pretty common for surgeons to earn more than $300k but not so much for specialists in other fields such as palliative care or general practitioners. Then again I don't live in America so maybe it's different there." } ]

[ { "docid": "233562", "title": "", "text": "\"the short answer: yes. The long answer depends on what you mean by modest living. As others have noted, living off a $300k principle involves risks, but the entire future has risk. By \"\"getting out of the rat race\"\" I hope you don't mean become a slug on the couch. Peruse mr. Money Mustache at https://www.mrmoneymustache.com/. One can live very frugally yet very well in some parts of the US.\"" } ]

[ { "docid": "217868", "title": "", "text": "Cash has zero value until it is transformed into something material.  Cash hoarders realize no improvement in their lifestyle by gaining more cash than they need.  If corporations are already so flush with cash they only inflate the stock market, why would further tax breaks improve anything?  An inflated stock market only improves income for very few.  People who need money will spend it and put it back into circulation.  People will not hoard cash if they know more will show up regardless of their ability to perform.  Less financial pressure and less resentment of the rich for their preferential treatment would create a more positive attitude among the population and improve productivity.  A happier work force is a more productive work force.  People should only work part time anyway so they can have a life outside of work to enjoy their lives while they have the health to do it.  Slaving your life away until you can't do the things you always wanted to do does not improve a person's outlook.  Life according to me.  Was a reduction in unemployment compensation, medicare, medicade and SNAP payments included in the study?  There may be a reduction in spending on crime and addiction as well." }, { "docid": "454287", "title": "", "text": "\"None of what I say is advice directed to you. It is how I would continue to analyse the situation you have, were it mine. First off, I prefer to work in certainties more than possibilities. Saying that, paying down the mortgage makes sense as I can calculate the amount I will save. I also believe that rate rises are coming in the future, based on the talk from the BofE, so any money I pay off now means guaranteed less interest to pay in the future. Also, the lower my loan-to-value ratio, the better/lower interest rates I can receive in the mortgage market. If I do not want to work until retirement age, it'd be nice to have as few bills as possible in the decade or so prior to retirement age. I could then do early-retirement or part-time work in the run-up to retirement. I could use my savings to fund life until retirement pays out. I'd be aiming to put 15% of my gross income into \"\"future investing\"\" - using ISAs to build up a savings pot, taking advantage of retirement products. That way all the money is not tied to a normal retirement age before it can accessed. And it's not touchable by future greedy Government taxation... Any income leftover above the 15%, I'd be throwing at the mortgage - taking advantage of the 10% overpay window, remortgaging as LTV comes down. In theory, overpaid mortgage equity is money that could still be accessed (provided house prices don't decline and remortgaging is a possibility). So, in short, I'd follow a plan along these lines of logic. 1) Make sure I have 4-6 months of living expenses as a Rainy Day Fund. Insulate myself from fluctuations in my financial situation. 2) Put away 15% of annual gross income towards \"\"future saving\"\". ISAs first, pension second. 3) Overpay the mortgage and look to remortgage as LTV drops. When LTV nears 60%, look to lock in to a longer-term fix. eg. 2 year fixes at 90% LTV, 5 year fixes at 60%. 4) Reassess steps 2 & 3 as life happens, circumstances change, work fluctuates, etc. 5) Once the mortgage is paid off, build as much wealth as possible - ISAs first, then non-tax efficient savings products. Aim for keeping expenses down and raising my savings % rate as much as possible. [Your analysis was thorough and shows you are thinking through consequences. Never forget to factor in the risk of carrying debt. Having no/low debt as you get older means there's more income left to build wealth. Ignore the American view of carrying debt for life and trusting investments to outperform the debt. You have to pay monthly to keep that debt around - and it ain't a pet!]\"" }, { "docid": "91265", "title": "", "text": "Looks like folks here don't like to look on the bright side. I remember watching a documentary about an American guy with terrible allergies going to Africa to deliberately infect himself with hookworm so that he could live a normal life. It worked." }, { "docid": "430123", "title": "", "text": "\"Frankly, I was just listing off reasons that I and others might be pissed off at our landlords. Yeah, I've lived in student-focused housing too, and student rentals suck balls. Hell, that's the reason I wound up in the \"\"upscale\"\" city of Cambridge instead of living in the \"\"cheaper\"\" young-people areas of Allston or Brighton: because those places have had their rents pushed up by students *way* beyond what it's worth paying for a tiny, near-windowless, roach-infested hole built in the 1940s with rats running free in the streets. And yeah, I understand that those places suck so bad because many students are shitty tenants. But my real point was: my landlord doesn't provide me a place to live, he charges me ever-increasing rent for a place to live that he didn't build, maintains to the minimum required by the lease, and doesn't ever upgrade.\"" }, { "docid": "537611", "title": "", "text": "\"If Trump really wanted to get Americans back to work, he would demolish the H1-B program. If I was president, it would be the first thing I went after. Cut H1-B visas by 60% over 4 years, and impart a penalty on companies who have x% of workers on this visa. It's not a race to the bottom. We have capable people here who get laid off because of this program. But \"\"something, something coal\"\" because he needed those idiots votes.\"" }, { "docid": "521646", "title": "", "text": "Australia is not really comparable. Where she lives in the US, there are 2-3 bedroom homes to rent for $125 per week. An apartment at the luxury end of the spectrum could be had for $250 per week (which is not viable for a minimum wage earner). Expenses in the US are far lower than Australia in most areas (outside of healthcare and higher education). Her life on $1700 per month in Kansas, is probably closer to the life of someone on $40k per year in Sydney. Not easy, and necessary to be frugal, but not at homeless levels." }, { "docid": "451849", "title": "", "text": "\"The general answer is: \"\"it depends on how long you want to live there\"\". Here is a good calculator to figure it out: http://www.nytimes.com/interactive/business/buy-rent-calculator.html Basically, if you plan to move in a few years, then renting makes more sense. It is a lot easier to move from an apartment when your lease is up versus selling a house, which can be subject to fluctuations in the real-estate market. As an example, during the real estate bubble, a lot of \"\"young professional\"\" types bought condos and town homes instead of renting. Now these people are married with kids, need to move somewhere bigger, but they can't get rid of their old place because they can't sell it for what they still owe. If these people had rented for a few years, they would be in a better position financially. (Many people fell for the mantra \"\"If you are renting, you are throwing your money away\"\", without looking at the long-term implications.) However, your question is a little unique, because you mentioned renting for the rest of your life, and putting the savings into an investment, which is a cool idea. (Thinking outside the box, I like it.) I'm going to assume you mean \"\"rent the same place for many years\"\" versus \"\"moving around the country every few years\"\". If you are staying in one place for a long time, I am going to say that buying a house is probably a better option. Here's why: So what about investing? Let's look at some numbers: So, based on the above, I say that buying a house is the way to go (as long as you plan to live in the same place for several years). However, if you could find a better investment than the Dow, or if mortgage interest rates change drastically, things could tip in another direction. Addendum: CrimsonX brought up a good point about the costs of owning a house (upkeep and property taxes), which I didn't mention above. However, I don't think they change my answer. If you rent, you are still paying those costs. They are just hidden from you. Your landlord pays the contractor or the tax man, and then you pay the landlord as part of your rent.\"" }, { "docid": "548635", "title": "", "text": "Thank for the response, honestly I appreciate the well thought out reply but I don't see how this necessarily can be attributed to our discussion. Biases or ignorance held by a successful race doesn't mean they aren't successful, and the fact he hasn't or at least you aren't aware that he or others have studied the same in other races and/or third world nations would just add to the point that it doesn't contradict that one race can be (although certainly flawed) superior than another." }, { "docid": "17488", "title": "", "text": "Absolutely. The overhead for a product based business like that is particularly high. Service based businesses tend to have much better profit margins. But if she was running a plant nursery she has to pay huge heating costs, renting the area she operates in, not to mention inventory and employees. That $300k vanishes pretty fast. This article talking about disappearing middle class is a bad argument. This sounds much more about how the recession hurts a small business. Assuming of course it is the recession. I know a coffee shop near me that isn't doing that great and says the economy is hurting them bad. They apparently don't realize that being blatantly rude to their customers drives them away. There are often other sides to the story besides the economy, whether the fault of the business owner or some other factor outside their control that may not be covered in these kinds of posts." }, { "docid": "343349", "title": "", "text": "You ever think it's Americans and not the workers? Hard to give up your 1gb speed to go to 2mb and no signal on your phone in bumpkinville for $5 over min wage breaking your back outside. To top it off not many people have the money to uproot their life and move out to the country for shit wages." }, { "docid": "192894", "title": "", "text": "This isn't new. In the mid 80s rules were established by the IRS to differentiate life insurance from Modified Endowment Contracts, placing upper limits on how much money could be placed in life insurance accounts relative to the coverage provided and how quickly (fastest a policy can become paid-in-full is 7 years). None of this closes the fundamental loophole, but it exists for a reason, taxation of life insurance is probably unwise and would result in less people using life insurance as a risk mitigation technique, despite the fact that it's very appropriate for that in some situations. The problem here is that once you get out of everyday-people numbers and into very large sums the vehicle can be clearly abused to avoid taxes on investment gains while living, and possibly avoid them altogether depending on how the estate is structured, and this is bad for the average person who'd like the megarich to pay their percent towards the public needs the same way the average guy does." }, { "docid": "441523", "title": "", "text": "I think you're being inexact with your comment about healthcare. Japanese healthcare outcomes are - by and large - not due to medical services or quality of clinical environments/hospitals. For example, Japanese who live in Japan have a lower incidence of cardiovascular diseases (especially those related to life style and diet) than Japanese who move to the USA, or Americans generally. There are other areas - lung cancer, for example - where outcomes are better as well despite more Japanese who smoke (though relative amount of smoking per smoker may differ - I'm not sure how much). The point is, Japanese health outcomes are largely better than US outcomes due to healthier lifestyles. I would go so far as to say it is the primary cause of comparatively better health outcomes." }, { "docid": "11659", "title": "", "text": "\"You are not required to contribute to a TFSA or an RRSP. Nobody contributes to OAS, it's a program to provide benefits to old people for them to be \"\"secure\"\". The only fund you MAY contribute to is CPP. If you're being paid a salary by a Canadian employer they will deduct some money from your salary (and add more money of their own) as CPP contributions. Ignore the getting of CPP early or late, since that's just a 5 year shift not related to \"\"ok, I'm leaving the country, send me my pension.\"\" Your issue is more \"\"can I collect when I no longer live there?\"\" Plenty of Canadians retire outside of Canada (the warmth of Florida lures many of us) and collect their CPP. There is even a page about the mechanics of getting your pension in another currency. That said, CPP is a very small pension. If you work for 40 years at more than $50,000 a year and wait till age 70 to collect you will still get less than $1000/month. Working for less time, less than that salary, or taking it before you're 70 will all reduce it substantially. Probably more relevant to you, you can have your Canadian years counted as American ones thanks to a Social Security Agreement between the two countries.\"" }, { "docid": "360018", "title": "", "text": "Ramsey promotes Growth mutual funds and says he can screen out examples of good funds with a solid history of 10% returns in a couple of minutes on Morningstar. The 12% in the video is fairly unrealistic, but 10% or 8% are realistic, especially when you buy into the market every month at all levels rather than chasing winners (buying high). At 10% you will still get $3 million in 40 years, and at 8% you'll get $1.5 million. You need to make sure you include reinvestment of dividends as well as mere price appreciation in these calculations of returns on investment. So yes, you could probably drive really nice cars this way without breaking the bank. Like any financial endeavor, this requires hard work, patience and discipline. The actual work in this case would be fairly minimal in comparison to the patience and discipline: If you get really lucky, you might end up with millions of dollars 40 years from now. If a health disaster, job loss, children's college, etc. strikes then you it might save you from financial ruin. Both are better than the rat race I agree his predictions are too rosy, but this ad is an emotional sales pitch designed to change goals and behavior. Compare it to the psychology and unrealistic claims in some of the auto commercials you see on TV." }, { "docid": "461382", "title": "", "text": "By numbers I assume you mean monetary amounts... the article doesn't define the separation that way... >In one of these countries live members of what Temin calls the “FTE sector” (named for finance, technology, and electronics, the industries which largely support its growth). These are the 20 percent of Americans who enjoy college educations, have good jobs, and sleep soundly knowing that they have not only enough money to meet life’s challenges, but also social networks to bolster their success." }, { "docid": "589863", "title": "", "text": "\"Don't go bashing white Christian American's too hard, bub. They're the only reason you life a free life (if you live in the USA), see WW1, WW2. I don't just take my news from Fox. In fact, lately, they seem to be getting taken over by CNN fucking crazy commies. But I take in the news from over a dozen sites and do my own cross checking/thinking. If you're a Bernie guy, although it's a whole lot better than an obama guy, you're still a moron, relatively speaking. And sticking your head in the sand about the muslim invasion is just going to get it cut off by them. Hey, check it out, more from your buddies just in from jolly ol' London, mate! \"\"Nursery worker is left with broken ribs and needing stitches after she was punched and kicked to the ground and slashed with a Stanley knife by three girls shouting 'Allah will get you'\"\"\"" }, { "docid": "473883", "title": "", "text": "NB - I live in Surrey and bought my house in January 2014. If you don't have a very social life, it does pay to stay outside London. Places outside London are cheap and you will get a better deal in relation to houses or flats as compared to London. I feel very priced out of the market regarding London mortgages I will strongly question you logic behind this ? Why only London ? Why not live in the commuter belt outside London. Good places to reside, good schools, nice neighbourhood and away from the hustle and bustle of London. Many of my colleagues commute from Cambridge and Oxford daily into Central London and they laugh at people who want to buy a house in London, just for the sake of buying a house. It seems that the housing market is generally in a bubble due to being distorted by the finance market London house market is different from the rest of UK. People from overseas tend to invest in London property market, so it is always inflated. Even the property tax hasn't deterred many. I could look into buying somewhere and renting it out You are trying to join the same people, because of whom you have been put out of the housing market. I strictly question this logic unless your mortgage is less than the rent you pay and what rent you get. Buy a roof over your head first, then think of profiting from property." }, { "docid": "305980", "title": "", "text": "Right. It's free market when it works, and help subsidise me when it doesn't. This tax is already paid by European airlines operating in Europe; and European airlines have to pay American taxes when they operate in the USA. The finding was that *American* airlines have to pay *European* taxes when they operate in Europe. However you're right that *this* could be the straw that broke the camel's back, you're wrong that we need to let Americans preserve their delusions. Let it crumble, and maybe the shareholders of the survivors will assassinate the next CEO who recommends a race to the bottom. By the way, [of course the TSA consults airlines](http://www.tsa.gov/press/releases/2011/1004.shtm). I can't imagine why anyone would think otherwise." }, { "docid": "520703", "title": "", "text": "I live in Oklahoma which most major jobs here do rely on the oil industry. What bugs me is this notion you are stating. For every non American with a job that is a American without period. Second most jobs do give two shits not in my state anyway about education they want to see how little they can pay you. I don't care if the stats say it is 4% I care about facts and the fact is most are under employeed or have stop looking for work. So you think I am stupid for not wanting use my education to work for slave wages. Why two months because all employers look at your last wages here and I was over qualified apparently because I am use to making way more like most Americans who are smart." } ]

[ { "docid": "316794", "title": "", "text": "\"Consider buying a legal \"\"mother daughter\"\" property, rent out the top part, and live in the \"\"mother\"\" component.\"" } ]

[ { "docid": "212471", "title": "", "text": "Interesting, I know a fair few doctors and lawyers (heck my fiance is a doctor) and it's not that common to earn more than $300k at 30 years old. Maybe it's more common at 50+? I know for doctors it's all dependent on your specialty, for example it's pretty common for surgeons to earn more than $300k but not so much for specialists in other fields such as palliative care or general practitioners. Then again I don't live in America so maybe it's different there." }, { "docid": "473883", "title": "", "text": "NB - I live in Surrey and bought my house in January 2014. If you don't have a very social life, it does pay to stay outside London. Places outside London are cheap and you will get a better deal in relation to houses or flats as compared to London. I feel very priced out of the market regarding London mortgages I will strongly question you logic behind this ? Why only London ? Why not live in the commuter belt outside London. Good places to reside, good schools, nice neighbourhood and away from the hustle and bustle of London. Many of my colleagues commute from Cambridge and Oxford daily into Central London and they laugh at people who want to buy a house in London, just for the sake of buying a house. It seems that the housing market is generally in a bubble due to being distorted by the finance market London house market is different from the rest of UK. People from overseas tend to invest in London property market, so it is always inflated. Even the property tax hasn't deterred many. I could look into buying somewhere and renting it out You are trying to join the same people, because of whom you have been put out of the housing market. I strictly question this logic unless your mortgage is less than the rent you pay and what rent you get. Buy a roof over your head first, then think of profiting from property." }, { "docid": "132601", "title": "", "text": "\"There are broadly two kinds of pension: final salary / defined benefit, and money purchase. The text you quote above, where it talks about \"\"pension\"\" it is referring to a final salary / defined benefit scheme. In this type of scheme you earn a salary of £X during your working life, and you are then entitled to a proportion of £X (the proportion depends on how long you worked there) as a pension. These types of scheme are relatively rare now (outside the public sector) because the employer is liable for making enough investments into a pot to have enough money to pay everyone's pension entitlements, and when the investments do poorly the liability for the shortfall ends up on the employer's plate. You might have heard about the \"\"black hole in public sector pensions\"\" which is what this refers to - the investments that the government have made to pay public sector workers' pensions has not in fact been sufficient. The other type of scheme is a money purchase scheme. In this scheme, you and/or your employer make payments into an investment pot which is locked away until you retire. Once you retire, that pot is yours but there are restrictions on what you can do with it - you can use it to purchase an annuity (I will give you my £X,000 pension pot in return for you giving me an annual income of £Y, say) and you can take some of it as a lump sum. The onus is on you to make sure that you (and/or your employer) have contributed enough to make a large enough pot to give you the income you want to live on, and to make a sensible decision about what to do with the pot when you retire and what to use it as income. With either type of scheme, you can claim this pension after you reach retirement age, whether or not you are still working. In some schemes you are also permitted to claim the pension earlier than retirement age if you have stopped working - it will depend on the rules of the scheme. What counts as \"\"retirement age\"\" depends on how old you are now (and whether you are male or female) as the government has been pushing this age out as people have been living longer. In addition to both schemes, there is also a \"\"state pension\"\" which is a fixed, non-means-tested, weekly amount paid from government funds. Again you are entitled to receive this after you pass retirement age, whether or not you are still working.\"" }, { "docid": "260255", "title": "", "text": "\"While I agree with the overarching narrative regarding the car industry, self driving cars, and how people will use transportation in the future, I deeply disagree with his timeframe and reject that his clearly large city centric thinking will effect all parts of the country and all parts of the world. There is no way this happens as quickly as he says it will for the following reasons: On his claim that electric cars will be all anyone will buy: 1. We lack the road or electrical grid infrastructure to support tens of millions of electric vehicles throughout the US, this will take far more than just 5-10 years, especially in the more rural parts of the country. 2. We lack the production capacity to create the batteries for 17 million of yearly sales of automobiles for the few years between 2021-2025 when everyone is presumably just buying only electric self driving cars. 3. The used market for combustion engine cars will \"\"tank\"\" so strongly that it will actually create demand for people to buy combustion cars, as the costs will now outweigh the savings of buying a new car with lower running costs, thus pushing his timeline out into the future by several years. 4. Cars, even electric cars, are much more complicated, durable, expensive, and prone to damage and accidents than most software and disposable consumer electronics he cites in his examples. Of course Nokia went from 50% of the market to 5% over one product cycle! People completely replaced their phones every 2-3 years back then! Wireless carriers built a system where even if your phone worked, you had little to no reason not to lock in another contract and get the next best phone. Of course people would dump their Nokia bricks for an iPhone, it was the next best thing. Cars have a much longer life cycle, and inefficient older models will be around for decades in some cases because they will be a sunk cost for those who bought them. On his claim that no one will own a car anymore and everyone will ride share: 1. How does one decide to take a road trip somewhere? What about people who travel for a living or as an integral part of doing their job? 2. I personally think a ride sharing transportation network represents a limiting of freedom. (Though I can see why people might make the opposite point) People identify with owning their own cars, keeping their own belongings in them, having them for use whenever they so need or desire. People who don't live in dense urban cores (I.e, a huge group of Americans, and especially a huge group of Americans who are older, have money, and are set in their ways.) aren't going to see this as nearly as attractive as someone who lives in New York or San Fransisco might, and those people hardly buy cars anyway. 3. People are fucking stubborn. It's going to take a lot for people to decide to change up such an integral part of their daily lives. This will not happen over a 3-4 year cycle. 4. Where is the infrastructure to park, charge, and perform maintenance on all these autonomous vehicles? We will need more cars available during rush hour than at 3pm or 3am for that matter. Where do the cars go then? 5. This simply won't work quickly in countries outside the very top of the first world. They won't have the infrastructure or capital to invest to bring it up to speed fast enough to derail oil demand as quickly as he claims. 5. This theory implies a central government that is in complete control to implement rules in support of autonomous cars. I believe most of this will be done at the state and municipality level at first, with some cities hopping on board and others banning the practice. 6. This theory also implies that the technology will be flawless. The first completely computer aided pedestrian disaster or multi car pile up will undoubtedly cause massive backlash (regardless of the statistics showing general reduction in accidents) and might clog this entire concept up in bureaucracy for decades as the government forces stricter and stricter safety and quality requirements on the software. I'm not saying his view isn't the long run eventually for mobility in the US and the world in general, but applying personal electronic technology cycle rules to large scale durable goods that work in real space instead of cyber space, represents a whole different set of challenges and could easily take 25-50 years to really pull off. Over that time, oil markets will right size themselves, and the automotive manufacturers will consolidate and cater their product lineups to meet demand/service the fleet. TL:DR - this will take much longer to accomplish than he surmises. Infrastructure takes time to build, cars are a different technology than consumer electronics, people are stubborn.\"" }, { "docid": "430123", "title": "", "text": "\"Frankly, I was just listing off reasons that I and others might be pissed off at our landlords. Yeah, I've lived in student-focused housing too, and student rentals suck balls. Hell, that's the reason I wound up in the \"\"upscale\"\" city of Cambridge instead of living in the \"\"cheaper\"\" young-people areas of Allston or Brighton: because those places have had their rents pushed up by students *way* beyond what it's worth paying for a tiny, near-windowless, roach-infested hole built in the 1940s with rats running free in the streets. And yeah, I understand that those places suck so bad because many students are shitty tenants. But my real point was: my landlord doesn't provide me a place to live, he charges me ever-increasing rent for a place to live that he didn't build, maintains to the minimum required by the lease, and doesn't ever upgrade.\"" }, { "docid": "197526", "title": "", "text": "\"you can relate everything on a credit report, and how things are calculated, to life scenarios. thats a 100% fact, and thats what people need to go by when designing their credit dicipline/diet. utilization: any kind of resource in life. water, food, energy, and etc. who would you want to live with more, the guy that just eats way too much, uses way too much energy than they need, and wastes way more water than they need? assuming there was no water cycle. payment history: speaks for itself derogatory remarks: s*** happens. thats what makes life life, but when given chances to fix your mistakes and own up to them, like i and every other responsible adult have done, and you dont, thats living up to the exact definition of derogatory. disrespecting and not caring. who wants to lend to someone who doesnt care? so if youre not gonna care, we will just put this special little remark in the derogatory section and show that you dont care about when you make mistakes. f*** it right? lol. well, thats what that section is for. showing you wont try to fix things when they go sour. if i had a guy who was fixing my roof, and did a bad job, but did everything he could to fix it, i wouldnt give him a bad rep at all. if a guy messed up my roof, and just said cya thanks for your money, hes getting a derogatory remark. credit age: just like life. showing the ability to maintain EVERY other aspect of a report for X amount of time. its like getting old as a person. after X amount of years, a lot of people will be able to say more about you as a person. whether youre a real male reproductive organ or an amazing guy. total accounts: is like taking on jobs as a self employed person or any business. if you have a lot of jobs, people must want you to do their work. it shows how people \"\"like you.\"\" hard inquiries: this is the one category of them all i dont fully agree on, can go either way, and i hate it. i really cant think of a life scenario to relate it to, so i kind of think its a prevention mechanism/keep a person in check kind of thing. like to save them from themself and save the lenders. for example, if a guy has great utilization, and just goes insane applying for credit cards, hell get everyone of them because hes showing almost no utilization. then said guy goes and looses his job, but since he racked up 50 cards at 1k each, now he can destroy 50k in credit. thats just my take, but thats EXACTLY how i look at it from TU/EX/EQs point of view.\"" }, { "docid": "451195", "title": "", "text": "As an investment, the trend doesn't really matter, what matters is the price which you buy the house, and the price at which you sell. Say you buy a house for $250k today. In general, it doesn't matter if the house is worth $200k or $300k tomorrow (neglecting things like refinancing and home equity loans). What matters is the price when you sell. The longer you plan to stay, the less the current market conditions mean. Of course there is a lot more that goes into the decision to buy a house, since you are going to live in it. You also need to take into account things like how long you plan on staying in the area, the stability of your job, and future family size." }, { "docid": "540800", "title": "", "text": "\"This is the best tl;dr I could make, [original](https://www.bloomberg.com/view/articles/2017-07-20/spending-a-lot-on-health-care-is-the-american-way) reduced by 86%. (I'm a bot) ***** > Why? And might we hope to get this spending down? Unfortunately, expensive health care is embedded in the American way of life - more specifically, the American desire to live it up with high consumption. > Why is American consumption so disproportionate to American GDP? One reason is the relatively low household savings rate, or possibly American net wealth is high relative to GDP. Consumption in the U.S., per capita, measures about 50 percent higher than in the European Union. > To put it most simply, we Americans spend a lot on health care because we spend a lot period. ***** [**Extended Summary**](http://np.reddit.com/r/autotldr/comments/6pl8ob/spending_a_lot_on_health_care_is_the_american_way/) | [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ \"\"Version 1.65, ~175686 tl;drs so far.\"\") | [Feedback](http://np.reddit.com/message/compose?to=%23autotldr \"\"PM's and comments are monitored, constructive feedback is welcome.\"\") | *Top* *keywords*: **American**^#1 **consumption**^#2 **spend**^#3 **health-care**^#4 **more**^#5\"" }, { "docid": "195830", "title": "", "text": "\"> Even if I did simply want to stop being American and live in Somalia I still have to pay taxes. No, actually you don't. Step 1. Move to Somalia. Step 2. Revoke your American citizenship. Step 3. Pay your final tax receipt. Step 4. Try to live the best that you can in Somalia... > If it was totally free to leave you'd have a point - that I'm opting in to being here after the fact by not leaving. But that's just not the case. There is a real cost to leaving and renouncing citizenship and thus there is an aspect of being under duress to this \"\"agreement\"\" you claim we make. This sounds a lot like the \"\"I didn't choose to be born\"\" argument. How old are you? None of us get to choose where we are born, and what system we are born into. However, there are costs associated with it that we inherit regardless. The choice that we have is to leave - and yes, there is a cost to that too. I am sure people who are born into third world nations would cry so many tears about how unfair the world is for you...\"" }, { "docid": "467833", "title": "", "text": "> outside of Germany, you have abysmal unemployment rates Europe has a higher unemployment rate, but that's OK - they have a strong social safety net. Unemployed people still get excellent free healthcare, unemployment benefits, university is still free. Europe does not optimize for full employment. > The US unemployment rate during the Great Recession peaked at 10% [Factually incorrect. 25%](https://en.wikipedia.org/wiki/Great_Depression) > You can have labor that is controlled like you mention and high unemployment or lower controls and less unemployment. Is it better to have high unemployment but workers that are better off or lower unemployment and workers that aren't as well off? Life is better in Europe. You know The State has got your back. You cannot lose your pension because your company went bankrupt (the pension funds are independent of the employer), healthcare is great and free at point of consumption, your kids will go to the best collage they can get into, because all collages are free. > The Euro zone is forgetting how to be competitive. We live in an economy where price matters. The price of labor determines the prices of goods and services. And supply and demand of products and services are determined by prices. Its a cold hard truth. You are optimizing for the wrong target. If you push price of labor down, you push standards of living down. That's not good. That's missing the point of having a State and an economy. We build our society to make out life better, not to generate shareholder value." }, { "docid": "192894", "title": "", "text": "This isn't new. In the mid 80s rules were established by the IRS to differentiate life insurance from Modified Endowment Contracts, placing upper limits on how much money could be placed in life insurance accounts relative to the coverage provided and how quickly (fastest a policy can become paid-in-full is 7 years). None of this closes the fundamental loophole, but it exists for a reason, taxation of life insurance is probably unwise and would result in less people using life insurance as a risk mitigation technique, despite the fact that it's very appropriate for that in some situations. The problem here is that once you get out of everyday-people numbers and into very large sums the vehicle can be clearly abused to avoid taxes on investment gains while living, and possibly avoid them altogether depending on how the estate is structured, and this is bad for the average person who'd like the megarich to pay their percent towards the public needs the same way the average guy does." }, { "docid": "93323", "title": "", "text": "One overarching thing to keep in mind is that wherever you go with Finance if you work hard enough and climb the ladder, you can make decent money. I know CIO's, Market Stragesits and even CFO's, Portfolio Managers and CPA's that all live extremely comfortably, and all of them work outside of the IB industry, basically, IB isn't the end-all for making large sums of money. The main reason why it pays so much upfront is that of the hours you have to work if you look at their salary at an hourly rate, it's around 10-12 bucks an hour. Definitely think about the Double major thing though, or potentially just doing a minor. It would definitely look good on a resume, especially if it's something you also enjoy, but you've gotta keep that GPA high, and getting a 4.0 in CS is quite a challenge, to begin with. Pretty much any of the Series certifications can help you depending on where you want to go career-wise, obviously for some positions have certain series certifications won't be useful at all. It's also worth looking into the CFA program if you plan on doing Financial Analysis, but you'll need a sponsor for this, just like the Series certifications. Happy to help man, if you've got any other questions feel free to reach out. I'm in the same boat just trying to figure out what I want to do with my life to make decent money so I can take care of my friends and family, and live life to the fullest." }, { "docid": "118667", "title": "", "text": "\"> Outside of money, the biggest thing I think we will leave to our kids is what we have learned... I would argue even money is less important, but continue. > ...you are acting like a totally responsible young adult according to societal norms and people who are supposed to give you advice, and you are totally fucking yourself. Totally agree. FYI, your example seems fitting for someone born into a middle class home and their choices are bad but not destructive. If it were someone from a poor household then the 25 year old doesn't know about the American Heart Association, doesn't know about credit to get a card or house, invests nothing, often gets payday loans, gets a car from a used car auto-lender, drinks and watches a lot of TV, has probably been involved in a pregnancy, and plays the lottery in the hopes of a better life. > Is that your fault? I would say, \"\"no\"\". Society has effectively set you up to fail. > What if you've concluded generational wealth is simply luck... > You may dismiss your opportunity as bullshit, and remained trapped in the standard American day to day wage/debt slavery. You almost certainly will dismiss the opportunity. Even if you can realize the AHA, financial advisor, or payday loan guy gave you bad advice, there are better looking opportunities. Put away money for a rainy day? Fuck that! If I listen to the auto-loan guy I get a car *today*. I'm not sure I understand where your contention was. Are you thinking that people shouldn't be cynical of the system and be able to recognize an opportunity to better their life? I'm heading out for the evening. I'll look for your replay later tonight and maybe respond. Thanks for the thoughtful discussion.\"" }, { "docid": "259227", "title": "", "text": "\"To summarize your starting situation: You want to: Possible paths: No small business Get a job. Invest the 300K in safe liquid investments then move the maximum amount each year into your retirement accounts. Depending on which company you work for that could include 401K (Regular or Roth), deductible IRA, Roth IRA. The amount of money you can transfer is a function of the options they give you, how much they match, and the amount of income you earn. For the 401K you will invest from your paycheck, but pull an equal amount from the remainder of the 300K. If you are married you can use the same procedure for your spouse's account. You current income funds any vacations or splurges, because you will not need to put additional funds into your retirement plan. By your late 30's the 300K will now be fully invested in retirement account. Unfortunately you can't touch much of it without paying penalties until you are closer to age 60. Each year before semi-retirement, you will have to invest some of your salary into non-retirement accounts to cushion you between age 40 and age 60. Invest/start a business: Take a chunk of the 300K, and decide that in X years you will use it to start a small business. This chunk of money must be liquid and invested safely so that you can use it when you want to. You also don't want to invest it in investments that have a risk of loss. Take the remaining funds and invest it as described in the no small business section. You will completely convert funds to retirement funds earlier because of a smaller starting amount. Hopefully the small business creates enough income to allow you to continue to fund retirement or semi-retirement. But it might not. Comment regarding 5 year \"\"rules\"\": Roth IRA: you have to remain invested in the Roth IRA for 5 years otherwise your withdrawal is penalized. Investing in stocks: If your time horizon is short, then stocks are too volatile. If it drops just before you need the money, it might not recover in time. Final Advice: Get a financial adviser that will lay out a complete plan for a fixed fee. They will discuss investment options, types not particular funds. They will also explain the tax implications of investing in various retirement accounts, and how that will impact your semi-retirement plans. Review the plan every few years as tax laws change.\"" }, { "docid": "343349", "title": "", "text": "You ever think it's Americans and not the workers? Hard to give up your 1gb speed to go to 2mb and no signal on your phone in bumpkinville for $5 over min wage breaking your back outside. To top it off not many people have the money to uproot their life and move out to the country for shit wages." }, { "docid": "87480", "title": "", "text": "I agree but... ( i didn't read the article in its entirety!) but if her business was grossing $300k per year... and for her to fall so hard in such a short time, tells me that even with such a large income, she was still living beyond her means." }, { "docid": "279356", "title": "", "text": "\"Having just come back from China, two things regarding its continued growth on this topic stuck out to me: 1) The need and want for high quality American Made goods - the Chinese acknowledge they are the kings at manufacturing things en masse, and that the Americans are the kings at making things that can last for life. 2) China is slowly starting to push manufacturing off to African countries as they continue to rise. Given that, it should be noted that once you leave a large city like Beijing or Shanghai and see the \"\"real China\"\" you can see how the country is artificially propped up by the government. Everything from real estate to its tech giants. A recession is looming there and could hit it hard. One quick edit: As Americans, we are often force fed this notion that the Chinese hate us, and all of this other nonsense. It is actually quite the opposite. While there is a fair level of blind kool-aid drinking and communist party following, the Chinese people actually love American citizens and very much want what we have. The Chinese word for United States is Měiguó, which means beautiful country.\"" }, { "docid": "20323", "title": "", "text": "If you invest in a 401(k), the shares in that plan are yours for as long as you live, or until you pull them out. So, if the employer is offering any sort of matching and those matched funds remain yours after you leave, then definitely contribute; that's an immediate return on your money. If the employer is NOT matching funds, then usually it is better to contribute to an IRA instead; you get the same income tax benefits from the deduction, without the headaches of going through your company (or the company from 3 jobs ago or whoever bought them) to get to your money. If I were in your position, the most I personally would do after I quit the company (which I'm assuming you'd be doing if you were going back to your country of origin) would be to have the 401k shares rolled over into a traditional IRA; that way I'd have more control over it from outside the country. Just keep the bank holding your IRA apprised of your movements around the world and how they can get ahold of you (it may be wise to grant a limited power of attorney to someone who will be staying in the U.S. if you don't want the bank mailing your statements all around the world), and the money can stay in an American account while you do whatever you have to outside it. As long as you don't take the money out in cash before you're 59 1/2 years old, you don't need to pay taxes or penalties on it. If you were to need it to cover unexpected expenses (perhaps relating to the aforementioned family emergency), then that decision can be made at that time. If you think that's even remotely likely, you may consider a Roth IRA. With a Roth, you pay the income taxes on your contributions, but the money is then yours; you can withdraw anything up to the total amount of your contributions without any additional taxes or penalties, and once you hit 59 and a half the interest also becomes available, also tax- and penalty- free. So if you had to leave the country and take a lot of cash with you, you could get out everything you actually put into a Roth with only minor if any transaction fees, and the interest will still be there compounding." }, { "docid": "311490", "title": "", "text": "\"I know something about this issue, so maybe I can put it into context from my world. One problem is that dairy farmers - like any small/mid-sized business - can only afford to pay so much in wages (especially factoring in the fact that the cost per employee is higher b/c employment taxes, maybe insurance, etc.). As a commodity, milk and feed (to make the milk) prices are set and any fluctuation is passed to the farmer, so it isn't like the costs of paying a higher wage can be passed directly on to the consumer. Also, the kind of work involved is not what most Americans are willing to do. There are 4 trailer parks within 5-15 minutes of the dairy farm here - and very seldom - if ever - has an American come asking for a job - when they did, they got a chance - at $12/hour and housing if needed. They never last long: drug/alcohol use, warrants, bad attitudes, absenteeism, mistreatment of the animals. Local workers simply are not dependable to show up on time, for every scheduled shift, and do a good job. Hispanic workers are paid the same wages. It isn't like 10-15 years ago when some jerk farmer thought he could cut his labor cost by paying half-wages to \"\"illegals\"\". Hispanics here have social networks, and know the value of their work. If they're not happy, underpaid, whatever - they will leave - and will instigate all the other Hispanics into leaving as well. Dairy farming is a hard, dangerous, smelly job that puts you out in the heat of summer, cold of winter, pouring rain, day and night, 24/7. If you paid a wage that compensates for that, there would be no dairy industry and if there were, its products would not be affordable. So the Hispanic workers get an ok wage to do a job that no American is willing to touch. And robots? They don't work that great either: expensive, constantly needing service - and the rats eat the power cables!\"" } ]

[ { "docid": "89008", "title": "", "text": "I believe so (that you can, not that you are greedy) I run my own business and, generally speaking, am 'charging' my company 40p per mile as per the quote above. I did not know about the ability to claim the shortfall, as it is not relevant to me, but it makes perfect sense and I'm sure that a phone call to HMRC will help you understand how to claim. As for the greedy question - personally I think that laws are there for a reason (both ways) so if there's money to be claimed - there's no reason not to do so, unless of course the hassle is greater than the potential gain. One last note - not sure exactly what the rules around this are, but I know that the allowance is not applicable for one's general commute and so if you're travelling to the same place over 40% of the time for more than two years you are no longer allowed to claim these miles." } ]

[ { "docid": "596518", "title": "", "text": "I was not able to find any authority for the opinion you suggest. Wash sale rules should, IMHO, apply. According to the regulations, you attribute the newly purchased shares to the oldest sold shares for the purposes of the calculation of the disallowed loss and cost basis. (c) Where the amount of stock or securities acquired within the 61-day period is less than the amount of stock or securities sold or otherwise disposed of, then the particular shares of stock or securities the loss from the sale or other disposition of which is not deductible shall be those with which the stock or securities acquired are matched in accordance with the following rule: The stock or securities acquired will be matched in accordance with the order of their acquisition (beginning with the earliest acquisition) with an equal number of the shares of stock or securities sold or otherwise disposed of. You can resort to the claim that you have not, in fact, entered into the contract within 30 days, but when you gave the instructions to reinvest dividends. I don't know if such a claim will hold, but to me it sounds reasonable. This is similar to the rules re short sales (in (g) there). In this case, wash sale rules will not apply (unless you instructed to reinvest dividends within the 30 days prior to the sale). But I'd ask a tax professional if such a claim would hold, talk to a EA/CPA licensed in your state." }, { "docid": "369419", "title": "", "text": "\"I would say similar rules apply in the US. If you have a net loss from rental property, you certainly can claim that loss against your personal income. There are various rules around this though that make it a bit less clear cut. If you are a \"\"real estate professional\"\", which basicly means you spend at least 750 hours per year working on your rental properties (or related activities), then all losses are deductible against any other ordinary income you have. If you aren't a \"\"real estate professional\"\", then your rental income is considered a \"\"passive activity\"\" and losses you can count against regular income are limited to $25,000 per year (with a carry-forward provision) and begin to phase out entirely if your income is between $100,000 and $150,000. So, the law here is structured to allow most small-time investors to take rental real estate losses against their ordinary income, but the income phase-out provision is designed to prevent the wealthy from using rental property losses to avoid taxation.\"" }, { "docid": "136862", "title": "", "text": "\"One common rule of thumb: you can probably get 4% or better returns on your investments ('\"\"typical market rate of return is 8%, derate to allow for inflation and off years). Figure out what kind of income you will want in retirement and divide by 0.04 to get the savings you need to accumulate to support that. This doesn't allow for the fact that your needs are also going to increase with inflation; you can make a guess at that and use an inflated needs estimate. Not sophisticated, not precise, but it's a quick and dirty ballpark estimate. And sometimes it's surprisingly close to what a proper model would say.\"" }, { "docid": "45090", "title": "", "text": "It might not be leniency for first time payers, but they do have programs, some federal some local, that help the poor and elderly complete their tax forms. There are also programs that allow the poor to file electronically for free. For most people the first time they file their taxes they are using the EZ form. Which is rather easy to do, even without the use of either web based or PC based software. The software tools all ask enough questions on the EZ forms to allow the user to know with confidence when their life choices have made it advantageous to use the more complex forms. The web versions of the software allow the taxpayer to start for free, thus reducing their initial investment for the software to zero. Because the first time filer is frequently a teenager the parents are generally responsible for proving that initial guidance. The biggest risk for a young taxpayer might be that the first year that itemizing deductions might be advantageous. They might never consider it, so they over pay. Or they discover in April that if they had only kept a receipt from a charity six months ago they could deduct the donation, so they are tempted to claim the donation without proof. Regarding leniency and assistance there is an interesting tax credit. The Earned Income Tax Credit. it gives a Tax credit to the working poor. They alert people that they need to Check Your Eligibility for the Earned Income Tax Credit They know that significant numbers of taxpayers fail to claim it. EITC can be a boost for workers who earned $50,270 or less in 2012. Yet the IRS estimates that one out of five eligible taxpayers fails to claim their EITC each year. The IRS wants everyone who is eligible for the credit to get the credit that they’ve earned. The rules for getting the credit are simple, all the information needed to claim it is already on the basic tax forms, but you have to know that you need a separate form to get the credit. But instead of making the credit automatic they say: If you use IRS e-file to prepare and file your tax return, the software will guide you and not let you forget this important step. E-file does the work and figures your EITC for you! and then : With IRS Free File, you can claim EITC by using brand name tax preparation software to prepare and e-file your tax return for free. It's available exclusively at IRS.gov/freefile. Free help preparing your return to claim your EITC is also available at one of thousands of Volunteer Income Tax Assistance sites around the country. To find the volunteer site nearest to you, use the VITA locator tool on IRS.gov. But if you don't use free file you might never know about the form. Apparently it escapes 20% of the people who could claim it." }, { "docid": "30935", "title": "", "text": "\"No, I do not. The advice is to take advice :-) but it is not required. Several \"\"low cost\"\" SIPPs allow an \"\"Execution Only\"\" transfer from some pensions (generally not occupational or defined benefits schemes [where transfers are generally a bad idea anyway] but FAVCs such as mine are ok). Best Invest is one such, and the fees are indeed relatively low. As far as anyone knows, the government's plans for changes to rules on using pension funds would still apply even once I've transferred my pension pot and begun to withdraw funds (provided I don't commit myself to an annuity or other irrevocable investment). I am not a financial adviser, nor employed or otherwise connected with Best Invest, and I'm not endorsing their SIPP schemes, just giving them as an example of what can be done. [Added after I carried out my plan] I found the process very straightforward; I needed to apply for a pension fund with my new provider and fill in a transfer form, which set up the scheme and transferred the funds with no expense required. Once the money arrived in my pension account I filled in another form to take the lump sum and set up regular withdrawals from the fund. I had my lump sum within a couple of months of initiating the transfer. I'm very happy I did not take independent advice because it would have been very poor value for money. During my researches I was approached eagerly by one firm promising to get me my money quick and claiming to be an independent financial advisor. Luckily I mistrusted the service they offered.\"" }, { "docid": "355686", "title": "", "text": "\"This is not a mistake. This is done for \"\"Out of Network\"\" providers, and mainly when the patient is an Anthem member, be it Blue Shield or Blue Cross. Even though an \"\"Assignment of Benefits\"\" is completed by the patient, and all fields on the claim from (CMS1500 or UB04) are completed assigning the benefits to the provider, Anthem has placed in their policy that the Assignment of Benefits the patient signs is null and void. No other carrier that I have come across conducts business in this manner. Is it smart? Absolutely not! They have now consumed their member's time in trying to figure out which provider the check is actually for, the member now is responsible for forwarding the payment, or the patient spends the check thinking Anthem made a mistake on their monthly premium at some point (odds are slim) and is now in debt thousands of dollars because they don't check with Anthem. It creates a huge mess for providers, not only have we chased Anthem for payment, but now we have to chase the patient and 50% of the time, never see the payment in our office. It creates more phone calls to Anthem, but what do they care, they are paying pennies on the dollar for their representatives in the Philippines to read from a script. Anthem is the second largest insurance carrier in the US. Their profit was over 800 million dollars within 3 months. The way they see it, we issued payment, so stop calling us. It's amazing how they can accept a CMS1500, but not follow the guidelines associated with it. Your best bet, and what we suggest to patients, either deposit the check and write your a personal check or endorse and forward. I personally would deposit the check and write a personal check for tracking purposes; however, keep in mind that in the future, you may depend on your bank statements for proof of income (e.g. Social Security) and imagine the work having to explain, and prove, a $20,000 deposit and withdraw within the same month.\"" }, { "docid": "4167", "title": "", "text": "\"I am not aware of any place that the tax forms ask, \"\"How many people live in your house?\"\" They ask how many dependants you have, and not everyone who lives in your house is your dependant. There are very specific rules about that. If your girlfriend is being claimed as a dependent on her parents' tax return, then she cannot also be claimed on anyone else's return, and there's no need to investigate further. To claim someone as a dependent, they have to meet a number of conditions. I am not a lawyer. See IRS Publication 17. But the gist of it is that they must, (a) either be a relative (there's a list of what sorts of relatives qualify) or live with you all year; (b) Living with you must not violate local law; (c) Must make less than $4000 per year; and (d) You must provide over half of their support. Your girlfriend may meet the \"\"live with you all year\"\" or maybe not. But the real stumper is likely to be (d). Unless your parents are paying her tuition, they almost certainly don't meet this test.\"" }, { "docid": "396066", "title": "", "text": "Yes, if you can split your income up over multiple years it will be to your advantage over earning it all in one year. The reasons are as you mentioned, you get to apply multiple deductions/credits/exemptions to the same income. Rather than just 1 standard deduction, you get to deduct 2 standard deductions, you can double the max saved in an IRA, you benefit more from any non-refundable credits etc. This is partly due to the fact that when you are filing your taxes in Year 1, you can't include anything from Year 2 since it hasn't happened yet. It doesn't make sense for the Government to take into account actions that may or may not happen when calculating your tax bill. There are factors where other year profit/loss can affect your tax liability, however as far as I know these are limited to businesses. Look into Loss Carry Forwarded/Back if you want to know more. Regarding the '30% simple rate', I think you are confusing something that is simple to say with something that is simple to implement. Are we going to go change the rules on people who expected their mortgage deduction to continue? There are few ways I can think of that are more sure to cause home prices to plummet than to eliminate the Mortgage Interest Deduction. What about removing Student Loan Interest? Under a 30% 'simple' rate, what tools would the government use to encourage trade in specific areas? Will state income tax deduction also be removed? This is going to punish those in a state with a high income tax more than those in states without income tax. Those are all just 'common' deductions that affect a lot of people, you could easily say 'no' to all of them and just piss off a bunch of people, but what about selling stock though? I paid $100 for the stock and I sold it for $120, do I need to pay $36 tax on that because it is a 'simple' 30% tax rate or are we allowing the cost of goods sold deduction (it's called something else I believe when talking about stocks but it's the same idea?) What about if I travel for work to tutor individuals, can I deduct my mileage expenses? Do I need to pay 30% income tax on my earnings and principal from a Roth IRA? A lot of people have contributed to a Roth with the understanding that withdrawals will be tax free, changing those rules are punishing people for using vehicles intentionally created by the government. Are we going to go around and dismantle all non-profits that subsist entirely on tax-deductible donations? Do I need to pay taxes on the employer's cost of my health insurance? What about 401k's and IRA's? Being true to a 'simple' 30% tax will eliminate all 'benefits' from every job as you would need to pay taxes on the value of the benefits. I should mention that this isn't exactly too crazy, there was a relatively recent IRS publication about businesses needing to withhold taxes from their employees for the cost of company supplied food but I don't know if it was ultimately accepted. At the end of the day, the concept of simplifying the tax law isn't without merit, but realize that the complexities of tax law are there due to the complexities of life. The vast majority of tax laws were written for a reason other than to benefit special interests, and for that reason they cannot easily be ignored." }, { "docid": "50357", "title": "", "text": ">“If you were to disallow deductions for settlements, then that would create an incentive for companies to litigate the case all the way to a trial verdict,” Victor Fleischer, a tax law professor at the University of Colorado, said. “If the company had to pay a claim in that instance, it would be deductible. That’s not wise public policy either.” Huh? First of all, if the deduction were disallowed why would the payment of a claim at the end of a trial be deductible? Second, part of the problem, which is unaddressed in the article, is that the companies paying these fines typically sign agreements that admit liability for the fine but deny all aspects of wrongdoing. Thus, there is no precedent set and there are no guidelines to follow in the future. As such, the result of a trial would actually be instructional to future participants in these markets. Similarly, it might actually result in personal liability for the worst offenders in the organizations." }, { "docid": "106735", "title": "", "text": "Your parents would not be able to claim her as a dependent as multiple people are not allowed to claim a single person as a dependent. Utilize the IRS website to show who you are and are not allowed to claim (https://www.irs.gov/uac/Who-Can-I-Claim-as-a-Dependent%3F)." }, { "docid": "593153", "title": "", "text": "Smartphone? GPS? If you have really absurd rules, your enforcers might require you to put up several signs to notify others about your policing of absurd acts like possessing dried plants in public, or whatever. Humans, being smart and reactive (not passive) animals, will naturally gravitate towards the most reasonable rules and perhaps change their own to match the prevailing norms, because those who had absurd rules would not be dealt with much. Perhaps package deliveries would not be allowed to any house that allows murder, rape, theft... and nobody would want to do any business with someone who allowed violent crimes. They'd be ostracized. If humans can establish a complex internet system, complete with tubes and kitten pics, we can establish a way to let every property owner establish their own rules and then innovate from there with social and trade consequences for those who have stupid rules. The basic premise is that, if you own your own house, you should have control over it, but you must pay the consequences if your rules make others not want to come or do any business with you. No monopoly should be able to apply their own rules against you. A texan like George Bush should have no power over a New York City resident, and vice versa." }, { "docid": "222914", "title": "", "text": "\"I want to caveat that I am not an active investor in Australia, you most likely should seek out other investors in your market and ask them for advice/mentorship, but since you came here I can give you some generalized advice. When investing in real estate there are a two main rules of thumb to quickly determine if the property will be a good investment. The 50% rule and the 2% (or 1%) rule. The 50% rules says that in general 50% if the income from the property will go to expenses not including debt service. If you are bringing in $1000 a month 500 of that will go to utilities, taxes, repair, capital expenditures, advertising, lawn care, etc. That leave you with 500 to pay the mortgage and if anything is left that can be cash flow. As this is your first property and it is in \"\" a relatively bad neighbourhood\"\" you might consider bumping that up to 60% just to make sure you have padding. The 1 or 2% rules says that the monthly rent should be 1(or 2) percent of the purchase price in this case the home is bought at 150,000. If the rent is 1,500 a month it might be a good investment but if it rents for 3,000 a month it probably is a good investment. There are other factors to consider if a home meets the 2% rule it might be in a rough neighborhood which increases turnover which in general is the biggest expense in an investment property. If a property meets one or both of these rules you should take a closer look at it and with proper due diligence determine that it is a deal. These rules are just hard and fast guidelines to property analysis, they may need to be adapted to you market. For example these rules will not hold in most (all?) big cities.\"" }, { "docid": "173212", "title": "", "text": "\"I would say to only bother keeping the ones you know you'll use for itemized deductions. This includes any unreimbursed business expenses and vehicle licensing fees. There are a lot of other itemized tax deductions possible, but those are two common ones. Also, keep track of your business mileage (mileage before and after the trip, and commuting doesn't count as \"\"business mileage\"\"). You may also want to keep receipts of all out-of-state purchases if your state is one of those that tries to collect state tax on out-of-state purchases. Ensure your supported charities are 501(c)(3), and they'll give you a receipt at the end of the year. Don't bother keeping fast food or gas receipts (unless they're business expenses).\"" }, { "docid": "597328", "title": "", "text": "I want to know it is taxable any guidelines As per the income tax rules, this is taxable to you. The amount will be treated as gift to you. The limit of this in a year [across all friends] is Rs 50,000. If the limit exceeds, the entire amount is taxable. You would need to declare this as other income and pay taxes as per your tax brackets." }, { "docid": "326451", "title": "", "text": "Your bank does not know about any SEPA Mandat you declare, until it gets in use. When the optionees withdraw money from your Account, they have to authenticate with the given Mandat and at this point your bank knows about that Mandat wich has an expiry date. According to the guidelines of the European Central Bank, your bank is not in duty to bookmark the expiration date. However, I'd assume they do anyway due they are allowed to and it makes things easier. Additional, if you can tell who the optionee is, you can block the withdraw before it happened. In any case, you have to call your bank." }, { "docid": "113948", "title": "", "text": "Yes, an overall $500 loss on the stock can be claimed. Since the day trader sold both lots she acquired, the Wash Sale rule has no net impact on her taxes. The Wash Sale rule would come into play if within thirty days of second sale, she purchased the stock a third time. Then she would have to amend her taxes because claiming the $500 loss would no longer be a valid under the Wash Sale rule. It would have to be added to the cost basis of the most recent purchase." }, { "docid": "588372", "title": "", "text": "Your administrator will pull from last year's funds first, before automatically moving on to the new year. The procedures are under guidelines from the IRS so it should be pretty standard. You likely only have to submit the claim once, but your administrator may have a special grace period form to fill out." }, { "docid": "246624", "title": "", "text": "\"First of all, the annual returns are an average, there are probably some years where their return was several thousand percent, this can make a decade of 2% a year become an average of 20% . Second of all, accredited investors are allowed to do many things that the majority of the population cannot do. Although this is mostly tied to net worth, less than 3% of the US population is registered as accredited investors. Accredited Investors are allowed to participate in private offerings of securities that do not have to be registered with the SEC, although theoretically riskier, these can have greater returns. Indeed a lot of companies that go public these days only do so after the majority of the growth potential is done. For example, a company like Facebook in the 90s would have gone public when it was a million dollar company, instead Facebook went public when it was already a 100 billion dollar company. The people that were privileged enough to be ALLOWED to invest in Facebook while it was private, experienced 10000% returns, public stock market investors from Facebook's IPO have experienced a nearly 100% return, in comparison. Third, there are even more rules that are simply different between the \"\"underclass\"\" and the \"\"upperclass\"\". Especially when it comes to leverage, the rules on margin in the stock market and options markets are simply different between classes of investors. The more capital you have, the less you actually have to use to open a trade. Imagine a situation where a retail investor can invest in a stock by only putting down 25% of the value of the stock's shares. Someone with the net worth of an accredited investor could put down 5% of the value of the shares. So if the stock goes up, the person that already has money would earn a greater percentage than the peon thats actually investing to earn money at all. Fourth, Warren Buffett's fund and George Soros' funds aren't just in stocks. George Soros' claim to fame was taking big bets in the foreign exchange market. The leverage in that market is much greater than one can experience in the stock market. Fifth, Options. Anyone can open an options contract, but getting someone else to be on the other side of it is harder. Someone with clout can negotiate a 10 year options contract for pretty cheap and gain greatly if their stock or other asset appreciates in value much greater. There are cultural limitations that prompt some people to make a distinction between investing and gambling, but others are not bound by those limitations and can take any kind of bet they like.\"" }, { "docid": "39734", "title": "", "text": "No, you may not deduct the charitable contributions of your children. The Nest covers this in detail: The IRS only allows you to deduct charitable contributions that you personally funded, whether the contribution was made in your name or in someone else's. If your child or dependent makes a donation to a charity, you are not allowed to claim it as a tax deduction. This is true even if your dependent does not claim the contribution on his own tax return because he opts for the standard deduction rather than itemizing or claims exemption. Now, had you constructed the transaction differently, it's possible you could've made the contribution in your child's name and thus claimed the deduction. Allowance is technically a gift, and if she agrees to forgo allowance in exchange for you making a contribution, well, the IRS can't really complain (though they might try if it were a large amount!). Contributions in the name of someone else, but funded by yourself, are deductible: [Y]ou can deduct contributions you make in someone else’s name. So if you donated a certain amount of money to XYZ charity in your child’s name, for example, you would be able to deduct this amount on your taxes, as long as the deduction requirements are met. You will need to keep accurate records of the payment along with the receipt from the organization to prove you financed the donation." } ]

[ { "docid": "178127", "title": "", "text": "\"The comments are getting too much, but to verify that you are not insane, you are being bullied. It sounds like this is a sub-prime loan, of which you are wisely trying to get out of. It also sounds like they are doing everything in their power to prevent you from doing so. For them you are a very profitable customer. This might take some legwork for you, but depending on how bad they are violating the law they might be willing to forgive the loan. What I am trying to say, it might be very worth your while! Your first step will be looking for any free resources at your disposal: Just be cautious as many \"\"credit representation\"\" type business are only offering loan consolidation. That is not what you need. Fight those bastards!\"" } ]

[ { "docid": "455470", "title": "", "text": "I don't want to get in the middle of a fight between you and your fiancee. Well, I suppose if she gets mad at me she can't break up with me or anything. But I'd say that you were right. Say you took the job. After 3 months there are 3 possibilities: The job becomes permanent. Hooray, everybody's happy. They say sorry, there is no long term position for you here, good bye. Now you've already quit your last job, this job is gone, and you're on the street. I don't know what the job market is like for people with your particular skills, but at the very least it would be inconvenient, and if you can't find another job quickly, you could be in serious trouble. They say they can give you a permanent job, but the pay, benefits, working conditions, whatever, will not be the same as they were for the temporary job. Now you're in a very poor negotiating position, as if you turn down any offer they make, you're unemployed. Something similar to this happened to me once: I quit my job to take a position with a contracting company. They placed me on a contract making a good salary, all around nice job. Then after a year I was told that the client wanted to turn this into a full time position. They were pleased with my work and were happy to hire me for the full-time job ... but the pay would be $15,000 less than what I was making as a contractor. I had already quit my previous job and moved to a new city. I had very little negotiating leverage. I basically had to take the job or be unemployed. @DStanley says you should have discussed this with your fiancee before making the decision. Fair enough, probably so. This is the sort of issue that can break up a relationship -- I mean radically different ideas about the proper balance between opportunity and security. Better to find out when you're engaged than after you're married. And if you were married you should certainly discuss such things with your wife and at least hear what she has to say before making a decision." }, { "docid": "433066", "title": "", "text": "\"Consumer Reports offers a service that can tell you detailed actual cost to a dealer for a specific model and accessories -- real cost after rebates, not just invoice price. It costs a bit to order these reports, but if you are serious about buying a new car they are a highly recommended tool -- cu is independent and will give you the best info available, and simply walking into the dealership with the report in your hand can save huge amounts of negotiating. \"\"If you can give it to me for $500 over the real price, as shown here, I'll sign now.\"\" Of course, standard advice is that it's usually better to buy a recent-model used car. I believe cu has other reports that can help you determine what a fair price is in that case, but usually I just bring it to a trusted garage and pay them to tell me exactly how much work it needs and whether they think it's worth the asking price.\"" }, { "docid": "463568", "title": "", "text": "if I open current accounts with all these institutions, will they know if I move money between them, i.e. from the one I pay my salary to, to the next, to the next etc. Of course they will know. After all you will provide the account numbers for transferring the money. Regarding the intent of transfer they don't care. They only care the about the amount coming in regularly. refuse to give me the rates and bonuses I want For this I will go through their terms and conditions and you should do it. Check for any excluded conditions. Read between the lines. But check on what amount will you be getting the interest. Most of these accounts pay interest daily and on the amount in the account in a day. So you might not be generating much of an interest in those accounts if you don't have a substantial balance." }, { "docid": "322238", "title": "", "text": "That totally sucks! I use Avis for work once a year when I'm flown out to corporate and both times I've done so they've managed to fuck up in regards to my reservation. The first time I received an email from them thanking me for using their service when I still had the car and saw a new $300 charge on my credit card. When I called to inquire about the car I had rented 3 days earlier that was still in my possession they informed me that the vehicle had been checked into one of their depots 2300 miles away and they were citing a fee for returning the vehicle to another location. When I asked the agent how many miles were recorded driven on the vehicle she responded with 108. I then asked her how far she thought Chicago was from San Francisco and if it was possible to drive that distance in 3 days while only incurring 108 miles on the vehicle. In the end, they refused to back down and I had to involve corporate to settle everything. The second issue was much less eventful but happened a week ago when I checked out a car. I received an email 2 hours later saying they're sorry my car hadn't been available and to call them for an explanation. Puzzled as I had gotten the car I had asked for I called and was told that their system says I had checked out and in the very same car I had the previous day at 8:34pm (check in and check out were recorded as the same time, same day) and they charged me $50 for a single day's rental. This time they recognized that it was an error and credited me back the money on my CC but I don't know why they have so many issues with their reservation system." }, { "docid": "210958", "title": "", "text": "\"This article feels like a project by an editor to see how well his new hire can write a \"\"finance\"\" article. Low hanging fruit: explain Tesla's junk rating compared to Ford's. The conclusion I was hoping he reached, which is my belief, is that Musk flys to close to the sun trying to balance expansion and debt with cash flows and revenue. If they fail Ford's the best positioned car manufacturer in my opinion. Sure, the Volvo's of the world are going all electric, but that's not what makes Tesla appealing in my opinion. They're a tech company masked as a car company. Ford is a car company trying to pivot to a tech company. Electric isn't the future, the vehical cloud is. Someone has to make these cars. Google or apple won't. Ford will hopefully build and service their own.\"" }, { "docid": "340287", "title": "", "text": "\"With that credit rating you should have no trouble getting a rate in that range. I have a similar credit score and my credit union gave me a car loan at 1.59%. No haggling required. In regards to your question, I think you have it backwards. They are more likely to give you a good rate on a high balance than a low one. Think about it from the bank's perspective... \"\"If I give you a small sale, will you give me a discount?\"\" This is the question you are asking. Their profit is a factor of how much you borrow and the interest rate. Low rate=less profit, low financing amount = less profit. The deal you proposed is a lose-lose for them.\"" }, { "docid": "585815", "title": "", "text": "We're pretty small about 20 employees. He refuses to allow me to get a second office person claiming he does not get along with other people. The issue is I've had him for such a long time I don't wanna break an 8 year employer relationship over something like that. I also believe there are ways around money tracking. For example he can add extra hours on employee time sheets and have it cashed and then keep the extra money after employees are paid. He always puts emphasis on how much good he does for the company when he's just doing his job. I'm looking for any kind of bait I can throw or some kind of trick. My friend was telling me what he did is give his employee an unexpected paid vacation and she had no time to cover her trail. Are there other things like this I can try?" }, { "docid": "516076", "title": "", "text": "\"I just don't know how else an employee gains any bargaining power without one? It seems to me in companies in my industry that those without unions bargain their own wage in secret. Then the company wins because its me vs you all the time. A union makes wages and benefits more transparent. You can pick up a copy of my collective bargaining agreement and see what everyone makes. Also you gain the backing legally with resources not available to most persons on their own. I just don't know another way employees can have any \"\"advantage\"\" in a common workplace.\"" }, { "docid": "329620", "title": "", "text": "The moment that you start to rent your car to strangers you are talking about using your car as a business. Will it be financially advantageous? If you can convince somebody to rent your vehicle for more than your required monthly payments then it might be. Of course you have to determine what would be the true cost of ownership for you. It could include your auto loan, and insurance, but you would be saving on the garage costs. Of course if you don't have it rented 100% of the time you will still have some costs. Your insurance company will need to know about your plan. They charge based on the risk. If you aren't honest about the situation they won't cover you if something goes wrong. The local government may want to know. They charge different car registration fees for businesses. If there are business taxes they will want that. Taxes. you are running a business so everybody from the federal governemnt to the local government may want a cut. Plus you will have to depreciate the value of the item. Turning the item from a personal use item to a business item can have tax issues. If you don't own it 100% the lender may also have concerns about making sure their collateral survives. Is it safe? and from the comments to the question : Should I do a contract or something that would protect me? Nope. it isn't safe unless you do have a contract. Of course that contract will have to be drawn up by a lawyer to make sure it protects you from theft, negligence, breach of contract.... You will have to be able to not just charge rent, but be able to repossess the car if they don't return it on time. You will have to be able to evaluate if the renter is trustworthy, or you may find your car is in far worse shape if you can even get it back." }, { "docid": "110953", "title": "", "text": "I do this all the time, my credit rating over time plotted on a graph looks like saw blades going upward on a slope I use a credit alert service to get my credit reports quarterly, and I know when the credit agencies update their files (every three months), so I never have a high balance at those particular times Basically, I use the negative hard pulls to propel my credit score upwards with a the consequentially lowered credit utilization ratio, and the credit history. So here is how it works for me, but I am not an impulse buyer and I wouldn't recommend it for most people as I have seen spending habits: Month 1: charge cards, pay minimum balance (raises score multiple points) Month 2: PAY OFF ALL CREDIT CARDS, massive deleveraging using actual money I already have (raises score multiple points) Month 3: get credit report showing low balance, charge cards, pay minimum balance ask for extensions of credit, AND followup on new credit line offers (lowers score several points per credit inquiry) Month 4: charge cards, pay minimum balance, discretionally approving hard pulls - always have room for one or two random hard pulls, such as for a new cell phone contract, or renting a car, or employment, etc Month 5: PAY OFF CREDIT CARDS using actual money you have. (the trick is to NEVER really go above a 15% credit utilization ratio, and to never overleverage. Tricky because very quickly you will get enough credit to go bankrupt) Month 6: get credit report showing low balances, a slight dip in score from last quarter, but still high continue." }, { "docid": "374334", "title": "", "text": "It is possible for an employer to check your credit score and it is legal. As long as you give them permission. You have every right to refuse BUT the employer also has the right to not give you a job. The reason is to get an overall feeling for your integrity, discipline, and lifestyle. People in debt are more likely to embezzle, etc. A low credit score can also indicate that you make poor choices in your financial and purchasing deals. If you are refused a job you are qualified under the Fair Credit Reporting Act to get a copy of your credit report. Source - Legal Match" }, { "docid": "202933", "title": "", "text": "“Chase’s tellers do not have the authority to close an account…” That’s a “truthy” bit of bullshit. Yes, a teller themselves do not have the authority to close an account. But if you are the owner of the account and you state to the teller that you would like to withdraw all of your money into a cashier’s check so as to close the account they cannot refuse you. Since they fed you this nonsense, they might play some delaying tactics like calling a manager and having them talk to you tough the window and such. But just stand your ground and state you would like to close the account and withdraw all funds. Now if they were extra slimy and if you were to withdraw all funds but they let the zero balance float for a bit so they could claim a fee on you, bullshit once again. You should take any notice of fees coupled with a dated receipt showing the date you withdrew funds, go to the branch and complain to the manager right away. State clearly you will not pay any fees and you would like written verification that your account is closed. Also—and this goes without saying and is implied above—but be sure to keep copies of all if your receipts and transactions. If they state they want to hold onto something, demand they make a copy. And for your own safety/sanity keep your own backup copies somewhere safe at home. All of that said, I have seen modern consumer bankers really act like a bunch of slimeballs in the past decade or so, but generally this has still been an exception to the rule. The reality is if you do not want to have your money in their bank it’s in their best interest to let go of you as soon as possible; especially if you have a small amount of money such as $1,500 at stake. Remember your rights as a consumer, remember it’s your money and remember—and remind them—that you can report them if they deny you reasonable access to your funds." }, { "docid": "456887", "title": "", "text": ">> Hey! Do you mind giving your credit card to the waiter... > I'm not especially fond of that, but it's easy to report fraud to the bank and most of the time the bank will reverse the charges. No kidding! Of course, even I give credit cards to waiters. What do I care? **As you said, you are not liable to any fraud on your credit card.** None at all!!!! It's only Merchant, not the credit card company, that pay the price for fraud... **and you pay higher prices to cover for losses from fraud.** > The PIN situation is different because a mugging is life-threatening. Nonsense! Mugging at the ATM is so rare, each ATM has a camera. **In any case, I am not talking about using PIN to withdraw money!** I am talking about PIN to authorize charges on a credit card or ATM card. >> We already determined that nobody even care about signatures or check them. > You can't use a stolen card at an ATM with a signature. Huh? You totally got it wrong what I said, or, you argue for the sake of argument. **I am saying that cards that require you to enter a PIN cannot be used used when stolen or copied. Yes or no?** **On the other hand, cards that require signature can be used when stolen or copied because signature is a worthless method to validate the charge. Yes or no?** LASTLY, my Costco credit card has a picture of me on it. **Question for you, since for some reason you argue so much against PINs: Wouldn't a picture on the card better than a signature?** Yes or no? Do you see? There are so many ways to make this system so much more secure and fraud proof... but, ON PURPOSE, the credit card companies don't want that... because they are not liable for fraud. Simple as that." }, { "docid": "5940", "title": "", "text": "\"Yes, your privacy is invaded, that's the law in many jurisdictions. The goal is to make money laundering and financing Evil Things harder. That's why banks are required to request proof for every money transfer larger than a specific sum. This is only a minor issue most of the time. You will have some kind of agreement with that Money Management company and this agreement (or a copy of it) will serve as a proof of your lawful reason to transfer money. It works just like that - you get to the bank and say you want to initiate a money transfer, the clerk asks you to show the \"\"proof\"\", you give them your agreement or a bill that requests you to pay or whatever else document you may have that proves that you're bound by some kind of contract with the recipient of money. The clerk then makes a copy of the \"\"proof\"\" and it stays in the bank to back the transfer until it is completed. The copy is then stored for some time and later destroyed - that's up to how the bank handles documents.\"" }, { "docid": "188423", "title": "", "text": "As a customer I absolutely hate aggressive marketing . If a shop aggressively markets to me I avoid it - this is why I avoid [Shell](http://www.shell.com/) and [WHSmith](http://whsmith.com/) . It is also why I prefer to shop at [Morrisons](http://www.morrisons.co.uk/) rather than at [Tesco](http://www.tesco.com/) ( although I will use the machines there ) . And it is also why , as a corpoprate and as a personal buyer , after 15 years , I will no longer be buying Toshiba - their laptops now come infested with spyware and adware . I also pulled out of LinkedIn when they started spamming me repeatedly despite me saying no marketing emails . I also avoid getting my car serviced in the UK because of all the agressive marketing . I don't put my details on marketing lists - I keep very tight control of address details including email addresses and I use source based email addresses so I can easily cut out any offending party . Re, Ford - why does he \\ they no longer sell just black cars ?! The companies that do their marketing well succeed very well . From what I have read [Steam](http://store.steampowered.com/) is one of these . We have a massive situation at the moment where many of the large corporations are having huge problems with getting sufficient sales - they are going the way of the dinosaurs . Part of this is that their customer base has been so impoverished that they can't afford to buy their products . But a large part of it is that they no longer supply the products , the price and the service that the customers are looking for . So customers look elsewhere and they get elsewhere - they find the products they want at a good price and with good service on the Internet and these are usually supplied by small and medium sized companies that are much more nimble . It's a case of bottom up progressive evolution winning over top down mass extinction events . There are a number of products that I have difficulty locating . One such range is men's clothes . The main stores don't stock what I am looking for . I can find what I am looking for in the odd small store in some parts of the world some of the time and I can find what I am looking for on the Internet - if the vendor's web site would work . Does this mean that I walk around dressed like a 15yr old ? No ! - it means that I hold off purchases - things that I would normally purchase every 2 years now get purchased every 6 years ." }, { "docid": "180295", "title": "", "text": "I am going to give advice that is slightly differently based on my own experiences. First, regarding the financing, I have found that the dealers do in fact have access to the best interest rates, but only after negotiating with a better financing offer from a bank. When I bought my current car, the dealer was offering somewhere around 3.3%, which I knew was way above the current industry standard and I knew I had good credit. So, like I did with my previous car and my wife's car, I went to local and national banks, came back with deals around 2.5 or 2.6%. When I told the dealer, they were able to offer 2.19%. So it's ok to go with the dealer's financing, just never take them at face value. Whatever they offer you and no matter how much they insist it's the best deal, never believe it! They can do better! With my first car, I had little credit history, similar to your situation, and interest rates were much higher then, like 6 - 8%. The dealer offered me 10%. I almost walked out the door laughing. I went to my own bank and they offered me 8%, which was still high, but better than 10%. Suddenly, the dealer could do 7.5% with a 0.25% discount if I auto-pay through my checking account. Down-payment wise, there is nothing wrong with a 35% down payment. When I purchased my current car, I put 50% down. All else being equal, the more cash down, the better off you'll be. The only issue is to weigh that down payment and interest rate against the cost of other debts you may have. If you have a 7% student loan and the car loan is only 3%, you're better off paying the minimum on the car and using your cash to pay down your student loan. Unless your student loan balance is significantly more than the 8k you need to finance (like a 20k or 30k loan). Also remember that a car is a depreciating asset. I pay off cars as fast as I can. They are terrible debt to have. A home can rise in value, offsetting a mortgage. Your education keeps you employed and employable and will certainly not make you dumber, so that is a win. But a car? You pay $15k for a car that will be worth $14k the next day and $10k a year from now. It's easy to get underwater with a car loan if the down payment is small, interest rate high, and the car loses value quickly. To make sure I answer your questions: Do you guys think it's a good idea to put that much down on the car? If you can afford it and it will not interfere with repayment of much higher interest debts, then yes. A car loan is a major liability, so if you can minimize the debt, you'll be better off. What interest rate is reasonable based on my credit score? I am not a banker, loan officer, or dealer, so I cannot answer this with much credibility. But given today's market, 2.5 - 4% seems reasonable. Do you think I'll get approved? Probably, but only one way to find out!" }, { "docid": "416317", "title": "", "text": "\"That's not the case where I'm located. Techs are hired \"\"temp to hire\"\" on contract. They are paid less than permanent employees. They aren't given any of the benefits of permanent employees. They are, just as the article says, treated like second class employees. Even third class at one company I worked for. And they are strung along with \"\"we just aren't hiring right now\"\" lines and told \"\"we'll extend your contract again and see if we are hiring at the end next time\"\". I was laid off from a full time position because we were bought out by another company. I spent 7 months unemployed. I got a call for contract work and it only lasted two weeks. I was paid significantly less than my previous full time job and was not offered any kind of benefits at all. When that contract was up I was offered a contract at another company. Again, I was paid significantly less than I was making before and I was strung along by that company for two years before another contract offered me more money. With that contract I was finally getting paid what I was getting paid at my last permanent position, but again I did not receive the same benefits as a full time employee. That contract let me go after 18 months due to policy that they couldn't string contractors along. I was told that I could wait 6 months and be hired again, though! I then spent four months unemployed until I found my next contract which then hired me full time after 6 months. I've been full time for 2 years here now, but who knows how long that'll last. I've seen companies suddenly \"\"restructure\"\", which means they bring in H1Bs. And I can't even blame this on me being a low level tech with no marketable skills. I've been in IT professionally for just a few months shy of 20 years. I've done everything from technical support, to security, to software QA, to system administration. I'm now in a job specializing in hardware. I have a resume that could be pages long with many different skill sets and roles. This is typical for nearly all of the contractors I know in this area. I run into people I know all the time floating from company to company around here. We're passed around like disposable commodities. But mention the word \"\"union\"\" and you'll get replaced with H1Bs. The tech industry is shitty that way.\"" }, { "docid": "296750", "title": "", "text": "\"Buried on the IRS web site is the \"\"Fillable Forms Error Search Tool\"\". Rather than including an explanation of errors in the rejection email itself, you're expected to copy and paste the error email into this form, which gives more details about what's wrong. (Don't blame me; I didn't design it.) If I copy your error message in, here's the response I get: There is an error with the “primary taxpayer’s Date of Birth” in Step 2 Section 4. The date of birth that was entered does not match IRS records. Make sure you enter the correct birth date, in the correct format, in the correct space. Scroll down, and enter the current date (“Today’s date”). Today’s date is the day you intend to e-file the return again. Also, if you are making an electronic payment you must re-date that section. E-File your return. You say that you've already checked your birthday, so I don't know as this is particularly helpful. If you're confident that it's correct and in the right place, I think your next step needs to be contacting the IRS directly. They have a link at the bottom of the error lookup response on how to contact them specifically about their solution not working, or you could try contacting your local IRS office or giving them a call.\"" }, { "docid": "404833", "title": "", "text": "I actually just did that with my Chase Freedom card. They rotate categories every 3 months, and from April-June it was 5% back at grocery stores. So I bought a ton of gas cards and got my 5% back. Next I figured out I would be clever and buy a ton of store gift cards (grocery gift cards) right at the end of the quarter, then use those in the future to purchase gas cards. Well, I just tried that a couple days ago and discovered the store refuses to sell a gift card if you're paying with a gift card! So now I'm stuck with $1,000 in grocery cards until I use them in actual grocery purchases haha One of the things about this grocery store is they partner with a gas station on their rewards program. They offer 10 cents off a gallon with every $100 spent in store, and they double it to 20 cents off a gallon if you buy $100 in gift cards. Then on the back of the receipt is a coupon for 10 cents off per gallon -- which they double on Tuesdays. Unfortunately I think I'm one of the only people that takes this much advantage of the program :-/ Side note: I actually just changed the billing cycle of my Chase Freedom card to end on the 24th of the month. That way I can charge a bunch of rewards in the final 6-7 days of the quarter. And if I have a $0 balance on the 24th, my bill isn't due for 7 weeks -- interest free! And Chase Freedom has never cared if you purchase gift cards with their quarterly rewards program. I also gave them a courtesy email giving the specific store and $$$ amount that was going to be charged, and of course they still called me with a 'fraud alert'..." } ]

[ { "docid": "584305", "title": "", "text": "\"You won't be able to sell the car with a lien outstanding on it, and whoever the lender is, they're almost certain to have a lien on the car. You would have to pay the car off first and obtain a clear title, then you could sell it. When you took out the loan, did you not receive a copy of the finance contract? I can't imagine you would have taken on a loan without signing paperwork and receiving your own copy at the time. If the company you're dealing with is the lender, they are obligated by law to furnish you with a copy of the finance contract (all part of \"\"truth in lending\"\" laws) upon request. It sounds to me like they know they're charging you an illegally high (called \"\"usury\"\") interest rate, and if you have a copy of the contract then you would have proof of it. They'll do everything they can to prevent you from obtaining it, unless you have some help. I would start by filing a complaint with the Better Business Bureau, because if they want to keep their reputation intact then they'll have to respond to your complaint. I would also contact the state consumer protection bureau (and/or the attorney general's office) in your state and ask them to look into the matter, and I would see if there are any local consumer watchdogs (local television stations are a good source for this) who can contact the lender on your behalf. Knowing they have so many people looking into this could bring enough pressure for them to give you what you're asking for and be more cooperative with you. As has been pointed out, keep a good, detailed written record of all your contacts with the lender and, as also pointed out, start limiting your contacts to written letters (certified, return receipt requested) so that you have documentation of your efforts. Companies like this succeed only because they prey on the fact many people either don't know their rights or are too intimidated to assert them. Don't let these guys bully you, and don't take \"\"no\"\" for an answer until you get what you're after. Another option might be to talk to a credit union or a bank (if you have decent credit) about taking out a loan with them to pay off the car so you can get this finance company out of your life.\"" } ]

[ { "docid": "589023", "title": "", "text": "\"Essentially. Though, at Sam's Club and COSTCO, you'll probably get your membership revoked. By asking to see your receipt and items, you're submitting to a search and the company has no legal authority to force you to do so. Basically, every time an employee asks to see your receipt and items, they are accusing you of theft and demanding you submit to a search. No, most employees don't know the legal details about this. They also can't stop you from saying \"\"No, I don't submit to a search of my items\"\" and walking right past them. It might or might not be a big hassle. I've seen people walk right by them at Walmart. At my own grocery store, we had no legal way to restrain people who were stealing. We could yell at them, take pictures of their face, and give the evidence to police but as non-police personnel, we couldn't physically restrain them. We had a designated security guy who could do it and if he wasn't working that day, no one was getting restrained. The tiny girl working in the garden section of Walmart asking to see your receipt probably isn't private security or Walmart loss prevention. It just depends how strongly you feel about the 4th and 5th amendment. I personally get pissed that I have a 13 month old I'm carrying and then I have to put everything down, open my bags while watching my 13 month old to keep her from bolting all for an 18 year old to just draw a yellow line through my receipt after they barely glanced at my items. It's a hassle for me and unnecessary if Walmart had a loss prevention team worth a shit but they refuse to adequately staff their stores. Hell, you don't even need a good loss prevention department if you have enough employees on the floor to deter theft.\"" }, { "docid": "202933", "title": "", "text": "“Chase’s tellers do not have the authority to close an account…” That’s a “truthy” bit of bullshit. Yes, a teller themselves do not have the authority to close an account. But if you are the owner of the account and you state to the teller that you would like to withdraw all of your money into a cashier’s check so as to close the account they cannot refuse you. Since they fed you this nonsense, they might play some delaying tactics like calling a manager and having them talk to you tough the window and such. But just stand your ground and state you would like to close the account and withdraw all funds. Now if they were extra slimy and if you were to withdraw all funds but they let the zero balance float for a bit so they could claim a fee on you, bullshit once again. You should take any notice of fees coupled with a dated receipt showing the date you withdrew funds, go to the branch and complain to the manager right away. State clearly you will not pay any fees and you would like written verification that your account is closed. Also—and this goes without saying and is implied above—but be sure to keep copies of all if your receipts and transactions. If they state they want to hold onto something, demand they make a copy. And for your own safety/sanity keep your own backup copies somewhere safe at home. All of that said, I have seen modern consumer bankers really act like a bunch of slimeballs in the past decade or so, but generally this has still been an exception to the rule. The reality is if you do not want to have your money in their bank it’s in their best interest to let go of you as soon as possible; especially if you have a small amount of money such as $1,500 at stake. Remember your rights as a consumer, remember it’s your money and remember—and remind them—that you can report them if they deny you reasonable access to your funds." }, { "docid": "397553", "title": "", "text": "T. Rowe is my new 401 k company and they have been pretty professional the problem was they required information from my old employer who refused to give it to them. But I am in touch my my old 401 k account and will be doing some more research into the companies and processes you guys have given me amd try to choose what is best for me" }, { "docid": "521144", "title": "", "text": "The hospital likely has a contract with your insurance company which makes them obligated to bill the insurance before billing you! I had a similar occurrence that was thrown out when my insurance company provided a copy of a contract with the hospital to the judge. So if there is an agreement they must file with the insurance in timely manner." }, { "docid": "188028", "title": "", "text": "\"I'm not sure if this answer is going to win me many friends on reddit, but here goes... There's no good reason why they couldn't have just told him the current balance shown on their records, BUT... **There are some good reasons why they can't quote a definitive \"\"payoff\"\" balance to instantly settle the account:** It's very possible to charge something today, and not have it show up on Chase's records until tomorrow, or Monday, or later. There are still places that process paper credit-card transactions, or that deal with 3rd-party payment processors who reconcile transactions M-F, 9-5ish, and so on. - Most transactions these days are authorized the instant you swipe the card, and the merchant won't process until they get authorization back from the CC company. But sometimes those authorizations come from third-party processors who don't bill Chase until later. Some of them might not process a Friday afternoon transaction until close-of-business Monday. - Also, there are things like taxicab fares that might be collected when you exit the cab, but the record exists only in the taxi's onboard machine until they plug it into something else at the end of the shift. - There are still some situations (outdoor flea-markets, auctions, etc) where the merchant takes a paper imprint, and doesn't actually process the payment until they physically mail it in or whatever. - Some small businesses have information-security routines in place where only one person is allowed to process credit-card payments, but where multiple customer service reps are allowed to accept the CC info, write it down on one piece of paper, then either physically hand the paper to the person with processing rights, or deposit the paper in a locked office or mail-slot for later processing. This is obviously not an instant-update system for Chase. (Believe it or not, this system is actually considered to be *more* secure than retaining computerized records unless the business has very rigorous end-to-end info security). So... there are a bunch of legit reasons why a CC company can't necessarily tell you this instant that you only need to pay $x and no more to close the account (although there is no good reason why they shouldn't be able to quote your current balance). What happens when you \"\"close an account\"\" is basically that they stop accepting new charges that were *made* after your notification, but they will still accept and bill you for legit charges that you incurred before you gave them notice. So basically, they \"\"turn off\"\" the credit-card, but they can't guarantee how much you owe until the next billing cycle after this one closes: - You notify them to \"\"close\"\" the account. They stop authorizing new charges. - Their merchant agreements basically give the merchant a certain window to process charges. The CC company process legit charges that were made prior to \"\"closing\"\" the account. - The CC company sends you the final statement *after* that window for any charges has expired, - When that final statement is paid (or if it is zero), *THAT* is when the account is settled and reported to Equifax etc as \"\"paid\"\". So it's hard to tell from your post who was being overly semantic/unreasonable. If the CC company refused to tell the current balance, they were just being dickheads. But if they refused to promise that the current balance shown is enough to instantly settle the account forever, they had legit reasons. Hope that helps.\"" }, { "docid": "340287", "title": "", "text": "\"With that credit rating you should have no trouble getting a rate in that range. I have a similar credit score and my credit union gave me a car loan at 1.59%. No haggling required. In regards to your question, I think you have it backwards. They are more likely to give you a good rate on a high balance than a low one. Think about it from the bank's perspective... \"\"If I give you a small sale, will you give me a discount?\"\" This is the question you are asking. Their profit is a factor of how much you borrow and the interest rate. Low rate=less profit, low financing amount = less profit. The deal you proposed is a lose-lose for them.\"" }, { "docid": "409573", "title": "", "text": "A financial institution is not obligated to offer you a loan. They will only offer you a loan if they believe that they will make money off you. They use all the info available in order to determine if offering you a loan is profitable. In short, whether they offer you a loan, and the interest rate they charge for that loan, is based on a few things: How much does it cost the bank to borrow money? [aka: how much does the bank need to pay people who have savings accounts with them?]; How much does the bank need to spend in order to administer the loan? [ie: the loan officer's time, a little time for the IT guy who helps around the office, office space they are renting in order to allow the transaction to take place]; and How many people will 'default' and never be able to repay their loan? [ex: if 1 out of 100 people default on their loans, then every one of those 100 loans needs to be charged an extra 1% in order to recover the money the bank will lose on the person who defaults]. What we are mostly interested in here is #3: how likely are you to default? The bank determines that by determining your income, your assets, your current debts outstanding, your past history with payments (also called a credit score), and specifically to mortgages, how much the house is worth. If you don't have a long credit history, and because you don't have a long income history, and because you are putting <10% down on the condo [20% is often a good % to strive for, and paying less than that can often imply you will need mandatory mortgage insurance, depending on jurisdiction] the bank is a little more uncertain about your likelihood to pay. Banks don't like uncertainty, and they can deal with that uncertainty in two ways: (1) They can charge you a higher interest rate; OR (2) They can refuse you the loan. Now just because one bank refuses you a loan, doesn't mean all will - but being refused by one bank is probably a good indication that many / most institutions would refuse you, because they all use very similar analytical tools to determine your 'risk level'. If you are refused a loan, you can try again at another institution, or you can wait, save a larger down payment, and build your credit history by faithfully paying your credit card every month, paying your utilities, and making your car and rent payments on time. This will give the banks more comfort that you will have the ability to pay your mortgage every month, and a larger down payment will give them comfort that if the housing market dips, you won't owe more than the house is worth. My parting shot is this: If you are new in your career with no income history, be very careful about buying a property immediately, even if you get approved. A good rule of thumb is to only buy a property when you plan on living there for at least 5 years, or else you are likely to lose money overall, after factoring closing costs and maintenance fees. If you are refused a loan, that's probably a good sign that you aren't financially ready yet, but even if a bank approves you for a loan, you might not be ready yet either." }, { "docid": "267422", "title": "", "text": "Credit history is local, so when you move to the US you start with the blank slate. Credit history length is a huge factor, so in the first year expect that nobody would trust you and you may be refused credit or asked for deposits. I was asked for deposits at cell phone company and refused for store cards couple of times. My advice - get a secured credit card (that means you put certain sum of money as a deposit in the bank and you get credit equal to that sum of money) and if you have something like a car loan that helps too (of course, you shouldn't buy a car just for that ;) but if you're buying anyway, just know it's not only hurting but also helping when you pay). Once you have a year or two of the history and you've kept with all the payments, you credit score would be OK and everybody would be happy to work with you. In 4-5 years you can have excellent credit record if you pay on time and don't do anything bad. If you are working it the US, a lot of help at first would be to take a letter from your company on an official letterhead saying that you are employed by this and that company and are getting salary of this and that. That can serve as an assurance for some merchants that otherwise would be reluctant to work with you because of the absence of credit history. If you have any assets overseas, especially if they are held in a branch of international bank in US dollars, that could help too. In general, don't count too much on credit for first 1-2 years (though you'd probably could get a car loan, for example, but rates would be exorbitant - easily 10 percentage points higher than with good credit), but it will get better soon." }, { "docid": "265558", "title": "", "text": "\"Geez man you're cutting it close to the end of the semester to be at the research stage of your project. I normally frown on posts that say \"\"LOL DO MY PROJECT FOR ME\"\" but i know a bit about this subject and want to share. I'm going to focus mostly on the B2B segment here because that's what I know. Many companies aren't spending as much as they used to on IT products or the staff to support them. They're also looking for ways to be more productive with their budgets. The consumer market is spending a lot less and is demanding products that Dell can't make as much money on. The big things right now are The cloud, virtualization and miniaturization. So, right now \"\"The Cloud\"\" is the buzzword. Lots of companies are moving their stuff offsite, letting someone else worry about major IT infrastructure. This typically costs the company less in both hardware and personnel costs. Companies still need a onsite presence for critical applications, data and backup but they need a lot less than what was necessary 5 years ago. Network backbones have grown in scale and many metropolitan areas can now support this type of computing. You also have virtualization which means you can run multiple \"\"servers\"\" on one physical server. What used to take up an entire rack years ago can now be run on a few servers. This means companies need less of the IT equipment Dell makes in order to grow and expand. All that means less of a demand for traditional IT equipment (computers and servers) and more of a demand for the proper software. I see Dell moving more towards personal devices and larger enterprise equipment &amp; servers. Personal devices include tablets, laptops/netbooks, phones, compact PCs. The business side includes high density servers, storage, software and services. The miniaturization of computer hardware along with the cloud will allow users to access their \"\"desktop\"\" and programs from anywhere and Dell will be providing products to access the cloud. Servers will have terabytes of memory and a large number of cores. (systems with terabytes of memory already exist but the cost is prohibitive for most companies). These systems will be used to support a business' needs through virtualization or provide users with the cloud. Dell has acquired a few software companies over the years and will most likely acquire more &amp; may offer software for cloud computing, IT management and possibly (probably not) virtualization. Over the past few years the desktop PC market has been shrinking as netbooks and new devices have been released. They still have a long way to go but someday they will largely replace the PC in homes and businesses; especially as costs come down. Also, Dell may see lots more money from government and healthcare in the next few years. The government may choose to spend even more money than they do now on infrastructure and projects to help get us out of the recession. Those projects will need IT resources. Same goes for healthcare, as the new healthcare laws go into effect they will need more IT resources to get the job done. source: me, I've worked in the IT industry for the past 9 years. The majority of our business is with Dell products. If you need more details about me send me message. Also please don't just copy paste my information. I'm giving you some ideas. Go look them up, learn about them, research them. College is about learning and one of the points of this project is to expand your knowledge about a subject. tl;dr due to new technology, people and companies will be buying less, margins will be thinner, Dell will probably focus on new markets. edit: after going through some of your posts it seems like you are in the IT industry as well so I'm confused and you may already know most of this information.\"" }, { "docid": "180295", "title": "", "text": "I am going to give advice that is slightly differently based on my own experiences. First, regarding the financing, I have found that the dealers do in fact have access to the best interest rates, but only after negotiating with a better financing offer from a bank. When I bought my current car, the dealer was offering somewhere around 3.3%, which I knew was way above the current industry standard and I knew I had good credit. So, like I did with my previous car and my wife's car, I went to local and national banks, came back with deals around 2.5 or 2.6%. When I told the dealer, they were able to offer 2.19%. So it's ok to go with the dealer's financing, just never take them at face value. Whatever they offer you and no matter how much they insist it's the best deal, never believe it! They can do better! With my first car, I had little credit history, similar to your situation, and interest rates were much higher then, like 6 - 8%. The dealer offered me 10%. I almost walked out the door laughing. I went to my own bank and they offered me 8%, which was still high, but better than 10%. Suddenly, the dealer could do 7.5% with a 0.25% discount if I auto-pay through my checking account. Down-payment wise, there is nothing wrong with a 35% down payment. When I purchased my current car, I put 50% down. All else being equal, the more cash down, the better off you'll be. The only issue is to weigh that down payment and interest rate against the cost of other debts you may have. If you have a 7% student loan and the car loan is only 3%, you're better off paying the minimum on the car and using your cash to pay down your student loan. Unless your student loan balance is significantly more than the 8k you need to finance (like a 20k or 30k loan). Also remember that a car is a depreciating asset. I pay off cars as fast as I can. They are terrible debt to have. A home can rise in value, offsetting a mortgage. Your education keeps you employed and employable and will certainly not make you dumber, so that is a win. But a car? You pay $15k for a car that will be worth $14k the next day and $10k a year from now. It's easy to get underwater with a car loan if the down payment is small, interest rate high, and the car loses value quickly. To make sure I answer your questions: Do you guys think it's a good idea to put that much down on the car? If you can afford it and it will not interfere with repayment of much higher interest debts, then yes. A car loan is a major liability, so if you can minimize the debt, you'll be better off. What interest rate is reasonable based on my credit score? I am not a banker, loan officer, or dealer, so I cannot answer this with much credibility. But given today's market, 2.5 - 4% seems reasonable. Do you think I'll get approved? Probably, but only one way to find out!" }, { "docid": "254684", "title": "", "text": "\"I can answer this question for my jurisdiction (Florida, USA), because I lived through it. My Dad (\"\"Alice\"\") passed away in 2008, just as the housing crisis was starting to heat up. What happened to the Mortgage? My Dad had a will in place. It was an old will (from the 1980's), but never-the-less, a will. We had to provide paperwork to the court that my Mom had already passed away, and my oldest brother was living out-of-state (he would have been the executor, otherwise). With the proper paperwork, I became the Executor, and the property passed in to probate. At this point, the \"\"Estate\"\" was responsible for the house and the mortgage on it (meaning me, as I was the Executor). We decided to sell the house, so we hired a realtor, and set an asking price about $40k over what was owed on it. As we waited for it to sell, I had to make monthly mortgage payments, and payments to the HOA (otherwise the HOA could put a lien on the property, making it more difficult to sell, should we find a buyer). Is it Automatically Transferred? In most jurisdictions, I would say not \"\"automatic\"\". I definitely had get an estate lawyer and file the proper legal paperwork with the local county courthouse. Some states have an easier probate process (\"\"Summary Administration\"\" in Florida), that eases the requirements for small estates. Is Bob expected to pay it off all at once? No, the mortgage holder was happy for me to make payments (out of other estate assets) in lieu of my Dad. The were earning interest, after all. This is probably true in most cases. Can the House be Foreclosed on? Yes. In our case, being 2008, we had a hard time selling the property. The asking price quickly went from $40k over what was owed, to $20k over, to $10k over, then to being equal to the mortgage value. Finally, I approached the bank about options. They suggested a \"\"Deed in Lieu of Foreclosure\"\" process. It was easier for us, and the bank had to pay less lawyers and such. Otherwise, a \"\"Deed in Lieu\"\" is effectively the same as a Foreclosure. At that point, we stopped making payments. Eventually, me and all my siblings (the \"\"heirs\"\") had to sign the proper paperwork giving the house over to the bank. In our case, the bank did not pursue us (or rather, the Estate) for the difference between final (auction) sale price and the mortgage balance (it was an FHA loan, so the US Government wound up picking up the difference). From what I understand, this could have happened, and we would have wound up with basically nothing out of the Estate. Can the Lender Force the Sale? I can't give a definite answer on this, but it probably depends. If you don't pay? Yes they sure can--it's usually part of the standard mortgage contract! I see 2 other options:\"" }, { "docid": "495874", "title": "", "text": "\"The two questions inherent in any decision to purchase an insurance plan is, \"\"how likely am I to need it?\"\", and \"\"what's the worst case scenario if I don't have it?\"\". The actuary that works for the insurance company is asking these same questions from the other end (with the second question thus being \"\"what would we be expected to have to pay out for a claim\"\"), using a lot of data about you and people like you to arrive at an answer. It really boils down to little more than a bet between you and the insurance company, and like any casino, the insurer has a house edge. The question is whether you think you'll beat that edge; if you're more likely than the insurer thinks you are to have to file a claim, then additional insurance is a good bet. So, the reasons you might decide against getting umbrella insurance include: Your everyday liability is low - Most people don't live in an environment where the \"\"normal\"\" insurance they carry won't pay for their occasional mistakes or acts of God. The scariest one for most is a car accident, but when you think of all the mistakes that have to be made by both sides in order for you to burn through the average policy's liability limits and still be ruined for life, you start feeling better. For instance, in Texas, minimum insurance coverage levels are 50/100/50; assuming neither party is hurt but the car is a total loss, your insurer will pay the fair market value of the car up to $50,000. That's a really nice car, to have a curbside value of 50 grand; remember that most cars take an initial hit of up to 25% of their sticker value and a first year depreciation of up to 50%. That 50 grand would cover an $80k Porsche 911 or top-end Lexus ES, and the owner of that car, in the U.S. at least, cannot sue to recover replacement value; his damages are only the fair market value of the car (plus medical, lost wages, etc, which are covered under your two personal injury liability buckets). If that's a problem, it's the other guy's job to buy his own supplemental insurance, such as gap insurance which covers the remaining payoff balance of a loan or lease above total loss value. Beyond that level, up into the supercars like the Bentleys, Ferraris, A-Ms, Rollses, Bugattis etc, the drivers of these cars know full well that they will never get the blue book value of the car from you or your insurer, and take steps to protect their investment. The guys who sell these cars also know this, and so they don't sell these cars outright; they require buyers to sign \"\"ownership contracts\"\", and one of the stipulations of such a contract is that the buyer must maintain a gold-plated insurance policy on the car. That's usually not the only stipulation; The total yearly cost to own a Bugatti Veyron, according to some estimates, is around $300,000, of which insurance is only 10%; the other 90% is obligatory routine maintenance including a $50,000 tire replacement every 10,000 miles, obligatory yearly detailing at $10k, fuel costs (that's a 16.4-liter engine under that hood; the car requires high-octane and only gets 3 mpg city, 8 highway), and secure parking and storage (the moguls in Lower Manhattan who own one of these could expect to pay almost as much just for the parking space as for the car, with a monthly service contract payment to boot). You don't have a lot to lose - You can't get blood from a turnip. Bankruptcy laws typically prevent creditors from taking things you need to live or do your job, including your home, your car, wardrobe, etc. For someone just starting out, that may be all you have. It could still be bad for you, but comparing that to, say, a small business owner with a net worth in the millions who's found liable for a slip and fall in his store, there's a lot more to be lost in the latter case, and in a hurry. For the same reason, litigious people and their legal representation look for deep pockets who can pay big sums quickly instead of $100 a month for the rest of their life, and so very few lawyers will target you as an individual unless you're the only one to blame (rare) or their client insists on making it personal. Most of your liability is already covered, one way or the other - When something happens to someone else in your home, your homeowner's policy includes a personal liability rider. The first two \"\"buckets\"\" of state-mandated auto liability insurance are for personal injury liability; the third is for property (car/house/signpost/mailbox). Health insurance covers your own emergency care, no matter who sent you to the ER, and life and AD&D insurance covers your own death or permanent disability no matter who caused it (depending on who's offering it; sometimes the AD&D rider is for your employer's benefit and only applies on the job). 99 times out of 100, people just want to be made whole when it's another Average Joe on the other side who caused them harm, and that's what \"\"normal\"\" insurance is designed to cover. It's fashionable to go after big business for big money when they do wrong (and big business knows this and spends a lot of money insuring against it), but when it's another little guy on the short end of the stick, rabidly pursuing them for everything they're worth is frowned on by society, and the lawyer virtually always walks away with the lion's share, so this strategy is self-defeating for those who choose it; no money and no friends. Now, if you are the deep pockets that people look for when they get out of the hospital, then a PLP or other supplemental liability insurance is definitely in order. You now think (as you should) that you're more likely to be sued for more than your normal insurance will cover, and even if the insurance company thinks the same as you and will only offer a rather expensive policy, it becomes a rather easy decision of \"\"lose a little every month\"\" or \"\"lose it all at once\"\".\"" }, { "docid": "108808", "title": "", "text": "I can't tell if he's running something similar to a pyramid scheme &gt;Everyone would work under the same Spartan conditions that Brito embraced. (In New York, Brito shares a large table with his head of sales and his finance chief.) “We always say the leaner the business, the more money we will have at the end of the year to share,” he said in a speech at Stanford in 2008. “I don’t have a company car. I don’t care. I can buy my own car. I don’t need the company to give me beer. I can buy my own beer.” That part is awesome though" }, { "docid": "267233", "title": "", "text": "In my area, the fixed prices are based on an average. My gas company will look at my previous months (six months if I remember correctly) payments and give me an average based on that amount. Then I am contracted for a year based on that average. If I lower my costs, I'm under contract and will not see the savings but if I go over for some reason, I will save money there. It really depends on how your utility companies work so I would check with them, look at your previous billing cycles and determine if the plan will possibly save you money. Of course some things can't be planned for such as the economic downturn like someone else mentioned." }, { "docid": "185988", "title": "", "text": "Just wanted to chip in on the card reader thing. If they threaten to call the cops, call their bluff; worst case you'll spend the time waiting for a copy to show up that would've been wasted driving around looking for an ATM. Also, make sure you call the company after the fact and let them know about it (as well as identifying details about when and what cab # you were in) -- some companies don't care but the ones I've had to call about generally take that seriously (i.e. management calling me back later to get as much identifying info as possible to find the drivers responsible)." }, { "docid": "329620", "title": "", "text": "The moment that you start to rent your car to strangers you are talking about using your car as a business. Will it be financially advantageous? If you can convince somebody to rent your vehicle for more than your required monthly payments then it might be. Of course you have to determine what would be the true cost of ownership for you. It could include your auto loan, and insurance, but you would be saving on the garage costs. Of course if you don't have it rented 100% of the time you will still have some costs. Your insurance company will need to know about your plan. They charge based on the risk. If you aren't honest about the situation they won't cover you if something goes wrong. The local government may want to know. They charge different car registration fees for businesses. If there are business taxes they will want that. Taxes. you are running a business so everybody from the federal governemnt to the local government may want a cut. Plus you will have to depreciate the value of the item. Turning the item from a personal use item to a business item can have tax issues. If you don't own it 100% the lender may also have concerns about making sure their collateral survives. Is it safe? and from the comments to the question : Should I do a contract or something that would protect me? Nope. it isn't safe unless you do have a contract. Of course that contract will have to be drawn up by a lawyer to make sure it protects you from theft, negligence, breach of contract.... You will have to be able to not just charge rent, but be able to repossess the car if they don't return it on time. You will have to be able to evaluate if the renter is trustworthy, or you may find your car is in far worse shape if you can even get it back." }, { "docid": "433066", "title": "", "text": "\"Consumer Reports offers a service that can tell you detailed actual cost to a dealer for a specific model and accessories -- real cost after rebates, not just invoice price. It costs a bit to order these reports, but if you are serious about buying a new car they are a highly recommended tool -- cu is independent and will give you the best info available, and simply walking into the dealership with the report in your hand can save huge amounts of negotiating. \"\"If you can give it to me for $500 over the real price, as shown here, I'll sign now.\"\" Of course, standard advice is that it's usually better to buy a recent-model used car. I believe cu has other reports that can help you determine what a fair price is in that case, but usually I just bring it to a trusted garage and pay them to tell me exactly how much work it needs and whether they think it's worth the asking price.\"" }, { "docid": "463568", "title": "", "text": "if I open current accounts with all these institutions, will they know if I move money between them, i.e. from the one I pay my salary to, to the next, to the next etc. Of course they will know. After all you will provide the account numbers for transferring the money. Regarding the intent of transfer they don't care. They only care the about the amount coming in regularly. refuse to give me the rates and bonuses I want For this I will go through their terms and conditions and you should do it. Check for any excluded conditions. Read between the lines. But check on what amount will you be getting the interest. Most of these accounts pay interest daily and on the amount in the account in a day. So you might not be generating much of an interest in those accounts if you don't have a substantial balance." }, { "docid": "296750", "title": "", "text": "\"Buried on the IRS web site is the \"\"Fillable Forms Error Search Tool\"\". Rather than including an explanation of errors in the rejection email itself, you're expected to copy and paste the error email into this form, which gives more details about what's wrong. (Don't blame me; I didn't design it.) If I copy your error message in, here's the response I get: There is an error with the “primary taxpayer’s Date of Birth” in Step 2 Section 4. The date of birth that was entered does not match IRS records. Make sure you enter the correct birth date, in the correct format, in the correct space. Scroll down, and enter the current date (“Today’s date”). Today’s date is the day you intend to e-file the return again. Also, if you are making an electronic payment you must re-date that section. E-File your return. You say that you've already checked your birthday, so I don't know as this is particularly helpful. If you're confident that it's correct and in the right place, I think your next step needs to be contacting the IRS directly. They have a link at the bottom of the error lookup response on how to contact them specifically about their solution not working, or you could try contacting your local IRS office or giving them a call.\"" } ]

[ { "docid": "438000", "title": "", "text": "Phone conversations are useless if the company is uncooperative, you must take it into the written word so it can be documented. Sent them certified letters and keep copies of everything you send and any written responses from the company. This is how you will get actual action." } ]

[ { "docid": "536772", "title": "", "text": "You'd have to consult a lawyer in the state that the transaction took place to get a definitive answer. And also provide the details of the contract or settlement agreement. That said, if you clearly presented the check as payment (verbally or otherwise) and they accepted and cashed the check, and it cleared, you should have good legal standing to force them to finalize the payment. While they had every right to refuse the payment, and also every right to place a hold on the credit until the transaction cleared their bank, they don't have the right to simply claim the payment as a gift just because it came in a different form than they specified in the contract. Obviously this is a lesson learned on reading the fine print though. And, to be frank, it sounds like someone wants to make life difficult for you for whatever reason. And if that is the case I would refer back to my initial comment about contacting a lawyer in that state." }, { "docid": "254684", "title": "", "text": "\"I can answer this question for my jurisdiction (Florida, USA), because I lived through it. My Dad (\"\"Alice\"\") passed away in 2008, just as the housing crisis was starting to heat up. What happened to the Mortgage? My Dad had a will in place. It was an old will (from the 1980's), but never-the-less, a will. We had to provide paperwork to the court that my Mom had already passed away, and my oldest brother was living out-of-state (he would have been the executor, otherwise). With the proper paperwork, I became the Executor, and the property passed in to probate. At this point, the \"\"Estate\"\" was responsible for the house and the mortgage on it (meaning me, as I was the Executor). We decided to sell the house, so we hired a realtor, and set an asking price about $40k over what was owed on it. As we waited for it to sell, I had to make monthly mortgage payments, and payments to the HOA (otherwise the HOA could put a lien on the property, making it more difficult to sell, should we find a buyer). Is it Automatically Transferred? In most jurisdictions, I would say not \"\"automatic\"\". I definitely had get an estate lawyer and file the proper legal paperwork with the local county courthouse. Some states have an easier probate process (\"\"Summary Administration\"\" in Florida), that eases the requirements for small estates. Is Bob expected to pay it off all at once? No, the mortgage holder was happy for me to make payments (out of other estate assets) in lieu of my Dad. The were earning interest, after all. This is probably true in most cases. Can the House be Foreclosed on? Yes. In our case, being 2008, we had a hard time selling the property. The asking price quickly went from $40k over what was owed, to $20k over, to $10k over, then to being equal to the mortgage value. Finally, I approached the bank about options. They suggested a \"\"Deed in Lieu of Foreclosure\"\" process. It was easier for us, and the bank had to pay less lawyers and such. Otherwise, a \"\"Deed in Lieu\"\" is effectively the same as a Foreclosure. At that point, we stopped making payments. Eventually, me and all my siblings (the \"\"heirs\"\") had to sign the proper paperwork giving the house over to the bank. In our case, the bank did not pursue us (or rather, the Estate) for the difference between final (auction) sale price and the mortgage balance (it was an FHA loan, so the US Government wound up picking up the difference). From what I understand, this could have happened, and we would have wound up with basically nothing out of the Estate. Can the Lender Force the Sale? I can't give a definite answer on this, but it probably depends. If you don't pay? Yes they sure can--it's usually part of the standard mortgage contract! I see 2 other options:\"" }, { "docid": "108591", "title": "", "text": "Your situation may be different if your employer contracts with a different company to manage these benefits (or manages them themselves), but I'll give you my experience. My employer contracts with WageWorks. I log on to the WageWorks site, select commuter options from a predefined list, e.g. public transit passes, gas debit cards, parking passes, etc. and the cost of my choices is automatically deducted from my paycheck each month, up to the limit. WageWorks either sends me whatever I purchased in the mail or reloads the card automatically, and the process continues each month. In my case, I couldn't use this to purchase a ticket for someone else, but I could choose the subway option for myself and let another person use it." }, { "docid": "516076", "title": "", "text": "\"I just don't know how else an employee gains any bargaining power without one? It seems to me in companies in my industry that those without unions bargain their own wage in secret. Then the company wins because its me vs you all the time. A union makes wages and benefits more transparent. You can pick up a copy of my collective bargaining agreement and see what everyone makes. Also you gain the backing legally with resources not available to most persons on their own. I just don't know another way employees can have any \"\"advantage\"\" in a common workplace.\"" }, { "docid": "265558", "title": "", "text": "\"Geez man you're cutting it close to the end of the semester to be at the research stage of your project. I normally frown on posts that say \"\"LOL DO MY PROJECT FOR ME\"\" but i know a bit about this subject and want to share. I'm going to focus mostly on the B2B segment here because that's what I know. Many companies aren't spending as much as they used to on IT products or the staff to support them. They're also looking for ways to be more productive with their budgets. The consumer market is spending a lot less and is demanding products that Dell can't make as much money on. The big things right now are The cloud, virtualization and miniaturization. So, right now \"\"The Cloud\"\" is the buzzword. Lots of companies are moving their stuff offsite, letting someone else worry about major IT infrastructure. This typically costs the company less in both hardware and personnel costs. Companies still need a onsite presence for critical applications, data and backup but they need a lot less than what was necessary 5 years ago. Network backbones have grown in scale and many metropolitan areas can now support this type of computing. You also have virtualization which means you can run multiple \"\"servers\"\" on one physical server. What used to take up an entire rack years ago can now be run on a few servers. This means companies need less of the IT equipment Dell makes in order to grow and expand. All that means less of a demand for traditional IT equipment (computers and servers) and more of a demand for the proper software. I see Dell moving more towards personal devices and larger enterprise equipment &amp; servers. Personal devices include tablets, laptops/netbooks, phones, compact PCs. The business side includes high density servers, storage, software and services. The miniaturization of computer hardware along with the cloud will allow users to access their \"\"desktop\"\" and programs from anywhere and Dell will be providing products to access the cloud. Servers will have terabytes of memory and a large number of cores. (systems with terabytes of memory already exist but the cost is prohibitive for most companies). These systems will be used to support a business' needs through virtualization or provide users with the cloud. Dell has acquired a few software companies over the years and will most likely acquire more &amp; may offer software for cloud computing, IT management and possibly (probably not) virtualization. Over the past few years the desktop PC market has been shrinking as netbooks and new devices have been released. They still have a long way to go but someday they will largely replace the PC in homes and businesses; especially as costs come down. Also, Dell may see lots more money from government and healthcare in the next few years. The government may choose to spend even more money than they do now on infrastructure and projects to help get us out of the recession. Those projects will need IT resources. Same goes for healthcare, as the new healthcare laws go into effect they will need more IT resources to get the job done. source: me, I've worked in the IT industry for the past 9 years. The majority of our business is with Dell products. If you need more details about me send me message. Also please don't just copy paste my information. I'm giving you some ideas. Go look them up, learn about them, research them. College is about learning and one of the points of this project is to expand your knowledge about a subject. tl;dr due to new technology, people and companies will be buying less, margins will be thinner, Dell will probably focus on new markets. edit: after going through some of your posts it seems like you are in the IT industry as well so I'm confused and you may already know most of this information.\"" }, { "docid": "473963", "title": "", "text": "\"I was wondering how do we calculate the total capital of a company? Which items should I look for in the financial statements? Total capital usually refers to the sum of long-term debt and total shareholder equity; both of these items can be found on the company's balance sheet. This is one of the calculations that's traditionally used when determining a company's return on capital. I'll use the balance sheet from Gilead Sciences' (GILD) 2012 10-K form as an example. Net long-term debt was $7,054,555,000 and total stockholder equity was $9,550,869,000 which should give a grand total of $16,605,424,000 for total capital. (I know you can do the math, but I always find an example helpful if it uses realistic numbers). You may sometimes hear the term \"\"total capital\"\" referring to \"\"total capital stock\"\" or \"\"total capital assets,\"\" in which case it may be referring to physical capital, i.e. assets like inventory, PP&E, etc., instead of financial capital/leverage. And how do I calculate notes payable? Is the same as accounts payable? As the word \"\"payable\"\" suggests, both are liabilities. However, I've always been taught that accounts payable are debts a business owes to its suppliers, while notes payable are debts a business owes to banks and other institutions with which it has signed a formal agreement and which use formal debt instruments, e.g. a loan contract. This definition seems to match various articles I found online. On a balance sheet, you can usually determine notes payable by combining the short-term debt of the company with the current portion of the long-term debt. These pieces comprise the debt that is due within the fiscal year. In the balance sheet for Gilead Sciences, I would only include the $1,169,490,000 categorized as \"\"Current portion of long-term debt and other obligations, net\"\" term, since the other current liabilities don't look like they would involve formal debt contracts. Since the notes payable section of GILD's balance sheet doesn't seem that diverse and therefore might not make the best example, I'll include the most recent balance sheet Monsanto as well.1 Monsanto's balance sheet lists a term called \"\"Short-term debt, including current portion of long-term debt\"\" with a value of $36 million. This looks like almost the exact definition of notes payable. 1. Note that this financial statement is called a Statement of Consolidated Financial Position on Monsanto's 10-K.\"" }, { "docid": "441400", "title": "", "text": "\"I can understand your nervousness being 40 and no retirement savings. Its understandable especially given your parents. Before going further, I would really recommend the books and seminars on Love and Respect. The subject matter is Christian based, but it based upon a lot of secular research from the University of Washington and some other colleges. It sounds like to me, this is more of a relationship issue than a money issue. For the first step I would focus on the positive. The biggest benefit you have is: Your husband is willing to work! Was he lazy, there would be a whole different set of issues. You should thank him for this. More positives are that you don't have any credit card debt, you only have one car payment (not two), and that you are paying additional payments on each. I'd prefer that you had no car payment. But your situation is not horrible. So how do you improve your situation? In my opinion getting your husband on board would be the first priority. Ask him if he would like to get the car paid off as fast as possible, or, building an emergency fund? Pick one of those to focus on, and do it together. Having an emergency fund of 3 to 6 months of expense is a necessary precursor to investing, anyway so you from the limited info in your post you are not ready to pour money into your 401K. Have you ever asked what his vision is for his family financially? Something like: \"\"Honey you care for us so wonderfully, what is your vision for me and our children? Where do you see us in 5, 10 and 20 years?\"\" I cannot stress enough how this is a relationship issue, not a math issue. While the problems manifests themselves in your balance sheet they are only a symptom. Attempting to cure the symptom will likely result in resentment for both of you. There is only one financial author that focuses on relationships and their effect on finances: Dave Ramsey. Pick up a copy of The Total Money Makeover, do something nice for him, and then ask him to read it. If he does, do something else nice for him and then ask him what he thinks.\"" }, { "docid": "409573", "title": "", "text": "A financial institution is not obligated to offer you a loan. They will only offer you a loan if they believe that they will make money off you. They use all the info available in order to determine if offering you a loan is profitable. In short, whether they offer you a loan, and the interest rate they charge for that loan, is based on a few things: How much does it cost the bank to borrow money? [aka: how much does the bank need to pay people who have savings accounts with them?]; How much does the bank need to spend in order to administer the loan? [ie: the loan officer's time, a little time for the IT guy who helps around the office, office space they are renting in order to allow the transaction to take place]; and How many people will 'default' and never be able to repay their loan? [ex: if 1 out of 100 people default on their loans, then every one of those 100 loans needs to be charged an extra 1% in order to recover the money the bank will lose on the person who defaults]. What we are mostly interested in here is #3: how likely are you to default? The bank determines that by determining your income, your assets, your current debts outstanding, your past history with payments (also called a credit score), and specifically to mortgages, how much the house is worth. If you don't have a long credit history, and because you don't have a long income history, and because you are putting <10% down on the condo [20% is often a good % to strive for, and paying less than that can often imply you will need mandatory mortgage insurance, depending on jurisdiction] the bank is a little more uncertain about your likelihood to pay. Banks don't like uncertainty, and they can deal with that uncertainty in two ways: (1) They can charge you a higher interest rate; OR (2) They can refuse you the loan. Now just because one bank refuses you a loan, doesn't mean all will - but being refused by one bank is probably a good indication that many / most institutions would refuse you, because they all use very similar analytical tools to determine your 'risk level'. If you are refused a loan, you can try again at another institution, or you can wait, save a larger down payment, and build your credit history by faithfully paying your credit card every month, paying your utilities, and making your car and rent payments on time. This will give the banks more comfort that you will have the ability to pay your mortgage every month, and a larger down payment will give them comfort that if the housing market dips, you won't owe more than the house is worth. My parting shot is this: If you are new in your career with no income history, be very careful about buying a property immediately, even if you get approved. A good rule of thumb is to only buy a property when you plan on living there for at least 5 years, or else you are likely to lose money overall, after factoring closing costs and maintenance fees. If you are refused a loan, that's probably a good sign that you aren't financially ready yet, but even if a bank approves you for a loan, you might not be ready yet either." }, { "docid": "357280", "title": "", "text": "I've been an F&I Manager at a new car dealership for over ten years, and I can tell you this with absolute certainty, your deal is final. There is no legal obligation for you whatsoever. I see this post is a few weeks old so I am sure by now you already know this to be true, but for future reference in case someone in a similar situation comes across this thread, they too will know. This is a completely different situation to the ones referenced earlier in the comments on being called by the dealer to return the vehicle due to the bank not buying the loan. That only pertains to customers who finance, the dealer is protected there because on isolated occasions, which the dealer hates as much as the customer, trust me, you are approved on contingency that the financing bank will approve your loan. That is an educated guess the finance manager makes based on credit history and past experience with the bank, which he is usually correct on. However there are times, especially late afternoon on Fridays when banks are preparing to close for the weekend the loan officer may not be able to approve you before closing time, in which case the dealer allows you to take the vehicle home until business is back up and running the following Monday. He does this mostly to give you sense of ownership, so you don't go down the street to the next dealership and go home in one of their vehicles. However, there are those few instances for whatever reason the bank decides your credit just isn't strong enough for the rate agreed upon, so the dealer will try everything he can to either change to a different lender, or sell the loan at a higher rate which he has to get you to agree upon. If neither of those two things work, he will request that you return the car. Between the time you sign and the moment a lender agrees to purchase your contract the dealer is the lien holder, and has legal rights to repossession, in all 50 states. Not to mention you will sign a contingency contract before leaving that states you are not yet the owner of the car, probably not in so many simple words though, but it will certainly be in there before they let you take a car before the finalizing contract is signed. Now as far as the situation of the OP, you purchased your car for cash, all documents signed, the car is yours, plain and simple. It doesn't matter what state you are in, if he's cashed the check, whatever. The buyer and seller both signed all documents stating a free and clear transaction. Your business is done in the eyes of the law. Most likely the salesman or finance manager who signed paperwork with you, noticed the error and was hoping to recoup the losses from a young novice buyer. Regardless of the situation, it is extremely unprofessional, and clearly shows that this person is very inexperienced and reflects poorly on management as well for not doing a better job of training their employees. When I started out, I found myself in somewhat similar situations, both times I offered to pay the difference of my mistake, or deduct it from my part of the sale. The General Manager didn't take me up on my offer. He just told me we all make mistakes and to just learn from it. Had I been so unprofessional to call the customer and try to renegotiate terms, I would have without a doubt been fired on the spot." }, { "docid": "417800", "title": "", "text": "\"http://www.nadaguides.com/ and http://www.kbb.com/ and http://www.edmunds.com/ are the leading sites to check vehicle values. Also, great how to at: http://www.ehow.com/how_2003079_sell-used-car-california.html Where to sell? You could sell it in your local newspaper classified, small auto newsprint mags/publications, Craigslist, ebay, or just put a sign in the window. The advertising method is up to you. You could also trade the car in to a dealer if you purchase another vehicle from a dealer if they offer that option. (Trade-In's generally bring in less money than private sales as a general rule). Some car places will do consignment requests to help you sell your car. However, they will normally take a percentage of the sale as payment for this service. What paperwork? If you own your car, you should have the title in hand. There are instructions on title on how to sign it over to another person. If you have a loan through a bank, the bank would have this title and you would need to express your interest in selling the property to the bank and work out the details with them. You do not hand over a title to anyone until full payment is made and the property will become theirs. Beyond the title, you will need to fill out a release of liability or report of sale form for the state. Titles have a portion you can mail in or you can fill it out online. This is to report the sale to the state to release liability from your name. You will also need to create a \"\"bill of sale\"\" between you and the buyer. There are many examples online or you can just create your own. You really need just a statement saying I release all interest of the vehicle and no warranty implied to this person with the VIN of the car, model, make, year, the buyers name and signature, and the sellers name and signature. This is your contract with the seller and they use this when they go to register the car in their name. Maintenance Disclosure? This is completely up to the seller on what they want to disclose. You are selling a used car and the buyer should know that. Vehicles with detailed records sell for more money and buyers are more interested in cars that have history records. This is where buyers should be the most careful, so the more records and history you can show, the better they will feel about the purchase. I believe you should share everything you know and any information about the history of the car. The more positive information you can prove/share, the more money or chance of sale you could have. Most money? First, clean the car out. I am amazed at the amount of people that try to sell a car and don't even bother to clean it out. A detail job would be great to get. You are trying to sell it, so you want it to look the best. Next, I would fix anything minor and cheap to fix. The less things wrong can mean more money. Back to your maintenance question, you will want to show how you have maintained the car. People might also ask for a carfax report to prove its clean history. Irresponsible and deceiving people tend to leave out important details in a car history like accidents, flood damage, or having re-built titles. You want to give the most information you can. Do not lie about any detail. Though, this can be a little tough when you are a 2nd or 3rd owner of a car and do not know about the original owners.\"" }, { "docid": "296750", "title": "", "text": "\"Buried on the IRS web site is the \"\"Fillable Forms Error Search Tool\"\". Rather than including an explanation of errors in the rejection email itself, you're expected to copy and paste the error email into this form, which gives more details about what's wrong. (Don't blame me; I didn't design it.) If I copy your error message in, here's the response I get: There is an error with the “primary taxpayer’s Date of Birth” in Step 2 Section 4. The date of birth that was entered does not match IRS records. Make sure you enter the correct birth date, in the correct format, in the correct space. Scroll down, and enter the current date (“Today’s date”). Today’s date is the day you intend to e-file the return again. Also, if you are making an electronic payment you must re-date that section. E-File your return. You say that you've already checked your birthday, so I don't know as this is particularly helpful. If you're confident that it's correct and in the right place, I think your next step needs to be contacting the IRS directly. They have a link at the bottom of the error lookup response on how to contact them specifically about their solution not working, or you could try contacting your local IRS office or giving them a call.\"" }, { "docid": "110953", "title": "", "text": "I do this all the time, my credit rating over time plotted on a graph looks like saw blades going upward on a slope I use a credit alert service to get my credit reports quarterly, and I know when the credit agencies update their files (every three months), so I never have a high balance at those particular times Basically, I use the negative hard pulls to propel my credit score upwards with a the consequentially lowered credit utilization ratio, and the credit history. So here is how it works for me, but I am not an impulse buyer and I wouldn't recommend it for most people as I have seen spending habits: Month 1: charge cards, pay minimum balance (raises score multiple points) Month 2: PAY OFF ALL CREDIT CARDS, massive deleveraging using actual money I already have (raises score multiple points) Month 3: get credit report showing low balance, charge cards, pay minimum balance ask for extensions of credit, AND followup on new credit line offers (lowers score several points per credit inquiry) Month 4: charge cards, pay minimum balance, discretionally approving hard pulls - always have room for one or two random hard pulls, such as for a new cell phone contract, or renting a car, or employment, etc Month 5: PAY OFF CREDIT CARDS using actual money you have. (the trick is to NEVER really go above a 15% credit utilization ratio, and to never overleverage. Tricky because very quickly you will get enough credit to go bankrupt) Month 6: get credit report showing low balances, a slight dip in score from last quarter, but still high continue." }, { "docid": "589023", "title": "", "text": "\"Essentially. Though, at Sam's Club and COSTCO, you'll probably get your membership revoked. By asking to see your receipt and items, you're submitting to a search and the company has no legal authority to force you to do so. Basically, every time an employee asks to see your receipt and items, they are accusing you of theft and demanding you submit to a search. No, most employees don't know the legal details about this. They also can't stop you from saying \"\"No, I don't submit to a search of my items\"\" and walking right past them. It might or might not be a big hassle. I've seen people walk right by them at Walmart. At my own grocery store, we had no legal way to restrain people who were stealing. We could yell at them, take pictures of their face, and give the evidence to police but as non-police personnel, we couldn't physically restrain them. We had a designated security guy who could do it and if he wasn't working that day, no one was getting restrained. The tiny girl working in the garden section of Walmart asking to see your receipt probably isn't private security or Walmart loss prevention. It just depends how strongly you feel about the 4th and 5th amendment. I personally get pissed that I have a 13 month old I'm carrying and then I have to put everything down, open my bags while watching my 13 month old to keep her from bolting all for an 18 year old to just draw a yellow line through my receipt after they barely glanced at my items. It's a hassle for me and unnecessary if Walmart had a loss prevention team worth a shit but they refuse to adequately staff their stores. Hell, you don't even need a good loss prevention department if you have enough employees on the floor to deter theft.\"" }, { "docid": "120279", "title": "", "text": "\"He sounds like a very bad salesman and I should know, because I was a sales manager at a bike shop which sold bikes from $200 to $10k. Now I had a clear goal, which is to sell as many bikes at the highest price possible, but I didn't do that by making customers uncomfortable. Each customer received different treatment depending on what they were looking for. For example, the $200 beach cruiser buyer was going to be told \"\"You look great on that bike... can I ring you up?\"\", whereas the racer interested in saving grams will receive a detailed discussion about his bike options. The $200 bike customer won't have very sophisticated questions (although I could give a lecture on cruisers), so giving out too much info complicates a likely quick impulse buy. On the other hand, we are building a relationship with the racer which will include detailed fitting sessions and time-consuming mechanical service. While I also want to close a high priced sale, it will take several visits to prove both I have the right bike and this is the best shop. But no matter what you were buying, I was always pleasant and unhurried, and my customers left happy. Specifically with this situation of high pressure tactics, the problem is the competition with internet sales. Often customers will have only 2 criteria, the model and the price, and if a shop does not meet both, the customer walks right out. Possibly this sales guy is a bit cynical with his tactics, but the reality is that if you have no relationship with that shop, you fall into the category of internet buyer. One thing the sales guy could have done was not tell you we wasn't going to honor this price if you came back. Occasionally there would be an internet buyer, and I showed no unpleasantness even though internet sellers could crush our brick and mortar shop. I would mention a competitive price and if he bought it, great, and if not, that's just business. As for the buyer, I would treat these tactics with a certain detachment. I would personally chuckle at his treatment and ask if I could kick the tires, an user car saying. I suppose the bottom line is if you are ready to buy this specific model, and if the price is right (and the shop is ethical so you won't get ripped off with garbage), then you have to be ready to buy on the spot. I will point out one horrible experience I had at a car dealership. I came in 15 minutes before closing and a sales person gave me a price almost a third cheaper than list. I wasn't ready to buy on my first visit ever to a dealership and of course, buying a car has all kinds of hidden fees. I asked will this be the price tomorrow, and he said absolutely not. I told him, \"\"so if I come in tomorrow morning, your dealer clock has only gone 15 minutes\"\" but that logic did not register with him. Maybe he thought I was going to spend 15k on the spot and pressure tactics would work on me. I never came back, but I did go another dealership and bought a car after a reasonable negotiation.\"" }, { "docid": "404833", "title": "", "text": "I actually just did that with my Chase Freedom card. They rotate categories every 3 months, and from April-June it was 5% back at grocery stores. So I bought a ton of gas cards and got my 5% back. Next I figured out I would be clever and buy a ton of store gift cards (grocery gift cards) right at the end of the quarter, then use those in the future to purchase gas cards. Well, I just tried that a couple days ago and discovered the store refuses to sell a gift card if you're paying with a gift card! So now I'm stuck with $1,000 in grocery cards until I use them in actual grocery purchases haha One of the things about this grocery store is they partner with a gas station on their rewards program. They offer 10 cents off a gallon with every $100 spent in store, and they double it to 20 cents off a gallon if you buy $100 in gift cards. Then on the back of the receipt is a coupon for 10 cents off per gallon -- which they double on Tuesdays. Unfortunately I think I'm one of the only people that takes this much advantage of the program :-/ Side note: I actually just changed the billing cycle of my Chase Freedom card to end on the 24th of the month. That way I can charge a bunch of rewards in the final 6-7 days of the quarter. And if I have a $0 balance on the 24th, my bill isn't due for 7 weeks -- interest free! And Chase Freedom has never cared if you purchase gift cards with their quarterly rewards program. I also gave them a courtesy email giving the specific store and $$$ amount that was going to be charged, and of course they still called me with a 'fraud alert'..." }, { "docid": "495874", "title": "", "text": "\"The two questions inherent in any decision to purchase an insurance plan is, \"\"how likely am I to need it?\"\", and \"\"what's the worst case scenario if I don't have it?\"\". The actuary that works for the insurance company is asking these same questions from the other end (with the second question thus being \"\"what would we be expected to have to pay out for a claim\"\"), using a lot of data about you and people like you to arrive at an answer. It really boils down to little more than a bet between you and the insurance company, and like any casino, the insurer has a house edge. The question is whether you think you'll beat that edge; if you're more likely than the insurer thinks you are to have to file a claim, then additional insurance is a good bet. So, the reasons you might decide against getting umbrella insurance include: Your everyday liability is low - Most people don't live in an environment where the \"\"normal\"\" insurance they carry won't pay for their occasional mistakes or acts of God. The scariest one for most is a car accident, but when you think of all the mistakes that have to be made by both sides in order for you to burn through the average policy's liability limits and still be ruined for life, you start feeling better. For instance, in Texas, minimum insurance coverage levels are 50/100/50; assuming neither party is hurt but the car is a total loss, your insurer will pay the fair market value of the car up to $50,000. That's a really nice car, to have a curbside value of 50 grand; remember that most cars take an initial hit of up to 25% of their sticker value and a first year depreciation of up to 50%. That 50 grand would cover an $80k Porsche 911 or top-end Lexus ES, and the owner of that car, in the U.S. at least, cannot sue to recover replacement value; his damages are only the fair market value of the car (plus medical, lost wages, etc, which are covered under your two personal injury liability buckets). If that's a problem, it's the other guy's job to buy his own supplemental insurance, such as gap insurance which covers the remaining payoff balance of a loan or lease above total loss value. Beyond that level, up into the supercars like the Bentleys, Ferraris, A-Ms, Rollses, Bugattis etc, the drivers of these cars know full well that they will never get the blue book value of the car from you or your insurer, and take steps to protect their investment. The guys who sell these cars also know this, and so they don't sell these cars outright; they require buyers to sign \"\"ownership contracts\"\", and one of the stipulations of such a contract is that the buyer must maintain a gold-plated insurance policy on the car. That's usually not the only stipulation; The total yearly cost to own a Bugatti Veyron, according to some estimates, is around $300,000, of which insurance is only 10%; the other 90% is obligatory routine maintenance including a $50,000 tire replacement every 10,000 miles, obligatory yearly detailing at $10k, fuel costs (that's a 16.4-liter engine under that hood; the car requires high-octane and only gets 3 mpg city, 8 highway), and secure parking and storage (the moguls in Lower Manhattan who own one of these could expect to pay almost as much just for the parking space as for the car, with a monthly service contract payment to boot). You don't have a lot to lose - You can't get blood from a turnip. Bankruptcy laws typically prevent creditors from taking things you need to live or do your job, including your home, your car, wardrobe, etc. For someone just starting out, that may be all you have. It could still be bad for you, but comparing that to, say, a small business owner with a net worth in the millions who's found liable for a slip and fall in his store, there's a lot more to be lost in the latter case, and in a hurry. For the same reason, litigious people and their legal representation look for deep pockets who can pay big sums quickly instead of $100 a month for the rest of their life, and so very few lawyers will target you as an individual unless you're the only one to blame (rare) or their client insists on making it personal. Most of your liability is already covered, one way or the other - When something happens to someone else in your home, your homeowner's policy includes a personal liability rider. The first two \"\"buckets\"\" of state-mandated auto liability insurance are for personal injury liability; the third is for property (car/house/signpost/mailbox). Health insurance covers your own emergency care, no matter who sent you to the ER, and life and AD&D insurance covers your own death or permanent disability no matter who caused it (depending on who's offering it; sometimes the AD&D rider is for your employer's benefit and only applies on the job). 99 times out of 100, people just want to be made whole when it's another Average Joe on the other side who caused them harm, and that's what \"\"normal\"\" insurance is designed to cover. It's fashionable to go after big business for big money when they do wrong (and big business knows this and spends a lot of money insuring against it), but when it's another little guy on the short end of the stick, rabidly pursuing them for everything they're worth is frowned on by society, and the lawyer virtually always walks away with the lion's share, so this strategy is self-defeating for those who choose it; no money and no friends. Now, if you are the deep pockets that people look for when they get out of the hospital, then a PLP or other supplemental liability insurance is definitely in order. You now think (as you should) that you're more likely to be sued for more than your normal insurance will cover, and even if the insurance company thinks the same as you and will only offer a rather expensive policy, it becomes a rather easy decision of \"\"lose a little every month\"\" or \"\"lose it all at once\"\".\"" }, { "docid": "322238", "title": "", "text": "That totally sucks! I use Avis for work once a year when I'm flown out to corporate and both times I've done so they've managed to fuck up in regards to my reservation. The first time I received an email from them thanking me for using their service when I still had the car and saw a new $300 charge on my credit card. When I called to inquire about the car I had rented 3 days earlier that was still in my possession they informed me that the vehicle had been checked into one of their depots 2300 miles away and they were citing a fee for returning the vehicle to another location. When I asked the agent how many miles were recorded driven on the vehicle she responded with 108. I then asked her how far she thought Chicago was from San Francisco and if it was possible to drive that distance in 3 days while only incurring 108 miles on the vehicle. In the end, they refused to back down and I had to involve corporate to settle everything. The second issue was much less eventful but happened a week ago when I checked out a car. I received an email 2 hours later saying they're sorry my car hadn't been available and to call them for an explanation. Puzzled as I had gotten the car I had asked for I called and was told that their system says I had checked out and in the very same car I had the previous day at 8:34pm (check in and check out were recorded as the same time, same day) and they charged me $50 for a single day's rental. This time they recognized that it was an error and credited me back the money on my CC but I don't know why they have so many issues with their reservation system." }, { "docid": "20079", "title": "", "text": "The basic idea behind a derivative is very simple actually. It is a contract where the final value depends on (is derived from) the value of something else. Stock, for instance, is not a derivative because the contract itself is actually ownership of part of a company. Whereas car insurance is a derivative because the payout depends on the value of something else namely your (and other peoples') cars. The problem with such a simple definition is that it covers such a broad class. It covers simple contracts like Futures where the end value just depends on the price of something on a future date. But it extends to contracts complicated enough that people in finance call them Exotics. Derivatives are broadly used for two things reducing risk (sometimes called insurance) and speculation. A farmer can use derivatives to make sure she gets paid a certain amount for her corn. A banker can group a bunch of loans together and sell slices to reduce the pain of a particular loan failing. At the same time people can use the same instruments to speculate on the price of (for example) that corn or those loans and the main advantage is that they don't have to buy the corn or loans directly. Any farmer will tell you corn can be very expensive to store. Derivatives generally cause problems both individually and sometimes world wide when people don't properly understand the risks involved. The most famous example being Mortgage-backed Securities and the recent Great Recession. You can start understand the instruments and their risks by this wonderful Wikipedia article and later perhaps a used collection of CFA books which cover derivatives in great detail. Edit: Michael Grünewald mentioned Hull's text on derivatives a wonderful middle ground between Wikipedia and the CFA books that I can't believe I didn't think about myself." }, { "docid": "267422", "title": "", "text": "Credit history is local, so when you move to the US you start with the blank slate. Credit history length is a huge factor, so in the first year expect that nobody would trust you and you may be refused credit or asked for deposits. I was asked for deposits at cell phone company and refused for store cards couple of times. My advice - get a secured credit card (that means you put certain sum of money as a deposit in the bank and you get credit equal to that sum of money) and if you have something like a car loan that helps too (of course, you shouldn't buy a car just for that ;) but if you're buying anyway, just know it's not only hurting but also helping when you pay). Once you have a year or two of the history and you've kept with all the payments, you credit score would be OK and everybody would be happy to work with you. In 4-5 years you can have excellent credit record if you pay on time and don't do anything bad. If you are working it the US, a lot of help at first would be to take a letter from your company on an official letterhead saying that you are employed by this and that company and are getting salary of this and that. That can serve as an assurance for some merchants that otherwise would be reluctant to work with you because of the absence of credit history. If you have any assets overseas, especially if they are held in a branch of international bank in US dollars, that could help too. In general, don't count too much on credit for first 1-2 years (though you'd probably could get a car loan, for example, but rates would be exorbitant - easily 10 percentage points higher than with good credit), but it will get better soon." } ]

[ { "docid": "92888", "title": "", "text": "The advice above is generally good, but the one catch I haven't seen addressed is which specific laws apply. You said that you are in Arkansas, but the dealer is in Texas. This means that the laws of at least two different states are in play, possibly three if the contract contains a clause stating that disputes will be handled in a certain jurisdiction, and you are going to have to do some research to figure out what actually applies. One thing that may significantly impact this issue is whether you were in TX or AR when you signed the contracts. If you borrowed the money in TX, and the lender is in TX, then it is almost certain that the laws of Texas will govern. However, if you were living in AR at the time you acquired the loan, particularly if you were in AR when you signed the papers, you have a decent case for claiming that the laws of Arkansas govern. I don't know enough about either state to know if one is more favorable to the consumer than the other, but it is a question you really want to have answered. That said, I would be shocked if any state did not have provisions requiring the lender to provide a copy of the terms and a detailed statement of the account and transaction history upon request. Spend some time on the web site of the Texas attorney general and/or legislator (because that is where the lender is, they are more likely to respect Texas law) to see if you can track down any specific laws or codes that you can reference. You might also look into the federal consumer protection laws, though I can't think of one off hand that would apply in the scenario you have described. Then work on putting together a letter asking them to provide a copy of the contract and a full history of the account. As others noted, make sure you send it certified/return receipt, or better yet use a private carrier such as fedex, and check the box about requiring a signature. Above all you need to get the dialog transferred to a written form. I can not stress this point enough. Everything you tell them or ask for from here out needs to be done in a written format. If they call you about anything, tell them you want to see their issue/offer in writing before you will consider it. You do not necessarily need a lawyer to do any of this, but you do need to know the applicable laws. Do the research to know what your legal standing is. Involve a lawyer if you feel you need to, but I have successfully battled several large utility companies and collection agencies into behaving without needing one." } ]

[ { "docid": "494791", "title": "", "text": "\"You should immediately tell your bank you've been scammed, request for the transactions' cancellation or revocation and get back most - if not all - of the money transferred. I've placed numerous orders online in the past and was always very careful about their trace-ability but I have to admit once I acted carelessly and got scammed. I didn't think of it much before placing an order for a very low priced laptop through a private seller on Amazon. I'd never purchased anything this way before but thought \"\"Amazon will protect me if anything goes wrong...\"\" so I sent an e-mail to the seller. He gave me his bank details (with Spanish IBAN) via a non-suspicious e-mail with the usual logos and e-mail address domain name, made the payment and guy came back to me saying he'll ship the laptop once he sees the funds received. Waited max. 2 days, trying to contact him but no response. Contacted Amazon giving the seller's ID and the \"\"transaction\"\"'s ID I'd received from him and they told me there's nothing they can do as that transaction is not recorded on their systems. Immediately after realizing I've been scammed and done my goof, I contacted my bank via e-mail explaining the situation. I was informed that the transaction can be cancelled but they cannot guarantee the return of the entire amount. After 2-3 days, I saw my balance richer by €950 and the payment I'd made to the scum was €1,000. I'd highly recommend that you check the fraud protection policy of your bank and in case there's something that can be done, then just get in contact with them explaining the situation.\"" }, { "docid": "267233", "title": "", "text": "In my area, the fixed prices are based on an average. My gas company will look at my previous months (six months if I remember correctly) payments and give me an average based on that amount. Then I am contracted for a year based on that average. If I lower my costs, I'm under contract and will not see the savings but if I go over for some reason, I will save money there. It really depends on how your utility companies work so I would check with them, look at your previous billing cycles and determine if the plan will possibly save you money. Of course some things can't be planned for such as the economic downturn like someone else mentioned." }, { "docid": "212142", "title": "", "text": "I say to always say yes when asked to loan money to a friend or family member as long as you have the money to do it with. That is the key: having th emoney to do it with. And - don't expect to get it back ever. If you do, great. When you don't, your expectation was met. Although not often, I've lent money to friends and most of the time have been paid back. $10, $300, more. For the times when I was not, I do remember but I don't hold it against the person. Money is only money, after all. Friends are precious and worthy of your aid, support, and respect. If they weren't, then one must ask if they are really a friend. - I have also had to borrow money once for a non-trivial amount. My family, who can easily afford it, refused but a friend helped me at a critical juncture. I offered to make a contract but my friend said no, pay me back when you can. I have tried to start paying back a couple of times but my friend refused telling me to wait until I was more financially stable. - If I am ever lucky enough to be in the position my friend is in, I will emulate this behavior and do the very same thing - and love doing it all the while." }, { "docid": "332763", "title": "", "text": "The first part of your comment is clearly copy pasted (or parroted) from a cnn type news source i will however grant you the GOP has done an exceptional job with their propagandaand misinformation regarding the ACA, the left has done so as well. The 20 million people added to healthcare is a number they boast and brag about when they dont realize (from a study im having a hard time reproducing so take it with a grain of salt) roughly 65% of those people could afford health insurance prior to the aca just chose not to buy and because of the mandate were forced to. I also know that for me health insurance prior to the ACA was significantly lower roughly 50% cheaper and that doesnt even begin to touch the hikes a lot of people i know saw. So the big difference here is preference because we can both pull information supporting our arguments and you may think youre morally superior to me for wanting to get everyone healthcare by any means necessary whereas i want to make it cheaper and give people the tools and resources to afford it instead of being reliant on theft to receive it. &gt;However, I don't think they are the low tax haven that you think they are. They have some of the lowest income tax rates in the world.Yes i would love to see 0 income tax rates but lower is always better. &gt;I am now owner of a company that does R&amp;D and works with the government. A lot of my knowledge about inventions, and how commercial works with government comes from my own personal experiences. While i do not own my own company or have anything to do with R&amp;D i can for a fact disprove your theory that &gt;Anyone comes to this game with the presupposition that government can't get anything done as well as commercial quickly learns that is not true. As i have and do work on many government contracted sites. Im in construction. And i can tell you from first hand experience the amount of wasted time and money on these sites is absolutely astounding. For instance i worked on a government building a year and a half ago in the western half of the country, this building was meant to service Veterans. Not only was this building over budget by 100% it was also 2 years behind schedule, many people would say that this is the contractors fault but thats only partly true because in a private sector site these contractors wouldnt have lasted more than a month before being replaced. We have both seen the opposite side of the same coin. We both acknowledge the private sector does everything better (for the most part) the only difference is you like the funding to be public (of course you do you make a fucking killing on these government contracts) whereas i want the funding to be private. The private sector will always have a need to innovate and that need will always be filled with or without the government the only difference is the private sector wont keep throwing money at an unsustainable rate like the government does because if they dont see results its not worth funding. Id also like to add you are near the same age as my father who also served in the military and i thank you for your service." }, { "docid": "456887", "title": "", "text": "&gt;&gt; Hey! Do you mind giving your credit card to the waiter... &gt; I'm not especially fond of that, but it's easy to report fraud to the bank and most of the time the bank will reverse the charges. No kidding! Of course, even I give credit cards to waiters. What do I care? **As you said, you are not liable to any fraud on your credit card.** None at all!!!! It's only Merchant, not the credit card company, that pay the price for fraud... **and you pay higher prices to cover for losses from fraud.** &gt; The PIN situation is different because a mugging is life-threatening. Nonsense! Mugging at the ATM is so rare, each ATM has a camera. **In any case, I am not talking about using PIN to withdraw money!** I am talking about PIN to authorize charges on a credit card or ATM card. &gt;&gt; We already determined that nobody even care about signatures or check them. &gt; You can't use a stolen card at an ATM with a signature. Huh? You totally got it wrong what I said, or, you argue for the sake of argument. **I am saying that cards that require you to enter a PIN cannot be used used when stolen or copied. Yes or no?** **On the other hand, cards that require signature can be used when stolen or copied because signature is a worthless method to validate the charge. Yes or no?** LASTLY, my Costco credit card has a picture of me on it. **Question for you, since for some reason you argue so much against PINs: Wouldn't a picture on the card better than a signature?** Yes or no? Do you see? There are so many ways to make this system so much more secure and fraud proof... but, ON PURPOSE, the credit card companies don't want that... because they are not liable for fraud. Simple as that." }, { "docid": "574398", "title": "", "text": "When adding a new or used car to the policy I have found that it is best to call the company in advance. I let them know I will be adding a car to the policy in the next few days, but I have no idea of the VIN or other info. I have a policy with a different company and they have told me that I am automatically covered as long as I provide the VIN and other details within 30 days. The next business day after the purchase I provide everything they need, and a new bill is generated. When removing a car from the policy it has worked the same way, a new bill is generated when removing the car. Depending on the timing and amounts they have either credited my account or sent a check. They should have no problem removing a car that was accidentally on the policy. It might be that they charge you a days coverage. When you call them about the refund, ask if the coverage for an additional vehicle is automatic, that way you don't have to provide the info until after you get the car home." }, { "docid": "185988", "title": "", "text": "Just wanted to chip in on the card reader thing. If they threaten to call the cops, call their bluff; worst case you'll spend the time waiting for a copy to show up that would've been wasted driving around looking for an ATM. Also, make sure you call the company after the fact and let them know about it (as well as identifying details about when and what cab # you were in) -- some companies don't care but the ones I've had to call about generally take that seriously (i.e. management calling me back later to get as much identifying info as possible to find the drivers responsible)." }, { "docid": "437182", "title": "", "text": "We aim to keep 6 months of expenses. The rationale is that its enough time to recover from most serious illnesses (that you can recover from) or a redundancy or pay for a large unexpected problem not covered by the insurance (e.g. the boiler dying). It also gives us enough time to reorganise finances if needed. For example we could get out of contracts (like mobile phones, sky TV), sell the car, and maybe even find a cheaper house if needed in that time. It will take a good chunk of time to build up that amount and it's worth considering how many commitments you have (kids, wife, mortgage, car...) as the fewer you have the less you need. If you have fewer commitments you can be comfortable with much less contingency. When I lived in rented accomodation and didn't run a car or have many possessions, I just maintained enough cash to cover my bills for about 6 weeks, this would give me enough time to find another job, and if I didn't get one I could always crash round a friend's house." }, { "docid": "553235", "title": "", "text": "\"Following @Brick's advice, I am posting this as an answer so it \"\"stands apart from the question\"\", but all the credit goes to @TTT, whose instructions I followed. I was able to get this collection completely deleted/removed from the 2 bureaus that were reporting it, using only the online dispute process. Of course, your mileage may vary, but here's some more details, that may be helpful to others. Equifax: Success! 3 weeks after disputing the collection using the online dispute process, and uploading my (scanned) \"\"final account statement\"\" to show that I paid the apartment complex, I received an email confirmation that it is deleted. (I had to go to a webpage to get the actual result.) TransUnion: Success! Although I never heard back from TU, my CreditKarma account now shows that the collection is no longer on my TU report either. I am not sure if this is because Equifax deleted it and TU just followed suit, or if TU did their own investigation (ideas, comments? could help others). Their online dispute process bugged out and didn't accept my upload, so they would have had to contact the apartment complex, so I was supposed to receive something by mail. I still haven't, but it's definitely gone from my report. Experian: It didn't show up on this report, so I can't give any feedback. I suppose it's also worth noting that I did not ever have any contact with the Collections Agency. I did visit the apartment office, in person, in order to get a copy of my final statement. While there, I spoke with the (new) manager, who said she would try to reach up the chain of command to figure something out. I'm not sure how much difference, if any, this may have made, as the complex is now owned by an entirely different company. In fact, the new manager had no idea who the old management company was, much less which collections agency they used. Also worth noting: Removing the collection made my score rise from 623 to 701! I know because, after getting the collection removed from my report, I re-applied for the auto loan I had been denied 3 weeks prior, and they gave me my Equifax score both times.\"" }, { "docid": "589023", "title": "", "text": "\"Essentially. Though, at Sam's Club and COSTCO, you'll probably get your membership revoked. By asking to see your receipt and items, you're submitting to a search and the company has no legal authority to force you to do so. Basically, every time an employee asks to see your receipt and items, they are accusing you of theft and demanding you submit to a search. No, most employees don't know the legal details about this. They also can't stop you from saying \"\"No, I don't submit to a search of my items\"\" and walking right past them. It might or might not be a big hassle. I've seen people walk right by them at Walmart. At my own grocery store, we had no legal way to restrain people who were stealing. We could yell at them, take pictures of their face, and give the evidence to police but as non-police personnel, we couldn't physically restrain them. We had a designated security guy who could do it and if he wasn't working that day, no one was getting restrained. The tiny girl working in the garden section of Walmart asking to see your receipt probably isn't private security or Walmart loss prevention. It just depends how strongly you feel about the 4th and 5th amendment. I personally get pissed that I have a 13 month old I'm carrying and then I have to put everything down, open my bags while watching my 13 month old to keep her from bolting all for an 18 year old to just draw a yellow line through my receipt after they barely glanced at my items. It's a hassle for me and unnecessary if Walmart had a loss prevention team worth a shit but they refuse to adequately staff their stores. Hell, you don't even need a good loss prevention department if you have enough employees on the floor to deter theft.\"" }, { "docid": "404833", "title": "", "text": "I actually just did that with my Chase Freedom card. They rotate categories every 3 months, and from April-June it was 5% back at grocery stores. So I bought a ton of gas cards and got my 5% back. Next I figured out I would be clever and buy a ton of store gift cards (grocery gift cards) right at the end of the quarter, then use those in the future to purchase gas cards. Well, I just tried that a couple days ago and discovered the store refuses to sell a gift card if you're paying with a gift card! So now I'm stuck with $1,000 in grocery cards until I use them in actual grocery purchases haha One of the things about this grocery store is they partner with a gas station on their rewards program. They offer 10 cents off a gallon with every $100 spent in store, and they double it to 20 cents off a gallon if you buy $100 in gift cards. Then on the back of the receipt is a coupon for 10 cents off per gallon -- which they double on Tuesdays. Unfortunately I think I'm one of the only people that takes this much advantage of the program :-/ Side note: I actually just changed the billing cycle of my Chase Freedom card to end on the 24th of the month. That way I can charge a bunch of rewards in the final 6-7 days of the quarter. And if I have a $0 balance on the 24th, my bill isn't due for 7 weeks -- interest free! And Chase Freedom has never cared if you purchase gift cards with their quarterly rewards program. I also gave them a courtesy email giving the specific store and $$$ amount that was going to be charged, and of course they still called me with a 'fraud alert'..." }, { "docid": "120279", "title": "", "text": "\"He sounds like a very bad salesman and I should know, because I was a sales manager at a bike shop which sold bikes from $200 to $10k. Now I had a clear goal, which is to sell as many bikes at the highest price possible, but I didn't do that by making customers uncomfortable. Each customer received different treatment depending on what they were looking for. For example, the $200 beach cruiser buyer was going to be told \"\"You look great on that bike... can I ring you up?\"\", whereas the racer interested in saving grams will receive a detailed discussion about his bike options. The $200 bike customer won't have very sophisticated questions (although I could give a lecture on cruisers), so giving out too much info complicates a likely quick impulse buy. On the other hand, we are building a relationship with the racer which will include detailed fitting sessions and time-consuming mechanical service. While I also want to close a high priced sale, it will take several visits to prove both I have the right bike and this is the best shop. But no matter what you were buying, I was always pleasant and unhurried, and my customers left happy. Specifically with this situation of high pressure tactics, the problem is the competition with internet sales. Often customers will have only 2 criteria, the model and the price, and if a shop does not meet both, the customer walks right out. Possibly this sales guy is a bit cynical with his tactics, but the reality is that if you have no relationship with that shop, you fall into the category of internet buyer. One thing the sales guy could have done was not tell you we wasn't going to honor this price if you came back. Occasionally there would be an internet buyer, and I showed no unpleasantness even though internet sellers could crush our brick and mortar shop. I would mention a competitive price and if he bought it, great, and if not, that's just business. As for the buyer, I would treat these tactics with a certain detachment. I would personally chuckle at his treatment and ask if I could kick the tires, an user car saying. I suppose the bottom line is if you are ready to buy this specific model, and if the price is right (and the shop is ethical so you won't get ripped off with garbage), then you have to be ready to buy on the spot. I will point out one horrible experience I had at a car dealership. I came in 15 minutes before closing and a sales person gave me a price almost a third cheaper than list. I wasn't ready to buy on my first visit ever to a dealership and of course, buying a car has all kinds of hidden fees. I asked will this be the price tomorrow, and he said absolutely not. I told him, \"\"so if I come in tomorrow morning, your dealer clock has only gone 15 minutes\"\" but that logic did not register with him. Maybe he thought I was going to spend 15k on the spot and pressure tactics would work on me. I never came back, but I did go another dealership and bought a car after a reasonable negotiation.\"" }, { "docid": "60623", "title": "", "text": "It is important to understand that when or before you received services from your medical provider(s), you almost certainly signed a document stating that you understand that you are fully responsible for the entire bill, even though the provider may be willing to bill the insurer on your behalf as a service. In almost all cases, this is the arrangement, so it is very unlikely that you will be able to dispute the validity of the bill, since you did receive the service and almost certainly agreed to be fully responsible for the payments. With regard to the discounts, your medical provides have likely contracted with your insurer to provide services at a certain price or discount level, so I would base all of your negotiations with the providers and/or the collectors on those amounts. They can't legitimately bill you for the full amount since you are insured by a company they have a contract with, and you are not self-pay/uninsured, and the fact that they haven't been paid by your insurer doesn't change that, because the discount likely depends on the contact they have with your insurer and not whether or not they are billed/paid by your insurer. Please note - this is a common arrangement, but I'd recommend that you verify this with your insurer. Unfortunately, payment in 90+ days is often typical by insurance standards, so it's not yet clear to me whether or not your insurer has broken any laws such as a Prompt Pay law, or violated the terms of your policy with them (read it!). However, you need to find out which claims rep/adjuster is handling your claims and follow up with them until the payments are made. It's not personal, so make this person's life miserable until it is done and call them so often that they know it's you by the caller ID. I would also recommend contacting the collector(s), and letting them know that you don't have the money and so will not be able to pay, provide them with copies of the EOBs that state that the insurance company plans to pay the providers, and then ignore their calls/letters until the payments are made. When they call, simply reiterate that you don't have the money and that your insurance company is in the process of paying the bills. You have to expect that you will be dealing with a low-paid employee that is following a script. You are just the next person on their robo-call list, and they are not going to understand that you don't have a pile of money laying around with which to pay them, even if you tell them repeatedly. Make sure that you at no point give them access to any of your financial accounts, such as a checking or savings account, or a debit card - they will access it and clean you out. It is likely that your insurance provider will pay the providers directly since they were likely billed by the providers originally. If the providers have sold the debt to the collectors (and are not just employing a collector for debt they still own), you may have to follow up with the providers as well and make sure that the collection activity stops, since the providers may also need to forward the payments to the collectors once they are paid by the insurance company. Of course, if the insurer refuses to pay the claims, at that point I would recommend meeting with a lawyer to seek to force them to pay." }, { "docid": "103970", "title": "", "text": "After doing some investigating, my employers contract with the credit card company has a clause that basically specifies that despite my name being on the credit card, and bills being sent to me, all liability is on the company. Additionally, the employer reserves the right to garnish wages in the event of a balance on the card. So it looks like it won't affect my credit score. I appreciate all of the advice." }, { "docid": "236580", "title": "", "text": "It's not greedy for me to demand money from you - in fact, it is greedy for you to refuse my demands that you give me money. It's not theft for me to take something from you - in fact, it is theft if you do not allow me to take something from you. Also, left is right, up is down, and cats are female dogs." }, { "docid": "521060", "title": "", "text": "Money factor is a term coined by leasing companies to make car leasing that much more convoluted. It's basically a decimal value that you multiply by 2400 in order to arrive at your actual annual percentage rate or interest rate. Here's a really good article detailing how you can calculate your interest rate based on other criteria in your leasing contract, because most of the time you won't even be given money factor on your leasing contract" }, { "docid": "335808", "title": "", "text": "My family members, particularly my aunt (his daughter), are telling me that when my grandpa dies they are taking my car. Bring this up with Grandpa. If this is what he wants to have happen, then help him make it happen before you finish paying $12,000 on a car worth only $6,000. Let the Aunt and other relatives deal with the remaining $12,000. If that isn't what he wants to have happen, then work out how you and he can legally make sure that what he wants to have happen actually happens. If the Aunt or others bring it up, make sure they understand that you still owe $12,000 on the car, and if they get the car they also get the loan. If they refuse to pay the loan then make sure they know you will cooperate with the bank when they attempt to repossess the car - up to and including providing them with keys and location. This will hurt your credit, and you will be on the hook for the remaining portion of the loan, but you at least won't have to deal with all of it - they'll sell it at auction and your loan amount will fall a little. But the best course of action is to work with Grandpa, and make sure that he understands the family's threats, how that will affect you since you're on the loan, and what options you'd like to pursue." }, { "docid": "48998", "title": "", "text": "\"Most practices I've gone to use a triplicate paper form called a \"\"medical encounter form\"\"with the specialty's most common procedure codes and laboratory codes preprinted. (And rarer ones hand added). The doctor fills this out and the office manager transcribes it. This also has a billing section where in my case the office manager initials \"\"cc\"\" for credit card. You probably refused or threw away your copy, but can ask to review their copy. Maybe there is a mis transcribed entry indicating payment at time of service.\"" }, { "docid": "133942", "title": "", "text": "I suspect that part of the problem with responding to surveys is that marketers realized they could use surveys as advertising. The last survey I actually responded to was over 5 years ago and was an ad for Geiko. I realized half way when they started asking me detailed questions about my memory of Geiko's commercials over and I then refused to give the satisfaction of saying Geiko." } ]

[ { "docid": "172855", "title": "", "text": "No, they cannot refuse to provide you with the current balance or a balance history. The other answers point you to resources that are available to help you put pressure on the dealership. The bottom line is that you now know that you have the right to the details and to audit their recording of the transactions. You should now use that information and demand a better response in writing. If they have to give you a response in writing, they can't deny the answer they gave in a court of law later on. They understand this, and they will take you more seriously if you send a letter. Make sure to keep copies of the letter and send it with certified delivery." } ]

[ { "docid": "456887", "title": "", "text": "&gt;&gt; Hey! Do you mind giving your credit card to the waiter... &gt; I'm not especially fond of that, but it's easy to report fraud to the bank and most of the time the bank will reverse the charges. No kidding! Of course, even I give credit cards to waiters. What do I care? **As you said, you are not liable to any fraud on your credit card.** None at all!!!! It's only Merchant, not the credit card company, that pay the price for fraud... **and you pay higher prices to cover for losses from fraud.** &gt; The PIN situation is different because a mugging is life-threatening. Nonsense! Mugging at the ATM is so rare, each ATM has a camera. **In any case, I am not talking about using PIN to withdraw money!** I am talking about PIN to authorize charges on a credit card or ATM card. &gt;&gt; We already determined that nobody even care about signatures or check them. &gt; You can't use a stolen card at an ATM with a signature. Huh? You totally got it wrong what I said, or, you argue for the sake of argument. **I am saying that cards that require you to enter a PIN cannot be used used when stolen or copied. Yes or no?** **On the other hand, cards that require signature can be used when stolen or copied because signature is a worthless method to validate the charge. Yes or no?** LASTLY, my Costco credit card has a picture of me on it. **Question for you, since for some reason you argue so much against PINs: Wouldn't a picture on the card better than a signature?** Yes or no? Do you see? There are so many ways to make this system so much more secure and fraud proof... but, ON PURPOSE, the credit card companies don't want that... because they are not liable for fraud. Simple as that." }, { "docid": "441400", "title": "", "text": "\"I can understand your nervousness being 40 and no retirement savings. Its understandable especially given your parents. Before going further, I would really recommend the books and seminars on Love and Respect. The subject matter is Christian based, but it based upon a lot of secular research from the University of Washington and some other colleges. It sounds like to me, this is more of a relationship issue than a money issue. For the first step I would focus on the positive. The biggest benefit you have is: Your husband is willing to work! Was he lazy, there would be a whole different set of issues. You should thank him for this. More positives are that you don't have any credit card debt, you only have one car payment (not two), and that you are paying additional payments on each. I'd prefer that you had no car payment. But your situation is not horrible. So how do you improve your situation? In my opinion getting your husband on board would be the first priority. Ask him if he would like to get the car paid off as fast as possible, or, building an emergency fund? Pick one of those to focus on, and do it together. Having an emergency fund of 3 to 6 months of expense is a necessary precursor to investing, anyway so you from the limited info in your post you are not ready to pour money into your 401K. Have you ever asked what his vision is for his family financially? Something like: \"\"Honey you care for us so wonderfully, what is your vision for me and our children? Where do you see us in 5, 10 and 20 years?\"\" I cannot stress enough how this is a relationship issue, not a math issue. While the problems manifests themselves in your balance sheet they are only a symptom. Attempting to cure the symptom will likely result in resentment for both of you. There is only one financial author that focuses on relationships and their effect on finances: Dave Ramsey. Pick up a copy of The Total Money Makeover, do something nice for him, and then ask him to read it. If he does, do something else nice for him and then ask him what he thinks.\"" }, { "docid": "589023", "title": "", "text": "\"Essentially. Though, at Sam's Club and COSTCO, you'll probably get your membership revoked. By asking to see your receipt and items, you're submitting to a search and the company has no legal authority to force you to do so. Basically, every time an employee asks to see your receipt and items, they are accusing you of theft and demanding you submit to a search. No, most employees don't know the legal details about this. They also can't stop you from saying \"\"No, I don't submit to a search of my items\"\" and walking right past them. It might or might not be a big hassle. I've seen people walk right by them at Walmart. At my own grocery store, we had no legal way to restrain people who were stealing. We could yell at them, take pictures of their face, and give the evidence to police but as non-police personnel, we couldn't physically restrain them. We had a designated security guy who could do it and if he wasn't working that day, no one was getting restrained. The tiny girl working in the garden section of Walmart asking to see your receipt probably isn't private security or Walmart loss prevention. It just depends how strongly you feel about the 4th and 5th amendment. I personally get pissed that I have a 13 month old I'm carrying and then I have to put everything down, open my bags while watching my 13 month old to keep her from bolting all for an 18 year old to just draw a yellow line through my receipt after they barely glanced at my items. It's a hassle for me and unnecessary if Walmart had a loss prevention team worth a shit but they refuse to adequately staff their stores. Hell, you don't even need a good loss prevention department if you have enough employees on the floor to deter theft.\"" }, { "docid": "521144", "title": "", "text": "The hospital likely has a contract with your insurance company which makes them obligated to bill the insurance before billing you! I had a similar occurrence that was thrown out when my insurance company provided a copy of a contract with the hospital to the judge. So if there is an agreement they must file with the insurance in timely manner." }, { "docid": "265558", "title": "", "text": "\"Geez man you're cutting it close to the end of the semester to be at the research stage of your project. I normally frown on posts that say \"\"LOL DO MY PROJECT FOR ME\"\" but i know a bit about this subject and want to share. I'm going to focus mostly on the B2B segment here because that's what I know. Many companies aren't spending as much as they used to on IT products or the staff to support them. They're also looking for ways to be more productive with their budgets. The consumer market is spending a lot less and is demanding products that Dell can't make as much money on. The big things right now are The cloud, virtualization and miniaturization. So, right now \"\"The Cloud\"\" is the buzzword. Lots of companies are moving their stuff offsite, letting someone else worry about major IT infrastructure. This typically costs the company less in both hardware and personnel costs. Companies still need a onsite presence for critical applications, data and backup but they need a lot less than what was necessary 5 years ago. Network backbones have grown in scale and many metropolitan areas can now support this type of computing. You also have virtualization which means you can run multiple \"\"servers\"\" on one physical server. What used to take up an entire rack years ago can now be run on a few servers. This means companies need less of the IT equipment Dell makes in order to grow and expand. All that means less of a demand for traditional IT equipment (computers and servers) and more of a demand for the proper software. I see Dell moving more towards personal devices and larger enterprise equipment &amp; servers. Personal devices include tablets, laptops/netbooks, phones, compact PCs. The business side includes high density servers, storage, software and services. The miniaturization of computer hardware along with the cloud will allow users to access their \"\"desktop\"\" and programs from anywhere and Dell will be providing products to access the cloud. Servers will have terabytes of memory and a large number of cores. (systems with terabytes of memory already exist but the cost is prohibitive for most companies). These systems will be used to support a business' needs through virtualization or provide users with the cloud. Dell has acquired a few software companies over the years and will most likely acquire more &amp; may offer software for cloud computing, IT management and possibly (probably not) virtualization. Over the past few years the desktop PC market has been shrinking as netbooks and new devices have been released. They still have a long way to go but someday they will largely replace the PC in homes and businesses; especially as costs come down. Also, Dell may see lots more money from government and healthcare in the next few years. The government may choose to spend even more money than they do now on infrastructure and projects to help get us out of the recession. Those projects will need IT resources. Same goes for healthcare, as the new healthcare laws go into effect they will need more IT resources to get the job done. source: me, I've worked in the IT industry for the past 9 years. The majority of our business is with Dell products. If you need more details about me send me message. Also please don't just copy paste my information. I'm giving you some ideas. Go look them up, learn about them, research them. College is about learning and one of the points of this project is to expand your knowledge about a subject. tl;dr due to new technology, people and companies will be buying less, margins will be thinner, Dell will probably focus on new markets. edit: after going through some of your posts it seems like you are in the IT industry as well so I'm confused and you may already know most of this information.\"" }, { "docid": "473963", "title": "", "text": "\"I was wondering how do we calculate the total capital of a company? Which items should I look for in the financial statements? Total capital usually refers to the sum of long-term debt and total shareholder equity; both of these items can be found on the company's balance sheet. This is one of the calculations that's traditionally used when determining a company's return on capital. I'll use the balance sheet from Gilead Sciences' (GILD) 2012 10-K form as an example. Net long-term debt was $7,054,555,000 and total stockholder equity was $9,550,869,000 which should give a grand total of $16,605,424,000 for total capital. (I know you can do the math, but I always find an example helpful if it uses realistic numbers). You may sometimes hear the term \"\"total capital\"\" referring to \"\"total capital stock\"\" or \"\"total capital assets,\"\" in which case it may be referring to physical capital, i.e. assets like inventory, PP&E, etc., instead of financial capital/leverage. And how do I calculate notes payable? Is the same as accounts payable? As the word \"\"payable\"\" suggests, both are liabilities. However, I've always been taught that accounts payable are debts a business owes to its suppliers, while notes payable are debts a business owes to banks and other institutions with which it has signed a formal agreement and which use formal debt instruments, e.g. a loan contract. This definition seems to match various articles I found online. On a balance sheet, you can usually determine notes payable by combining the short-term debt of the company with the current portion of the long-term debt. These pieces comprise the debt that is due within the fiscal year. In the balance sheet for Gilead Sciences, I would only include the $1,169,490,000 categorized as \"\"Current portion of long-term debt and other obligations, net\"\" term, since the other current liabilities don't look like they would involve formal debt contracts. Since the notes payable section of GILD's balance sheet doesn't seem that diverse and therefore might not make the best example, I'll include the most recent balance sheet Monsanto as well.1 Monsanto's balance sheet lists a term called \"\"Short-term debt, including current portion of long-term debt\"\" with a value of $36 million. This looks like almost the exact definition of notes payable. 1. Note that this financial statement is called a Statement of Consolidated Financial Position on Monsanto's 10-K.\"" }, { "docid": "463568", "title": "", "text": "if I open current accounts with all these institutions, will they know if I move money between them, i.e. from the one I pay my salary to, to the next, to the next etc. Of course they will know. After all you will provide the account numbers for transferring the money. Regarding the intent of transfer they don't care. They only care the about the amount coming in regularly. refuse to give me the rates and bonuses I want For this I will go through their terms and conditions and you should do it. Check for any excluded conditions. Read between the lines. But check on what amount will you be getting the interest. Most of these accounts pay interest daily and on the amount in the account in a day. So you might not be generating much of an interest in those accounts if you don't have a substantial balance." }, { "docid": "72854", "title": "", "text": "\"To answer your question as clarified in a comment: All I wanted to know what will happen if I enter my debit card number in the sixteen digit account number they offer on the application for balance transfer. That's all. Almost certainly (subject to the particular terms and conditions of the offer), no money will move, the only question is exactly when and how they will say no. If you do it online, and their system is clever enough to look up the IIN (the first six digits) of the card number you enter, their system might learn straight away that you have entered a debit card number (eg a card starting 431940 is a Bank of Ireland debit card). Otherwise, you'll have to wait until the request goes to their back office system, which will eventually lead to the card issuer's system being contacted, at which point it will become clear that it's a debit card, and your transfer request will be refused at that point. That said, some credit card companies do offer a \"\"Money Transfer\"\" aka \"\"Super Balance Transfer\"\", which is an offer to transfer money directly into a bank account, putting the resulting debt on the credit card. I've never seen these offered without having to call a service centre and talk to a person, though, presumably so that they can check that the details they have for you (about income etc) are still correct.\"" }, { "docid": "397553", "title": "", "text": "T. Rowe is my new 401 k company and they have been pretty professional the problem was they required information from my old employer who refused to give it to them. But I am in touch my my old 401 k account and will be doing some more research into the companies and processes you guys have given me amd try to choose what is best for me" }, { "docid": "588153", "title": "", "text": "A derivative is a financial instrument of a special kind, the kind “whose price depends on, or is derived from, another asset”. This definition is from John Hull, Options, Futures and Other Derivatives – a book definitely worth to own if you are curious about this, you can easily find old copies for a few dollars. The first point is that a derivative is a financial instrument, like credits, or insurances, the second point is that its price depends closely from the price of something else, the mentioned asset. In most cases derivatives can be understood as financial insurances against some risk bound to the asset. In the sequel I give a small list of derivatives and highlight the assets and the risk they can be bound to. And first, let me point out that the definition is (marginally) wrong because some derivatives depend on things which are not assets, nor do they have a price, like temperature, sunlight, or even your own life in the case of mortgages. But before going in this list, let me go through the remaining points of your question. What is the basic idea and concept behind a derivative? As already noted, in most cases, a derivative can be understood as a financial insurance compensating from a risk of some sort. In a classical insurance contract, one party of the contract is an insurance company, but in the broader case of a derivative, that counterparty can be pretty anything: an insurance, a bank, a government, a large company, and most probably market makers. How is it really used, and how does this deviate from the first point? Briefly, how does is it affecting people, and how is it causing problems? An important point with derivatives is that it can be arbitrarily complicated to compute their prices. Actually what is hidden in the attempt of giving a definition for derivatives, is that they are products whose price Y is a measurable function of one or several random variables X_1, X_2, … X_n on which we can use the theory of arbitrage pricing to get hints on the actual price Y of the asset – this is what the depends on means in technical terms. In the most favorable case, we obtain an easy formula linking Y to the X_is which tells us what is the price of our financial instrument. But in practice, it can be very difficult, if at all possible, to determine a price for derivatives. This has two implications: Persons possessing sophisticated techniques to compute the price of derivatives have a strategic advantage on derivatives market, in comparison to less advanced actors on the market. Organisation owning assets they cannot price cannot compute their bilan anymore, so that they cannot know for sure their financial situation. They are somehow playing roulette. But wait, if derivatives are insurances they should help to mitigate some financial risk, which precisely means that they should help their owners to more accurately see their financial situation! How is this not a contradiction? Some persons with sophisticated techniques to compute the price of derivatives are actually selling complicated derivatives to less knowledgeable persons. For instance, many communes in France and Germany have contracted credits whose reimbursements have a fixed interest part, like in a classical credit, and a variable interest part whose rate is computed against a complicated formula involving the value of the Swiss frank at each quarter starting from the inception of the credit. (So, for a 25 years running credit of theis type, the price Y of the credit at its inception depends on 100 Xs, which are the uncertain prices for the Swiss frank each quarter of the 25 next years.) Some of these communes can be quite small, with 5.000 inhabitants, and needless to say, do not have the required expertise to analyse the risks bound to such instruments, which in that special case led the court call the credit a swindling and to cancel the credit. But what chain of events leads a 5.000 inhabitants city in France to own a credit whose reimbursements depends on the Swiss frank? After the credit crunch in 2007 and the fall of Lehman Brothers in 2008, it has begun to be very hard to organise funding, which basically means to conclude credits running long in time on large amounts of money. So, the municipality needs a 25 years credit of 10.000.000 EUROS and goes to its communal bank. The communal bank has hundreds or thousands of municipalities looking for credits and needs itself a financing. So the communal bank goes to one of the five largest financial institutions in the world, which insists on selling a huge credit whose reimbursements have a variable part depending on hundred of values the Swiss frank will have in the 25 next years. Since the the big bank has better computation techniques than the small bank it makes a big profit. Since the small bank has no idea, how to compute the correct price of the credit it bought, it cuts this in pieces and sell it in the same form to the various communes it works with. If we were to attribute this kind of intentions to the largest five banks, we could ask about the possibility that they designed the credit to take advantage of the primitive evaluation methods of the small bank. We could also ask if they organised a cartel to force communal banks to buy their bermudean snowballs. And we could also ask, if they are so influent that they eventually can manipulate the Swiss frank to secure an even higher profit. But I will not go into this. To the best of my understanding, the subprime crisis is a play along the same plot, with different actors, but I know this latter subject only by what I could read in French newspapers. So much for the “How is it causing problems?” part. What is some of the terminology in relation to derivatives (and there meanings of course)? Answering this question is basically the purpose of the 7 first chapters of the book by Hull, along with deriving some important mathematical principles. And I will not copy these seven chapters here! How would someone get started dealing in derivatives (I'm playing a realistic stock market simulation, so it doesn't matter if your answer to this costs me money)? If you ask the question, I understand that you are not a professional, so that your are actually trying to become the one that has money and zero knowledge in the play I outlined above. I would recommand not doing this. That said, if you have a good mathematical background and can program well, once you are confindent with the books of Hull and Joshi, you can have fun implementing various market models and implementing trading strategies. Once you are confident with this, you can also read the articles on quantitative finance on arXiv.org. And once you are done with this, you can decide for yourself if you want to play the same market as the guys writing these articles. (And yes, even for the simplest options, they have better models than you have and will systematically outperform you in the long run, even if some random successes will give you the feeling that you do well and could do better.) (indeed, I've made it a personal goal to somehow lose every last cent of my money) You know your weapons! :) Two parties agree today on a price for one to deliver a commodity to the other at some future instant. This is a classical future contract, it can be modified in every imaginable way, usually by embedding options. For instance one party could have the option to choose between different delivery points or delivery days. Two parties write today a contract allowing the one party to buy at some future time a commodity to the the second party. The price is written today, as part of the contract. (There is the corresponding option entitling the owner to sell something.) Unlike the future contract, only one party can be obliged to do something, the other jas a right but no obligation. If you buy and option, your are buying some sort of insurance against a change of price on some asset. This is the most familiar to anybody. Credits can come in many different flavours, especially the formula to compute interests, or also embed options. Common options are early settlement options or restructuration options. While this is not completely inutitive, the credit works like an insurance. This is most easily understood from the side of the organisation lending the money, that speculates that the ratio of creanciers going bankrupt will be low enough for her to make profit, just like a fire insurance company speculates that the ratio of fire accidents will be low enough for her to make a profit. This is like a mortgage on a financial institution. Two parties agree that one will recive an upfront today and give a compensation to the second one if some third party defaults. Here this is an explicit insurance against the unfortuante event, where a creancier goes bankrupt. One finds here more or less standard options on electricity. But electricity have delicious particularities as it can practically not be stored, and fallout is also (usually) avoided. As for classical options, these are insurances against price moves. A swap is like two complementary credits on the same amount of money, so that it ends up in the two parties not actually exchanging the credit nominal and only paying interest one to the other — which makes only sense if these interests are computed with different formulas. Typical example are fixed rate vs. EURIBOR on some given maturity, which we interpret as an insurance against fluctuations of the EURIBOR, or a fixed rate vs. the exchange ratio between two currencies, which we interpret as an insurance against the two currencies decorrelating. Swaps are the richest and the most generic category of financial derivatives. The off-the-counter market features very imaginative, very customised insurance products. The most basic form is the insurance against drought, but you can image different dangers, and once you have it you can put it in options, in a swap, etc. For instance, a restaurant with a terrasse could enter in a weather insurance, paying each year a fixed amount of money and becoming in return an amount of money based on the amount of rainy day in a year. Actually, this list is virtually without limits!" }, { "docid": "329620", "title": "", "text": "The moment that you start to rent your car to strangers you are talking about using your car as a business. Will it be financially advantageous? If you can convince somebody to rent your vehicle for more than your required monthly payments then it might be. Of course you have to determine what would be the true cost of ownership for you. It could include your auto loan, and insurance, but you would be saving on the garage costs. Of course if you don't have it rented 100% of the time you will still have some costs. Your insurance company will need to know about your plan. They charge based on the risk. If you aren't honest about the situation they won't cover you if something goes wrong. The local government may want to know. They charge different car registration fees for businesses. If there are business taxes they will want that. Taxes. you are running a business so everybody from the federal governemnt to the local government may want a cut. Plus you will have to depreciate the value of the item. Turning the item from a personal use item to a business item can have tax issues. If you don't own it 100% the lender may also have concerns about making sure their collateral survives. Is it safe? and from the comments to the question : Should I do a contract or something that would protect me? Nope. it isn't safe unless you do have a contract. Of course that contract will have to be drawn up by a lawyer to make sure it protects you from theft, negligence, breach of contract.... You will have to be able to not just charge rent, but be able to repossess the car if they don't return it on time. You will have to be able to evaluate if the renter is trustworthy, or you may find your car is in far worse shape if you can even get it back." }, { "docid": "374334", "title": "", "text": "It is possible for an employer to check your credit score and it is legal. As long as you give them permission. You have every right to refuse BUT the employer also has the right to not give you a job. The reason is to get an overall feeling for your integrity, discipline, and lifestyle. People in debt are more likely to embezzle, etc. A low credit score can also indicate that you make poor choices in your financial and purchasing deals. If you are refused a job you are qualified under the Fair Credit Reporting Act to get a copy of your credit report. Source - Legal Match" }, { "docid": "60623", "title": "", "text": "It is important to understand that when or before you received services from your medical provider(s), you almost certainly signed a document stating that you understand that you are fully responsible for the entire bill, even though the provider may be willing to bill the insurer on your behalf as a service. In almost all cases, this is the arrangement, so it is very unlikely that you will be able to dispute the validity of the bill, since you did receive the service and almost certainly agreed to be fully responsible for the payments. With regard to the discounts, your medical provides have likely contracted with your insurer to provide services at a certain price or discount level, so I would base all of your negotiations with the providers and/or the collectors on those amounts. They can't legitimately bill you for the full amount since you are insured by a company they have a contract with, and you are not self-pay/uninsured, and the fact that they haven't been paid by your insurer doesn't change that, because the discount likely depends on the contact they have with your insurer and not whether or not they are billed/paid by your insurer. Please note - this is a common arrangement, but I'd recommend that you verify this with your insurer. Unfortunately, payment in 90+ days is often typical by insurance standards, so it's not yet clear to me whether or not your insurer has broken any laws such as a Prompt Pay law, or violated the terms of your policy with them (read it!). However, you need to find out which claims rep/adjuster is handling your claims and follow up with them until the payments are made. It's not personal, so make this person's life miserable until it is done and call them so often that they know it's you by the caller ID. I would also recommend contacting the collector(s), and letting them know that you don't have the money and so will not be able to pay, provide them with copies of the EOBs that state that the insurance company plans to pay the providers, and then ignore their calls/letters until the payments are made. When they call, simply reiterate that you don't have the money and that your insurance company is in the process of paying the bills. You have to expect that you will be dealing with a low-paid employee that is following a script. You are just the next person on their robo-call list, and they are not going to understand that you don't have a pile of money laying around with which to pay them, even if you tell them repeatedly. Make sure that you at no point give them access to any of your financial accounts, such as a checking or savings account, or a debit card - they will access it and clean you out. It is likely that your insurance provider will pay the providers directly since they were likely billed by the providers originally. If the providers have sold the debt to the collectors (and are not just employing a collector for debt they still own), you may have to follow up with the providers as well and make sure that the collection activity stops, since the providers may also need to forward the payments to the collectors once they are paid by the insurance company. Of course, if the insurer refuses to pay the claims, at that point I would recommend meeting with a lawyer to seek to force them to pay." }, { "docid": "76120", "title": "", "text": "Well first problem is usually that you are trying to do too much, you end up micro managing, once a company becomes large enough this is impossible to keep doing at the same level. If you find that you don't have enough time maybe it's time to either hire someone new, or promote/transfer someone. You need to trust and give freedom to your employees to do their job in their own way which may or may not be better than yours. (Communicate with each at intervals.) A lot of business owners struggle with this because it costs them money, and that is wrong it's cost your company money which is a separate entity than you. A piece of property that makes you less money than the week before is still making you money you are not losing money. So get that out of your head, it's not your money until you take it out of the business until then that money including profits are the property of the business (this is how the law see it by the way.) Marginally an understaffed store will make a larger percentage of profits from revenue, a well staffed store will make more actual profits from more actual revenue because it can handle the business coming into the store better, which in turns should lead to more business. On a particular day you may see more money in profit from an understaffed store, someone calls out let's say, but trust me when I say that will not continue for very long. On of the biggest challenges new business owners face is they are fugal, as in they don't spend the money they need to. This means buying new equipment, and hiring and giving raises and promotions, so you can handle new business as well. Let say you are making T-Shirts, or really adding new designs to pre-made plain shirts, you can only press one at a time which for a while is enough, but eventually you are going to need another press so you can do 2 at a time, but a lot business owners will somehow expect an employee to produce more with what he has, now orders aren't being filed and you are in a panic and possibly angry but guess what you are angry at the employee not the fact you were to stupid to realize that he needs 2 presses to do the job correctly that's your own fault and you're blind to it, because you feel as if you are working twice as hard than them because of the problem you created! And let's say the problem is different now the press isn't getting hot enough and it take 20% per shirt to get it to stay on correctly and you decide to never fix it, then a light goes out then blank then blank and suddenly you realize finally all of this needs to be replaced at the same time. I've seen things like this happen, in new and old businesses things work fine for the first 5 years then normal maintenance is forgotten, have a depreciation fund ready so it doesn't feel like you are spending any money, that's what that fund is for and you put into it from the beginning, need a $2k equipment, ohh I have $4k saved for this already, it was money intended to be spent on this. But of course some of this is going to depend on the type of business you are running! And since you have provided us no details I can't give an answer for you because all businesses are different, but I feel that these things, refusing to give freedom and authority to other employees, and refusing to spend money when needed are the biggest pitfalls most business owners fall into." }, { "docid": "585815", "title": "", "text": "We're pretty small about 20 employees. He refuses to allow me to get a second office person claiming he does not get along with other people. The issue is I've had him for such a long time I don't wanna break an 8 year employer relationship over something like that. I also believe there are ways around money tracking. For example he can add extra hours on employee time sheets and have it cashed and then keep the extra money after employees are paid. He always puts emphasis on how much good he does for the company when he's just doing his job. I'm looking for any kind of bait I can throw or some kind of trick. My friend was telling me what he did is give his employee an unexpected paid vacation and she had no time to cover her trail. Are there other things like this I can try?" }, { "docid": "5940", "title": "", "text": "\"Yes, your privacy is invaded, that's the law in many jurisdictions. The goal is to make money laundering and financing Evil Things harder. That's why banks are required to request proof for every money transfer larger than a specific sum. This is only a minor issue most of the time. You will have some kind of agreement with that Money Management company and this agreement (or a copy of it) will serve as a proof of your lawful reason to transfer money. It works just like that - you get to the bank and say you want to initiate a money transfer, the clerk asks you to show the \"\"proof\"\", you give them your agreement or a bill that requests you to pay or whatever else document you may have that proves that you're bound by some kind of contract with the recipient of money. The clerk then makes a copy of the \"\"proof\"\" and it stays in the bank to back the transfer until it is completed. The copy is then stored for some time and later destroyed - that's up to how the bank handles documents.\"" }, { "docid": "515615", "title": "", "text": "If your credit card's interest rates are not more than your 35% (25% for your tax bracket and 10% penalty), there is no way I would consider this. If you boil it down to the numbers, you are asking whether you should borrow money at a 35% interest to pay off your credit cards. I would say Absolutely Not! $20K of auto loans which equal $1100 a month in payments. Also we purchased a car for me a year ago which is 375 a month. Probably shouldn't have done it but the car I was driving was on it's last leg. Where is the $805 difference going? You've got to make sacrifices, and right now you are leaning towards sacrificing your future for your present. It would take years of Large Contributions to make up for the money lost in early withdraw penalties and taxes, not to mention the loss in growth these accounts would have been earning if left alone. This plan is similar to saying you want to spend $60k to pay off $40k. Don't do it! If it was me, I'd get a couple $3,000 cars. That should free up at least $600 a month and reduces your debt by $14k. I'd also pull my child out of private school unless there is really no public option, which based upon your refusal to consider selling your house, I image there's a decent public school near your neighborhood. That's an extra $500 a month. Next, I'd sell anything that I could through craigslist or garage sales. I'd get on a written budget and the envelope system, to make sure you are really as 'tight' as you are presenting in your question. Hating Debt is a great motivator, but you shouldn't let it lead you to make even bigger financial mistakes. I think you started doing well and got promotions and did what almost everyone else does; you increased your standard of living. No matter what you choose to do, you will never build your retirement or have financial stability without living on a budget and spending less than you make. Maybe attacking this debt the old-fashioned way will give you the tools you need to gain financial stability long-term. Updated to address calculations Assuming 18% CC interest and 10% IRA Growth. And always spending at least $1500 on CC debt until it's gone, then $1,500 back into retirement after that. If you continued paying $1,500 a month the credit cards would take about 71 months to pay off. In that time, you'd spend a total of $106,500 on the debt. Your plan would spend $60k upfront to reduce the debt by $40k. The new balance of $25k would be paid off in 20 months and would cost $30k total. Total cost on your plan would be $90k. Your plan pays $16.5k less in total, and it would be 51 months quicker. However, you would have no retirement at age 40. If you then saved $1500 a month in retirement, you would catch up to the $70k loss in your IRA at age 49 (I'm including growth in both accounts to calculate this). If you had instead just left the IRA alone, you'd be done with the CCs at age 44. If after age 44, you put in $1500 month into retirement your plan would never catch up to this plan. It seems to me that cashing out your IRA is a 5 year detour." }, { "docid": "521060", "title": "", "text": "Money factor is a term coined by leasing companies to make car leasing that much more convoluted. It's basically a decimal value that you multiply by 2400 in order to arrive at your actual annual percentage rate or interest rate. Here's a really good article detailing how you can calculate your interest rate based on other criteria in your leasing contract, because most of the time you won't even be given money factor on your leasing contract" }, { "docid": "48998", "title": "", "text": "\"Most practices I've gone to use a triplicate paper form called a \"\"medical encounter form\"\"with the specialty's most common procedure codes and laboratory codes preprinted. (And rarer ones hand added). The doctor fills this out and the office manager transcribes it. This also has a billing section where in my case the office manager initials \"\"cc\"\" for credit card. You probably refused or threw away your copy, but can ask to review their copy. Maybe there is a mis transcribed entry indicating payment at time of service.\"" } ]

[ { "docid": "490223", "title": "", "text": "While the OP disses the health insurance coverage offered through his wife's employer as a complete rip-off, one advantage of such coverage is that, if set up right (by the employer), the premiums can be paid for through pre-tax dollars instead of post-tax dollars. On the other hand, Health insurance premiums cannot be deducted on Schedule C by self-employed persons. So the self-employed person has to pay both the employer's share as well as the employee's share of Social Security and Medicare taxes on that money. Health insurance premiums can be deducted on Line 29 of Form 1040 but only for those months during which the Schedule C filer is neither covered nor eligible to be covered by a subsidized health insurance plan maintained by an employer of the self-employed person (whose self-employment might be a sideline) or the self-employed person's spouse. In other words, just having the plan coverage available through the wife's employment, even though one disdains taking it, is sufficient to make a Line 29 deduction impermissible. So, AGI is increased. Health insurance premiums can be deducted on Schedule A but only to the extent that they (together with other medical costs) exceed 10% of AGI. For many people in good health, this means no deduction there either. Thus, when comparing the premiums of health insurance policies, one should pay some attention to the tax issues too. Health insurance through a spouse's employment might not be that bad a deal after all." } ]

[ { "docid": "469774", "title": "", "text": "Why should healthy people be required to subsidize the sick? A single, healthy, working young man or woman needs catastrophic coverage only. They don't need: pregnancy, mental health, substance abuse, child coverage, mammograms, and all the other bullshit that Obamacare policies mandate, which needlessly increase the cost. &gt;That's Republicans for you. They obstruct and sabotage the system and then blame everyone else when the system doesn't work. Why are you pointing blame on Republicans? The death spiral started while Obama was in office." }, { "docid": "218533", "title": "", "text": "Exactly. that is paying double the money for no better coverage. It makes no sense. The paperwork when you file a claim will ask you if there is coverage from another policy. Making the same claim to two different policies, without telling them, would be considered insurance fraud. For that kind of money the insurance company would be involved with paying the re-builder money periodically. Obviously only one re-builder is involved, and they would notice if they were getting paid more than was required. While you could decide to take the money and not rebuild, but that wouldn't work if you had a mortgage. The lender would want their money or force you to rebuild." }, { "docid": "410226", "title": "", "text": "HSA rules are different in some regards than deductions allowable under Pub 502 which deals with medical expenses deductible in Schedule A of your tax return. Pub 969 governs HSA's and similar reimbursement plans, and the guidelines are as follows: Insurance premiums. You can’t treat insurance premiums as qualified medical expenses unless the premiums are for: -Long-term care insurance. -Health care continuation coverage (such as coverage under COBRA). -Health care coverage while receiving unemployment compensation under federal or state law. -Medicare and other health care coverage if you were 65 or older (other than premiums for a Medicare supplemental policy, such as Medigap). Since your wife is still being treated like an employee for health benefits, and you are not on COBRA, thus not eligible for a deduction. You may qualify under the unemployment provision depending on the cause of her disability." }, { "docid": "277714", "title": "", "text": "If the funds are deposited into a noninterest-bearing account, they will be covered by FDIC insurance regardless of the amount (However, this extended coverage may not be valid after Dec. 31, 2012): On November 9, 2010, the FDIC issued a Final Rule implementing section 343 of the Dodd-Frank Wall Street Reform and Consumer Protection Act that provides for unlimited insurance coverage of noninterest-bearing transaction accounts. Beginning December 31, 2010, through December 31, 2012, all noninterest-bearing transaction accounts are fully insured, regardless of the balance of the account, at all FDIC-insured institutions. (Source: http://www.fdic.gov/deposit/deposits/changes.html)" }, { "docid": "9152", "title": "", "text": "\"The key point to answer the question is to consider risk aversion. Assume I suggest a game to you: Throw a coin and if you win, you get $5, if you lose nothing happens. Will you play the game? Of course, you will - you have nothing to lose! What if I suggest this: If you win, you get $10,000,005 and if you lose you must pay $10,000,000 (I also accept cars, houses, spouses, and kidneys as payment). While the expected value of the second game is the same as for the first, if you lose the second game you are more or less doomed to spend the rest of your life in poverty or not even have a rest of your life. Therefore, you will not wish to play the second game. Well, maybe you do - but probably only if you are very, very rich and can easily afford a loss (even if you had $11,000,000 you won't be as happy with a possible raise to $21,000,005 as you'd be unhappy with dropping to a mere $1,000,000, so you'd still not like to play). Some model this by taking logarithms: If your capital grows from $500 to $1000 or from $1000 to $2000, in both cases it doubles, hence is considered the same \"\"personal gain\"\", effectively. And, voíla, the logartithm of your capital grows by the same amount in both cases. This refelcts that a rich man will not be as happy about finding a $10 note as a poor man will be about finding a nickel. The effect of an insurance is that you replace an uncertain event of great damage with a certain event of little damage. Of course, the insurance company plays the same game, with roles swapped - so why do they play? One point is that they play the game very often, which tends to nivel the risks - unless you do something stupid and insure all inhabitants of San Francisco (and nobody else) against eqarthquakes. But also they have enough capital that they can afford to lose the game. In a fair situation, i.e. when the insurance costs just as much as damage cost multiplied with probability of damage, a rational you would eagerly buy the insurance because of risk aversion. Therefore, the insurance will in effect be able to charge more than the statistically fair price and many will still (gnawingly) buy it, and that's how they make a living. The decision how much more one is willing to accept as insurance cost is also a matter of whether you can afford a loss of the insured item easily, with regrets, barely, or not all.\"" }, { "docid": "530441", "title": "", "text": "There are a lot of moving parts, individual premiums and annual increases have little to do with employer premiums and annual increases and vice versa. Most people think of XYZ insurer as a single company with a single pool of insured folks. This common knowledge isn't accurate. Insurers pool their business segments separately. This means that Individual, small business, mid-size business, and large business are all different operating segments from the viewpoint of the insurer. It's possible to argue that because so many people are covered by employer plans that individual plans have a hard time accumulating the required critical mass of subscribers to keep increases reasonable. Age banded rating: Individual coverage and small group coverage is age rated, meaning every year you get older. In addition to your age increase, the premium table for your plan also receives an increase. Employers with 100+ eligible employees are composite rated (in general), meaning every employee costs the same amount. The 18 year old employee costs $500 per month, the 64 year old costs $500 per month. Generally, the contributions an employee pays to participate in the plan are also common among all ages. This means that on a micro level increases can be more incremental because the employer is abstracting the gross premium. Composite rating generally benefits older folks while age rating generally benefits younger folks. Employer Morale Incentive: Generally the cost to an employee covered by an employer plan isn't directly correlated to the gross premium, and increases to the contribution(s) aren't necessarily correlated to the increases the employer receives. Employers are incentivised by employee morale. It's pretty common for employers to shoulder a disproportionate amount of an increase to keep everyone happy. Employers may offset the increase by shopping some ancillary benefit like group life insurance, or bundling the dental program with the medical carrier. Remember, employees don't pay premiums they pay contributions and some employers are more generous than others. Employers are also better at budgeting for planned increases than individuals are. Regulators: In many of the states that are making the news because of their healthcare premium increases there simply isn't a regulator scrutinizing increases. California requires all individual and small group premiums to be filed with the state and increases must be justified with some sort of math and approved by a regulator. Without this kind of oversight insurers have only the risk of subscriber flight to adjust plan provisions and press harder during provider contract negotiations. Expiring Transitional Reinsurance Fee and Funds: One of the fees introduced by healthcare reform paid by insurers and self-insured employers established a pot of money that individual plans could tap to cope with the new costs of the previously uninsurable folks. This fee and corresponding pot of money is set to expire and can no longer be taken in to account by underwriters. Increased Treatment Availability: It's important that as new facilities go online, insurer costs will increase. If a little town gets a new cancer clinic, that pool will see more cancer treatment costs simply as a result of increased treatment availability. Consider that medical care inflation is running at about 4.9% annually as of the most recent CPI table, the rest of the increases will result from the performance of that specific risk pool. If that risk pool had a lot of cancer diagnoses, you're looking at a big increase. If that risk pool was under priced the prior year you will see an above average increase, etc." }, { "docid": "117921", "title": "", "text": "\"All life insurance is pretty much the same when it comes to cost. You can run the numbers over certain time period and the actual cost of insurance is about the same. A simplified way to explain life insurance and the differences between them below: The 3 characteristics of life insurance: There are 5 popular types of life insurance and they are: Term Whole Life Universal Life Variable Universal Life Indexed Universal Life But first, one must understand the most basic life insurance which is called Annual Renewable Term: This is a policy that covers 1 year and is renewable every year after. The cost of insurance typically increases each year as the insured ages. So for every year of coverage, your premium increases like in the simplified illustration above. This is the building block of all life insurance, term or permanent. There is no cash value; all premium goes to the cost of insurance. This is an ART that spans over a longer time period than 1 year (say 5, 10, 15, 20 or 30 years). All the cost is added together then divided by the number of years of coverage to give a level premium payment for the duration of the policy. The longest coverage offered these days is 30 years. There is no cash value; all premium goes to the cost of insurance. The premium is fixed (level) for the term specified. If the policy comes to an end and the owner wishes to renew it, it will be at higher premium. This can be seen in the simplified illustration above for a 15-year term policy. Because life insurance gets very expensive as you reach old age, life insurance companies came up with a way to make it affordable for the consumer wishing to have coverage for their entire lifespan. They allow you to have interest rate crediting on the cash value account inside the policy. To have cash value in the first place, you must pay premiums that are more than the cost of insurance. The idea is: your cash value grows over time to help pay for the cost of insurance in the later stages of the policy, where the cost of insurance is typically higher. This is illustrated above in an overly simplified way. This is a permanent life insurance policy that is designed to cover the lifespan of the insured. There is cash value that is credited on a fixed interest rate specified by the insurance company (typically 3-5%). The premium is fixed for the life of the policy. It was designed for insuring the entire lifespan of the insured. This is variation of Whole Life. There is cash value; it is credited on a fixed interest rate specified by the insurance company, but it does fluctuate year to year depending on the economy (typically 3-6%). The premium is flexible; you can increase/decrease the premium. This is basically a universal life policy, but the cash value sits in an account that is invested in the market, normally mutual funds. Your interest that is being credited (to your account with your cash value from investments) is subjected to risk in the market, rise/fall with the market depending on the portfolio of your choosing, hence the word \"\"Variable\"\". You take on the risk instead of the insurance company. It can be a very good product if the owner knows how to manage it (just like any other investment products). This is a hybrid of the UL and the VUL. The interest rate depends on the performance of a market index or a set of market indices. The insurance company states a maximum interest rate (or cap) you can earn up to and a guaranteed minimum floor on your cash value interest that will be credited (typically 0% floor and 12% cap). It is purely a method to credit you interest rate. It takes the market risk out of the equation but still retains some of the growth potential of the market. Term policy is designed for temporary coverage. There is no cash value accumulation. Permanent policies such as whole life, universal life, variable universal life and indexed universal life have a cash value accumulation component that was originally designed to help pay for the cost of insurance in the later stages of the policy when the insured is at an advanced age, so it can cover the entire lifespan of the insured. People do take advantage of that cash value component and its tax advantages for retirement income supplement and maximize the premium contribution. Always remember that life insurance is a life insurance product, and not an investment vehicle. There is a cost of insurance that you are paying for. But if you have life insurance needs, you might as well take advantage of the cash value accumulation, deferred tax growth, and tax-free access that these permanent policies offer.\"" }, { "docid": "588399", "title": "", "text": "\"Whether you can establish an HSA has nothing to do with your employment status or your retirement plan. It has to do with the type of medical insurance you have. The insurance company should be able to tell you if your plan is \"\"HSA compatible\"\". To be HSA compatible, a plan must have a \"\"high deductible\"\" -- in 2014, $1250 for an individual plan or $2500 for a family plan. It must not cover any expenses before the deductible, that is, you cannot have any \"\"first dollar\"\" coverage for doctor's visits, prescription drug coverage, etc. (There are some exceptions for services considered \"\"preventive care\"\".) There are also limits on the out-of-pocket max. I think that's it, but the insurance company should know if their plans qualify or not. If you have a plan that is HSA compatible, but also have another plan that is not HSA compatible, then you don't qualify. And all that said ... If you are covered under your husband's medical insurance, and your husband already has an HSA, why do you want to open a second one? There's no gain. There is a family limit on contributions to an HSA -- $6,550 in 2014. You don't get double the limit by each opening your own HSA. If you have two HSA's, the combined total of your contributions to both accounts must be within the limit. If you have some administrative reason for wanting to keep separate accounts, yes, you can open your own, and in that case, you and your husband are each allowed to contribute half the limit, or you can agree to some other division. I suppose you might want to have an account in your own name so that you control it, especially if you and your husband have different ideas about managing finances. (Though how to resolve such problems would be an entirely different question. Personally, I don't think the solution is to get into power struggles over who controls what, but whatever.) Maybe there's some advantage to having assets in your own name if you and your husband were to divorce. (Probably not, though. I think a divorce court pretty much ignores whose name assets are in when dividing up property.) See IRS publication 969, http://www.irs.gov/publications/p969/index.html for lots and lots of details.\"" }, { "docid": "201012", "title": "", "text": "To add to JoeTaxpayer's answer, the cost of providing (term) life insurance for one year increases with the age of the insured. Thus, if you buy a 30-year term policy with level premiums (the premium is the same for 30 years) then, during the earlier years, you pay more than the cost to the insurance company for providing the benefit. In later years, you pay somewhat less than the cost of providing the insurance. The excess premiums that the insurance company charged in earlier years and the earnings from investing that money covers the difference between the premium paid in later years and the true cost of providing the coverage. If after 20 years you decide that you no longer need the protection (children have grown up and now have jobs etc) and you cancel the policy, you will have overpaid for the protection that you got. The insurance company will not give you backsies on the overpayment. As an alternative, you might want to consider a term life insurance policy in which the premiums increase each year (or increase every 5 years) and thus better approximate the actual cost to the insurance company. One advantage is that you pay less in early life and pay more in later years (when hopefully your income will have increased and you can afford to pay more). Thus, you can get a policy with a larger face value (150K for your wife and 400K for yourself is really quite small) with annual premium of $550 now and more in later years. Also if you decide to cancel the policy after 20 years, you will not have overpaid for the level of coverage provided. Finally, in addition to a policy with larger face value, I recommend that you include the mortgage (if any) on your house in the amount that you decide is enough for your family to live on and to send the kids to college, etc., or get a separate (term life insurance) policy to cover the mortgage on your home. Many mortgage contracts have clauses to the effect that the entire principal owed becomes immediately due if either of the borrowers dies. Yes, the widow or widower can get a replacement mortgage, or prove to the lender that the monthly payments will continue as before, (or pay off the mortgage from that $150K or $400K which will leave a heck of a lot less for the family to survive on) etc., but in the middle of dealing with all the hassles created by a death in the family, this is one headache that can be taken care of now. The advantage of including the mortgage amount in a single policy that will support the family when you are gone is that you get a bit of a break; the sum of the annual premiums on ten policies for $100K is more than the premiums for a single $1M policy. There is also the consideration that the principal owed on the mortgage declines over the years (very slowly at first, though) and so there will be more money available for living expenses in later years. Alternatively, consider a special term life insurance policy geared towards mortgage coverage. The face value of this policy reduces each year to match the amount still due on the mortgage. Note that you may already have such a policy in place because the lender has insisted on you getting such a policy as a condition for issuing the loan. In this case, keep in mind that not only is the lender the beneficiary of such a policy, but if you bought the policy through the lender, you are providing extra profit to the lender; you can get a similar policy at lower premiums on the open market than the policy that your lender has so thoughtfully provided you. I bought mine from a source that caters to employees of nonprofit organizations and public sector employees; your mileage may vary." }, { "docid": "60508", "title": "", "text": "\"The following is from Wikipedia - Term life insurance (with very minor editing) Because term life insurance is a pure death benefit, its primary use is to provide coverage of financial responsibilities, for the insured. Such responsibilities may include, but are not limited to, consumer debt, dependent care, college education for dependents, funeral costs, and mortgages. Term life insurance is generally chosen in favor of permanent life insurance because it is usually much less expensive (depending on the length of the term). Many financial advisors or other experts commonly recommend term life insurance as a means to cover potential expenses until such time that there are sufficient funds available from savings to protect those whom the insurance coverage was intended to protect. For example, an individual might choose to obtain a policy whose term expires near his or her retirement age based on the premise that, by the time the individual retires, he or she would have amassed sufficient funds in retirement savings to provide financial security for their dependents. This suggests the questions \"\"why do you have this policy?\"\" also \"\"how many term life policies do you need?\"\" or \"\"how much insurance do you need?\"\" Clearly you will be better off investing the premiums in the market. Your beneficiaries may be better off either way (depends when you die and to a lesser extent on market performance). If you are not able to retire now but expect to be able to later, you should strongly consider having sufficient insurance to provide income replacement for your spouse. This is a fairly common why.\"" }, { "docid": "264224", "title": "", "text": "Oh man. There was a nice place that kept the bar open late. Out of college we'd go there later in the evening (after ten) now and then. The bar tenders actually learned who we were (they weren't a busy place that late) and would rarely charge us for more than a few drinks. We'd order small plates and stuff too. I'd try to tip at least based on what stuff SHOULD have cost so the tip was almost always bigger than the bill. Loved that place." }, { "docid": "545305", "title": "", "text": "Regarding auto insurance, you have to look at the different parts. In the United Sates most states do require a level of specific coverage for all drivers. That is to make sure that if you are at fault there is money available to pay the victims. That payment may be for damage to their car or other property, but it also covers medical costs. Many policies also cover you if the other driver doesn't have insurance. The policy that covers the loss of the vehicle is required if you have a loan or are leasing the car. Somebody else owns it while there is a loan, so they can and do require you to pay to protect the vehicle. If there i no loan you don't have to have that portion of a policy. Other parts such as towing, roadside assistance, and rental cars replacement may be required by the insurance standards for your state, or might be almost impossible to drop because all insurance companies include it to stay competitive with their competition. Dropping the non-required parts of the coverage is acceptable when you don't have a loan. Some people do drop it to save money. But that does mean you are self insuring. If you can afford to self insure a new car, great. The interesting thing is that some people have more than enough assets to self inure the non-required part of auto insurance. But then they realize that they do need to up their umbrella liability insurance. This is to protect them from somebody deciding that their resources make them a tempting target when they are involved in a collision." }, { "docid": "109675", "title": "", "text": "Whole life in most instances is a very bad plan. It's marketed as a life insurance policy wrapped in an investment but it does neither very well. The hidden caveat of whole life is that the investment goes away if you die. Say for example I have a $100,000 whole life insurance policy and over the years I have paid in enough to have a $15,000 cash value on the policy. If I die, my family gets $100,000 and the cash value is lost. With term life you can get a substantially higher amount of coverage for a smaller payment. If you invest the difference you end up not only with better coverage, but a better cash value from the difference if you don't die (which is what we all hope for anyways). As JackiYo said, your insurance should be designed around replacing lost income/value. You should get 10x your annual income in term life insurance." }, { "docid": "282814", "title": "", "text": "Answer their questions as honestly as you can, they should know that you aren't going to have the answer off hand to everything and that is ok. One way that you can cover yourself is to take photographs of everything that way if anything catastrophic does happen you will have something to show exactly how it was when the adjuster comes to do their estimates. Hopefully you never need to use that but better to err on the side of caution. The insurance company isn't all that important, read reviews as mentioned in another answer. You can also look into multiple policy discounts. If your insurance provider for your auto insurance also offers homeowners policies they might also offer you a discount on one or both policies for grouping them. Feel free to shop around and look for the best coverage at the best price. Overall the most important thing is going to be a company that is easy to deal with. It is not worth saving a couple dollars a year to have insurance through somewhere that is going to make it a nightmare to make a claim. In addition to answering all of their questions make sure that you have all of your own questions answered. Depending on location you might want to ask if they cover hurricanes, flooding, tornadoes, other natural events, etc. If you have any special items like collectibles, jewelry, expensive electronics, firearms, etc you might want to ask if that is covered of if you need a separate rider for those items." }, { "docid": "485318", "title": "", "text": "As a recent college grad who switched to his own car insurance, many of the things I did myself are reflected here. The #1 thing I did was find out what coverages I had, what coverages some friends of mine had (car enthusiasts mostly - they're the most informed on this stuff), and then figured out what kind of coverages I wanted. From there, I went around getting quotes from anyone and everyone and eventually built out a sizeable spreadsheet that made it obvious which company was going to offer me the best rate at a given coverage level. Something else to remember - not all insurance companies look at past accidents and violations (speeding, etc) the same. In my search, I found some have a 3-year scope on accidents and violations, while others were as much as 5 years. So, if your driving record isn't a shining example (mine isn't perfect), you could potentially save money by considering insurance through a company that will see fewer violations/incidents than another because of the size of their scope. I ended up saving $25/mo by choosing a company that had a 3-year scope, which was on the cusp of when my last violation/incident occurred. Insurance companies will also give out discounts for younger drivers based on GPA average. If you have kids and they maintain a high GPA, you might be able to get a discount there. Not all companies offer it, so if they do it's worth finding out how much it is" }, { "docid": "506685", "title": "", "text": "Another source of insurance can be through the working spouses employment. Some companies do provide free or low cost coverage for spouses without a need for a physical exam. The risk is that it might not be available at the amount you want, and that if the main spouse switches companies it might not be available with the new employer. A plus is that if there is a cost it is only a one year commitment. Term insurance is the way to go. It is simple to purchase, and not complex to understand. Sizing is key. You may need to provide some level of coverage until the youngest child is in high school or college. Of course the youngest child might not have been born yet. The longer the term, the higher the cost to account for the inflation during the period of the insurance. If the term expires, but the need still exists, it is possible to get another policy but the cost of the new term policy will be higher because the insured is older. If there are special needs children involved the amount and length may need to be increased due to the increased costs and duration of need. Don't forget to periodically review the insurance situation to make sure your need haven't changed so much a new level of insurance would be needed." }, { "docid": "138696", "title": "", "text": "Never take the first quote. Consider what it would really cost to replace the house -- to rebuild and pay for living while you do so (including demolition, etc.) and/or pay off the mortgage and return your equity if it is a financed property. Most insurances will have a limit on how much coverage you can get based on the property value and your goods value estimates. Shop around for a company that will give you a good price but also good customer service and a smooth claims process. They should be solvent (able to pay your claim if, say, a tornado hit the whole neighborhood). And they should cover your reasonable replacement costs. And remember, insurance is about the big losses like fires. Know what you are comfortable self insuring (higher or lower deductibles, optional coverages, etc.) and you will have an easier time getting the coverage you need for the price you want to pay." }, { "docid": "97162", "title": "", "text": "Your plan isn't bad, but it probably isn't worth the cost for the small amount of credit building it will achieve. If you do decide to continue with it though, you'll save in interest if you make the big payment now rather than in 6 months. In other words, you can take the minimum payment, multiply it by 5, subtract that amount from the total you owe and pay the difference immediately. This way you'll still get the 6 months of reporting to the credit bureaus, but you'll pay less interest since you'll have less principle each month. I would recommend applying for the credit card right now. I believe you'll probably get approved now. If you do, then pay off the car loan without thinking about it. (If you don't get approved, think about it, then probably still pay it off.) Regarding the full coverage insurance, even after the loan is paid off and you aren't required to have it, you may still want to keep it. Even if you're the best driver on earth, if someone hits you and doesn't have insurance, or they have insurance and drive off, or a deer runs in front of you, etc, you'll lose your car and won't be reimbursed. Also, as Russell pointed out in the comments below, without collision coverage your insurance company has no incentive to work on your behalf when someone else hits you, so even if it's not your fault you may still not get reimbursed. So, I wouldn't pass on the full coverage unless your car isn't worth very much or you can stomach losing it if something happens. Good luck, and congrats on being able to pay for a car in full at 19 years old." }, { "docid": "265177", "title": "", "text": "\"In regards to purchasing full coverage on your car even if you can afford to replace it, consider the hassle you have to deal with an accident that is not just the cost. As an example, my sister's car was stolen and wrecked. It was her problem to go recover the car on the other side of the state such that she would not be paying the storage \"\"fees\"\" imposed by the sheriff of the other county. Had she had insurance they would have taken care of it call. Another story is that I rented a car and side swiped in the parking lot by a hit and run. I was responsible for the minor damage. I started down the path of paying out of pocket because it was small enough that I did not want to submit a claim. The rental car agency started to pile on extra fees such that it was worth it to turn in a claim. My insurance company was savvy enough to be able to dispute the extra charges. After I submitted it to the insurance company I basically did nothing. They took care of everything. So, in summary, when you buy full coverage on your car, it is not just a financial decision. It is also about not having to deal with a hassle.\"" } ]

[ { "docid": "98112", "title": "", "text": "\"Like most forms of insurance, health insurance is regulated at the state level. So what is available to you will depend greatly upon which state you live in. You can probably find a list of insurance companies from your state's official website. Many states now provide \"\"insurance of last resort\"\" for individuals who can't get insurance through private insurance companies. You can try looking into professional and trade associations. Some offer group insurance plans comparable with COBRA coverage, meaning you'd get a group discount and benefits but without the benefit of an employer paying 30-80% of your premiums. As a software developer you may qualify for membership in the IEEE or ACM, which both offer several forms of insurance to members. The ASP also offers insurance, though they don't provide much information about it on the public portions of their website. These organization offer other benefits besides insurance so you may want to take that in to consideration. The National Federation of Independent Business also offers insurance to members. You may find other associations in your specific area. Credit Unions, Coops and the local chamber of commerce are all possible avenues of finding lower cost insurance options. If you are religious there are even some faith based non-insurance organizations that provide medical cost sharing services. They depend upon the generosity and sense of fairness and obligation of their members to share the burden of medical expenses so their definitely not for everyone.\"" } ]

[ { "docid": "325370", "title": "", "text": "\"A few points that I would note: Call options - Could the bond be called away by the issuer? This is something to note as some bonds may end up not being as good as one thought because of this option that gets used. Tax considerations - Are you going for corporate, Treasury, or municipals? Different ones may have different tax consequences to note if you aren't holding the bond in a tax-advantaged account,e.g. Roth IRA, IRA or 401k. Convertible or not? - Some bonds are known as \"\"convertibles\"\" since the bond comes with an option on the stock that can be worth considering for some kinds of bonds. Inflation protection - Some bonds like TIPS or series I savings bonds can have inflation protection built into them that can also be worth understanding. In the case of TIPS, there are principal adjustments while the savings bond will have a change in its interest rate. Default risk - Some of the higher yield bonds may have an issuer go under which is another way one may end up with equity in a company rather than getting their money back. On the other side, for some municipals one could have the risk of the bond not quite being as good as one thought like some Detroit bonds that may end up in a different result given their bankruptcy but there are also revenue bonds that may not meet their target for another situation that may arise. Some bonds may be insured though this requires a bit more research to know the credit rating of the insurer. As for the latter question, what if interest rates rise and your bond's value drops considerably? Do you hold it until maturity or do you try to sell it and get something that has a higher yield based on face value?\"" }, { "docid": "166826", "title": "", "text": "\"It's never too early to start estate planning, and if you already have a family, getting your personal affairs in order is a must. The sooner you start planning, the more prepared you will be for life's unexpected twists and turns. The following tips, aimed at those under 40, can help you approach and simplify the estate planning process: Start now, regardless of net worth. [Estate planning](http://money.usnews.com/money/personal-finance/articles/2013/09/19/estate-planning-tips-for-people-under-40) is a crucial process for everyone, regardless of wealth level, says Marc Henn, a certified financial planner and president of Harvest Financial Advisors. \"\"Many people will say, 'Well, I don't have a lot of assets, therefore I don't need an estate plan,'\"\" he says. \"\"Maybe you only have debt, but it still applies. If you want the people around you to appropriately deal with your finances, a plan is still just as important.\"\" This is especially true if you are responsible for financially dependent individuals, such as young children. \"\"The less you have, the more important every bit you've got is to you and the people you care about,\"\" says Lawrence Lehmann, a partner at Lehmann, Norman and Marcus L.C. in New Orleans. \"\"If you don't have much money, you really can't afford to make a mistake.\"\" Have the \"\"what if?\"\" conversation with friends and family. Before jumping into the estate planning process, it's important to establish exactly what you want, and need, to happen after you die and relay those wishes to those around you. \"\"We find that the best transitions and financial transfers happen when all family members are involved in the [decision making](http://corlisslawgroup.com),\"\" says John Sweeney, executive vice president of retirement and investing strategies at Fidelity Investments. \"\"This way, after a loved one is gone, no one is squabbling over a couch or going, 'Why did person A get more than person B?' If wishes are laid out clearly while the individual is living, they can share the rationale behind the decisions.\"\" Focus on the basic estate plan components. Experts say life insurance, a will, a living will and a durable power of attorney are all important aspects of an estate plan that should be established at the start of the planning process. In the event of an untimely death, life insurance can replace lost earnings, which can be especially beneficial for younger individuals, says Bill Kirchick, a partner with Bingham McCutchen law firm in Boston. \"\"Young people can't afford to die,\"\" he says. \"\"They are going to lose a source of income if something happens to a young couple and they haven't had enough time to accumulate wealth from earnings to put aside in savings or a retirement plan.\"\" Also, the earlier you take out a life insurance policy, the more likely you are to be approved for reduced rates compared to older individuals. Utilize estate planning professionals. To draft these basic estate plans, experts recommend carefully selecting a team of professionals who will educate you and draft what you need based on your individual situation. \"\"Don't feel like you have to jump at the first person whose name is given to you,\"\" Kirchick says. \"\"I think that people should interview two or more attorneys, accountants, trust officers, financial advisors and so on.\"\" According to financial planning experts, the average initial cost for the legal drafting of a will, living will and durable power of attorney documentation is between $500 and $1,200, depending on the family size and location. Continue to review your plan over time. Finally, your estate plan should never be a \"\"one and done thing,\"\" according to Henn. \"\"Every five to seven years, the documents should be readdressed to adapt to significant life events, tax law changes or even the addition of more children,\"\" he says. It is also important to keep tabs on your insurance policies and investments, as they all tie into the estate plan and can fluctuate based on the economic environment. If you have to make revisions, Henn says it will cost as much as it did to create the documents in the first place.\"" }, { "docid": "73281", "title": "", "text": "The article http://www.forbes.com/2008/09/15/bearstearns-lehman-compliance-pf-ii-in_js_0915soapbox_inl.html does a nice job explaining SIPC insurance coverage. The coverage is currently $500k total / 250k of which can be cash, that's the one update I'd offer." }, { "docid": "189130", "title": "", "text": "Family Life Insurance Adviser Sydney is one of the biggest names in providing advice for family life insurance in Sydney. We have an expert team of advisers who will help you to choose best and suitable family life insurance plan as per your needs and requirements." }, { "docid": "265177", "title": "", "text": "\"In regards to purchasing full coverage on your car even if you can afford to replace it, consider the hassle you have to deal with an accident that is not just the cost. As an example, my sister's car was stolen and wrecked. It was her problem to go recover the car on the other side of the state such that she would not be paying the storage \"\"fees\"\" imposed by the sheriff of the other county. Had she had insurance they would have taken care of it call. Another story is that I rented a car and side swiped in the parking lot by a hit and run. I was responsible for the minor damage. I started down the path of paying out of pocket because it was small enough that I did not want to submit a claim. The rental car agency started to pile on extra fees such that it was worth it to turn in a claim. My insurance company was savvy enough to be able to dispute the extra charges. After I submitted it to the insurance company I basically did nothing. They took care of everything. So, in summary, when you buy full coverage on your car, it is not just a financial decision. It is also about not having to deal with a hassle.\"" }, { "docid": "229727", "title": "", "text": "It is important that a cleaning business should avail of an insurance policy from a reputed broker. Polished Insurance has been providing insurance coverage for cleaners since 2001. Throughout the years, they are recognised as amongst the UK’s top brokers in the cleaning industry. If your cleaning business needs insurance, then you should get one from them. Visit their website at www.polished-insurance.co.uk for more details." }, { "docid": "82805", "title": "", "text": "With the crazy amount of fee overhead in Instacart, I am not sure if teaming up would Aldi would make sense for them. Maybe it will be different for Aldi but for a Costco order, the items were %10-15 more expensive, there was a processing fee, delivery fee and they expected you to tip the shopper. That's just crazy so I would never use Instacart again unless they provided a large discount again similar to one they do for first time customers." }, { "docid": "9152", "title": "", "text": "\"The key point to answer the question is to consider risk aversion. Assume I suggest a game to you: Throw a coin and if you win, you get $5, if you lose nothing happens. Will you play the game? Of course, you will - you have nothing to lose! What if I suggest this: If you win, you get $10,000,005 and if you lose you must pay $10,000,000 (I also accept cars, houses, spouses, and kidneys as payment). While the expected value of the second game is the same as for the first, if you lose the second game you are more or less doomed to spend the rest of your life in poverty or not even have a rest of your life. Therefore, you will not wish to play the second game. Well, maybe you do - but probably only if you are very, very rich and can easily afford a loss (even if you had $11,000,000 you won't be as happy with a possible raise to $21,000,005 as you'd be unhappy with dropping to a mere $1,000,000, so you'd still not like to play). Some model this by taking logarithms: If your capital grows from $500 to $1000 or from $1000 to $2000, in both cases it doubles, hence is considered the same \"\"personal gain\"\", effectively. And, voíla, the logartithm of your capital grows by the same amount in both cases. This refelcts that a rich man will not be as happy about finding a $10 note as a poor man will be about finding a nickel. The effect of an insurance is that you replace an uncertain event of great damage with a certain event of little damage. Of course, the insurance company plays the same game, with roles swapped - so why do they play? One point is that they play the game very often, which tends to nivel the risks - unless you do something stupid and insure all inhabitants of San Francisco (and nobody else) against eqarthquakes. But also they have enough capital that they can afford to lose the game. In a fair situation, i.e. when the insurance costs just as much as damage cost multiplied with probability of damage, a rational you would eagerly buy the insurance because of risk aversion. Therefore, the insurance will in effect be able to charge more than the statistically fair price and many will still (gnawingly) buy it, and that's how they make a living. The decision how much more one is willing to accept as insurance cost is also a matter of whether you can afford a loss of the insured item easily, with regrets, barely, or not all.\"" }, { "docid": "65887", "title": "", "text": "\"Without more specifics, yes, you should. The risk depends on your policy, but the impact is high. The actual requirement will depend on your state and the specific language in your policy. Some policies will provide full coverage if that driver has your permission to use the car. The cost of not complying can be substantial. If you live with your girlfriend, apply for a policy and fail to disclose her presence in your household, that could be construed as intent to fraud in some situations. Other companies will drop your coverage if they find out. You need to think long and hard before not answering a question posed by an insurance company with complete honesty. There are documented cases where families have lost out on thousands of dollars because someone checked the \"\"non-smoker\"\" box on a life insurance form, but the insurance company found a picture of the person smoking a cigar at a wedding.\"" }, { "docid": "172251", "title": "", "text": "It probably does make sense for you to buy term life insurance separate from your employer, for a few reasons: There are a number of life insurance calculators on the web. Try two or three -- some of them ask different questions and can give you a range of answers regarding how much coverage you should have. Then take a look at some of the online quote sites -- there are a couple that don't require you to enter your personal information, just general age/health/zip code so you can get an accurate quote for a couple of different coverage levels without having to deal with a salesman yet. (It was my experience that these quotes were very close -- within $20/year -- of what I was quoted through an agent.) Using this information, decide how much coverage you need and can afford. If you're a homeowner, and the insurance company with whom you have your homeowner's policy offers life insurance, call them up and get a quote. They may be able to give you a discount because of your existing relationship; sanity check this against what you got from the quotes website." }, { "docid": "545305", "title": "", "text": "Regarding auto insurance, you have to look at the different parts. In the United Sates most states do require a level of specific coverage for all drivers. That is to make sure that if you are at fault there is money available to pay the victims. That payment may be for damage to their car or other property, but it also covers medical costs. Many policies also cover you if the other driver doesn't have insurance. The policy that covers the loss of the vehicle is required if you have a loan or are leasing the car. Somebody else owns it while there is a loan, so they can and do require you to pay to protect the vehicle. If there i no loan you don't have to have that portion of a policy. Other parts such as towing, roadside assistance, and rental cars replacement may be required by the insurance standards for your state, or might be almost impossible to drop because all insurance companies include it to stay competitive with their competition. Dropping the non-required parts of the coverage is acceptable when you don't have a loan. Some people do drop it to save money. But that does mean you are self insuring. If you can afford to self insure a new car, great. The interesting thing is that some people have more than enough assets to self inure the non-required part of auto insurance. But then they realize that they do need to up their umbrella liability insurance. This is to protect them from somebody deciding that their resources make them a tempting target when they are involved in a collision." }, { "docid": "105596", "title": "", "text": "Without knowing the WSC's objectives, priorities of those objectives and affordability we cannot determine which type of insurance is best. Life insurance for seniors is very expensive if you examine the per unit cost (e.g. cost per $1000 of death benefit). Therefore affordability is a critical deciding factor for WSC. Let's assume that we know the WSC's affordability and therefore the monthly premium is a fixed determined number, then there is a inverse relationship between the length of coverage and the amount of coverage. We have to achieve a balance between these two factors to best meet the WSC's objective. If the proposed plan is not affordable then the WSC must leave out his/her objectives with lesser priorities out of the total coverage amount." }, { "docid": "216286", "title": "", "text": "\"This is really unfortunate. In general you can't back date individual policies. You could have (if it was available to you) elected to extend your employer's coverage via COBRA for the month of May, and possibly June depending on when your application was submitted, then let the individual coverage take over when it became effective. Groups have some latitude to retroactively cover and terminate employees but that's not an option in the world of individual coverage, the carriers are very strict about submission deadlines for specific effective dates. This is one of the very few ways that carriers are able to say \"\"no\"\" within the bounds of the ACA. You submit an application, you are assigned an effective date based on the date your application was received and subsequently approved. It has nothing to do with how much money you send them or whether or not you told them to back date your application. If someone at the New York exchange told you you could have a retroactive effective date they shouldn't have. Many providers have financial hardship programs. You should talk to the ER hospital and see what might be available to you. The insurer is likely out of the equation though if the dates of service occurred before your policy was effective. Regarding your 6th paragraph regarding having paid the premium. In this day and age carriers can only say \"\"no\"\" via administrative means. They set extremely rigid effective dates based on your application date. They will absolutely cancel you if you miss a payment. If you get money to them but it was after the grace period date (even by one minute) they will not reinstate you. If you're cancelled you must submit a new application which will create a new coverage gap. You pay a few hundred dollars each month to insure infinity risk, you absolutely have to cover your administrative bases because it's the only way a carrier can say \"\"no\"\" anymore so they cling to it.\"" }, { "docid": "97162", "title": "", "text": "Your plan isn't bad, but it probably isn't worth the cost for the small amount of credit building it will achieve. If you do decide to continue with it though, you'll save in interest if you make the big payment now rather than in 6 months. In other words, you can take the minimum payment, multiply it by 5, subtract that amount from the total you owe and pay the difference immediately. This way you'll still get the 6 months of reporting to the credit bureaus, but you'll pay less interest since you'll have less principle each month. I would recommend applying for the credit card right now. I believe you'll probably get approved now. If you do, then pay off the car loan without thinking about it. (If you don't get approved, think about it, then probably still pay it off.) Regarding the full coverage insurance, even after the loan is paid off and you aren't required to have it, you may still want to keep it. Even if you're the best driver on earth, if someone hits you and doesn't have insurance, or they have insurance and drive off, or a deer runs in front of you, etc, you'll lose your car and won't be reimbursed. Also, as Russell pointed out in the comments below, without collision coverage your insurance company has no incentive to work on your behalf when someone else hits you, so even if it's not your fault you may still not get reimbursed. So, I wouldn't pass on the full coverage unless your car isn't worth very much or you can stomach losing it if something happens. Good luck, and congrats on being able to pay for a car in full at 19 years old." }, { "docid": "145614", "title": "", "text": "\"Life Insurance can be a difficult decision. We have to first assess the \"\"want\"\" for it vs. the \"\"need\"\" for it, and that differs from person to person. Any Life licensed agent should be happy to do this calculation for you at no cost and no obligation. Just be sure you are well educated in the subject to make sure they are looking after YOUR needs and not their wallets. For the majority of clients, when looking at \"\"needs\"\" we will be sure to look at income coverage (less what the household needs with one less body) as well as debt coverage, education costs etc. More importantly make sure you are buying the RIGHT insurance, as much as the right amount.\"" }, { "docid": "218533", "title": "", "text": "Exactly. that is paying double the money for no better coverage. It makes no sense. The paperwork when you file a claim will ask you if there is coverage from another policy. Making the same claim to two different policies, without telling them, would be considered insurance fraud. For that kind of money the insurance company would be involved with paying the re-builder money periodically. Obviously only one re-builder is involved, and they would notice if they were getting paid more than was required. While you could decide to take the money and not rebuild, but that wouldn't work if you had a mortgage. The lender would want their money or force you to rebuild." }, { "docid": "217748", "title": "", "text": "Edit: Let's forget about Wikipedia. From the horse's mouth: The cafeteria plan rules require that a health FSA provide uniform coverage throughout the coverage period (which is the period when the employee is covered by the plan). See Proposed Treasury Regulations Section 1.125-5(d). Under the uniform coverage rules, the maximum amount of reimbursement from a health FSA must be available at all times during the coverage period. This means that the employee’s entire health FSA election is available from the first day of the plan year to reimburse qualified medical expenses incurred during the coverage period. The cafeteria plan may not, therefore, base its reimbursements to an employee on what that employee may have contributed up to any particular date, such as the date the employee is laid-off or terminated. Thus, if an employee’s reimbursements from the health FSA exceed his contributions to the health FSA at the time of lay-off or termination, the employer cannot recoup the difference from the employee. (emphasis added) http://www.irs.gov/pub/irs-wd/1012060.pdf Uniform Coverage Rule The IRS has required that “health FSAS must qualify as accident or health plans. This means that, in general, while the health coverage under the FSA need not be provided through a commercial insurance contract, health FSAS must exhibit the risk-shifting and risk-distribution characteristics of insurance.” This concept has led to the “uniform coverage” rule. The uniform­coverage rule requires that the maximum amount of an employee’s projected elective contributions to a health FSA must be available from the first day of the plan year to reimburse the employee’s qualified medical expenses, regardless of the amount actually contributed to the plan at the time that reimbursement is sought. Citing proposed Treasury Regulations Section the IRS General Counsel has determined that: “Under the uniform coverage rules, the maximum amount of reimbursement from a health FSA must be available at all times during the coverage period. The cafeteria plan may not, therefore, base its reimbursements to an employee on what that employee may have contributed up to any particular date, such as the date the employee is laid-off or terminated. Thus, if an employee’s reimbursements from the health FSA exceed his contributions to the health FSA at the time of or termination, the employer cannot recoup the difference from the employee.” This rule is unfair and also constitutes a disincentive to establishing FSAS because of the exposure to out-of pocket expenditures arising from employees who leave the company. NSBA believes that the uniform coverage rule should also be revised if the or lose- it rule is changed. Revising the use-it or lose-it rule while leaving the uniform coverage rule unchanged will introduce an inappropriate asymmetry to FSAS. An employer should be allowed to deduct any negative amount arising from insuftîcient employee contributions from a terminating partieipant’s last paycheck. http://www.ecfc.org/files/legislative-news/NSBA_(David_Burton).pdf (emphasis added) Now, that's some fresh bitterness for you right there. (Dated August 17, 2012)" }, { "docid": "29300", "title": "", "text": "It is true that with a job that pays you via payroll check that will result in a W-2 because you are an employee, the threshold that you are worried about before you have to file is in the thousands. Unless of course you make a lot of money from bank interest or you have income tax withheld and you want it refunded to you. Table 2 and table 3 in IRS pub 501, does a great job of telling you when you must. For you table 3 is most likely to apply because you weren't an employee and you will not be getting a W-2. If any of the five conditions listed below applied to you for 2016, you must file a return. You owe any special taxes, including any of the following. a. Alternative minimum tax. (See Form 6251.) b. Additional tax on a qualified plan, including an individual retirement arrangement (IRA), or other tax­favored account. (See Pub. 590­A, Contributions to Individual Retirement Arrangements (IRAs); Pub. 590­B, Distributions from Individual Retirement Arrangements (IRAs); and Pub. 969, Health Savings Accounts and Other Tax­Favored Health Plans.) But if you are filing a return only because you owe this tax, you can file Form 5329 by itself. c. Social security or Medicare tax on tips you didn't report to your employer (see Pub. 531, Reporting Tip Income) or on wages you received from an employer who didn't withhold these taxes (see Form 8919). d. Write­in taxes, including uncollected social security, Medicare, or railroad retirement tax on tips you reported to your employer or on group­term life insurance and additional taxes on health savings accounts. (See Pub. 531, Pub. 969, and the Form 1040 instructions for line 62.) e. Household employment taxes. But if you are filing a return only because you owe these taxes, you can file Schedule H (Form 1040) by itself. f. Recapture taxes. (See the Form 1040 instructions for lines 44, 60b, and 62.) You (or your spouse if filing jointly) received Archer MSA, Medicare Advantage MSA, or health savings account distributions. You had net earnings from self­employment of at least $400. (See Schedule SE (Form 1040) and its instructions.) You had wages of $108.28 or more from a church or qualified church­controlled organization that is exempt from employer social security and Medicare taxes. (See Schedule SE (Form 1040) and its instructions.) Advance payments of the premium tax credit were made for you, your spouse, or a dependent who enrolled in coverage through the Health Insurance Marketplace. You should have received Form(s) 1095­A showing the amount of the advance payments, if any. It appears that item 3: You had net earnings from self­employment of at least $400. (See Schedule SE (Form 1040) and its instructions.) would most likely apply. It obviously is not too late to file for 2016, because taxes aren't due for another month. As to previous years that would depend if you made money those years, and how much." }, { "docid": "124142", "title": "", "text": "Here are some ways my family saves money on our home insurance: Here are a couple of good articles on the subject: Finally - make sure you get adequate coverage! Make sure you consider your real insurance needs, and not just the cost of the insurance. If the worst happens, you'll want good coverage with a good company." } ]

[ { "docid": "17208", "title": "", "text": "See my comment for some discussion of why one might choose an identical fund over an ETF. As to why someone would choose the higher cost fund in this instance ... The Admiral Shares version of the fund (VFIAX) has the same expense ratio as the ETF but has a minimum investment of $10K. Some investors may want to eventually own the Admiral Shares fund but do not yet have $10K. If they begin with the Investor Shares now and then convert to Admiral later, that conversion will be a non-taxable event. If, however, they start with ETF shares now and then sell them later to buy the fund, that sale will be a taxable event. Vanguard ETFs are only commission-free to Vanguard clients using Vanguard Brokerage Services. Some investors using other brokers may face all sorts of penalties for purchasing third-party ETFs. Some retirement plan participants (either at Vanguard or another broker) may not even be allowed to purchase ETFs." } ]

[ { "docid": "491472", "title": "", "text": "\"Determine which fund company issues the fund. In this case, a search reveals the fund name to be Vanguard Dividend Growth Fund from Vanguard Funds. Locate information for the fund on the fund company's web site. Here is the overview page for VDIGX. In the fund information, look for information about distributions. In the case of VDIGX, the fourth tab to the right of \"\"Overview\"\" is \"\"Distributions\"\". See here. At the top: Distributions for this fund are scheduled Semi-Annually The actual distribution history should give you some clues as to when. Failing that, ask your broker or the fund company directly. On \"\"distribution\"\" vs. \"\"dividend\"\": When a mutual fund spins off periodic cash, it is generally not called a \"\"dividend\"\", but rather a \"\"distribution\"\". The terminology is different because a distribution can be made up of more than one kind of payout. Dividends are just one kind. Capital gains, interest, and return of capital are other kinds of cash that can be distributed. While cash is cash, the nature of each varies for tax purposes and so they are classified differently.\"" }, { "docid": "524612", "title": "", "text": "ETFs are a type of investment, not a specific choice. In other words, there are good ETFs and bad. What you see is the general statement that ETFs are preferable to most mutual funds, if only for the fact that they are low cost. An index ETF such as SPY (which reflects the S&P 500 index) has a .09% annual expense, vs a mutual fund which average a full percent or more. sheegaon isn't wrong, I just have a different spin to offer you. Given a long term return of say even 8% (note - this question is not a debate of the long term return, and I purposely chose a low number compared to the long term average, closer to 10%) and the current CD rate of <1%, a 1% hit for the commission on the buy side doesn't bother me. The sell won't occur for a long time, and $8 on a $10K sale is no big deal. I'd not expect you to save $1K/yr in cash/CDs for the years it would take to make that $8 fee look tiny. Not when over time the growth will overshaddow this. One day you will be in a position where the swings in the market will produce the random increase or decrease to your net worth in the $10s of thousands. Do you know why you won't lose a night's sleep over this? Because when you invested your first $1K, and started to pay attention to the market, you saw how some days had swings of 3 or 4%, and you built up an immunity to the day to day noise. You stayed invested and as you gained wealth, you stuck to the right rebalancing each year, so a market crash which took others down by 30%, only impacted you by 15-20, and you were ready for the next move to the upside. And you also saw that since mutual funds with their 1% fees never beat the index over time, you were happy to say you lagged the S&P by .09%, or 1% over 11 year's time vs those whose funds had some great years, but lost it all in the bad years. And by the way, right until you are in the 25% bracket, Roth is the way to go. When you are at 25%, that's the time to use pre-tax accounts to get just below the cuttoff. Last, welcome to SE. Edit - see sheegaon's answer below. I agree, I missed the cost of the bid/ask spread. Going with the lowest cost (index) funds may make better sense for you. To clarify, Sheehan points out that ETFs trade like a stock, a commission, and a bid/ask, both add to transaction cost. So, agreeing this is the case, an indexed-based mutual fund can provide the best of possible options. Reflecting the S&P (for example) less a small anual expense, .1% or less." }, { "docid": "161966", "title": "", "text": "Does the Spanish market, or any other market in euroland, have the equivalent of ETF's? If so there ought to be one that is based on something like the US S&P500 or Russell 3000. Otherwise you might check for local offices of large mutual fund companies such as Vanguard, Schwab etc to see it they have funds for sale there in Spain that invest in the US markets. I know for example Schwab has something for Swiss residents to invest in the US market. Do bear in mind that while the US has a stated policy of a 'strong dollar', that's not really what we've seen in practice. So there is substantial 'currency risk' of the dollar falling vs the euro, which could result in a loss for you. (otoh, if the Euro falls out of bed, you'd be sitting pretty.) Guess it all depends on how good your crystal ball is." }, { "docid": "536853", "title": "", "text": "\"Asset management typically refers to the \"\"product\"\" group e.g. Mutual fund, etf, etc., like invesco offering qqq or some emerging market mutual fund. Capital management is more vague and can refer to a wide range of financial products and services including asset management and stuff like ptfl planning, wealth advisory etc. That said they are both used interchangeably and not like anyone would correct you if you used one vs the other...\"" }, { "docid": "473150", "title": "", "text": "Price, whether related to a stock or ETF, has little to do with anything. The fund or company has a total value and the value is distributed among the number of units or shares. Vanguard's S&P ETF has a unit price of $196 and Schwab's S&P mutual fund has a unit price of $35, it's essentially just a matter of the fund's total assets divided by number of units outstanding. Vanguard's VOO has assets of about $250 billion and Schwab's SWPPX has assets of about $25 billion. Additionally, Apple has a share price of $100, Google has a share price of $800, that doesn't mean Google is more valuable than Apple. Apple's market capitalization is about $630 billion while Google's is about $560 billion. Or on the extreme a single share of Berkshire's Class A stock is $216,000, and Berkshire's market cap is just $360 billion. It's all just a matter of value divided by shares/units." }, { "docid": "387980", "title": "", "text": "\"If you want the answer from the horse's mouth, go to the website of the ETF or mutual find, and the expense ratio will be listed there, both on the \"\"Important Information\"\" part of the front page, as well as in the .pdf file that you click on to download the Prospectus. Oh wait, you don't want to go the fund's website at all, just to a query site where you type in something like VFINX. hit SEARCH, and out pops the expense ratio for the Vanguard S&P 500 Index Fund? Well, have you considered MorningStar?\"" }, { "docid": "328086", "title": "", "text": "There's a few different types of investments you could do. As poolie mentioned, you could split your money between the Vanguard All World ex-US and Vanguard Total Stock Market index. A similar approach would be to invest in the Vanguard Total World Stock ETF. You wouldn't have to track separate fund performances, at the downside of not being able to allocate differential amounts to the US and non-US markets (Vanguard will allocate them by market cap). You could consider investing in country-specific broad market indices like the S&P 500 and FTSE 100. While not as diversified as the world indices, they are more correlated with the country's economic outlook. Other common investing paradigms are investing in companies which have historically paid out high dividends and companies that are under-valued by the market but have good prospects for future growth. This gets in the domain of value investing, which an entire field by itself. Like Andrew mentioned, investing in a mutual fund is hassle-free. However, mutual fees/commissions and taxes can be higher (somewhere in the range 1%-5%) than index funds/ETF expense ratios (typically <0.50%), so they would have to outperform the market by a bit to break-even. There are quite a few good books out there to read up about investing. I'd recommend The Intelligent Investor and Millionaire Teacher to understand the basics of long-term investing, but of course, there are many other equally good books too." }, { "docid": "65567", "title": "", "text": "If you have just started an IRA (presumably with a contribution for 2012), you likely have $5000 in it, or $10,000 if you made a full contribution for 2013 as well. At this time, I would recommend putting it all in a single low-cost mutual fund. Typically, mutual funds that track an index such as the S&P 500 Index have lower costs (annual expense fees) than actively managed funds, and most investment companies offer such mutual funds, with Fidelity, Vanguard, Schwab, to name a few, having very low expenses even among index funds. Later, when you have more money in the account, you can consider diversifying into more funds, buying stocks and bonds, investing in ETFs, etc. Incidentally, if you are just starting out and your Roth IRA is essentially your first investment experience, be aware that you do not need a brokerage account for your Roth IRA until you have more money in the account to invest and specifically want to buy individual stocks and bonds instead of just mutual funds. If you opened a brokerage account for your Roth IRA, close it and transfer the Roth IRA to your choice of mutual fund company; else you will be paying annual fees to the brokerage for maintaining your account, inactivity fees since you won't be doing any trading, etc. The easiest way to do this is to go to the mutual fund company web site and tell them that you want to transfer your IRA to them (not roll over your IRA to them) and they will take care of all the paper work and collecting your money from the brokerage (ditto if your Roth IRA is with a bank or another mutual fund company). Then close your brokerage account." }, { "docid": "419985", "title": "", "text": "There's really no right or wrong answer here because you'll be fine either way. If you've investing amounts in the low 5 figures you're likely just getting started, and if your asset allocation is not optimal it's not that big a deal because you have a long time horizon to adjust it, and the expense ratio differences here won't add up to that much. A third option is Vanguard ETFs, which have the expense ratio of Admiral Shares but have lower minimums (i.e. the cost of a single share, typically on the order of $100). However, they are a bit more advanced than mutual funds in that they trade on the market and require you to place orders rather than just specifying the amount you want to buy. A downside here is you might end up with a small amount of cash that you can't invest, since you can initially only buy whole numbers of ETFs shares. So what I'd recommend is buying roughly the correct number of ETFs shares you want except for your largest allocation, then use the rest of your cash on Admiral Shares of that (if possible). For example, let's say you have $15k to invest and you want to be 2/3 U.S. stock, 1/6 international stock, and 1/6 U.S. bond. I would buy as many shares of VXUS (international stock ETF) and BND (U.S. bond ETF) as you can get for $2500 each, then whatever is left over (~$10k) put into VTSAX (U.S. stock Admiral Shares mutual fund)." }, { "docid": "459596", "title": "", "text": "\"Morningstar is often considered a trusted industry standard when it comes to rating mutual funds and ETFs. They offer the same data-centric information for other investments as well, such as individual stocks and bonds. You can consult Morningstar directly if you like, but any established broker will usually provide you with Morningstar's ratings for the products it is trying to sell to you. Vanguard offers a few Emerging Markets stock and bond funds, some actively managed, some index funds. Other investment management companies (Fidelity, Schwab, etc.) presumably do as well. You could start by looking in Morningstar (or on the individual companies' websites) to find what the similarities and differences are among these funds. That can help answer some important questions: I personally just shove a certain percentage of my portfolio into non-US stocks and bonds, and of that allocation a certain fraction goes into \"\"established\"\" economies and a certain fraction into \"\"emerging\"\" ones. I do all this with just a few basic index funds, because the indices make sense (to me) and index funds cost very little.\"" }, { "docid": "335357", "title": "", "text": "Your question indicates confusion regarding what an Individual Retirement Account (whether Roth or Traditional) is vs. the S&P 500, which is nothing but a list of stocks. IOW, it's perfectly reasonable to open a Roth IRA, put your $3000 in it, and then use that money to buy a mutual fund or ETF which tracks the S&P 500. In fact, it's ridiculously common... :)" }, { "docid": "83079", "title": "", "text": "Check out some common portfolios compared: Note that all these portfolios are loosely based on Modern Portfolio Theory, a theory of how to maximize reward given a risk tolerance introduced by Harry Markowitz. The theory behind the Gone Fishin' Portfolio and the Couch Potato Portfolio (more info) is that you can make money by rebalancing once a year or less. You can take a look at 8 Lazy ETF Portfolios to see other lazy allocation percentages. One big thing to remember - the expense ratio of the funds you invest in is a major contributor to the return you get. If they're taking 1% of all of your gains, you're not. If they're only taking .2%, that's an automatic .8% you get. The reason Vanguard is so often used in these model portfolios is that they have the lowest expense ratios around. If you are talking about an IRA or a mutual fund account where you get to choose who you go with (as opposed to a 401K with company match), conventional wisdom says go with Vanguard for the lowest expense ratios." }, { "docid": "524525", "title": "", "text": "Loads of financial advisors advise holding index funds they may advise other things as well, but low fee index funds are a staple portfolio item. I can't speak to the particulars of Canada, but in the US you would just open a brokerage account (or IRA or SEP IRA in the case of a small business owner) and buy a low cost S&P index ETF or low/no fee/commission S&P index mutual fund. There's no magic to it. Some examples in no particular order are, Vanguard's VOO, Schwab's SWPPX, and iShares' IVV. There are also Canadian index equities like Vanguard's VCN and iShare's XIC." }, { "docid": "211525", "title": "", "text": "First, a Roth is funded with post tax money. The Roth IRA deposit will not offset any tax obligation you might have. The IRA is not an investment, it's an account with a specific set of tax rules that apply to it. If you don't have a brokerage account, I'd suggest you consider a broker that has an office nearby. Schwab, Fidelity, Vanguard are 3 that I happen to have relationships with. Once the funds are deposited, you need to choose how to invest for the long term. The fact that I'd choose the lowest cost S&P ETF or mutual fund doesn't mean that's the ideal investment for you. You need to continue to do research to find the exact investment that matches your risk profile. By way of example, up until a few years ago, my wife and I were nearly 100% invested in stocks, mostly the S&P 500. When we retired, four years ago, I shifted a bit to be more conservative, closer to 80% stock 20% cash." }, { "docid": "328477", "title": "", "text": "\"Don't do it until you have educated yourself enough to know what you are doing. I hope you won't take this personally, but given that you are wandering around asking random strangers on the Internet how to \"\"get into investing,\"\" I feel safe in concluding that you are by no means a sophisticated enough investor to be choosing individual investments, nor should you be trusting financial advisors to choose investments for you. Believe me, they do not have your interests at heart. I usually advise people in your position to start by reading one book: A Random Walk Down Wall Street by Burton Malkiel. Once you've read the book by Malkiel you'll understand that the best strategy for all but the most sophisticated investors is to buy an index fund, which simply purchases a portfolio of ALL available stocks without trying to pick winners and losers. The best index funds are at Vanguard (there is also a Vanguard site for non-US residents). Vanguard is one of the very, very, very few honest players in the business. Unlike almost any other mutual fund, Vanguard is owned by its investors, so it has no profit motive. They never try to pick individual stocks, so they don't have to pay fancy high-priced analysts to pick stocks. If you find it impossible to open a Vanguard account from wherever you're living, find a local brokerage account that will allow you to invest in the US stock market. Many Vanguard mutual funds are available as ETFs which means that you buy and sell them just like any other stock on the US market, which should be easy to do from any reasonably civilized place.\"" }, { "docid": "49168", "title": "", "text": "The creation mechanism for ETF's ensures that the value of the underlying stocks do not diverge significantly from the Fund's value. Authorized participants have a strong incentive to arbitrage any pricing differences and create/redeem blocks of stock/etf until the prices are back inline. Contrary to what was stated in a previous answer, this mechanism lowers the cost of management of ETF's when compared to mutual funds that must access the market on a regular basis when any investors enter/exit the fund. The ETF only needs to create/redeem in a wholesale basis, this allows them to operate with management fees that are much lower than those of a mutual fund. Expenses Due to the passive nature of indexed strategies, the internal expenses of most ETFs are considerably lower than those of many mutual funds. Of the more than 900 available ETFs listed on Morningstar in 2010, those with the lowest expense ratios charged about .10%, while those with the highest expenses ran about 1.25%. By comparison, the lowest fund fees range from .01% to more than 10% per year for other funds. (For more on mutual fund feeds, read Stop Paying High Fees.)" }, { "docid": "560783", "title": "", "text": "Mutual funds don't do what ETFs do because, according to how the fund was built in their contract, they can't. That is not how they are built and the people that invested in them expect them to act in a certain way. That is ok, though. Many people still invest in mutual funds partially because of their history but there are some advantages to mutual funds over etfs. Mainly mutual funds must mark-to-market at the end of day while etf values can drift from the asset value especially in crisis. As long enough people invest in mutual funds the funds make enough money on their fees they don't need to change. Maybe mutual funds will go extinct as etfs do have significant advantages, but it likely won't happen soon." }, { "docid": "159471", "title": "", "text": "Why don't you look at the actual funds and etfs in question rather than seeking a general conclusion about all pairs of funds and etfs? For example, Vanguard's total stock market index fund (VTSAX) and ETF (VTI). Comparing the two on yahoo finance I find no difference over the last 5 years visually. For a different pair of funds you may find something very slightly different. In many cases the index fund and ETF will not have the same benchmark and fees so comparisons get a little more cloudy. I recall a while ago there was an article that was pointing out that at the time emerging market ETF's had higher fees than corresponding index funds. For this reason I think you should examine your question on a case-by-case basis. Index fund and ETF returns are all publicly available so you don't have to guess." }, { "docid": "493366", "title": "", "text": "Here are the specific Vanguard index funds and ETF's I use to mimic Ray Dalio's all weather portfolio for my taxable investment savings. I invest into this with Vanguard personal investor and brokerage accounts. Here's a summary of the performance results from 2007 to today: 2007 is when the DBC commodity fund was created, so that's why my results are only tested back that far. I've tested the broader asset class as well and the results are similar, but I suggest doing that as well for yourself. I use portfoliovisualizer.com to backtest the results of my portfolio along with various asset classes, that's been tremendously useful. My opinionated advice would be to ignore the local investment advisor recommendations. Nobody will ever care more about your money than you, and their incentives are misaligned as Tony mentions in his book. Mutual funds were chosen over ETF's for the simplicity of auto-investment. Unfortunately I have to manually buy the ETF shares each month (DBC and GLD). I'm 29 and don't use this for retirement savings. My retirement is 100% VSMAX. I'll adjust this in 20 years or so to be more conservative. However, when I get close to age 45-50 I'm planning to shift into this allocation at a market high point. When I approach retirement, this is EXACTLY where I want to be. Let's say you had $2.7M in your retirement account on Oct 31, 2007 that was invested in 100% US Stocks. In Feb of 2009 your balance would be roughly $1.35M. If you wanted to retire in 2009 you most likely couldn't. If you had invested with this approach you're account would have dropped to $2.4M in Feb of 2009. Disclaimer: I'm not a financial planner or advisor, nor do I claim to be. I'm a software engineer and I've heavily researched this approach solely for my own benefit. I have absolutely no affiliation with any of the tools, organizations, or funds mentioned here and there's no possible way for me to profit or gain from this. I'm not recommending anyone use this, I'm merely providing an overview of how I choose to invest my own money. Take or leave it, that's up to you. The loss/gain incured from this is your responsibility, and I can't be held accountable." } ]

[ { "docid": "536120", "title": "", "text": "Where are you planning on buying this ETF? I'm guessing it's directly through Vanguard? If so, that's likely your first reason - the majority of brokerage accounts charge a commission per trade for ETFs (and equities) but not for mutual funds. Another reason is that people who work in the financial industry (brokerages, mutual fund companies, etc) have to request permission for every trade before placing an order. This applies to equities and ETFs but does not apply to mutual funds. It's common for a request to be denied (if the brokerage has inside information due to other business lines they'll block trading, if a mutual fund company is trading the same security they'll block trading, etc) without an explanation. This can happen for months. For these folks it's typically easier to use mutual funds. So, if someone can open an account with Vanguard and doesn't work in the financial industry then I agree with your premise. The Vanguard Admiral shares have a much lower expense, typically very close to their ETFs. Source: worked for a brokerage and mutual fund company" } ]

[ { "docid": "589957", "title": "", "text": "In a situation like this, I presume you'd invest in the child company if you thought that the child company would increase in value at a higher rate than the parent. You'd invest in the parent company if you thought the parent company would perform well as a whole, but you did not want to assume the risk of an individual company underneath it. Say the child company is worth 100 million, and the parent company is worth 500 million. You've invested a sum of money in the child company. The child company performs very well, and increases in value by, say, 20 million. As the parent company owns the child, we could say it also increases in value by roughly 20 million. The difference is proportional - Your investment in the child sees a 20% gain in value, whereas your investment in the parent sees a 4% gain in total value, as in this example the parent company, which owns nearly 100% of the child company, is worth 5x more and thus proportionally sees 1/5 the increase in value, due to it being worth more as a whole. Think of it similarly to a mutual fund or ETF that invests in many different stocks on the market. As the market does well, that mutual fund or ETF does well, too. As the mutual fund is made up of many individual stocks, one stock performing very well, say at a 10-20% increase in value, does not raise the value of the ETF or mutual fund by 10-20%. The etf / mutual fund will perform slightly better (Assuming all other components remain equal for this example), but only proportionally to the fraction of it that's made up of the stock that's performing well." }, { "docid": "502271", "title": "", "text": "Thanks very much. 12b1 is a form that explains how a fund uses that .25-1% fee, right? So that's part of the puzzle im getting at. I'm not necessarily trying to understand my net fees, but more who pays who and based off of what. For a quick example, betterment bought me a bunch of vanguard ETFs. That's cool. But vanguard underperformed vs their blackrock and ssga etfs. I get that vanguard has lower fees, but the return was less even taking those into account. I'm wondering, first what sort of kickback betterment got for buying those funds, inclusive of wholesale deals, education fees etc. I'm also wondering how this food chain goes up and down the sponsor, manager tree. I'm sure it's more than just splitting up that 1%" }, { "docid": "87722", "title": "", "text": "In my opinion, if you are doing long-term investing, this is a non-issue. The difference of hours in being able to trade an ETF during the day vs. only being able to trade a traditional mutual fund at day-end is irrelevant if you are holding the investment for a long time. If you are engaging in day trading, market timing, or other advanced/controversial trading practices, then I suppose it could make a difference. For the way I invest (index funds, long-term, set-it-and-forget-it), ETFs have no advantage over traditional mutual funds." }, { "docid": "491472", "title": "", "text": "\"Determine which fund company issues the fund. In this case, a search reveals the fund name to be Vanguard Dividend Growth Fund from Vanguard Funds. Locate information for the fund on the fund company's web site. Here is the overview page for VDIGX. In the fund information, look for information about distributions. In the case of VDIGX, the fourth tab to the right of \"\"Overview\"\" is \"\"Distributions\"\". See here. At the top: Distributions for this fund are scheduled Semi-Annually The actual distribution history should give you some clues as to when. Failing that, ask your broker or the fund company directly. On \"\"distribution\"\" vs. \"\"dividend\"\": When a mutual fund spins off periodic cash, it is generally not called a \"\"dividend\"\", but rather a \"\"distribution\"\". The terminology is different because a distribution can be made up of more than one kind of payout. Dividends are just one kind. Capital gains, interest, and return of capital are other kinds of cash that can be distributed. While cash is cash, the nature of each varies for tax purposes and so they are classified differently.\"" }, { "docid": "580802", "title": "", "text": "You cannot do a 1031 exchange with stocks, bonds, mutual funds, or ETFs. There really isn't much difference between an ETF and its equivalent index mutual fund. Both will have minimal capital gains distributions. I would not recommend selling an index mutual fund and taking a short-term capital gain just to buy the equivalent ETF." }, { "docid": "467575", "title": "", "text": "There are ETFs and mutual funds that pay dividends. Mutual funds and ETFs are quite similar. Your advisor is correct regarding future funds you invest. But you already had incurred the risk of buying an individual stock. That is a 'sunk cost'. If you were satisfied with the returns you could have retained the HD stock you already owned and just put future moneys into an ETF or mutual fund. BTW: does your advisor receive a commission from your purchase of a mutual fund? That may have been his motivation to give you the advice to sell your existing holdings." }, { "docid": "286525", "title": "", "text": "There is a LOT of shuffling going on in the financial services industry. I would not immediately say your advisor is acting in bad faith. The DOL fiduciary changes are quite significant for some brokers. Investment Advisors who are fee-based have less of an impact since they are already fiduciaries. That being said, your issue is still the same. How can you get a low-cost solution to your problem? You might want to consider Vanguard, Fidelity, or another mutual fund company that can keep your costs low. However, you should understand that if you are using mutual funds, the fees are paid one way or another. 12b1 fees, commissions, and expenses are all deducted from the fund's gross returns. You have to choose between low cost and paid advice. you cannot get high-quality low-cost advice. Fortunately, there are a lot of new solutions out there, robo-advisors, indexing, asset allocation mutual funds, ETFs, and more. Do a bit of homework and you should be able to come up with a reasonable solution. I hope you found this helpful. Kirk" }, { "docid": "497344", "title": "", "text": "\"For equities, buy direct from the transfer agent. You have to buy one full share at a minimum but after that dividend reinvestment is free. There are others like share builder and foliofn that let you buy fractional shares. As the other poster said their roster is limited so you cannot buy every ETF out there. With your example of not wanting to spend $200 I agree with the others that you should invest in a mutual fund. Vanguard will have every index fund you need and can invest as little as $50, as long as you sign up for a systematic investment draft from your bank. Plus vanguard typically has the lowest fees in the industry. The most important thing is to start investing as soon as possible and as regular as possible. \"\"Pay yourself first\"\"\"" }, { "docid": "479420", "title": "", "text": "Mutual funds buy (and sell) shares in companies in accordance with the policies set forth in their prospectus, not according to the individual needs of an investor, that is, when you invest money in (or withdraw money from) a mutual fund, the manager buys or sells whatever shares that, in the manager's judgement, will be the most appropriate ones (consistent with the investment policies). Thus, a large-cap mutual fund manager will not buy the latest hot small-cap stock that will likely be hugely profitable; he/she must choose only between various large capitalization companies. Some exchange-traded funds are fixed baskets of stocks. Suppose you will not invest in a company X as a matter of principle. Unless a mutual fund prospectus says that it will not invest in X, you may well end up having an investment in X at some time because the fund manager bought shares in X. With such an ETF, you know what is in the basket, and if the basket does not include stock in X now, it will not own stock in X at a later date. Some exchange-traded funds are constructed based on some index and track the index as a matter of policy. Thus, you will not be investing in X unless X becomes part of the index because Standard or Poor or Russell or somebody changed their minds, and the ETF buys X in order to track the index. Finally, some ETFs are exactly like general mutual funds except that you can buy or sell ETF shares at any time at the price at the instant that your order is executed whereas with mutual funds, the price of the mutual fund shares that you have bought or sold is the NAV of the mutual fund shares for that day, which is established based on the closing prices at the end of the trading day of the stocks, bonds etc that the fund owns. So, you might end up owning stock in X at any time based on what the fund manager thinks about X." }, { "docid": "406920", "title": "", "text": "Exchange-traded funds are bought and sold like stocks so you'd be able to place stop orders on them just like you could for individual stocks. For example, SPY would be the ticker for an S & P 500 ETF known as a SPDR. Open-end mutual funds don't have stop orders because of how the buying and selling is done which is on unknown prices and often in fractional shares. For example, the Vanguard 500 Index Investor shares(VFINX) would be an example of an S & P 500 tracker here." }, { "docid": "159471", "title": "", "text": "Why don't you look at the actual funds and etfs in question rather than seeking a general conclusion about all pairs of funds and etfs? For example, Vanguard's total stock market index fund (VTSAX) and ETF (VTI). Comparing the two on yahoo finance I find no difference over the last 5 years visually. For a different pair of funds you may find something very slightly different. In many cases the index fund and ETF will not have the same benchmark and fees so comparisons get a little more cloudy. I recall a while ago there was an article that was pointing out that at the time emerging market ETF's had higher fees than corresponding index funds. For this reason I think you should examine your question on a case-by-case basis. Index fund and ETF returns are all publicly available so you don't have to guess." }, { "docid": "400196", "title": "", "text": "Almost all major no-load mutual fund families allow you to do the kind of thing you are talking about, however you may need an initial investment of between $1000 to $3000 depending on the fund. Once you have it however, annual fee's are usually very little, and the fees to buy that companies funds are usually zero if it's a no-load company (Vanguard, TRowPrice, etc) With the larger companies that means you have a pretty large selection of funds, but generally EACH fund has a minimum initial purchase, once that's met then you can buy additional amounts in small quantities without a problem. For someone on a smaller budget, many low cost brokers (ETrade as mentioned by Litteadv, Scottrade as mentioned by myself in another similar question today) allow you to start with smaller initial balances and have a small selection of funds or ETF's that you can trade from without commission. In the case of Scottrade, they have like 15 ETF's that you can trade comission free. Check with the various low cost brokerages such as ETrade, Scottrade, and TDAmeritrade, to see what their policies are, and what if any funds/ETF's they allow you to trade in without commissions. Keep in mind that for Mutual funds, there may still be a fund minimum initial investment that applies, be sure to check if that is the case or not. The lack of any minimum investment makes ETF's a slightly more attractive option for someone who doesn't have the 'buy in' that many funds require." }, { "docid": "358997", "title": "", "text": "What is your time horizon? Over long horizons, you absolutely want to minimise the expense ratio – a seemingly puny 2% fee p.a. can cost you a third of your savings over 35 years. Over short horizons, the cost of trading in and trading out might matter more. A mutual fund might be front-loaded, i.e. charge a fixed initial percentage when you first purchase it. ETFs, traded daily on an exchange just like a stock, don't have that. What you'll pay there is the broker commission, and the bid-ask spread (and possibly any premium/discount the ETF has vis-a-vis the underlying asset value). Another thing to keep in mind is tracking error: how closely does the fond mirror the underlying index it attempts to track? More often than not it works against you. However, not sure there is a systematic difference between ETFs and funds there. Size and age of a fund can matter, indeed - I've had new and smallish ETFs that didn't take off close down, so I had to sell and re-allocate the money. Two more minor aspects: Synthetic ETFs and lending to short sellers. 1) Some ETFs are synthetic, that is, they don't buy all the underlying shares replicating the index, actually owning the shares. Instead, they put the money in the bank and enter a swap with a counter-party, typically an investment bank, that promises to pay them the equivalent return of holding that share portfolio. In this case, you have (implicit) credit exposure to that counter-party - if the index performs well, and they don't pay up, well, tough luck. The ETF was relying on that swap, never really held the shares comprising the index, and won't necessarily cough up the difference. 2) In a similar vein, some (non-synthetic) ETFs hold the shares, but then lend them out to short sellers, earning extra money. This will increase the profit of the ETF provider, and potentially decrease your expense ratio (if they pass some of the profit on, or charge lower fees). So, that's a good thing. In case of an operational screw up, or if the short seller can't fulfil their obligations to return the shares, there is a risk of a loss. These two considerations are not really a factor in normal times (except in improving ETF expense ratios), but during the 2009 meltdown they were floated as things to consider. Mutual funds and ETFs re-invest or pay out dividends. For a given mutual fund, you might be able to choose, while ETFs typically are of one type or the other. Not sure how tax treatment differs there, though, sorry (not something I have to deal with in my jurisdiction). As a rule of thumb though, as alex vieux says, for a popular index, ETFs will be cheaper over the long term. Very low cost mutual funds, such as Vanguard, might be competitive though." }, { "docid": "288679", "title": "", "text": "ETFs are both liquid (benefits active traders) and a simple way for people to invest in funds even if they don't have the minimum balance needed to invest in a mutual fund (EDIT: in which purchases are resolved at the end of the trading day). One big difference between ETFs and mutual funds is that you must buy ETFs in whole units, whereas you can add $100 to a mutual fund and the fund will determine -- usually to 4 decimal places -- how many shares you've purchased." }, { "docid": "143238", "title": "", "text": "\"There are a few reasons why an index mutual fund may be preferable to an ETF: I looked at the iShare S&P 500 ETF and it has an expense ratio of 0.07%. The Vanguard Admiral S&P 500 index has an expense ratio of 0.05% and the Investor Shares have an expense ratio of 0.17%, do I don't necessarily agree with your statement \"\"admiral class Vanguard shares don't beat the iShares ETF\"\".\"" }, { "docid": "270992", "title": "", "text": "The main difference between an ETF and a Mutual Fund is Management. An ETF will track a specific index with NO manager input. A Mutual Fund has a manager that is trying to choose securities for its fund based on the mandate of the fund. Liquidity ETFs trade like a stock, so you can buy at 10am and sell at 11 if you wish. Mutual Funds (most) are valued at the end of each business day, so no intraday trading. Also ETFs are similar to stocks in that you need a buyer/seller for the ETF that you want/have. Whereas a mutual fund's units are sold back to itself. I do not know of many if any liquity issues with an ETF, but you could be stuck holding it if you can not find a buyer (usually the market maker). Mutual Funds can be closed to trading, however it is rare. Tax treatment Both come down to the underlying holdings in the fund or ETF. However, more often in Mutual Funds you could be stuck paying someone else's taxes, not true with an ETF. For example, you buy an Equity Mutual Fund 5 years ago, you sell the fund yourself today for little to no gain. I buy the fund a month ago and the fund manager sells a bunch of the stocks they bought for it 10 years ago for a hefty gain. I have a tax liability, you do not even though it is possible that neither of us have any gains in our pocket. It can even go one step further and 6 months from now I could be down money on paper and still have a tax liability. Expenses A Mutual Fund has an MER or Management Expense Ratio, you pay it no matter what. If the fund has a positive return of 12.5% in any given year and it has an MER of 2.5%, then you are up 10%. However if the fund loses 7.5% with the same MER, you are down 10%. An ETF has a much smaller management fee (typically 0.10-0.95%) but you will have trading costs associated with any trades. Risks involved in these as well as any investment are many and likely too long to go into here. However in general, if you have a Canadian Stock ETF it will have similar risks to a Canadian Equity Mutual Fund. I hope this helps." }, { "docid": "488651", "title": "", "text": "It varies. Depending on your brokerage, they may charge you per transaction, so the more transactions, the higher the cost. Though this (from what I've seen), is uncommon with many index funds. In terms of how aggressive you want to be with your investment varies on your comfort with risk, timeline of investment and many other factors beyond the scope of this question. The biggest issue you may need to be aware of is if you are looking at mutual funds, they may have minimum investments. Depending on what that minimum investment is set to, you may not be able to split your $5500 into more than one fund. A lot of this comes down to the specific funds in which your are anticipating investing, as well as the service you use to do so (Fidelity, Vanguard, etc). Ultimately, diversification can be a lot safer, but there are logistics to consider. Personally, I began with a target fund (a mutual fund with adjusted risk based on the estimated year of retirement) and add additional mutual funds, stocks and ETFs as time goes on." }, { "docid": "354280", "title": "", "text": "\"Usually the new broker will take care of this for you. It can take a couple of weeks. If you are planning to go with Vanguard, you probably want to actually get an account at Vanguard, as Vanguard funds usually aren't \"\"No Transaction Fee\"\" funds with many brokers. If you are planning to invest in ETFs, you'll get more flexibility with a broker.\"" }, { "docid": "45970", "title": "", "text": "\"Index funds can be a very good way to get into the stock market. It's a lot easier, and cheaper, to buy a few shares of an index fund than it is to buy a few shares in hundreds of different companies. An index fund will also generally charge lower fees than an \"\"actively managed\"\" mutual fund, where the manager tries to pick which stocks to invest for you. While the actively managed fund might give you better returns (by investing in good companies instead of every company in the index) that doesn't always work out, and the fees can eat away at that advantage. (Stocks, on average, are expected to yield an annual return of 4%, after inflation. Consider that when you see an expense ratio of 1%. Index funds should charge you more like 0.1%-0.3% or so, possibly more if it's an exotic index.) The question is what sort of index you're going to invest in. The Standard and Poor's 500 (S&P 500) is a major index, and if you see someone talking about the performance of a mutual fund or investment strategy, there's a good chance they'll compare it to the return of the S&P 500. Moreover, there are a variety of index funds and exchange-traded funds that offer very good expense ratios (e.g. Vanguard's ETF charges ~0.06%, very cheap!). You can also find some funds which try to get you exposure to the entire world stock market, e.g. Vanguard Total World Stock ETF, NYSE:VT). An index fund is probably the ideal way to start a portfolio - easy, and you get a lot of diversification. Later, when you have more money available, you can consider adding individual stocks or investing in specific sectors or regions. (Someone else suggested Brazil/Russia/Indo-China, or BRICs - having some money invested in that region isn't necessarily a bad idea, but putting all or most of your money in that region would be. If BRICs are more of your portfolio then they are of the world economy, your portfolio isn't balanced. Also, while these countries are experiencing a lot of economic growth, that doesn't always mean that the companies that you own stock in are the ones which will benefit; small businesses and new ventures may make up a significant part of that growth.) Bond funds are useful when you want to diversify your portfolio so that it's not all stocks. There's a bunch of portfolio theory built around asset allocation strategies. The idea is that you should try to maintain a target mix of assets, whatever the market's doing. The basic simplified guideline about investing for retirement says that your portfolio should have (your age)% in bonds (e.g. a 30-year-old should have 30% in bonds, a 50-year-old 50%.) This helps maintain a balance between the volatility of your portfolio (the stock market's ups and downs) and the rate of return: you want to earn money when you can, but when it's almost time to spend it, you don't want a sudden stock market crash to wipe it all out. Bonds help preserve that value (but don't have as nice of a return). The other idea behind asset allocation is that if the market changes - e.g. your stocks go up a lot while your bonds stagnate - you rebalance and buy more bonds. If the stock market subsequently crashes, you move some of your bond money back into stocks. This basically means that you buy low and sell high, just by maintaining your asset allocation. This is generally more reliable than trying to \"\"time the market\"\" and move into an asset class before it goes up (and move out before it goes down). Market-timing is just speculation. You get better returns if you guess right, but you get worse returns if you guess wrong. Commodity funds are useful as another way to diversify your portfolio, and can serve as a little bit of protection in case of crisis or inflation. You can buy gold, silver, platinum and palladium ETFs on the stock exchanges. Having a small amount of money in these funds isn't a bad idea, but commodities can be subject to violent price swings! Moreover, a bar of gold doesn't really earn any money (and owning a share of a precious-metals ETF will incur administrative, storage, and insurance costs to boot). A well-run business does earn money. Assuming you're saving for the long haul (retirement or something several decades off) my suggestion for you would be to start by investing most of your money* in index funds to match the total world stock market (with something like the aforementioned NYSE:VT, for instance), a small portion in bonds, and a smaller portion in commodity funds. (For all the negative stuff I've said about market-timing, it's pretty clear that the bond market is very expensive right now, and so are the commodities!) Then, as you do additional research and determine what sort investments are right for you, add new investment money in the places that you think are appropriate - stock funds, bond funds, commodity funds, individual stocks, sector-specific funds, actively managed mutual funds, et cetera - and try to maintain a reasonable asset allocation. Have fun. *(Most of your investment money. You should have a separate fund for emergencies, and don't invest money in stocks if you know you're going need it within the next few years).\"" } ]

[ { "docid": "268289", "title": "", "text": "\"One reason is that it is not possible (at Vanguard and at many other brokerages) to auto-invest into ETFs. Because the ETF trades like a stock, you typically must buy a whole number of shares. This makes it difficult to do auto-investing where you invest, say, a fixed dollar amount each month. If you're investing $100 and the ETF trades for $30 a share, you must either buy 3 shares and leave $10 unspent, or buy 4 and spend $20 more than you planned. This makes auto-investing with dollar amounts difficult. (It would be cool if there were brokerages that handled this for you, for instance by accumulating \"\"leftover\"\" cash until an additional whole share could be purchased, but I don't know of any.) A difference of 0.12% in the expense ratios is real, but small. It may be outweighed by the psychological gains of being able to adopt a \"\"hands-off\"\" auto-investing plan. With ETFs, you generally must remember to \"\"manually\"\" buy the shares yourself every so often. For many average investors, the advantage of being able to invest without having to think about it at all is worth a small increase in expense ratio. The 0.12% savings don't do you any good if you never remember to buy shares until the market is already up.\"" } ]

[ { "docid": "524612", "title": "", "text": "ETFs are a type of investment, not a specific choice. In other words, there are good ETFs and bad. What you see is the general statement that ETFs are preferable to most mutual funds, if only for the fact that they are low cost. An index ETF such as SPY (which reflects the S&P 500 index) has a .09% annual expense, vs a mutual fund which average a full percent or more. sheegaon isn't wrong, I just have a different spin to offer you. Given a long term return of say even 8% (note - this question is not a debate of the long term return, and I purposely chose a low number compared to the long term average, closer to 10%) and the current CD rate of <1%, a 1% hit for the commission on the buy side doesn't bother me. The sell won't occur for a long time, and $8 on a $10K sale is no big deal. I'd not expect you to save $1K/yr in cash/CDs for the years it would take to make that $8 fee look tiny. Not when over time the growth will overshaddow this. One day you will be in a position where the swings in the market will produce the random increase or decrease to your net worth in the $10s of thousands. Do you know why you won't lose a night's sleep over this? Because when you invested your first $1K, and started to pay attention to the market, you saw how some days had swings of 3 or 4%, and you built up an immunity to the day to day noise. You stayed invested and as you gained wealth, you stuck to the right rebalancing each year, so a market crash which took others down by 30%, only impacted you by 15-20, and you were ready for the next move to the upside. And you also saw that since mutual funds with their 1% fees never beat the index over time, you were happy to say you lagged the S&P by .09%, or 1% over 11 year's time vs those whose funds had some great years, but lost it all in the bad years. And by the way, right until you are in the 25% bracket, Roth is the way to go. When you are at 25%, that's the time to use pre-tax accounts to get just below the cuttoff. Last, welcome to SE. Edit - see sheegaon's answer below. I agree, I missed the cost of the bid/ask spread. Going with the lowest cost (index) funds may make better sense for you. To clarify, Sheehan points out that ETFs trade like a stock, a commission, and a bid/ask, both add to transaction cost. So, agreeing this is the case, an indexed-based mutual fund can provide the best of possible options. Reflecting the S&P (for example) less a small anual expense, .1% or less." }, { "docid": "49168", "title": "", "text": "The creation mechanism for ETF's ensures that the value of the underlying stocks do not diverge significantly from the Fund's value. Authorized participants have a strong incentive to arbitrage any pricing differences and create/redeem blocks of stock/etf until the prices are back inline. Contrary to what was stated in a previous answer, this mechanism lowers the cost of management of ETF's when compared to mutual funds that must access the market on a regular basis when any investors enter/exit the fund. The ETF only needs to create/redeem in a wholesale basis, this allows them to operate with management fees that are much lower than those of a mutual fund. Expenses Due to the passive nature of indexed strategies, the internal expenses of most ETFs are considerably lower than those of many mutual funds. Of the more than 900 available ETFs listed on Morningstar in 2010, those with the lowest expense ratios charged about .10%, while those with the highest expenses ran about 1.25%. By comparison, the lowest fund fees range from .01% to more than 10% per year for other funds. (For more on mutual fund feeds, read Stop Paying High Fees.)" }, { "docid": "230997", "title": "", "text": "\"Back in the olden days, if you wanted to buy the S&P, you had to have a lot of money so you can buy the shares. Then somebody had the bright idea of making a fund that just buys the S&P, and then sells small pieces of it to investor without huge mountains of capital. Enter the ETFs. The guy running the ETF, of course, doesn't do it for free. He skims a little bit of money off the top. This is the \"\"fee\"\". The major S&P ETFs all have tiny fees, in the percents of a percent. If you're buying the index, you're probably looking at gains (or losses) to the tune of 5, 10, 20% - unless you're doing something really silly, you wouldn't even notice the fee. As often happens, when one guy starts doing something and making money, there will immediately be copycats. So now we have competing ETFs all providing the same service. You are technically a competitor as well, since you could compete with all these funds by just buying a basket of shares yourself, thereby running your own private fund for yourself. The reason this stuff even started was that people said, \"\"well why bother with mutual funds when they charge such huge fees and still don't beat the index anyway\"\", so the index ETFs are supposed to be a low cost alternative to mutual funds. Thus one thing ETFs compete on is fees: You can see how VOO has lower fees than SPY and IVV, in keeping with Vanguard's philosophy of minimal management (and management fees). Incidentally, if you buy the shares directly, you wouldn't charge yourself fees, but you would have to pay commissions on each stock and it would destroy you - another benefit of the ETFs. Moreover, these ETFs claim they track the index, but of course there is no real way to peg an asset to another. So they ensure tracking by keeping a carefully curated portfolio. Of course nobody is perfect, and there's tracking error. You can in theory compare the ETFs in this respect and buy the one with the least tracking error. However they all basically track very closely, again the error is fractions of the percent, if it is a legitimate concern in your books then you're not doing index investing right. The actual prices of each fund may vary, but the price hardly matters - the key metric is does it go up 20% when the index goes up 20%? And they all do. So what do you compare them on? Well, typically companies offer people perks to attract them to their own product. If you are a Fidelity customer, and you buy IVV, they will waive your commission if you hold it for a month. I believe Vanguard will also sell VOO for free. But for instance Fidelity will take commission from VOO trades and vice versa. So, this would be your main factor. Though, then again, you can just make an account on Robinhood and they're all commission free. A second factor is reliability of the operator. Frankly, I doubt any of these operators are at all untrustworthy, and you'd be buying your own broker's ETF anyway, and presumably you already went with the most trustworthy broker. Besides that, like I said, there's trivial matters like fees and tracking error, but you might as well just flip a coin. It doesn't really matter.\"" }, { "docid": "370244", "title": "", "text": "Behind the scenes, mutual funds and ETFs are very similar. Both can vary widely in purpose and policies, which is why understanding the prospectus before investing is so important. Since both mutual funds and ETFs cover a wide range of choices, any discussion of management, assets, or expenses when discussing the differences between the two is inaccurate. Mutual funds and ETFs can both be either managed or index-based, high expense or low expense, stock or commodity backed. Method of investing When you invest in a mutual fund, you typically set up an account with the mutual fund company and send your money directly to them. There is often a minimum initial investment required to open your mutual fund account. Mutual funds sometimes, but not always, have a load, which is a fee that you pay either when you put money in or take money out. An ETF is a mutual fund that is traded like a stock. To invest, you need a brokerage account that can buy and sell stocks. When you invest, you pay a transaction fee, just as you would if you purchase a stock. There isn't really a minimum investment required as there is with a traditional mutual fund, but you usually need to purchase whole shares of the ETF. There is inherently no load with ETFs. Tax treatment Mutual funds and ETFs are usually taxed the same. However, capital gain distributions, which are taxable events that occur while you are holding the investment, are more common with mutual funds than they are with ETFs, due to the way that ETFs are structured. (See Fidelity: ETF versus mutual funds: Tax efficiency for more details.) That having been said, in an index fund, capital gain distributions are rare anyway, due to the low turnover of the fund. Conclusion When comparing a mutual fund and ETF with similar objectives and expenses and deciding which to choose, it more often comes down to convenience. If you already have a brokerage account and you are planning on making a one-time investment, an ETF could be more convenient. If, on the other hand, you have more than the minimum initial investment required and you also plan on making additional regular monthly investments, a traditional no-load mutual fund account could be more convenient and less expensive." }, { "docid": "27930", "title": "", "text": "Also, when they mean SP500 fund - it means that fund which invests in the top 500 companies in the SP Index, is my understanding correct? Yes that is right. In reality they may not be able to invest in all 500 companies in same proportion, but is reflective of the composition. I wanted to know whether India also has a company similar to Vanguard which offers low cost index funds. Almost all mutual fund companies offer a NIFTY index fund, both as mutual fund as well as ETF. You can search for index fund and see the total assets to find out which is bigger compared to others." }, { "docid": "560208", "title": "", "text": "\"Often in life we have to choose the lesser of evils. Whole Life as an investment vs. Term Life and invest the difference is one of these times. I assume the following statement is true. \"\"The commissions on whole life are sick. The selling agent gets upward of 90% of your first year's premium.\"\" But how does that compare to investing in mutual funds (as one alternative)? Well according to Vanguard the average mutual fund keeps 60% of the total returns over the average investors lifetime. And of course income taxes (on withdrawal) consume another 30% (or more) of the dollars you withdraw (from a tax deferred retirement plan like a 401k.) http://www.fool.com/School/MutualFunds/Performance/Record.htm So you have to pick your poison and make the choice that fits your view of the future. Personally I don't believe my cost of living in retirement will be radically lower than my cost of living while working. Additionally I believe income tax rates will be higher in the future than the in the present and so deferring taxes (like a 401k) doesn't make sense to me. (In 1980 a 401k made sense when the average 401k participant was paying over 50% in federal income tax and also got a pension.) So paying 90% of my first year's premium rather than 60% of my gains over my lifetime seems acceptable. And borrowing tax free against my life insurance once retired (with no intention of paying it back) will, I believe, provide greater income than a 401k could.\"" }, { "docid": "589957", "title": "", "text": "In a situation like this, I presume you'd invest in the child company if you thought that the child company would increase in value at a higher rate than the parent. You'd invest in the parent company if you thought the parent company would perform well as a whole, but you did not want to assume the risk of an individual company underneath it. Say the child company is worth 100 million, and the parent company is worth 500 million. You've invested a sum of money in the child company. The child company performs very well, and increases in value by, say, 20 million. As the parent company owns the child, we could say it also increases in value by roughly 20 million. The difference is proportional - Your investment in the child sees a 20% gain in value, whereas your investment in the parent sees a 4% gain in total value, as in this example the parent company, which owns nearly 100% of the child company, is worth 5x more and thus proportionally sees 1/5 the increase in value, due to it being worth more as a whole. Think of it similarly to a mutual fund or ETF that invests in many different stocks on the market. As the market does well, that mutual fund or ETF does well, too. As the mutual fund is made up of many individual stocks, one stock performing very well, say at a 10-20% increase in value, does not raise the value of the ETF or mutual fund by 10-20%. The etf / mutual fund will perform slightly better (Assuming all other components remain equal for this example), but only proportionally to the fraction of it that's made up of the stock that's performing well." }, { "docid": "266194", "title": "", "text": "\"If you want a Do-It-Yourself solution, look to a Vanguard account with their total market index funds. There's a lot of research that's been done recently in the financial independence community. Basically, there's not many money managers who can outperform the market index (either S&P 500 or a total market index). Actually, no mutual funds have been identified that outperform the market, after fees, consistently. So there's not much sense in paying someone to earn you less than a low fee index fund could do. And some of the numbers show that you can actually lose value on your 401k due to high fees. That's where Vanguard comes in. They offer some of the lowest fees (if not the lowest) and a selection of index funds that will let you balance your portfolio the way you want. Whether you want to go 100% total stock market index fund or a balance between total stock market index fund and total bond index fund, or a \"\"lazy 3 fund portfolio\"\", Vanguard gives you the tools to do it yourself. Rebalancing would require about an hour every quarter. (Or time span you declare yourself). jlcollinsnh A Simple Path to Wealth is my favorite blog about financial independence. Also, Warren Buffet recommended that the trustees for his wife's inheritance when he passes invest her trust in one investment. Vanguard's S&P500 index fund. The same fund he chose in a 10 year $1M bet vs. hedge fund managers. (proceeds go to charity). That was about 9 years ago. So far, Buffet's S&P500 is beating the hedge funds. Investopedia Article\"" }, { "docid": "488651", "title": "", "text": "It varies. Depending on your brokerage, they may charge you per transaction, so the more transactions, the higher the cost. Though this (from what I've seen), is uncommon with many index funds. In terms of how aggressive you want to be with your investment varies on your comfort with risk, timeline of investment and many other factors beyond the scope of this question. The biggest issue you may need to be aware of is if you are looking at mutual funds, they may have minimum investments. Depending on what that minimum investment is set to, you may not be able to split your $5500 into more than one fund. A lot of this comes down to the specific funds in which your are anticipating investing, as well as the service you use to do so (Fidelity, Vanguard, etc). Ultimately, diversification can be a lot safer, but there are logistics to consider. Personally, I began with a target fund (a mutual fund with adjusted risk based on the estimated year of retirement) and add additional mutual funds, stocks and ETFs as time goes on." }, { "docid": "219477", "title": "", "text": "Where you can put the money really depends on your risk tolerance. You could take $50k and put it into a good share class municipal and government bond fund that would likely be tax exempt. In a few years span I don't think you're likely to lose much in a tax-managed bond fund but it's certainly possible! Here is a link for Vanguard tax-exempt bond funds by state of residency: https://investor.vanguard.com/mutual-funds/vanguard-mutual-funds-list?assetclass=bond&taxeff=xmpt These funds have returns well exceeding CD's or standard savings accounts. Risk of loss is real, but returns are possible." }, { "docid": "473658", "title": "", "text": "ETFs offer the flexibility of stocks while retaining many of the benefits of mutual funds. Since an ETF is an actual fund, it has the diversification of its potentially many underlying securities. You can find ETFs with stocks at various market caps and style categories. You can have bond or mixed ETFs. You can even get ETFs with equal or fundamental weighting. In short, all the variety benefits of mutual funds. ETFs are typically much less expensive than mutual funds both in terms of management fees (expense ratio) and taxable gains. Most of them are not actively managed; instead they follow an index and therefore have a low turnover. A mutual fund may actively trade and, if not balanced with a loss, will generate capital gains that you pay taxes on. An ETF will produce gains only when shifting to keep inline with the index or you yourself sell. As a reminder: while expense ratio always matters, capital gains and dividends don't matter if the ETF or mutual fund is in a tax-advantaged account. ETFs have no load fees. Instead, because you trade it like a stock, you will pay a commission. Commissions are straight, up-front and perfectly clear. Much easier to understand than the various ways funds might charge you. There are no account minimums to entry with ETFs, but you will need to buy complete shares. Only a few places allow partial shares. It is generally harder to dollar-cost average into an ETF with regular automated investments. Also, like trading stocks, you can do those fancy things like selling short, buying on margin, options, etc. And you can pay attention to the price fluctuations throughout the day if you really want to. Things to make you pause: if you buy (no-load) mutual funds through the parent company, you'll get them at no commission. Many brokerages have No Transaction Fee (NTF) agreements with companies so that you can buy many funds for free. Still look out for that expense ratio though (which is probably paying for that NTF advantage). As sort of a middle ground: index funds can have very low expense ratios, track the same index as an ETF, can be tax-efficient or tax-managed, free to purchase, easy to dollar-cost average and easier to automate/understand. Further reading:" }, { "docid": "87722", "title": "", "text": "In my opinion, if you are doing long-term investing, this is a non-issue. The difference of hours in being able to trade an ETF during the day vs. only being able to trade a traditional mutual fund at day-end is irrelevant if you are holding the investment for a long time. If you are engaging in day trading, market timing, or other advanced/controversial trading practices, then I suppose it could make a difference. For the way I invest (index funds, long-term, set-it-and-forget-it), ETFs have no advantage over traditional mutual funds." }, { "docid": "143238", "title": "", "text": "\"There are a few reasons why an index mutual fund may be preferable to an ETF: I looked at the iShare S&P 500 ETF and it has an expense ratio of 0.07%. The Vanguard Admiral S&P 500 index has an expense ratio of 0.05% and the Investor Shares have an expense ratio of 0.17%, do I don't necessarily agree with your statement \"\"admiral class Vanguard shares don't beat the iShares ETF\"\".\"" }, { "docid": "354280", "title": "", "text": "\"Usually the new broker will take care of this for you. It can take a couple of weeks. If you are planning to go with Vanguard, you probably want to actually get an account at Vanguard, as Vanguard funds usually aren't \"\"No Transaction Fee\"\" funds with many brokers. If you are planning to invest in ETFs, you'll get more flexibility with a broker.\"" }, { "docid": "161966", "title": "", "text": "Does the Spanish market, or any other market in euroland, have the equivalent of ETF's? If so there ought to be one that is based on something like the US S&P500 or Russell 3000. Otherwise you might check for local offices of large mutual fund companies such as Vanguard, Schwab etc to see it they have funds for sale there in Spain that invest in the US markets. I know for example Schwab has something for Swiss residents to invest in the US market. Do bear in mind that while the US has a stated policy of a 'strong dollar', that's not really what we've seen in practice. So there is substantial 'currency risk' of the dollar falling vs the euro, which could result in a loss for you. (otoh, if the Euro falls out of bed, you'd be sitting pretty.) Guess it all depends on how good your crystal ball is." }, { "docid": "467575", "title": "", "text": "There are ETFs and mutual funds that pay dividends. Mutual funds and ETFs are quite similar. Your advisor is correct regarding future funds you invest. But you already had incurred the risk of buying an individual stock. That is a 'sunk cost'. If you were satisfied with the returns you could have retained the HD stock you already owned and just put future moneys into an ETF or mutual fund. BTW: does your advisor receive a commission from your purchase of a mutual fund? That may have been his motivation to give you the advice to sell your existing holdings." }, { "docid": "423658", "title": "", "text": "It depends on how much diversification you think you need and what your mutual fund options are. For instance, picking an index fund already provides a fair amount of diversification, especially if you select a Total Market type of index (readily available from Fidelity and Vanguard, and many other fund families). Are you looking to balance domestic vs. international investments? You may want to add an international index fund to the mix. Feel that a particular sector has tremendous potential? Add a sector fund. This investment mix is up to you (or your investment advisor). However, depending on your Roth IRA mutual fund choices, some of these funds may have minimum investment requirement - $3k to open a fund's account, for instance. In that case, you'd have no choice but to put your entire investment into one fund, and wait for subsequent years where you'd be able to invest in other funds after providing additional contributions and/or reallocation any growth from your initial investment. One thing to look at is whether you have an option of putting some of your contributions into a money market account within the Roth IRA - you can then reallocate funds from that account into another fund after you can meet the minimum investment requirement. However, in my opinion, if you start out by investing in a solid, low-cost index fund from a reputable mutual fund company, you've already picked up most of the diversification you need - a single fund is enough." }, { "docid": "105011", "title": "", "text": "What is my best bet with the 401K? I know very little about retirement plans and don't plan to ever touch this money until I retire but could this money be of better use somewhere else? You can roll over a 401k into an IRA. This lets you invest in other funds and stocks that were not available with your 401k plan. Fidelity and Vanguard are 2 huge companies that offer a number of investment opportunities. When I left an employer that had the 401k plan with Fidelity, I was able to rollover the investments and leave them in the existing mutual funds (several of the funds have been closed to new investors for years). Usually, when leaving an employer, I have the funds transferred directly to the place my IRA is at - this avoids tax penalties and potential pitfalls. The student loans.... pay them off in one shot? If the interest is higher than you could earn in a savings account, then it is smarter to pay them off at once. My student loans are 1.8%, so I can earn more money in my mutual funds. I'm suspicious and think something hinky is going to happen with the fiscal cliff negotiations, so I'm going to be paying off my student loans in early 2013. Disclaimer: I have IRA accounts with both Fidelity and Vanguard. My current 401k plan is with Vanguard." }, { "docid": "211525", "title": "", "text": "First, a Roth is funded with post tax money. The Roth IRA deposit will not offset any tax obligation you might have. The IRA is not an investment, it's an account with a specific set of tax rules that apply to it. If you don't have a brokerage account, I'd suggest you consider a broker that has an office nearby. Schwab, Fidelity, Vanguard are 3 that I happen to have relationships with. Once the funds are deposited, you need to choose how to invest for the long term. The fact that I'd choose the lowest cost S&P ETF or mutual fund doesn't mean that's the ideal investment for you. You need to continue to do research to find the exact investment that matches your risk profile. By way of example, up until a few years ago, my wife and I were nearly 100% invested in stocks, mostly the S&P 500. When we retired, four years ago, I shifted a bit to be more conservative, closer to 80% stock 20% cash." } ]

[ { "docid": "150219", "title": "", "text": "\"We will bill our clients periodically and will get paid monthly. Who are \"\"we\"\"? If you're not employed - you're not the one doing the work or billing the client. Would IRS care about this or this should be something written in the policy of our company. For example: \"\"Every two months profits get divided 50/50\"\" They won't. S-Corp is a pass-through entity. We plan to use Schedule K when filing taxes for 2015. I've never filled a schedule K before, will the profit distributions be reflected on this form? Yes, that is what it is for. We might need extra help in 2015, so we plan to hire an additional employee (who will not be a shareholder). Will our tax liability go down by doing this? Down in what sense? Payroll is deductible, if that's what you mean. Are there certain other things that should be kept in mind to reduce the tax liability? Yes. Getting a proper tax adviser (EA/CPA licensed in your State) to explain to you what S-Corp is, how it works, how payroll works, how owner-shareholder is taxed etc etc.\"" } ]

[ { "docid": "453961", "title": "", "text": "\"Is it possible if (After getting EIN) I change my LLC type (disregarded entity or C type or S type or corporation or change in number of members) for tax saving ? You marked your question as \"\"real-estate\"\", so I'm guessing you're holding rental properties in your LLC. That means that you will not be able to qualify for S-Corp, only C-Corp treatment. That in turn means that you'll be subject to double taxation and corporate tax rate. I fail to see what tax savings you're expecting in this situation. But yes, you can do it, if you so wish. I suggest you talk to a licensed tax adviser (EA/CPA licensed in your State) before you make any changes, because it will be nearly impossible to reverse the check-the-box election once made (for at least 5 years).\"" }, { "docid": "277185", "title": "", "text": "\"A qualifying distribution seems guaranteed to fall under long term capital gains. But a disqualifying distribution could also fall under long term capital gains depending on when it is sold. So what's the actual change that occurs once something becomes a qualifying as opposed to a disqualifying distribution? Yes a qualifying distribution always falls under long term capital gain. The difference between qualifying and disqualifying is how the \"\"bargain element\"\" of benefit is calculated. In case of disqualifying distribution it is always the discount offered, Irrespective of the final sale price of the stock. In case of qualifying distribution it is lower of actual discount or profit. Thus if you sell the stock at same price or slightly lower price than the price on exercise date, your \"\"bargain element\"\" is less. This is not the case with disqualifying distribution.\"" }, { "docid": "277125", "title": "", "text": "The math works out so that the 401k is still a better deal in the long term over a taxable account because of the tax-deferred growth. Let's assume you invest in an S&P 500 index fund in either a taxable investment account or a 401k and the difference in fees is .5%. I used an online calculator and a hypothetical 1k/year investment over 30 years with 4.5% tax-deferred growth vs 5% taxable and a 25% tax bracket. After 30 years the tax-deferred 401k account will have $67k and the taxable account will have $58k. The math isn't perfect -- I'm sure I'm missing some intricacies with dividends/capital gains distributions and that you'll then pay income tax on the 401k upon retirement as you drawn down, but it still seems pretty clear that the 401k will win in the long run, especially if you invest more than the 1k/year used in my example. But yeah, .84% expenses on an index fund is robbery. Can you bring that to the attention of the HR department? Maybe they'll want to look for a lower-fee provider and it's in their best interest too, if they also participate." }, { "docid": "287923", "title": "", "text": "\"Offset against taxable gains means that the amount - $25 million in this case - can be used to reduce another sum that the company would otherwise have to pay tax on. Suppose the company had made a profit of $100 million on some other investments. At some point, they are likely to have to pay corporation tax on that amount before being able to distribute it as a cash dividend to shareholders. However if they can offset the $25 million, then they will only have to pay tax on $75 million. This is quite normal as you usually only pay tax on the aggregate of your gains and losses. If corporation tax is about 32% that would explain the claimed saving of approximately $8 million. It sounds like the Plaintiffs want the stock to be sold on the market to get that tax saving. Presumably they believe that distributing it directly would not have the same effect because of the way the tax rules work. I don't know if the Plaintiffs are right or not, but if they are the difference would probably come about due to the stock being treated as a \"\"realized loss\"\" in the case where they sell it but not in the case where they distribute it. It's also possible - though this is all very speculative - that if the loss isn't realised when they distribute it directly, then the \"\"cost basis\"\" of the shareholders would be the price the company originally paid for the stock, rather than the value at the time they receive it. That in turn could mean a tax advantage for the shareholders.\"" }, { "docid": "314342", "title": "", "text": "\"Many individual states, counties, and cities have their own income taxes, payroll taxes, sales taxes, property taxes, etc., you will need to consult your state and local government websites for information about additional taxes that apply based on your locale. Wages, Salaries, Tips, Cash bonuses and other taxable employee pay, Strike benefits, Long-term disability, Earnings from self employment Earned income is subject to payroll taxes such as: Earned income is also subject to income taxes which are progressively higher depending on the amount earned minus tax credits, exemptions, and/or deductions depending on how you file. There are 7 tax rates that get progressively larger as your income rises but only applies to the income in each bracket. 10% for the first 18,650 (2017) through 39.6% for any income above 470,700. The full list of rates is in the above linked article about payroll taxes. Earned income is required for contributions to an IRA. You cannot contribute more to an IRA than you have earned in a given year. Interest, Ordinary Dividends, Short-term Capital Gains, Retirement income (pensions, distributions from tax deferred accounts, social security), Unemployment benefits, Worker's Compensation, Alimony/Child support, Income earned while in prison, Non-taxable military pay, most rental income, and S-Corp passthrough income Ordinary income is taxed the same as earned income with the exception that social security taxes do not apply. This is the \"\"pure taxable income\"\" referred to in the other linked question. Dividends paid by US Corporations and qualified foreign corporations to stock-holders (that are held for a certain period of time before the dividend is paid) are taxed at the Long-term Capital Gains rate explained below. Ordinary dividends like the interest earned in your bank account are included with ordinary income. Stocks, Bonds, Real estate, Carried interest -- Held for more than a year Income from assets that increase in value while being held for over a year. Long term capital gains justified by the idea that they encourage people to hold stock and make long term investments rather than buying and then quickly reselling for a short-term profit. The lower tax rates also reflect the fact that many of these assets are already taxed as they are appreciating in value. Real-estate is usually taxed through local property taxes. Equity in US corporations realized by rising stock prices and dividends that are returned to stock holders reflect earnings from a corporation that are already taxed at the 35% Corporate tax rate. Taxing Capital gains as ordinary income would be a second tax on those same profits. Another problem with Long-term capital gains tax is that a big portion of the gains for assets held for multiple decades are not real gains. Inflation increases the price of assets held for longer periods, but you are still taxed on the full gain even if it would be a loss when inflation is calculated. Capital gains are also taxed differently depending on your income level. If you are in the 10% or 15% brackets then Long-term capital gains are assessed at 0%. If you are in the 25%, 28%, 33%, or 35% brackets, they are assessed at 15%. Only those in the 39.6% bracket pay 20%. Capital assets sold at a profit held for less than a year Income from buying and selling any assets such as real-estate, stock, bonds, etc., that you hold for less than a year before selling. After adding up all gains and losses during the year, the net gain is taxed as ordinary income. Collectibles held for more than a year are not considered capital assets and are still taxed at ordinary income rates.\"" }, { "docid": "590453", "title": "", "text": "If you're into math, do this thought experiment: Consider the outcome X of a random walk process (a stock doesn't behave this way, but for understanding the question you asked, this is useful): On the first day, X=some integer X1. On each subsequent day, X goes up or down by 1 with probability 1/2. Let's think of buying a call option on X. A European option with a strike price of S that expires on day N, if held until that day and then exercised if profitable, would yield a value Y = min(X[N]-S, 0). This has an expected value E[Y] that you could actually calculate. (should be related to the binomial distribution, but my probability & statistics hat isn't working too well today) The market value V[k] of that option on day #k, where 1 < k < N, should be V[k] = E[Y]|X[k], which you can also actually calculate. On day #N, V[N] = Y. (the value is known) An American option, if held until day #k and then exercised if profitable, would yield a value Y[k] = min(X[k]-S, 0). For the moment, forget about selling the option on the market. (so, the choices are either exercise it on some day #k, or letting it expire) Let's say it's day k=N-1. If X[N-1] >= S+1 (in the money), then you have two choices: exercise today, or exercise tomorrow if profitable. The expected value is the same. (Both are equal to X[N-1]-S). So you might as well exercise it and make use of your money elsewhere. If X[N-1] <= S-1 (out of the money), the expected value is 0, whether you exercise today, when you know it's worthless, or if you wait until tomorrow, when the best case is if X[N-1]=S-1 and X[N] goes up to S, so the option is still worthless. But if X[N-1] = S (at the money), here's where it gets interesting. If you exercise today, it's worth 0. If wait until tomorrow, there's a 1/2 chance it's worth 0 (X[N]=S-1), and a 1/2 chance it's worth 1 (X[N]=S+1). Aha! So the expected value is 1/2. Therefore you should wait until tomorrow. Now let's say it's day k=N-2. Similar situation, but more choices: If X[N-2] >= S+2, you can either sell it today, in which case you know the value = X[N-2]-S, or you can wait until tomorrow, when the expected value is also X[N-2]-S. Again, you might as well exercise it now. If X[N-2] <= S-2, you know the option is worthless. If X[N-2] = S-1, it's worth 0 today, whereas if you wait until tomorrow, it's either worth an expected value of 1/2 if it goes up (X[N-1]=S), or 0 if it goes down, for a net expected value of 1/4, so you should wait. If X[N-2] = S, it's worth 0 today, whereas tomorrow it's either worth an expected value of 1 if it goes up, or 0 if it goes down -> net expected value of 1/2, so you should wait. If X[N-2] = S+1, it's worth 1 today, whereas tomorrow it's either worth an expected value of 2 if it goes up, or 1/2 if it goes down (X[N-1]=S) -> net expected value of 1.25, so you should wait. If it's day k=N-3, and X[N-3] >= S+3 then E[Y] = X[N-3]-S and you should exercise it now; or if X[N-3] <= S-3 then E[Y]=0. But if X[N-3] = S+2 then there's an expected value E[Y] of (3+1.25)/2 = 2.125 if you wait until tomorrow, vs. exercising it now with a value of 2; if X[N-3] = S+1 then E[Y] = (2+0.5)/2 = 1.25, vs. exercise value of 1; if X[N-3] = S then E[Y] = (1+0.5)/2 = 0.75 vs. exercise value of 0; if X[N-3] = S-1 then E[Y] = (0.5 + 0)/2 = 0.25, vs. exercise value of 0; if X[N-3] = S-2 then E[Y] = (0.25 + 0)/2 = 0.125, vs. exercise value of 0. (In all 5 cases, wait until tomorrow.) You can keep this up; the recursion formula is E[Y]|X[k]=S+d = {(E[Y]|X[k+1]=S+d+1)/2 + (E[Y]|X[k+1]=S+d-1) for N-k > d > -(N-k), when you should wait and see} or {0 for d <= -(N-k), when it doesn't matter and the option is worthless} or {d for d >= N-k, when you should exercise the option now}. The market value of the option on day #k should be the same as the expected value to someone who can either exercise it or wait. It should be possible to show that the expected value of an American option on X is greater than the expected value of a European option on X. The intuitive reason is that if the option is in the money by a large enough amount that it is not possible to be out of the money, the option should be exercised early (or sold), something a European option doesn't allow, whereas if it is nearly at the money, the option should be held, whereas if it is out of the money by a large enough amount that it is not possible to be in the money, the option is definitely worthless. As far as real securities go, they're not random walks (or at least, the probabilities are time-varying and more complex), but there should be analogous situations. And if there's ever a high probability a stock will go down, it's time to exercise/sell an in-the-money American option, whereas you can't do that with a European option. edit: ...what do you know: the computation I gave above for the random walk isn't too different conceptually from the Binomial options pricing model." }, { "docid": "490497", "title": "", "text": "Back in the late 80's I had a co-worked do exactly this. In those days you could only do things quarterly: change the percentage, change the investment mix, make a withdrawal.. There were no Roth 401K accounts, but contributions could be pre-tax or post-tax. Long term employees were matched 100% up to 8%, newer employees were only matched 50% up to 8% (resulting in 4% match). Every quarter this employee put in 8%, and then pulled out the previous quarters contribution. The company match continued to grow. Was it smart? He still ended up with 8% going into the 401K. In those pre-Enron days the law allowed companies to limit the company match to 100% company stock which meant that employees retirement was at risk. Of course by the early 2000's the stock that was purchased for $6 a share was worth $80 a share... Now what about the IRS: Since I make designated Roth contributions from after-tax income, can I make tax-free withdrawals from my designated Roth account at any time? No, the same restrictions on withdrawals that apply to pre-tax elective contributions also apply to designated Roth contributions. If your plan permits distributions from accounts because of hardship, you may choose to receive a hardship distribution from your designated Roth account. The hardship distribution will consist of a pro-rata share of earnings and basis and the earnings portion will be included in gross income unless you have had the designated Roth account for 5 years and are either disabled or over age 59 ½. Regarding getting just contributions: What happens if I take a distribution from my designated Roth account before the end of the 5-taxable-year period? If you take a distribution from your designated Roth account before the end of the 5-taxable-year period, it is a nonqualified distribution. You must include the earnings portion of the nonqualified distribution in gross income. However, the basis (or contributions) portion of the nonqualified distribution is not included in gross income. The basis portion of the distribution is determined by multiplying the amount of the nonqualified distribution by the ratio of designated Roth contributions to the total designated Roth account balance. For example, if a nonqualified distribution of $5,000 is made from your designated Roth account when the account consists of $9,400 of designated Roth contributions and $600 of earnings, the distribution consists of $4,700 of designated Roth contributions (that are not includible in your gross income) and $300 of earnings (that are includible in your gross income). See Q&As regarding Rollovers of Designated Roth Contributions, for additional rules for rolling over both qualified and nonqualified distributions from designated Roth accounts." }, { "docid": "458079", "title": "", "text": "S-Corp income is passed through to owners and is taxed on their 1040 as ordinary income. If you take a wage (pay FICA) and then take additional distributions these are not subject to FICA. A lot of business owners will buy up supplies/ necessary expenses right before the end of the tax year to lower their tax liability." }, { "docid": "520584", "title": "", "text": "IANAL (and nor am I an accountant), so I can't give a definitive answer as to legality, but AFAIK, what you propose is legal. But what's the benefit? Avoiding corporation tax? It's simplistic – and costly – to think in terms like that. You need to run the numbers for different scenarios, and make a plan. You can end up ahead of the game precisely by choosing to pay some corporate tax each year. Really! Read on. One of the many reasons that self-employed Canadians sometimes opt for a corporate structure over being a sole proprietor is to be able to not pay themselves everything the company earns each year. This is especially important when a business has some really good years, and others, meh. Using the corporation to retain earnings can be more tax effective. Example: Imagine your corporation earns, net of accounting & other non-tax costs except for your draws, $120,000/year for 5 years, and $0 in year 6. Assume the business is your only source of income for those 6 years. Would you rather: Pay yourself the entire $120,000/yr in years 1-5, then $0 in year 6 (living off personal savings you hopefully accumulated earlier), subjecting the $120,000/yr to personal income tax only, leaving nothing in the corporation to be taxed? Very roughly speaking, assuming tax rates & brackets are level from year to year, and using this calculator (which simplifies certain things), then in Ontario, then you'd net ~$84,878/yr for years 1-5, and $0 in year 6. Overall, you realized $424,390. Drawing the income in this manner, the average tax rate on the $600,000 was 29.26%. vs. Pay yourself only $100,000/yr in years 1-5, leaving $20,000/yr subject to corporation tax. Assuming a 15.5% combined federal/provincial corporate tax rate (includes the small business deduction), then the corp. is left with $16,900/yr to add to retained earnings in years 1-5. In year 6, the corp. has $84,500 in retained earnings to be distributed to you, the sole owner, as a dividend (of the non-eligible kind.) Again, very roughly speaking, you'd personally net $73,560/yr in years 1-5, and then on the $84,500 dividend in year 6, you'd net $73,658. Overall, you realized $441,458. Drawing the income in this manner, the average tax rate on the $600K was 26.42%. i.e. Scenario 2, which spreads the income out over the six years, saved 2.84% in tax, or $14,400. Smoothing out your income is also a prudent thing to do. Would you rather find yourself in year 6, having no clients and no revenue, with nothing left to draw on? Or would you rather the company had saved money from the good years to pay you in the lean one?" }, { "docid": "249322", "title": "", "text": "I am a registered S-corp but for alot of industries that threshold is too low (I'm in housing) &gt;Do you have any insight on average *effective* rates paid by SE owners? &gt; &gt;As a counterpoint to your (very valid) links, filing as S-corp allows for taxes on distributions to be exempt from payroll tax and taxed at much lower rates. Also, being SE allows for various deductions not possible for wage earners. There's probably other examples not immediately coming to mind. &gt; &gt;Also, SE taxes equal taxes otherwise paid by employer + employee. It's just that those employer taxes don't appear on the employee's paystub so not everyone realizes this. The article I posted also doesn't take into account state taxes, do example non deductible B&amp;O, end user Sales tax or impact fees... That Employees don't pay or often even know about, yet some of us small business owners are also employees, so we get double taxed..." }, { "docid": "132738", "title": "", "text": "\"This is actually quite a complicated issue. I suggest you talk to a properly licensed tax adviser (EA/CPA licensed in your State). Legal advice (from an attorney licensed in your State) is also highly recommended. There are many issues at hand here. Income - both types of entities are pass-through, so \"\"earnings\"\" are taxed the same. However, for S-Corp there's a \"\"reasonable compensation\"\" requirement, so while B and C don't do any \"\"work\"\" they may be required to draw salary as executives/directors (if they act as such). Equity - for S-Corp you cannot have different classes of shares, all are the same. So you cannot have 2 partners contribute money and third to contribute nothing (work is compensated, you'll be getting salary) and all three have the same stake in the company. You can have that with an LLC. Expansion - S-Corp is limited to X shareholders, all of which have to be Americans. Once you get a foreign partner, or more than 100 partners - you automatically become C-Corp whether you want it or not. Investors - it would be very hard for you to find external investors if you're a LLC. There are many more things to consider. Do not make this decision lightly. Fixing things is usually much more expensive than doing them right at the first place.\"" }, { "docid": "88575", "title": "", "text": "\"A mutual fund's return or yield has nothing to do with what you receive from the mutual fund. The annual percentage return is simply the percentage increase (or decrease!) of the value of one share of the mutual fund from January 1 till December 31. The cash value of any distributions (dividend income, short-term capital gains, long-term capital gains) might be reported separately or might be included in the annual return. What you receive from the mutual fund is the distributions which you have the option of taking in cash (and spending on whatever you like, or investing elsewhere) or of re-investing into the fund without ever actually touching the money. Regardless of whether you take a distribution as cash or re-invest it in the mutual fund, that amount is taxable income in most jurisdictions. In the US, long-term capital gains are taxed at different (lower) rates than ordinary income, and I believe that long-term capital gains from mutual funds are not taxed at all in India. You are not taxed on the increase in the value of your investment caused by an increase in the share price over the year nor do you get deduct the \"\"loss\"\" if the share price declined over the year. It is only when you sell the mutual fund shares (back to the mutual fund company) that you have to pay taxes on the capital gains (if you sold for a higher price) or deduct the capital loss (if you sold for a lower price) than the purchase price of the shares. Be aware that different shares in the sale might have different purchase prices because they were bought at different times, and thus have different gains and losses. So, how do you calculate your personal return from the mutual fund investment? If you have a money management program or a spreadsheet program, it can calculate your return for you. If you have online access to your mutual fund account on its website, it will most likely have a tool called something like \"\"Personal rate of return\"\" and this will provide you with the same calculations without your having to type in all the data by hand. Finally, If you want to do it personally by hand, I am sure that someone will soon post an answer writing out the gory details.\"" }, { "docid": "494880", "title": "", "text": "Your question mixes up different things. Your LLC business type is determined by how you organize your business at the state level. Separately, you can also elect to be treated in one of several different status for federal taxation. (Often this automatically changes your tax status at the state level too, but you need to check that with your state tax authority.) It is true that once you have an EIN, you can apply to be taxed as a C Corp or S Corp. Whether or not that will result in tax savings will depend on the details of your business. We won't be able to answer that for you. You should get a professional advisor if you need help making that determination." }, { "docid": "126771", "title": "", "text": "\"Tax is often calculated per item. Especially in the days of the internet, some items are taxable and some aren't, depending on the item and your nexus. I would recommend calculating and storing tax with each item, to account for these subtle differences. EDIT: Not sure why this was downvoted, if you don't believe me, you can always check with Amazon: http://www.amazon.com/gp/help/customer/display.html/ref=hp_468512_calculated?nodeId=468512#calculated I think they know what they're talking about. FINAL UPDATE: Now, if someone goes to your site, and buys something from your business (in California) and the shipping address for the product is Nevada, then taxes do not have to be collected. If they have a billing address in California, and a shipping address in Nevada, and the goods are shipping to Nevada, you do not have to declare tax. If you have a mixture of tangible (computer, mouse, keyboard) and intangible assets (warranty) in a cart, and the shipping address is in California, you charge tax on the tangible assets, but NOT on the intangible assets. Yes, you can charge tax on the whole order. Yes for most businesses that's \"\"Good enough\"\", but I'm not trying to provide the \"\"good enough\"\" solution, I'm simply telling you how very large businesses run and operate. As I've mentioned, I've done several tax integrations using software called Sabrix (Google if you've not heard of it), and have done those integrations for companies like the BBC and Corbis (owned and operated by Bill Gates). Take it or leave it, but the correct way to charge taxes, especially given the complex tax laws of the US and internationally, is to charge per item. If you just need the \"\"good enough\"\" approach, feel free to calculate it by total. Some additional reading: http://en.wikipedia.org/wiki/Taxation_of_Digital_Goods Another possible federal limitation on Internet taxation is the United States Supreme Court case, Quill Corp. v. North Dakota, 504 U.S. 298 (1992),[6] which held that under the dormant commerce clause, goods purchased through mail order cannot be subject to a state’s sales tax unless the vendor has a substantial nexus with the state levying the tax. In 1997, the federal government decided to limit taxation of Internet activity for a period of time. The Internet Tax Freedom Act (ITFA) prohibits taxes on Internet access, which is defined as a service that allows users access to content, information, email or other services offered over the Internet and may include access to proprietary content, information, and other services as part of a package offered to customers. The Act has exceptions for taxes levied before the statute was written and for sales taxes on online purchases of physical goods.\"" }, { "docid": "559884", "title": "", "text": "The dividend quoted on a site like the one you linked to on Yahoo shows what 1 investor owning 1 share received from the company. It is not adjusted at all for taxes. (Actually some dividend quotes are adjusted but not for taxes... see below.) It is not adjusted because most dividends are taxed as ordinary income. This means different rates for different people, and so for simplicity's sake the quotes just show what an investor would be paid. You're responsible for calculating and paying your own taxes. From the IRS website: Ordinary Dividends Ordinary (taxable) dividends are the most common type of distribution from a corporation or a mutual fund. They are paid out of earnings and profits and are ordinary income to you. This means they are not capital gains. You can assume that any dividend you receive on common or preferred stock is an ordinary dividend unless the paying corporation or mutual fund tells you otherwise. Ordinary dividends will be shown in box 1a of the Form 1099-DIV you receive. Now my disclaimer... what you see on a normal stock quote for dividend in Yahoo or Google Finance is adjusted. (Like here for GE.) Many corporations actually pay out quarterly dividends. So the number shown for a dividend will be the most recent quarterly dividend [times] 4 quarters. To find out what you would receive as an actual payment, you would need to divide GE's current $0.76 dividend by 4 quarters... $0.19. So you would receive that amount for each share of stock you owned in GE." }, { "docid": "316074", "title": "", "text": "\"I've been in a similar situation before. While contracting, sometimes the recruiting agency would allow me to choose between being a W2 employee or invoicing them via Corp-2-Corp. I already had a company set up (S-Corp) but the considerations are similar. Typically the C2C rate was higher than the W2 rate, to account for the extra 7.65% FICA taxes and insurance. But there were a few times where the rate offered was identical, and I still choose C2C because it enabled me to deduct many of my business expenses that I wouldn't have otherwise been able to deduct. In my case the deductions turned out to be greater than the FICA savings. Your case is slightly different than mine though in that I already had the company set up so my company related costs were \"\"sunk\"\" as far as my decision was concerned. For you though, the yearly costs associated with running the business must be factored in. For example, suppose the following: Due to these expenses you need to make up $3413 in tax deductions due to the LLC. If your effective tax rate on the extra income is 30%, then your break even point is approximately $8K in deductions (.3*(x+3413)=3413 => x = $7963) So with those made up numbers, if you have at least $8K in legitimate additional business expenses then it would make sense to form an LLC. Otherwise you'd be better off as a W2. Other considerations:\"" }, { "docid": "397920", "title": "", "text": "I heard that a C-Corp being a one person shop (no other employees but the owner) can pay for the full amount 100% of personal rent if the residence is being used as a home office. Sure. Especially if you don't mind being audited. Technically, it doesn't matter how the money gets where it goes as long as the income tax filings accurately describe the tax situation. But the IRS hates it when you make personal expenses from a business account, even if you've paid the required personal income tax (because their computers simply aren't smart enough to keep up with that level of chaos). Also, on a non-tax level, commingling of business and personal funds can reduce the effectiveness of your company's liability protection and you could more easily become personally liable if the company goes bankrupt. From what I understand the 30% would be the expense, and the 70% profit distribution. I recommend you just pay yourself and pay the rent from your personal account and claim the allowed deductions properly like everyone else. Why & when it would make sense to do this? Are there any tax benefits? Never, because, no. You would still have to pay personal income tax on your 70% share of the rent (the 30% you may be able to get deductions for but the rules are quite complicated and you should never just estimate). The only way to get money out of a corporation without paying personal income tax is by having a qualified dividend. That's quite complicated - your accounting has to be clear that the money being issued as a qualified dividend came from an economic profit, not from a paper profit resulting from the fact that you worked hard without paying yourself market value." }, { "docid": "20036", "title": "", "text": "That's really not something that can be answered based on the information provided. There are a lot of factors involved: type of income, your wife's tax bracket, the split between Federal and State (if you're in a high bracket in a high income-tax rate State - it may even be more than 50%), etc etc. The fact that your wife didn't withdraw the money is irrelevant. S-Corp is a pass-through entity, i.e.: owners are taxed on the profits based on their personal marginal tax rates, and it doesn't matter what they did with the money. In this case, your wife re-invested it into the corp (used it to pay off corp debts), which adds back to her basis. You really should talk to a tax adviser (EA/CPA licensed in your State) to learn how S-Corps work and how to use them properly. Your wife, actually, as she's the owner." }, { "docid": "211485", "title": "", "text": "\"Being self-employed, your \"\"profit\"\" is calculated as all the bills you send out, minus all business-related cost that you have (you will need a receipt for everything, and there are different rules for things that last for long time, long tools, machinery). You can file your taxes yourself - the HRS website will tell you how to, and you can do it online. It's close to the same as your normal online tax return. Only thing is that you must keep receipts for all the cost that you claim. Your tax: Assuming your gross salary is £25,000 and your profits are about £10,000, you will be paying 8% for national insurance, and 20% income tax. If you go above £43,000 or thereabouts, you pay 40% income tax on any income above that threshold, instead of 20%, but your national insurance payments stop.\"" } ]

[ { "docid": "385073", "title": "", "text": "It's whatever you decide. Taking money out of an S-Corp via distribution isn't a taxable event. Practically speaking, yes, you should make sure you have enough money to afford the distribution after paying your expenses, lest you have to put money back a few days later in to pay the phone bill. You might not want to distribute every penny of profit the moment you book it, either -- keeping some money in the business checking account is probably a good idea. If you have consistent cash flow you could distribute monthly or quarterly profits 30 or 60 days in arrears, for example, and then still have cash on hand for operations. Your net profit is reflected on the Schedule K for inclusion on your personal tax return. As an S-Corp, the profit is passed through to the shareholders and is taxable whether or not you actually distributed the money. You owe taxes on the profit reported on the Schedule K, not the amounts distributed. You really should get a tax accountant. Long-term, you'll save money by having your books set up correctly from the start rather than have to go back and fix any mistakes. Go to a Chamber of Commerce meeting or ask a colleague, trusted vendor, or customer for a recommendation." } ]

[ { "docid": "193485", "title": "", "text": "\"A nondividend distribution is typically a return of capital; in other words, you're getting money back that you've contributed previously (and thus would have been taxed upon in previous years when those funds were first remunerated to you). Nondividend distributions are nontaxable, so they do not represent income from capital gains, but do effect your cost basis when determining the capital gain/loss once that capital gain/loss is realized. As an example, publicly-traded real estate investment trusts (REITs) generally distribute a return of capital back to shareholders throughout the year as a nondividend distribution. This is a return of a portion of the shareholder's original capital investment, not a share of the REITs profits, so it is simply getting a portion of your original investment back, and thus, is not income being received (I like to refer to it as \"\"new income\"\" to differentiate). However, the return of capital does change the cost basis of the original investment, so if one were to then sell the shares of the REIT (in this example), the basis of the original investment has to be adjusted by the nondividend distributions received over the course of ownership (in other words, the cost basis will be reduced when the shares are sold). I'm wondering if the OP could give us some additional information about his/her S-Corp. What type of business is it? In the course of its business and trade activity, does it buy and sell securities (stocks, etc.)? Does it sell assets or business property? Does it own interests in other corporations or partnerships (sales of those interests are one form of capital gain). Long-term capital gains are taxed at rates lower than ordinary income, but the IRS has very specific rules as to what constitutes a capital gain (loss). I hate to answer a question with a question, but we need a little more information before we can weigh-in on whether you have actual capital gains or losses in the course of your S-Corporation trade.\"" }, { "docid": "400016", "title": "", "text": "While debt increases the likelihood and magnitude of a crash, speculation, excess supply and other market factors can result in crashes without requiring excessive debt. A popular counter example of crashes due to speculation is 16th century Dutch Tulip Mania. The dot com bubble is a more recent example of a speculative crash. There were debt related issues for some companies and the run ups in stock prices were increased by leveraged traders, but the actual crash was the result of failures of start up companies to produce profits. While all tech stocks fell together, sound companies with products and profits survive today. As for recessions, they are simply periods of time with decreased economic activity. Recessions can be caused by financial crashes, decreased demand following a war, or supply shocks like the oil crisis in the 1970's. In summary, debt is simply a magnifier. It can increase profits just as easily as can increase losses. The real problems with crashes and recessions are often related to unfounded faith in increasing value and unexpected changes in demand." }, { "docid": "277185", "title": "", "text": "\"A qualifying distribution seems guaranteed to fall under long term capital gains. But a disqualifying distribution could also fall under long term capital gains depending on when it is sold. So what's the actual change that occurs once something becomes a qualifying as opposed to a disqualifying distribution? Yes a qualifying distribution always falls under long term capital gain. The difference between qualifying and disqualifying is how the \"\"bargain element\"\" of benefit is calculated. In case of disqualifying distribution it is always the discount offered, Irrespective of the final sale price of the stock. In case of qualifying distribution it is lower of actual discount or profit. Thus if you sell the stock at same price or slightly lower price than the price on exercise date, your \"\"bargain element\"\" is less. This is not the case with disqualifying distribution.\"" }, { "docid": "196374", "title": "", "text": "\"First to clear a few things up. It is definitely not a gift. The people are sending you money only because you are providing them with a service. And for tax purposes, it is not a \"\"Donation\"\". It has nothing to do with the fact that you are soliciting the donation, as charitable organizations solicit donations all the time. For tax purposes, it is not a \"\"Donation\"\" because you do not have 501(c)(3) non profit status. It is income. The question is then, is it \"\"Business\"\" income, or \"\"Hobby\"\" related income? Firstly, you haven't mentioned, but it's important to consider, how much money are you receiving from this monthly, or how much money do you expect to receive from this annually? If it's a minimal amount, say $50 a month or less, then you probably just want to treat it as a hobby. Mostly because with this level of income, it's not likely to be profitable. In that case, report the income and pay the tax. The tax you will owe will be minimal and will probably be less than the costs involved with setting up and running it as a business anyway. As a Hobby, you won't be able to deduct your expenses (server costs, etc...) unless you itemize your taxes on Schedule A. On the other hand if your income from this will be significantly more than $600/yr, now or in the near future, then you should consider running it as a business. Get it clear in your mind that it's a business, and that you intend it to be profitable. Perhaps it won't be profitable now, or even for a while. What's important at this point is that you intend it to be profitable. The IRS will consider, if it looks like a business, and it acts like a business, then it's probably a business... so make it so. Come up with a name for your business. Register the business with your state and/or county as necessary in your location. Get a bank account for your business. Get a separate Business PayPal account. Keep personal and business expenses (and income) separate. As a business, when you file your taxes, you will be able to file a Schedule C form even if you do not itemize your taxes on Schedule A. On Schedule C, you list and total your (business) income, and your (business) expenses, then you subtract the expenses from the income to calculate your profit (or loss). If your business income is more than your business expenses, you pay tax on the difference (the profit). If your business expenses are more than your business income, then you have a business loss. You would not have to pay any income tax on the business income, and you may be able to be carry the loss over to the next and following years. You may want to have a service do your taxes for you, but at this level, it is certainly something you could do yourself with some minimal consultations with an accountant.\"" }, { "docid": "443983", "title": "", "text": "Yes, it should come out tax free. However you should have reported it to the IRS at the time (currently it is done on form 8606). If you haven't done it, the IRS may disagree with you on that and require taxes. If you have proper documentation of the contribution, then when you withdraw from your IRA - you use that same form 8606 to calculate the non-taxable portion. Note that you cannot just take $2K out of the 1099-R, the non-taxable portion will be prorated through all of your IRA withdrawals. Also, keep in mind that only the actual after tax portion will be tax-free, the gains will be taxable. I.e.: if you deposited $2K after tax (and nothing else), and they have now grown to $100K - you will only have 2% of your distribution tax free (2k/100K * distributed amount)." }, { "docid": "206350", "title": "", "text": "\"The formula for standard deviation is fairly simple in both the discrete and continuous cases. It's mostly safe to use the discrete case when working with adjusted closing prices. Once you've calculated the standard deviation for a given time period, the next task (in the simplest case) is to calculate the mean of that same period. This allows you to roughly approximate the distribution, which can give you all sorts of testable hypotheses. Two standard deviations (σ) away from the mean (μ) is given by: It doesn't make any sense to talk about \"\"two standard deviations away from the price\"\" unless that price is the mean or some other statistic for a given time period. Normally you would look at how far the price is from the mean, e.g. does the price fall two or three standard deviations away from the mean or some other technical indicator like the Average True Range (an exponential moving average of the True Range), some support level, another security, etc. For most of this answer, I'll assume we're using the mean for the chosen time period as a base. However, the answer is still more complicated than many people realize. As I said before, to calculate the standard deviation, you need to decide on a time period. For example, you could use S&P 500 data from Yahoo Finance and calculate the standard deviation for all adjusted closing prices since January 3, 1950. Downloading the data into Stata and applying the summarize command gives me: As you can probably see, however, these numbers don't make much sense. Looking at the data, we can see that the S&P 500 hasn't traded close to 424.4896 since November 1992. Clearly, we can't assume that this mean and standard deviation as representative of current market conditions. Furthermore, these numbers would imply that the S&P 500 is currently trading at almost three standard deviations away from its mean, which for many distribution is a highly improbable event. The Great Recession, quantitative easing, etc. may have changed the market significantly, but not to such a great extent. The problem arises from the fact that security prices are usually non-stationary.. This means that the underlying distribution from which security prices are \"\"drawn\"\" shifts through time and space. For example, prices could be normally distributed in the 50's, then gamma distributed in the 60's because of a shock, then normally distributed again in the 70's. This implies that calculating summary statistics, e.g. mean, standard deviation, etc. are essentially meaningless for time periods in which prices could follow multiple distributions. For this and other reasons, it's standard practice to look at the standard deviation of returns or differences instead of prices. I covered in detail the reasons for this and various procedures to use in another answer. In short, you can calculate the first difference for each period, which is merely the difference between the closing price of that period and the closing price of the previous period. This will usually give you a stationary process, from which you can obtain more meaningful values of the standard deviation, mean, etc. Let's use the S&P500 as an example again. This time, however, I'm only using data from 1990 onwards, for the sake of simplicity (and to make the graphs a bit more manageable). The summary statistics look like this: and the graph looks like this; the mean is the central horizontal red line, and the top and bottom lines indicate one standard deviation above and below the mean, respectively. As you can see, the graph seems to indicate that there were long periods in which the index was priced well outside this range. Although this could be the case, the graph definitely exhibits a trend, along with some seemingly exogenous shocks (see my linked answer). Taking the first difference, however, yields these summary statistics: with a graph like this: This looks a lot more reasonable. In periods of recession, the price appears much more volatile, and it breaches the +/- one standard deviation lines indicated on the graph. This is only a simple summary, but using first differencing as part of the wider process of detrending/decomposing a time series is a good first step. For some technical indicators, however, stationary isn't as relevant. This is the case for some types of moving averages and their associated indicators. Take Bollinger bands for instance. These are technical indicators that show a number of standard deviations above and below a moving average. Like any calculation of standard deviation, moving average, statistic, etc. they require data over a specified time period. The analyst chooses a certain number of historical periods, e.g. 20, and calculates the moving average for that many previous periods and the moving/rolling standard deviation for those same periods as well. The Bollinger bands represent the values a certain number of standard deviations away from the moving average at a given point in time. At this given point, you can calculate the value two standard deviations \"\"away from the value,\"\" but doing so still requires the historical stock price (or at least the historical moving average). If you're only given the price in isolation, you're out of luck. Moving averages can indirectly sidestep some of the issues of stationarity I described above because it's straightforward to estimate a time series with a process built from a moving average (specifically, an auto-regressive moving average process) but the econometrics of time series is a topic for another day. The Stata code I used to generate the graphs and summary statistics:\"" }, { "docid": "520584", "title": "", "text": "IANAL (and nor am I an accountant), so I can't give a definitive answer as to legality, but AFAIK, what you propose is legal. But what's the benefit? Avoiding corporation tax? It's simplistic – and costly – to think in terms like that. You need to run the numbers for different scenarios, and make a plan. You can end up ahead of the game precisely by choosing to pay some corporate tax each year. Really! Read on. One of the many reasons that self-employed Canadians sometimes opt for a corporate structure over being a sole proprietor is to be able to not pay themselves everything the company earns each year. This is especially important when a business has some really good years, and others, meh. Using the corporation to retain earnings can be more tax effective. Example: Imagine your corporation earns, net of accounting & other non-tax costs except for your draws, $120,000/year for 5 years, and $0 in year 6. Assume the business is your only source of income for those 6 years. Would you rather: Pay yourself the entire $120,000/yr in years 1-5, then $0 in year 6 (living off personal savings you hopefully accumulated earlier), subjecting the $120,000/yr to personal income tax only, leaving nothing in the corporation to be taxed? Very roughly speaking, assuming tax rates & brackets are level from year to year, and using this calculator (which simplifies certain things), then in Ontario, then you'd net ~$84,878/yr for years 1-5, and $0 in year 6. Overall, you realized $424,390. Drawing the income in this manner, the average tax rate on the $600,000 was 29.26%. vs. Pay yourself only $100,000/yr in years 1-5, leaving $20,000/yr subject to corporation tax. Assuming a 15.5% combined federal/provincial corporate tax rate (includes the small business deduction), then the corp. is left with $16,900/yr to add to retained earnings in years 1-5. In year 6, the corp. has $84,500 in retained earnings to be distributed to you, the sole owner, as a dividend (of the non-eligible kind.) Again, very roughly speaking, you'd personally net $73,560/yr in years 1-5, and then on the $84,500 dividend in year 6, you'd net $73,658. Overall, you realized $441,458. Drawing the income in this manner, the average tax rate on the $600K was 26.42%. i.e. Scenario 2, which spreads the income out over the six years, saved 2.84% in tax, or $14,400. Smoothing out your income is also a prudent thing to do. Would you rather find yourself in year 6, having no clients and no revenue, with nothing left to draw on? Or would you rather the company had saved money from the good years to pay you in the lean one?" }, { "docid": "188220", "title": "", "text": "Profits and losses in a partnership, LLC or S-corp are always reported proportional to the share of ownership. If you have a 30% share in a partnership, you will report 30% of the profit (or loss) of the respective tax year on your personal return. If you look at Part II, section J of your K-1, it should show your percentage of ownership in the entity. All numbers in Part III should reflect the amount of your share (not the entity's total amounts, which will be on Form 1065 for a partnership):" }, { "docid": "136805", "title": "", "text": "The mathematics make it easier to understand why this is the case. Using very bad shorthand, d1 and d2 are inputs into N(), and N() can be expressed as the probability of the expected value or the most probable value which in this case is the discounted expected stock price at expiration. d1 has two σs which is volatility in the numerator and one in the denominator. Cancelling leaves one on top. Calculating when it's infinity gives an N() of 1 for S and 0 for K, so the call is worth S and the put PV(K). At 0 for σ, it's the opposite. More concise is that any mathematical moment be it variance which mostly influences volatility, mean which determines drift, or kurtosis which mostly influences skew are all uncertanties thus costs, so the higher they are, the higher the price of an option. Economically speaking, uncertainties are costs. Since costs raise prices, and volatility is an uncertainty, volatility raises prices. It should be noted that BS assumes that prices are lognormally distributed. They are not. The closest distribution, currently, is the logVariance Gamma distribution." }, { "docid": "411063", "title": "", "text": "Through your question and then clarification through the comments, it looks like you have a U.S. LLC with at least two members. If you did not elect some other tax treatment, your LLC will be treated as a partnership by the IRS. The partnership should file a tax return on Form 1065. Then each partner will get a Schedule K-1 from the partnership, which the partner should use to include their respective shares of the partnership income and expenses on their personal Forms 1040. You can also elect to be taxed as an S-Corp or a C-Corp instead of a partnership, but that requires you to file a form explicitly making such election. If you go S-Corp, then you will file a different form for the company, but the procedure is roughly the same - Income gets passed through to the owners via a Schedule K-1. If you go C-Corp, then the owners will pay no tax on their own Form 1040, but the C-Corp itself will pay income tax. As far as whether you should try to spend the money as business expense to avoid paying extra tax - That's highly dependent on your specific situation. I'd think you'd want to get tailored advice for that." }, { "docid": "249322", "title": "", "text": "I am a registered S-corp but for alot of industries that threshold is too low (I'm in housing) &gt;Do you have any insight on average *effective* rates paid by SE owners? &gt; &gt;As a counterpoint to your (very valid) links, filing as S-corp allows for taxes on distributions to be exempt from payroll tax and taxed at much lower rates. Also, being SE allows for various deductions not possible for wage earners. There's probably other examples not immediately coming to mind. &gt; &gt;Also, SE taxes equal taxes otherwise paid by employer + employee. It's just that those employer taxes don't appear on the employee's paystub so not everyone realizes this. The article I posted also doesn't take into account state taxes, do example non deductible B&amp;O, end user Sales tax or impact fees... That Employees don't pay or often even know about, yet some of us small business owners are also employees, so we get double taxed..." }, { "docid": "458079", "title": "", "text": "S-Corp income is passed through to owners and is taxed on their 1040 as ordinary income. If you take a wage (pay FICA) and then take additional distributions these are not subject to FICA. A lot of business owners will buy up supplies/ necessary expenses right before the end of the tax year to lower their tax liability." }, { "docid": "211485", "title": "", "text": "\"Being self-employed, your \"\"profit\"\" is calculated as all the bills you send out, minus all business-related cost that you have (you will need a receipt for everything, and there are different rules for things that last for long time, long tools, machinery). You can file your taxes yourself - the HRS website will tell you how to, and you can do it online. It's close to the same as your normal online tax return. Only thing is that you must keep receipts for all the cost that you claim. Your tax: Assuming your gross salary is £25,000 and your profits are about £10,000, you will be paying 8% for national insurance, and 20% income tax. If you go above £43,000 or thereabouts, you pay 40% income tax on any income above that threshold, instead of 20%, but your national insurance payments stop.\"" }, { "docid": "159162", "title": "", "text": "Do you have any insight on average *effective* rates paid by SE owners? As a counterpoint to your (very valid) links, filing as S-corp allows for taxes on distributions to be exempt from payroll tax and taxed at much lower rates. Also, being SE allows for various deductions not possible for wage earners. There's probably other examples not immediately coming to mind. Also, SE taxes equal taxes otherwise paid by employer + employee. It's just that those employer taxes don't appear on the employee's paystub so not everyone realizes this." }, { "docid": "289833", "title": "", "text": "\"S-Corp is a corporation. I.e.: you add a \"\"Inc.\"\" or \"\"Corp.\"\" to the name or something of that kind. \"\"S\"\" denotes a specific tax treatment which may change during the lifetime of the corporation. It doesn't refer to a legal status.\"" }, { "docid": "507276", "title": "", "text": "\"Are these all of the taxes or is there any additional taxes over these? Turn-over tax is not for retail investors. Other taxes are paid by the broker as part of transaction and one need not worry too much about it. Is there any \"\"Income tax\"\" to be paid for shares bought/holding shares? No for just buying and holding. However if you buy and sell; there would be a capital gain or loss. In stocks, if you hold a security for less than 1 year and sell it; it is classified as short term capital gain and taxes at special rate of 15%. The loss can be adjusted against any other short term gain. If held for more than year it is long term capital gain. For stock market, the tax is zero, you can't adjust long term losses in stock markets. Will the money received from selling shares fall under \"\"Taxable money for FY Income tax\"\"? Only the gain [or loss] will be tread as income not the complete sale value. To calculate gain, one need to arrive a purchase price which is price of stock + Brokerage + STT + all other taxes. Similar the sale price will be Sales of stock - Brokerage - STT - all other taxes. The difference is the gain. Will the \"\"Dividend/Bonus/Buy-back\"\" money fall under taxable category? Dividend is tax free to individual as the company has already paid dividend distribution tax. Bonus is tax free event as it does not create any additional value. Buy-Back is treated as sale of shares if you have participated. Will the share-holder pay \"\"Dividend Distribution Tax\"\"? Paid by the company. What is \"\"Capital Gains\"\"? Profit or loss of buying and selling a particular security.\"" }, { "docid": "479461", "title": "", "text": "\"The S&P 500 is an index. This refers to a specific collection of securities which is held in perfect proportion. The dollar value of an index is scaled arbitrarily and is based off of an arbitrary starting price. (Side note: this is why an index never has a \"\"split\"\"). Lets look at what assumptions are included in the pricing of an index: All securities are held in perfect proportion. This means that if you invest $100 in the index you will receive 0.2746 shares of IBM, 0.000478 shares of General Motors, etc. Also, if a security is added/dropped from the list, you are immediately rebalancing the remaining money. Zero commissions are charged. When the index is calculated, they are using the current price (last trade) of the underlying securities, they are not actually purchasing them. Therefore it assumes that securities may be purchased without commission or other liquidity costs. Also closely related is the following. The current price has full liquidity. If the last quoted price is $20 for a security, the index assumes that you can purchase an arbitrary amount of the security at that price with a counterparty that is willing to trade. Dividends are distributed immediately. If you own 500 equities, and most distributed dividends quarterly, this means you will receive on average 4 dividends per day. Management is free. All equities can be purchased with zero research and administrative costs. There is no gains tax. Trading required by the assumptions above would change your holdings constantly and you are exempt from short-term or long-term capital gains taxes. Each one of these assumptions is, of course, invalid. And the fund which endeavors to track the index must make several decisions in how to closely track the index while avoiding the problems (costs) caused by the assumptions. These are shortcuts or \"\"approximations\"\". Each shortcut leads to performance which does not exactly match the index. Management fees. Fees are charged to the investor as load, annual fees and/or redemptions. Securities are purchased at real prices. If Facebook were removed from the S&P 500 overnight tonight, the fund would sell its shares at the price buyers are bidding the next market day at 09:30. This could be significantly different than the price today, which the index records. Securities are purchased in blocks. Rather than buying 0.000478 shares of General Motors each time someone invests a dollar, they wait for a few people and then buy a full share or a round lot. Securities are substituted. With lots of analysis, it may be determined that two stocks move in tandem. The fund may purchase two shares of General Motors rather than one of General Motors and Ford. This halves transaction costs. Debt is used. As part of substitution, equities may be replaced by options. Option pricing shows that ownership of options is equivalent to holding an amount of debt. Other forms of leverage may also be employed to achieve desired market exposure. See also: beta. Dividends are bundled. VFINX, the largest S&P 500 tracking fund, pays dividends quarterly rather than immediately as earned. The dividend money which is not paid to you is either deployed to buy other securities or put into a sinking fund for payment. There are many reasons why you can't get the actual performance quoted in an index. And for other more exotic indices, like VIX the volatility index, even more so. The best you can do is work with someone that has a good reputation and measure their performance.\"" }, { "docid": "314342", "title": "", "text": "\"Many individual states, counties, and cities have their own income taxes, payroll taxes, sales taxes, property taxes, etc., you will need to consult your state and local government websites for information about additional taxes that apply based on your locale. Wages, Salaries, Tips, Cash bonuses and other taxable employee pay, Strike benefits, Long-term disability, Earnings from self employment Earned income is subject to payroll taxes such as: Earned income is also subject to income taxes which are progressively higher depending on the amount earned minus tax credits, exemptions, and/or deductions depending on how you file. There are 7 tax rates that get progressively larger as your income rises but only applies to the income in each bracket. 10% for the first 18,650 (2017) through 39.6% for any income above 470,700. The full list of rates is in the above linked article about payroll taxes. Earned income is required for contributions to an IRA. You cannot contribute more to an IRA than you have earned in a given year. Interest, Ordinary Dividends, Short-term Capital Gains, Retirement income (pensions, distributions from tax deferred accounts, social security), Unemployment benefits, Worker's Compensation, Alimony/Child support, Income earned while in prison, Non-taxable military pay, most rental income, and S-Corp passthrough income Ordinary income is taxed the same as earned income with the exception that social security taxes do not apply. This is the \"\"pure taxable income\"\" referred to in the other linked question. Dividends paid by US Corporations and qualified foreign corporations to stock-holders (that are held for a certain period of time before the dividend is paid) are taxed at the Long-term Capital Gains rate explained below. Ordinary dividends like the interest earned in your bank account are included with ordinary income. Stocks, Bonds, Real estate, Carried interest -- Held for more than a year Income from assets that increase in value while being held for over a year. Long term capital gains justified by the idea that they encourage people to hold stock and make long term investments rather than buying and then quickly reselling for a short-term profit. The lower tax rates also reflect the fact that many of these assets are already taxed as they are appreciating in value. Real-estate is usually taxed through local property taxes. Equity in US corporations realized by rising stock prices and dividends that are returned to stock holders reflect earnings from a corporation that are already taxed at the 35% Corporate tax rate. Taxing Capital gains as ordinary income would be a second tax on those same profits. Another problem with Long-term capital gains tax is that a big portion of the gains for assets held for multiple decades are not real gains. Inflation increases the price of assets held for longer periods, but you are still taxed on the full gain even if it would be a loss when inflation is calculated. Capital gains are also taxed differently depending on your income level. If you are in the 10% or 15% brackets then Long-term capital gains are assessed at 0%. If you are in the 25%, 28%, 33%, or 35% brackets, they are assessed at 15%. Only those in the 39.6% bracket pay 20%. Capital assets sold at a profit held for less than a year Income from buying and selling any assets such as real-estate, stock, bonds, etc., that you hold for less than a year before selling. After adding up all gains and losses during the year, the net gain is taxed as ordinary income. Collectibles held for more than a year are not considered capital assets and are still taxed at ordinary income rates.\"" }, { "docid": "338700", "title": "", "text": "It sounds like something is getting lost in translation here. A business owner should not have to pay personal income tax on business expenses, with the caveat that they are truly business expenses. Here's an example where what you described could happen: Suppose a business has $200K in revenue, and $150K in legitimate business expenses (wages and owner salaries, taxes, services, products/goods, etc.) The profit for this example business is $50K. Depending on how the business is structured (sole proprietor, llc, s-corp, etc), the business owner(s) may have to pay personal income tax on the $50K in profit. If the owner then decided to have the business purchase a new vehicle solely for personal use with, say, $25K of that profit, then the owner may think he could avoid paying income tax on $25K of the $50K. However, this would not be considered a legitimate business expense, and therefore would have to be reclassified as personal income and would be taxed as if the $25K was paid to the owner. If the vehicle truly was used for legitimate business purposes then the business expenses would end up being $175K, with $25K left as profit which is taxable to the owners. Note: this is an oversimplification as it's oftentimes the case that vehicles are partially used for business instead of all or nothing. In fact, large items such as vehicles are typically depreciated so the full purchase price could not be deducted in a single year. If many of the purchases are depreciated items instead of deductions, then this could explain why it appears that the business expenses are being taxed. It's not a tax on the expense, but on the income that hasn't been reduced by expenses, since only a portion of the big ticket item can be treated as an expense in a single year." } ]

[ { "docid": "555486", "title": "", "text": "\"1.Why is there no \"\"United States Treasury\"\" endorsement? Why should there be, and what do you think it would look like? Some person at Treasury sitting at a desk all day signing \"\"Uncle Sam\"\"? At most you would expect to see some stamp, because it's clear that no person is going to sign all of these checks. 2.Can I have the check returned for proper endorsement? No, this is none of your business unless you have some serious reason to believe that someone other than the treasury cashed your check. (If that were really your concern, then you'd have a bigger issue than the endorsement.) 3.If I am required to endorse checks made out to me, why isn't the US Treasury? As others have noted, an endorsement is often not required as long as the name on the check matches a name on the account to which it is deposited. Individual banks may have stricter rules, but that's between you and your bank.\"" } ]

[ { "docid": "54204", "title": "", "text": "This is subject to some amount of opinion, but I think that Treasury Inflation Protected Securities (TIPS) are closest to what you describe. These are issued by the US Treasury like a treasury bond, but the rate is adjusted for inflation. https://www.treasurydirect.gov/indiv/products/prod_tips_glance.htm I see your comment about taxes. TIPS are exempt from state and local taxes, but they are subject to federal tax on the income and on the growth of the principal." }, { "docid": "200457", "title": "", "text": "The U.S. Treasury said the same thing on the lawfulness of retailers refusing legal tender at point of sale - retailers are allowed to refuse any denomination of U.S. currency: [...]all United States money as identified above are a valid and legal offer of payment for debts when tendered to a creditor. There is, however, no Federal statute mandating that a private business, a person or an organization must accept currency or coins as for payment for goods and/or services. [...]" }, { "docid": "467509", "title": "", "text": "\"Keep in mind that many checks are being cashed via scanner or photo. These can be home based, business based or ATM based systems. The key requirement is that the software has to be able to distinguish the \"\"written\"\" parts from the background parts. If the image doesn't have enough contrast for the edge detection to work, the check can't be easily processed. In that case a human looks at the image and decodes the image and processes the transaction. The image is not in color. Many businesses scan the check and hand the original back to you after having the Point of Sale system process the image. Post 2001 the checks in the united states are no longer moved through the banking system, only their images. With the roll out of these image based systems, in the future almost no physical checks will be seen by banks. Therefore the actual ink color is not important, only the result.\"" }, { "docid": "268026", "title": "", "text": "\"If you sign the check \"\"For Deposit Only\"\", the bank will put it in your account. You may need to set up a \"\"payable name\"\" on the account matching your DBA alias. However, having counted offerings for a church on several occasions, I know that banks simply have no choice but to be lax about the \"\"Pay to the Order Of\"\" line on checks. Say the church's \"\"legal name\"\" for which the operating funds account was opened is \"\"Saint Barnabas Episcopal Church of Red Bluff\"\". You'll get offering checks made out to \"\"Saint Barnabas\"\", \"\"Saint B's\"\", \"\"Episcopal Church of Red Bluff\"\", \"\"Red Bluff Episcopal\"\", \"\"Youth Group Fund\"\", \"\"Pastor Frank\"\", etc. The bank will take em all; just gotta stamp em with the endorsement for the church. Sometimes the money will be \"\"earmarked\"\" based on the payable line; any attempt to pay the pastor directly will go into his \"\"discretionary fund\"\", and anything payable to a specific subgroup of the church will go into their asset account line, but really all the cash goes directly to the same bank account anyway. For-profit operations are similar; an apartment complex may get checks payable to the apartment name, the management company name, even the landlord. I expect that your freelance work will be no different.\"" }, { "docid": "264075", "title": "", "text": "How would I go about this so that I can start using this money? You would open the LLC. The checks were not written out to you, they were written out to the LLC. Only the LLC can endorse them." }, { "docid": "508960", "title": "", "text": "\"I would contact the security/fraud departments at your bank and see if you can get in contact (via your bank) with the bank that the check is drawn on. By my reading of your question, it sounds like the person you are dealing with fraudulently endorsed a third party check, which you subsequently endorsed for deposit. Explain this situation to your bank. As far as the other person goes, tell her \"\"I'm in contact with the frauds department at my bank, as the validity of the check is in question, and I'm not giving you a cent until the matter is resolved.\"\" Depositing a bad check is a misdemeanor in most jurisdictions, so it's essential to bring this to the attention of the bank and authorities asap.\"" }, { "docid": "213331", "title": "", "text": "\"Your friend probably cannot deposit the check to your U.S. bank account. U.S. banks that I've worked with will not accept a deposit from someone who is not an owner of the account. I don't know why not. If some stranger wants to make unauthorized deposits to my account, why should I object? But that's the common rule. You could endorse the check, your friend could then deposit it to his own account or cash it, and then transfer the money to you in a variety of ways. But I think it would be easier to just deposit the check in your account wherever it is you live. Most banks have no problem with depositing a foreign check. There may be a fairly long delay before you can get access to the money while the check clears through the system. I don't know exactly what you mean by a \"\"prize check\"\", but assuming that this is taxable income, yes, I assume the U.S. government would want their hard-earned share of your money. These days you can pay U.S. taxes on-line if you have a credit card. If you have not already paid U.S. taxes for the year, you should make an \"\"estimated payment\"\". i.e. you can't wait until April 15 of the next year, you have to pay most or all of the taxes you will owe in the calendar year you earned it.\"" }, { "docid": "178356", "title": "", "text": "Global Trade Connect is most common and popular website for the business in the United States because here is easy to start and manage for any company's product and service. If you are fighting to search the profitable products for the reselling in online, then you need to spot unique products before using given Wholesale trade. You should always cross check by finding the same products at the different marketplace.You need to plan carefully that how you can beat a competition." }, { "docid": "408723", "title": "", "text": "Check global ATM alliance they are banks that use reciprocal benefits on each other in other countries without fees. For example the in the USA Bank of America and In France it is BNP Paribas. Both are banks in this alliance. I use this option between the United States and the Caribbean my banks of choice are Bank of America in the US and in the Caribbean I use Scotia Bankand since I have accounts in both weekends I can use both ATM cards on any of these two banks without any processing fees!!!! You should check the global ATM alliance to see if it is an option that you could use." }, { "docid": "406656", "title": "", "text": "\"My late answer is: Be aware of the difference of being a contractor and being an employee. I am not sure of the laws in Canada, but in the United States lots of small companies like to hire people as \"\"contractors\"\" but make them work under rules that fall into employee. The business is trying to avoid paying payroll taxes, which is fine, but make sure you know your rights and responsibilities as a contractor vs employee. You can check with your state's Bureau of Labor and Industry in the US, but I am sure wherever you are from there is a government agency to do the same thing.\"" }, { "docid": "211290", "title": "", "text": "\"Hypothetically, yes! From the U.S. BEP's guidelines on Damaged Currency: Under regulations issued by the Department of the Treasury, mutilated United States currency may be exchanged at face value if: \"\"50% or less\"\" includes \"\"0%\"\". However, it is probably going to be very difficult to prove that the currency existed, had a specific face value, and was completely destroyed (instead of being replaced with a decoy at the last minute.)\"" }, { "docid": "393495", "title": "", "text": "Nope, but if we don't point it out, *other people* won't ever realize how internally contradictory statism is. I mean, that's what got me off the horse, was realizing how self-contradictory the state is. The only consistency you see from a statist is that they consistently endorse whatever benefits them." }, { "docid": "252227", "title": "", "text": "\"The only party that can pay back a government bond is the government that issued it itself. In the case of Argentina, US vulture funds have won cases against it, but it has yet to pay. The best one can do to collect is to sue in a jurisdiction that permits and hope to seize the defaulted government's assets held in such jurisdiction. One could encourage another state to go to war to collect, but this is highly unlikely since a state that doesn't repay is probably a poor state with nothing much to loot; besides, most modern governments do not loot the conquered anymore. Such a specific eventuality hasn't happened in at least a lifetime, anyways. It is highly unlikely that any nation would be foolish enough to challenge the United States considering its present military dominance. It is rare for nations with medium to large economies to spurn their government obligations for long with Argentina as the notable exception. Even Russia became current when they spontaneously disavowed their government debt during the oil collapse of 1998. Countries with very small economies such as Zimbabwe are the only remaining nations that try to use their central banks to fund debt repayments if they even repay at all, but they quickly see that the destruction caused by hyperinflation neither helps with government debt nor excessive government expenditure. Nevertheless, it could be dangerous to assume that no nation would default on its debt for any period of time, and the effects upon countries with defaulted government debt show that it has far reaching negative consequences. If the US were to use its central bank to repay its government obligations, the law governing the Federal Reserve would have to be changed since it is currently mandated to \"\"maintain long run growth of the monetary and credit aggregates commensurate with the economy's long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices and moderate long-term interest rates.\"\" The United States Treasury has no power over the Federal Reserve thus cannot force the Federal Reserve to betray its mandate by purchasing government debt. It should be noted that while Japan has a government debt twice its GDP, it also has a persistent slight deflation which has produced incredibly low interest rates, allowing it to finance government debt more easily, a situation the US does not enjoy. For now, the United States seems to be able to pay expenditures and finance at low interest rates. At what ratio of government debt to GDP that would cause interest rates to climb thus put pressure on the US's ability to repay does not seem to be well known.\"" }, { "docid": "42999", "title": "", "text": "After reading OP Mark's question and the various answers carefully and also looking over some old pay stubs of mine, I am beginning to wonder if he is mis-reading his pay stub or slip of paper attached to the reimbursement check for the item(s) he purchases. Pay stubs (whether paper documents attached to checks or things received in one's company mailbox or available for downloading from a company web site while the money is deposited electronically into the employee's checking account) vary from company to company, but a reasonably well-designed stub would likely have categories such as Taxable gross income for the pay period: This is the amount from which payroll taxes (Federal and State income tax, Social Security and Medicare tax) are deducted as well as other post-tax deductions such as money going to purchase of US Savings Bonds, contributions to United Way via payroll deduction, contribution to Roth 401k etc. Employer-paid group life insurance premiums are taxable income too for any portion of the policy that exceeds $50K. In some cases, these appear as a lump sum on the last pay stub for the year. Nontaxable gross income for the pay period: This would be sum total of the amounts contributed to nonRoth 401k plans, employee's share of group health-care insurance premiums for employee and/or employee's family, money deposited into FSA accounts, etc. Net pay: This is the amount of the attached check or money sent via ACH to the employee's bank account. Year-to-date amounts: These just tell the employee what has been earned/paid/withheld to date in the various categories. Now, OP Mark said My company does not tax the reimbursement but they do add it to my running gross earnings total for the year. So, the question is whether the amount of the reimbursement is included in the Year-to-date amount of Taxable Income. If YTD Taxable Income does not include the reimbursement amount, then the the OP's question and the answers and comments are moot; unless the company has really-messed-up (Pat. Pending) payroll software that does weird things, the amount on the W2 form will be whatever is shown as YTD Taxable Income on the last pay stub of the year, and, as @DJClayworth noted cogently, it is what will appear on the W2 form that really matters. In summary, it is good that OP Mark is taking the time to investigate the matter of the reimbursements appearing in Total Gross Income, but if the amounts are not appearing in the YTD Taxable Income, his Payroll Office may just reassure him that they have good software and that what the YTD Taxable Income says on the last pay stub is what will be appearing on his W2 form. I am fairly confident that this is what will be the resolution of the matter because if the amount of the reimbursement was included in Taxable Income during that pay period and no tax was withheld, then the employer has a problem with Social Security and Medicare tax underwithholding, and nonpayment of this tax plus the employer's share to the US Treasury in timely fashion. The IRS takes an extremely dim view of such shenanigans and most employers are unlikely to take the risk." }, { "docid": "168382", "title": "", "text": "\"In one personal finance book I read that if a company is located in a country with credit rating X it can't have credit rating better (lower - i.e. further from AAA level) than X. This is simply wrong. Real world evidence proves it wrong. Automatic Data Processing (ADP), Exxon Mobile (XOM), Johnson & Johnson (JNJ), and Microsoft (MSFT) all have a triple-A rating today, even though the United States doesn't. Toyota (TM) remained triple-A for many years even after Japanese debt was downgraded. The explanation was the following: country has rating X because risk of doing business with it is X and so risk of doing business with any company located in that country automatically can't be better than X. When reading financial literature, you should always be critical. Let's evaluate this statement. First off, a credit rating is not the \"\"risk of doing business.\"\" That is way too generic. Specifically, a credit rating attempts to define an individual or company's ability to repay it's obligations. Buying treasuries constitutes as doing business with the gov't, but you can argue that buying stamps at USPS is also doing business with the gov't, and a credit rating won't affect the latter too much. So a credit rating reflects the ability of an entity to repay it's obligations. What does the ability of a government to repay have to do with the ability of companies in that country to repay? Not much. Certainly, if a company keeps it's surplus cash all in treasuries, then downgrading the government will affect the company, but in general, the credit rating of a company determines the company's ability to pay.\"" }, { "docid": "585269", "title": "", "text": "\"(Since you used the dollar sign without any qualification, I assume you're in the United States and talking about US dollars.) You have a few options here. I won't make a specific recommendation, but will present some options and hopefully useful information. Here's the short story: To buy individual stocks, you need to go through a broker. These brokers charge a fee for every transaction, usually in the neighborhood of $7. Since you probably won't want to just buy and hold a single stock for 15 years, the fees are probably unreasonable for you. If you want the educational experience of picking stocks and managing a portfolio, I suggest not using real money. Most mutual funds have minimum investments on the order of a few thousand dollars. If you shop around, there are mutual funds that may work for you. In general, look for a fund that: An example of a fund that meets these requirements is SWPPX from Charles Schwabb, which tracks the S&P 500. Buy the product directly from the mutual fund company: if you go through a broker or financial manager they'll try to rip you off. The main advantage of such a mutual fund is that it will probably make your daughter significantly more money over the next 15 years than the safer options. The tradeoff is that you have to be prepared to accept the volatility of the stock market and the possibility that your daughter might lose money. Your daughter can buy savings bonds through the US Treasury's TreasuryDirect website. There are two relevant varieties: You and your daughter seem to be the intended customers of these products: they are available in low denominations and they guarantee a rate for up to 30 years. The Series I bonds are the only product I know of that's guaranteed to keep pace with inflation until redeemed at an unknown time many years in the future. It is probably not a big concern for your daughter in these amounts, but the interest on these bonds is exempt from state taxes in all cases, and is exempt from Federal taxes if you use them for education expenses. The main weakness of these bonds is probably that they're too safe. You can get better returns by taking some risk, and some risk is probably acceptable in your situation. Savings accounts, including so-called \"\"money market accounts\"\" from banks are a possibility. They are very convenient, but you might have to shop around for one that: I don't have any particular insight into whether these are likely to outperform or be outperformed by treasury bonds. Remember, however, that the interest rates are not guaranteed over the long run, and that money lost to inflation is significant over 15 years. Certificates of deposit are what a bank wants you to do in your situation: you hand your money to the bank, and they guarantee a rate for some number of months or years. You pay a penalty if you want the money sooner. The longest terms I've typically seen are 5 years, but there may be longer terms available if you shop around. You can probably get better rates on CDs than you can through a savings account. The rates are not guaranteed in the long run, since the terms won't last 15 years and you'll have to get new CDs as your old ones mature. Again, I don't have any particular insight on whether these are likely to keep up with inflation or how performance will compare to treasury bonds. Watch out for the same things that affect savings accounts, in particular fees and reduced rates for balances of your size.\"" }, { "docid": "457729", "title": "", "text": "It's worth pointing out that a bulk of the bond market is institutional investors (read: large corporations and countries). For individuals, it's very easy to just put your cash in a checking account. Checking accounts are insured and non-volatile. But what happens when you're GE or Apple or Panama? You can't just flop a couple billion dollars in to a Chase checking account and call it a day. Although, you still need a safe place to store money that won't be terribly volatile. GE can buy a billion dollars of treasury bonds. Many companies need tremendous amounts of collateral on hand, amounts far in excess of the capacity of a checking account; those funds are stored in treasuries of some sort. Separately, a treasury bond is not a substitute investment for an S&P index fund. For individuals they are two totally different investments with totally different characteristics. The only reason an individual investor should compare the return of the S&P against the readily available yield of treasuries is to ensure the expected return of an equity investment can sufficiently pay for the additional risk." }, { "docid": "590837", "title": "", "text": "\"It is not allowed to pay refunds to anyone other than the taxpayer. This is due to various tax return fraud schemes that were running around. Banks are required to enforce this. If the direct deposit is denied, a check will be issued. In her name, obviously. What she does with it when she gets it is her business - but I believe that tax refund checks may not be just \"\"endorsed\"\", the bank will likely want to see her when you deposit it to your account, even if it is endorsed. For the same reason.\"" }, { "docid": "561764", "title": "", "text": "Publication 17 Your Income Tax top of page 14 If the direct deposit cannot be done, the IRS will send a check instead. When your girlfriend gets the check, she can endorse it over to you for deposit into your account." } ]

[ { "docid": "545421", "title": "", "text": "\"Welcome to the 21st century, the New Order. Forget all that legal mumbo jumbo you may have read back in law school in the 1960s about commercial code. Its all gone now. Now we have Check 21 and the Patriot Act !!! Basically what this means is that because some Arab fanatics burned down the World Trade Center, the US government and its allied civilian banking company henchmen now have total control and dictatorship over \"\"your\"\" money, which is no longer really money, but more like a \"\"credit\"\" to your account with THEM which they can do with what they want. Here are some of the many consequences of the two aforementioned acts: (1) You can no longer sue a bank for mishandling your money (2) All your banking transaction information is the joint property of the bank, its \"\"affiliates\"\" and the US Treasury (3) You can no longer conduct private monetary transactions with other people using a bank as your agent; you can only request that a bank execute an unsecured transaction on your behalf and the bank has total control over that transaction and the terms on which occurs; you have no say over these terms and you cannot sue a bank over any financial tort on you for any reason. (4) All banks are required to spy on you, report any \"\"suspicious\"\" actions on your part, develop and run special software to detect these \"\"suspicious actions\"\", and send their employees to government-run educational courses where they are taught to spy on customers, how to report suspicious customers and how to seize money and safe deposit boxes from customers when the government orders them to do so. (5) All banks are required to positively identify everyone who has a bank account or safe deposit box and report all their accounts to the government. (6) No transactions can be done anonymously. All parties to every banking transaction must be identified and recorded. So, from the above it should be clear to (if you are a lawyer) why no endorsement is present. That is because your check is not a negotiable instrument anymore, it is merely a request to the bank to transfer funds to the Treasury. The Treasury does not need to \"\"endorse\"\" anything. In fact, legally speaking, the Treasury could simply order your bank to empty your account into theirs, and they actually do this all the time to people they are \"\"investigating\"\" for supposed crimes. You don't need to endorse checks you receive either because, as I said above, the check is no longer a negotiable instrument. Banks still have people do it, but it is just a pro forma habit from the old days. Since you can't sue the bank, the endorsement is pretty meaningless because it cannot be challenged in court anyway. You could probably just write \"\"X\"\" there and they would deposit it.\"" } ]

[ { "docid": "457729", "title": "", "text": "It's worth pointing out that a bulk of the bond market is institutional investors (read: large corporations and countries). For individuals, it's very easy to just put your cash in a checking account. Checking accounts are insured and non-volatile. But what happens when you're GE or Apple or Panama? You can't just flop a couple billion dollars in to a Chase checking account and call it a day. Although, you still need a safe place to store money that won't be terribly volatile. GE can buy a billion dollars of treasury bonds. Many companies need tremendous amounts of collateral on hand, amounts far in excess of the capacity of a checking account; those funds are stored in treasuries of some sort. Separately, a treasury bond is not a substitute investment for an S&P index fund. For individuals they are two totally different investments with totally different characteristics. The only reason an individual investor should compare the return of the S&P against the readily available yield of treasuries is to ensure the expected return of an equity investment can sufficiently pay for the additional risk." }, { "docid": "565133", "title": "", "text": "In the united states, they may request a check written by the bank to the other party. I have had to make large payments for home settlements, or buying a car. If the transaction was over a specified limit, they wanted a cashiers check. They wanted to make sure it wouldn't bounce. I have had companies rebate me money, and say the maximum value of the check was some small value. I guess that was to prevent people from altering the check. One thing that has happened to me is that a large check I wanted to deposit was held for a few extra days to make sure it cleared. I wouldn't have access to the funds until the deadline passed." }, { "docid": "233577", "title": "", "text": "The US does have a gold reserve. The main reserves are held at Fort Knox but there is even more gold, mostly owned by other countries, stored in the basement of the New York Federal Reserve Bank (Think Die Hard 3). The United States Bullion Depository, often known as Fort Knox, is a fortified vault building located adjacent to Fort Knox, Kentucky, used to store a large portion of United States official gold reserves and occasionally other precious items belonging or entrusted to the federal government. The United States Bullion Depository holds 4,578 metric tons (5046 tons) of gold bullion (147.2 million oz. troy). This is roughly 2.5% of all the gold ever refined throughout human history. Even so, the depository is second in the United States to the Federal Reserve Bank of New York's underground vault in Manhattan, which holds 7,000 metric tons (7716 tons) of gold bullion (225.1 million oz. troy), some of it in trust for foreign nations, central banks and official international organizations. Source: Wikipedia" }, { "docid": "467509", "title": "", "text": "\"Keep in mind that many checks are being cashed via scanner or photo. These can be home based, business based or ATM based systems. The key requirement is that the software has to be able to distinguish the \"\"written\"\" parts from the background parts. If the image doesn't have enough contrast for the edge detection to work, the check can't be easily processed. In that case a human looks at the image and decodes the image and processes the transaction. The image is not in color. Many businesses scan the check and hand the original back to you after having the Point of Sale system process the image. Post 2001 the checks in the united states are no longer moved through the banking system, only their images. With the roll out of these image based systems, in the future almost no physical checks will be seen by banks. Therefore the actual ink color is not important, only the result.\"" }, { "docid": "538603", "title": "", "text": "**United States Postal Service** The United States Postal Service (USPS; also known as the Post Office, U.S. Mail, or Postal Service) is an independent agency of the United States federal government responsible for providing postal service in the United States. It is one of the few government agencies explicitly authorized by the United States Constitution. The U.S. Mail traces its roots to 1775 during the Second Continental Congress, when Benjamin Franklin was appointed the first postmaster general. The Post Office Department was created in 1792 from Franklin's operation, elevated to a cabinet-level department in 1872, and transformed in 1971 into the U.S. Postal Service as an independent agency. *** ^[ [^PM](https://www.reddit.com/message/compose?to=kittens_from_space) ^| [^Exclude ^me](https://reddit.com/message/compose?to=WikiTextBot&amp;message=Excludeme&amp;subject=Excludeme) ^| [^Exclude ^from ^subreddit](https://np.reddit.com/r/economy/about/banned) ^| [^FAQ ^/ ^Information](https://np.reddit.com/r/WikiTextBot/wiki/index) ^| [^Source](https://github.com/kittenswolf/WikiTextBot) ^| [^Donate](https://www.reddit.com/r/WikiTextBot/wiki/donate) ^] ^Downvote ^to ^remove ^| ^v0.28" }, { "docid": "483453", "title": "", "text": "\"Yea. Almost every form I fill out wants to know \"\"Employer Name\"\". They don't even bother checking \"\"Are you Self Employed\"\". Of course, I end up writing \"\"Self Employed\"\" in employer name field anyway. In the United States, it is even harder because EVERY state has their own labor and employment laws. You are a freelancer but what if you need to travel to a client site in a different state. Bam, you gotta file taxes for that state as well even if you made like a few hundred bucks. Too much red tape and it is really hard to change.\"" }, { "docid": "393495", "title": "", "text": "Nope, but if we don't point it out, *other people* won't ever realize how internally contradictory statism is. I mean, that's what got me off the horse, was realizing how self-contradictory the state is. The only consistency you see from a statist is that they consistently endorse whatever benefits them." }, { "docid": "438121", "title": "", "text": "\"During GM's Chapter 11 reorganization in 2009, a new company was formed, with new stock. The old General Motors Corporation was renamed to \"\"Motors Liquidation Company,\"\" and the new company was named \"\"General Motors Company.\"\" The new company purchased some of the assets from the old company, and the old company was left to sell off the remaining assets and settle the debts. None of the stock transferred from the old company to the new one; if you were a GM stockholder of the old company and didn't sell, it is now worthless. When the new company formed, the stock was not traded publicly. The company was primarily owned by the United States and Canadian governments; together, they owned 72.5%. In 2010, GM had an IPO, and the US government sold most of their stake. By the end of 2013, the US government sold the remaining stake; the government no longer has any ownership in GM. When we talk about voting rights for stockholders, we are mainly talking about voting for the members of the board of directors. And yes, the government did indeed have a hand in selecting the board of the new company. The Treasury Department selected 10 members of the board, and the Canadian government selected 1 member. There were 19 board members total. (Source) Unlike some companies, there are not \"\"voting\"\" and \"\"non-voting\"\" classes of GM stock. All the shares sold by the US government are voting shares. Additional Sources:\"" }, { "docid": "237514", "title": "", "text": "\"There are very few circumstances where forming an out of state entity is beneficial, but a website is within these circumstances in certain instances. Businesses with no physical operations do not need to care what jurisdiction they are registered in: your home state, a better united state or non-united state. The \"\"limited liability\"\" does it's job. If you are storing inventory or purchasing offices to compliment your online business, you need to register in the state those are located in. An online business is an example of a business with no physical presence. All states want you to register your LLC in the state that you live in, but this is where you need to read that state's laws. What are the consequences of not registering? There might be none, there might be many. In New York, for example, there are no consequences for not registering (and registering in new york - especially the city - is likely the most expensive in the USA). If your LLC needs to represent itself in court, New York provides retroactive foreign registrations and business licenses. So basically, despite saying that you need to pay over $1000 to form your LLC \"\"or else\"\", the reality is that you get the local limited liability protection in courts whenever you actually need it. Check your local state laws, but more times than not it is analogous to asking a barber if you need a haircut, the representative is always going to say \"\"yes, you do\"\" while the law, and associated case law, reveals that you don't. The federal government doesn't care what state your form an LLC or partnership in. Banks don't care what state you form an LLC or partnership in. The United States post office doesn't care. Making an app? The Apple iTunes store doesn't care. So that covers all the applicable authorities you need to consider. Now just go with the cheapest. In the US alone there are 50 states and several territories, all with their own fee structures, so you just have to do your research. Despite conflicting with another answer, Wyoming is still relevant, because it is cheap and has a mature system and laws around business entity formation. http://www.incorp.com has agents in every state, but there are registered agents everywhere, you can even call the Secretary of State in each state for a list of registered agents. Get an employer ID number yourself after the business entity is formed, it takes less than 5 minutes. All of this is also contingent on how your LLC or partnership distributes funds. If your LLC is not acting like a pass through entity to you and your partner,but instead holding its own profits like a corporation, then again none of this matters. You need to form it within the state you live and do foreign registrations in states where it has any physical presence, as it has becomes its own tax person in those states. This is relevant because you said you were trying to do something with a friend.\"" }, { "docid": "254556", "title": "", "text": "UNG United States Natural Gas Fund Natural Gas USO United States Oil Fund West Texas Intermediate Crude Oil UGA United States Gasoline Fund Gasoline DBO PowerShares DB Oil Fund West Texas Intermediate Crude Oil UHN United States Heating Oil Fund Heating Oil I believe these are as close as you'd get. I'd avoid the double return flavors as they do not track well at all. Update - I understand James' issue. An unmanaged single commodity ETF (for which it's impractical to take delivery and store) is always going to lag the spot price rise over time. And therefore, the claims of the ETF issuer aside, these products will almost certain fail over time. As shown above, When my underlying asset rises 50%, and I see 24% return, I'm not happy. Gold doesn't have this effect as the ETF GLD just buys gold, you can't really do that with oil." }, { "docid": "54204", "title": "", "text": "This is subject to some amount of opinion, but I think that Treasury Inflation Protected Securities (TIPS) are closest to what you describe. These are issued by the US Treasury like a treasury bond, but the rate is adjusted for inflation. https://www.treasurydirect.gov/indiv/products/prod_tips_glance.htm I see your comment about taxes. TIPS are exempt from state and local taxes, but they are subject to federal tax on the income and on the growth of the principal." }, { "docid": "480238", "title": "", "text": "They can go to an ATM and deposit it in to their account. The ATM does not care to read the name, and the bank does not care to verify anything if the check goes through (meaning the bank it is drawn on pays). So if nobody complains, that's it, he has your money. You would need to go to the check-writer's bank and ask for help, or look at the check-writer's cancelled check copy if you get to it. That bank can find out where it was deposited to, and then you have to go after the guy and get your money back - if it is still recoverable! - if it is a poor sod and he already blew your 5 grand, you can sue his pants off, but there are no 5 grand in them anywhere. So bad luck for you. Technically, the bank is not supposed to accept the check if the name doesn't match. At the counter, that might get a question, but as said above, there are deposit ATMs, and he could also just endorse the check to himself and sign the endorsement with some illegible scrawling, and claim that this is your signature - how would Joe the teller know? Either way, he gets the check in his account, and then he can take it out and blow it. It is legally clearly theft or fraud, and probably a federal crime, but if the guy is bankrupt, that doesn't help you much. Depending on that bank's fine-print, they might or might not cover your loss, but I wouldn't hold my breath. Better don't lose a check." }, { "docid": "507287", "title": "", "text": "I'm going to give the checkmark to Joe, but I wanted to convey my personal experience. I bank with TD in New Jersey and was informed by the teller that I simply needed to endorse the check myself and indicate Parent of Minor. I cannot attest if other banks will accept this, but it at least works for TD and my situation in particular." }, { "docid": "561764", "title": "", "text": "Publication 17 Your Income Tax top of page 14 If the direct deposit cannot be done, the IRS will send a check instead. When your girlfriend gets the check, she can endorse it over to you for deposit into your account." }, { "docid": "316359", "title": "", "text": "In my experience, you don't need to endorse a check with a signature to deposit it into your account. You do if you are exchanging the check for cash. Businesses usually have a stamp with their account number on them. Once stamped, those checks are only able to be deposited into that account. Individuals can do the same. I have had issues depositing insurance and government checks in the past that had both my and my wife's name on them. Both of us had to endorse the check to be able to deposit them. I think this was some kind of fraud prevention scheme, so that later one of us couldn't claim they didn't know anything about the check." }, { "docid": "94957", "title": "", "text": "\"Its a classic sign of fraud. The fraud is on you. You cashed the check not given to you, and not endorsed by the person its given to, so even if the check is legit you're still in trouble. There are many variations of this scheme, but the common thing is that the \"\"innocent\"\" third party is given a check to cash, and gives its own check or cash in return. The check ends up being forged, stolen, or otherwise invalid, but the cash/check the third party gave is long gone. Usually its cash, because its untraceable. You should wait at least a couple of weeks to make sure the check doesn't bounce. You might want to contact the check owner to verify its legit, and suggest to return the money, if it is not. You might also want to consult with an attorney. Bear in mind, that it might be reported to the authorities as a money laundering scheme (which it very well might be), and you'll have some explaining to do in this case, even if the check is legit.\"" }, { "docid": "221784", "title": "", "text": "Check with the state that you lived in. Inactive accounts typically get turned over to the State Treasury or Comptroller to be claimed. The time is typically set by statute. Hopefully, you don't live in a state like California or Arizona that treats abandoned property like booty." }, { "docid": "529879", "title": "", "text": "It would be better to use a bank account and have the refund deposited directly to it. But you said you never had a bank account, so that may be a problem. Another option is to have the refund check mailed to you, and you deposit it in your local bank, converting to your home currency (or not, depending on local laws). Generally, for another person to cash a check made out to you - you need to endorse it first. Physically, on the back of the check. That means you have to see the check. Specifically with tax refund checks there's much more scrutiny since there's a lot of fraud going on with regards to tax refunds. Thus, I doubt a bank would allow a third party cash a check made out to you, without you actually being present there." }, { "docid": "251700", "title": "", "text": "I suspect @SpehroPefhany is correct and that your bank will cash a check from the US Department of the Treasury. Especially since they're the same ones who guarantee the U.S. Dollar. They may hold the funds until the check clears, but I think you'll have good luck going through your bank. Of course, fees and exchange rate are a factor. Consider browsing the IRS and US Treasury Department websites for suggestions/FAQs. I suggest you line up a way to cash it, and make sure there's enough left after fees and exchange rate and postage to get the check that the whole process is worth it, all before you ask it to be shipped to you. If there's no way to do it through your bank, through a money exchange business (those at the airport come to mind) or through your government (postal bank?), and the check is enough that you're willing to go through some trouble, then you should look into assigning power of attorney for this purpose. I don't know if it is possible, but it might be worth looking into. Look for US based banks in your area." } ]

[ { "docid": "225395", "title": "", "text": "\"Yep, most 401k options suck. You'll have access to a couple dozen funds that have been blessed by the organization that manages your account. I recently rolled my 401k over into a self-directed IRA at Fidelity, and I have access to the entire mutual fund market, and can trade stocks/bonds if I wish. As for a practical solution for your situation: the options you've given us are worryingly vague -- hopefully you're able to do research on what positions these funds hold and make your own determination. Quick overview: Energy / Utilities: Doing good right now because they are low-risk, generally high dividends. These will underperform in the short-term as the market recovers. Health Care: riskier, and many firms are facing a sizable patent cliff. I am avoiding this sector. Emerging Markets: I'm also avoiding this due to the volatility and accounting issues, but it's up to you. Most large US companies have \"\"emerging markets\"\" exposure, so not necessary for to invest in a dedicated fund in my unprofessional opinion. Bonds: Avoid. Bonds are at their highest levels in decades. Short-term they might be ok; but medium-term, the only place to go is down. All of this depends on your age, and your own particular investment objectives. Don't listen to me or anyone else without doing your own research.\"" } ]

[ { "docid": "10089", "title": "", "text": "Congratulations on deciding to save for retirement. Since you cite Dave Ramsey as the source of your 15% number, what does he have to say about where to invest the money? If you want to have instantaneous penalty-free access to your retirement money, all you need to do is set up one or more ordinary accounts that you think of as your retirement money. Just be careful not to put the money into CDs since Federal law requires a penalty of three months interest if you cash in the CD before its maturity date (penalty!) or put the money into those pesky mutual funds that charge a redemption fee (penalty!) if you take the money out within x months of investing it where x can be anywhere from 3 to 24 or more. In Federal tax law (and in most state tax laws as well) a retirement account has special privileges accorded to it in that the interest, dividends, capital gains, etc earned on the money in your retirement account are not taxed in the year earned (as they would be in a non-retirement account), but the tax is either deferred till you withdraw money from the account (Traditional IRAs, 401ks etc) or is waived completely (Roth IRAs, Roth 401ks etc). In return for this special treatment, penalties are imposed (in addition to tax) if you withdraw money from your retirement account before age 59.5 which presumably is on the distant horizon for you. (There are some exceptions (including first-time home buying and extraordinary medical expenses) to this rule that I won't bother going into). But You are not required to invest your retirement money into such a specially privileged retirement account. It is perfectly legal to keep your retirement money in an ordinary savings account if you wish, and pay taxes on the interest each year. You can invest your retirement money into municipal bonds whose interest is free of Federal tax (and usually free of state tax as well if the municipality is located in your state of residence) if you like. You can keep your retirement money in a sock under your mattress if you like, or buy a collectible item (e.g. a painting) with it (this is not permitted in an IRA), etc. In short, if you are concerned about the penalties imposed by retirement accounts on early withdrawals, forgo the benefits of these accounts and put your retirement money elsewhere where there is no penalty for instant access. If you use a money management program such as Mint or Quicken, all you need to do is name one or more accounts or a portfolio as MyRetirementMoney and voila, it is done. But those accounts/portfolios don't have to be retirement accounts in the sense of tax law; they can be anything at all." }, { "docid": "526520", "title": "", "text": "Even if you're paying a lot of taxes now, you're talking marginal dollars when you look at current contribution, and average tax rate when making withdrawals. IE, if you currently pay 28% on your last dollar (and assuming your contribution is entirely in your marginal rate), then you're paying 28% on all of the Roth contributions, but probably paying a lower average tax rate, due to the lower tax rates on the first many dollars. Look at the overall average tax rate of your expected retirement income - if you're expecting to pull out $100k a year, you're probably paying less than 20% in average taxes, because the first third or so is taxed at a very low rate (0 or 15%), assuming things don't change in our tax code. Comparing that to your 28% and you have a net gain of 8% by paying the taxes later - nothing to shake a stick at. At minimum, have enough in your traditional IRA to max out the zero tax bucket (at least $12k). Realistically you probably should have enough to max out the 15% bucket, as you presumably are well above that bucket now. Any Roth savings will be more than eliminated by this difference: 28% tax now, 15% tax later? Yes please. A diversified combination is usually best for those expecting to have a lot of retirement savings - enough in Traditional to get at least $35k or so a year out, say, and then enough in Roth to keep your comfortable lifestyle after that. The one caveat here is in the case when you max out your contribution levels, you may gain by using money that is not in your IRA to pay the taxes on the conversion. Talk to your tax professional or accountant to verify this will be helpful in your particular instance." }, { "docid": "551403", "title": "", "text": "\"From a purely analytical standpoint, assuming you are investing your Roth IRA contributions in broad market securities (such as the SPDR S&P 500 ETF, which tracks the S&P 500), the broader market has historically had more upward movement than downward, and therefore a dollar invested today will have a greater expected value than a dollar invested tomorrow. So from this perspective, it is better to \"\"max out\"\" your Roth on the first day of the contribution year and immediately invest in broad market (or at least well diversified) securities. That being said, opportunity costs must also be taken into account--every dollar you use to fund your Roth IRA is a dollar that is no longer available to be invested elsewhere (hence, a lost opportunity). With this in mind, if you are currently eligible for a 401k in which your employer matches some portion of your contributions, it is generally advised that you contribute to the 401k up to the employer-match. For example, if your employer matches 75% of contributions up to 3.5% of your gross salary, then it is advisable that you first contribute this 3.5% to your 401k before even considering contributing to a Roth IRA. The reasoning behind this is two-fold: first, the employer-match can be considered as a guaranteed Return on Investment--so for example, for an employer that matches 75%, for every dollar you contribute you already have earned a 75% return up to the employer's limit. Secondly, 401k contributions have tax implications: not only is the money contributed to the 401k pre-tax (i.e., contributions are not taxed), it also reduces your taxable income, so the marginal tax benefit of these contributions must also be taken into account. Keep in mind that in the usual circumstances, 401k disbursements are taxable. Finally, many financial advisors will also suggest establishing an \"\"emergency fund\"\", which is money that you will not use unless you suffer an emergency that has an impact on your normal income--loss of job, medical emergency, etc. These funds are often kept in highly liquid accounts (savings accounts, money-market funds, etc.) so they can be accessed immediately when you run into one of \"\"life's little surprises\"\". Generally, it is advised that an emergency fund between $500-$1000 is established ASAP, and over time the emergency fund should be increased until it has reached a value equivalent to the sum of 8 months' worth of expenses. If funding an IRA is preventing you from working towards such an emergency fund, then you may want to consider waiting on maxing out the IRA before you have that EF established. Of course, it goes without saying that credit card balances with APRs other than 0.00% (or similar) should be paid off before an IRA is funded, since while you can only hope to match the market at best (between 10-15% a year) in your IRA investments, paying down credit card balances is an instant \"\"return\"\" of whatever the APR is, which usually tends to be between a 15-30% APR. In a nutshell, assuming you are maxing out your 401k (if applicable), have an emergency fund established, are not carrying any high-APR credit card balances, and are able to do so, historical price movements in the markets suggest that funding your Roth IRA upfront and investing these funds immediately in a broadly diversified portfolio will yield a higher expected return than funding the account periodically throughout the year (using dollar cost averaging or similar strategies). If this is not the case, take some time to consider the opportunity costs you are incurring from not fully contributing to your 401k, carrying high credit card balances, or not having a sufficient emergency fund established. This is not financial advice specific to any individual and your mileage may vary. Consider consulting a Certified Financial Planner, Certified Public Accountant, etc. before making any major financial decisions.\"" }, { "docid": "516777", "title": "", "text": "I rolled mine over from the company I was at into my own brokerage house. You can't roll them into a Roth IRA, so I needed to setup a traditional IRA. There is paperwork your old jobs can provide you. I had to put in some mailing addresses, some account numbers and turn them in. My broker received it, I chose what I wanted to invest it in and that was that. No tax penalty or early withdrawal penalty. The key to avoiding penalties is to have your past employers send the money directly to another retirement fund, not send a check to you." }, { "docid": "398520", "title": "", "text": "Don’t take the cash deposit whatever you do. This is a retirement savings vehicle after all and you want to keep this money designated as such. You have 3 options: 1) Rollover the old 401k to the new 401k. Once Your new plan is setup you can call who ever runs that plan and ask them how to get started. It will require you filling out a form with the old 401k provider and they’ll transfer the balance of your account directly to the new 401k. 2) Rollover the old 401k to a Traditional IRA. This involves opening a new traditional IRA if you don’t already have one (I assume you don’t). Vanguard is a reddit favorite and I can vouch for them as Well. Other shops like Fidelity and Schwab are also good but since Vanguard is very low cost and has great service it’s usually a good choice especially for beginners. 3) Convert the old 401k to a ROTH IRA. This is essentially the same as Step 2, the difference is you’ll owe taxes on the balance you convert. Why would you voluntarily want to pay taxes f you can avoid them with options 1 or 2? The beauty of the ROTH is you only pay taxes on the money you contribute to the ROTH, then it grows tax free and when you’re retired you get to withdraw it tax free as well. (The money contained in a 401k or a traditional IRA is taxed when you withdraw in retirement). My $.02. 401k accounts typically have higher fees than IRAs, even if they own the same mutual funds the expense ratios are usually more in the 401k. The last 2 times I’ve changed jobs I’ve converted the 401k money into my ROTH IRA. If it’s a small sum of money and/or you can afford to pay the taxes on the money I’d suggest doing the same. You can read up heavily on the pros/cons of ROTH vs Traditional but My personal strategy is to have 2 “buckets” or money when I retire (some in ROTH and some in Traditional). I can withdraw as much money from the Traditional account until I Max out the lowest Tax bracket and then pull any other money I need from the ROTH accounts that are tax free.This allows you to keep taxes fairly low in retirement. If you don’t have a ROTH now this is a great way to start one." }, { "docid": "454333", "title": "", "text": "If you're in the 25% tax bracket, then you probably shouldn't be doing a Roth conversion right now. You'd prefer to do Roth conversions when you can do so at a 15% rate. You could contribute some of your current annual contributions to Roth directly, but even that isn't a great idea except to diversify your holdings. Odds are you won't be paying 25% average tax rate on your retirement, unless you're doing very well in your retirement account. Odds are you'll be somewhere around 15%. Converting at a 15% rate therefore is fine; basically, you'll have something like this, based on some assumptions (I'm making up dollars, brackets, etc.; obviously these will change): Doing this, you pay 0-15% tax on up to 75k, then pay 0 tax after that on the Roth (which you paid 15% tax on already). Therefore, you don't end up paying more than 15% on any single dollar, and you pay less on the total sum. But you also don't really want to be paying 25% on any of it, since that won't really help you out any and could hurt you (will hurt you, if you end up getting some of that 15% bracket income from the Roth). If you're in the 25% bracket now, then you probably are better off just keeping everything in regular IRA (unless you're expecting to be in the 28% bracket after retirement?). Putting some in Roth isn't a terrible idea, just for diversification's sake, but it's probably going to cost you money unless tax rates rise dramatically (which they certainly could, though not as likely to rise on the 'middle class' 0-100k range). They'd have to double for you to be worse off this way. And finally: do not ever withdraw from the 401k to pay taxes on a conversion. You're subject to a 10% penalty for doing that (as it's an early withdrawal) and also have to pay taxes on that withdrawal. Ick. For more information about when Roth makes sense, read site moderator JoeTaxpayer's Blog article on the subject, which explains this in great detail." }, { "docid": "2128", "title": "", "text": "If the IRA is costing you $100 a year, you should almost certainly transfer it to a cheaper provider, regardless of whether you're going to withdraw anything. You can transfer the IRA to another provider that doesn't charge you the fees. Or you can convert it to Roth and combine it with your existing Roth. Either way, you will keep all the money, and save $100 per year in the future. If you want to take money out of your retirement accounts, you should take it out of your Roth IRA, because you can withdraw contributions (i.e., up to the amount you contributed) from the Roth without tax or penalty. Whether you should withdraw anything from your retirement accounts is a different question. If you're already maxing out your Roth IRA, and you have sufficient retirement savings, you could just instead plow that $5500 into your student loans. (If you can afford it, of course, it'd be better to just pay the $7500 from your income and still contribute to the retirement accounts.) There's no reason to withdraw from retirement accounts to pay loans when you could just divert current income for that purpose instead." }, { "docid": "211525", "title": "", "text": "First, a Roth is funded with post tax money. The Roth IRA deposit will not offset any tax obligation you might have. The IRA is not an investment, it's an account with a specific set of tax rules that apply to it. If you don't have a brokerage account, I'd suggest you consider a broker that has an office nearby. Schwab, Fidelity, Vanguard are 3 that I happen to have relationships with. Once the funds are deposited, you need to choose how to invest for the long term. The fact that I'd choose the lowest cost S&P ETF or mutual fund doesn't mean that's the ideal investment for you. You need to continue to do research to find the exact investment that matches your risk profile. By way of example, up until a few years ago, my wife and I were nearly 100% invested in stocks, mostly the S&P 500. When we retired, four years ago, I shifted a bit to be more conservative, closer to 80% stock 20% cash." }, { "docid": "418864", "title": "", "text": "\"Keep in mind, there are too many variables to address in a single post. I could (and might) write a full book on the topic. One simple way to comprehend your perceived observation. In the 25% bracket, you have $1000 of income and two choices. Net out $750, and deposit to Roth, or deposit the full $1000 to the traditional IRA or 401(k). Sufficient time passes for the investment to grow 10 fold. For what it's worth, 8% at 30 years will do that. The Roth is now worth $7500 tax free. The traditional 401(k) is worth $10000 but subject to tax. At 25%, we're at the same $7500. For those looking to invest more than a gross $18,000, the Roth flavor is an effective $24,000, as post tax, this is $18,000. I wrote a bit more on this in the whimsically titled The Density of Your IRA. This is really a top 10%er issue, as it takes quite a bit of income for the $23,000 combined IRA and 401(k) limits to be a problem. In my writing, the larger case to be made is for taking advantage of the tax rate difference between the time of deposit and withdrawal. A look at the 2016 tax rates is in order. Let's stick with 25% while working. Now, at retirement, but before social security, as that's another story, the couple has $20,600 in standard deduction and exemption, and both the 10 and 15% brackets to enjoy. Ignoring any other deductions, potential credits, etc, let's look at a gross $80,000 withdrawal. The numbers happen to work out to an average 10%, with the couple being in a marginal 15% bracket. A full 25% or $20,000 tax would be the break-even to the \"\"same bracket in/out\"\" analysis, so this produces a $12,000 benefit. This issue is often treated as if there were 2 points in time, the deposit, and the withdrawal. For most people, that may be the case. Keep in mind, current law allows a conversion to Roth any time in between. This gives an opportunity to make a deposit while in the 25% bracket, and convert in any year the marginal rate drops back to 15% for whatever reason. Last - I can't ignore the Social Security problem. Simply put, when half of your Social Security benefits plus other income exceed $25,000 ($32,000 if married filing joint) your benefits start to become taxable, until 85% of your benefits are fully taxed. This issue is worthy of multiple posts by itself. It's not a deal killer, just another point to consider. A very high income earner might be beyond these levels already, in which case the point is moot. A low income earner, not impacted at all. It's those who are in the range to navigate this that would benefit to take advantage of the scenario I presented above and spend down pre-tax accounts, while planning to use the Roths when Social Security starts. This should make it clear - it's not all or none. Those retiring with $2M in 100% pretax, or $1.5M 100% in Roth have both missed the chance to have the optimal mix.\"" }, { "docid": "127664", "title": "", "text": "\"Your employment status is not 100% clear from the question. Normally, consultants are sole-proprietors or LLC's and are paid with 1099's. They take care of their own taxes, often with schedule C, and they sometimes can but generally do not use \"\"employer\"\" company 401(k). If this is your situation, you can contact any provider you want and set up your own solo 401(k), which will have great investment options and no fees. I do this, through Fidelity. If you are paid with a W2, you are not a consultant. You are an employee and must use your employer's 401(k). Figure out what you are. If you are a consultant, open a solo 401(k) at the provider of your choice. Make sure beforehand that they allow incoming rollovers. Roll all of your previous 401(k)s and IRA's into it. When you have moved your 401(k) to a better provider, you won't be paying any extra fees, but you will not recoup any fees your original provider charged. I'm not sure why you mention a Roth IRA. If you try to roll your 401(k) into a Roth instead of a traditional IRA or 401(k), be aware that you will be taxed on everything you roll. ---- Edit: a little info about IRA's in response to your comment ---- Tax advantaged retirement accounts come in two flavors: one is managed by your company and the money is taken out of your paycheck. This is usually a 401(k) or 403(b). You can contribute up to $18K per year and your company can also contribute to it. The other flavor is an IRA. You can contribute $5,500 per year to this for you and $5,500 for your spouse. These are outside of your company and you make the deposits yourself. You choose your own provider, so competition has driven prices way down. You can have both a 401(k) and an IRA and contribute the max to both (though at high incomes you lose the ability to deduct IRA contributions). These accounts are tax advantaged because you only pay taxes once. With a regular brokerage account, you pay income tax in the year in which you earn money, then you pay tax every year on dividends and any capital gains that have been realized by selling. There are two types of tax-advantaged accounts: Traditional IRA or Traditional 401(k). You do not pay income tax on this money in the year you earn it, nor do you pay capital gains tax. Instead you pay tax only in the year in which you take the money out (in retirement). Roth IRA or Roth 401(k). You do pay income tax on money on this money in the year in which you earn it. But then you don't pay tax on any gains or withdrawals ever again. When you leave your job (and sometimes at other times) you can move your money out of a 401(k) into your IRA, where you can do a better job managing it. You can also move money from your IRA into a 401(k) if your 401(k) provider will allow you to. Whether traditional or Roth is better depends on your tax rate now and your tax rate at retirement. However, if you choose to move money from a traditional account into a Roth account, you must pay tax on it in that year as if it was income because traditional and Roth accounts are taxed at different times. For that reason, if you are just trying to move money out of your 401(k) to save on fees, the logical place to put it is in a traditional IRA. Moving money from a traditional to a Roth may make sense, for example, if your tax rate is temporarily low this year, but that would be a separate decision from the one you are looking at. You can always roll your traditional IRA into a Roth later if that does become the case. Otherwise, there's no reason to think your traditional 401(k) should be rolled into a Roth IRA according to what you have described.\"" }, { "docid": "448260", "title": "", "text": "A 401K (pre-tax or Roth) account or an IRA (Deductible or Roth) account is a retirement account. Which means you delay paying taxes now on your deposits, or you avoid paying taxes on your earnings later. But a retirement account doesn't perform any different than any other account year-to-year. Being a retirement account doesn't dictate a type of investment. You can invest in a certificate of deposit that is guaranteed to make x% this year; or you can invest in stocks, bonds, mutual funds that infest in stocks or bonds. Those stocks and bonds can be growth focused, or income focused; they can be from large companies or small companies; US companies or international companies. Or whatever mix you want. The graph in your question shows that if you invest early in your adulthood, and keep investing, and you make the average return you should make more money than starting later. But a couple of notes: So to your exact questions: An S&P 500 investment should perform exactly the same this year if it is in a 401K, IRA, or taxable account With a few exceptions: Yes any investment can lose money. The last 6 months have been volatile and the last month and a half especially so. A retirement account isn't any different. An investment in mutual fund X in a retirement account is just as depressed a one in the same fund but from a taxable account." }, { "docid": "95390", "title": "", "text": "\"Where are you from? The Netherlands has tax treaties with different countries that may offer you some additional options. The Netherlands calculates a maximum tax free contribution to your pension each year based on your income. If you contributed less than you were allowed to (pensioengat), you can invest the difference between your actual and allowed contributions in special retirement investments that usually offer tax advantages. A gap like this can be due to getting a bonus or a raise. After looking around, the investments available are either a special savings account (banksparen) or an annuity (lijfrente). Your allowed contributions to both will be tax deductible and the investment itself is excluded from wealth tax (box 3 taxes). I also see Aegon offering an \"\"investment annuity\"\" that lets you invest in any of 7 of their mutual funds until a certain date at which time you liquidate and use the proceeds to fund an annuity. With the Dutch retirement options, wou will not in general get the same freedom of choice or low costs associated with IRAs in the US. I'm not sure about ISAs in the UK. It's also important to check any tax agreements between countries to ensure your chosen investment vehicle gets the tax advantaged treatment in your home country as it does in the Netherlands. For US citizens, this is important even when living abroad. For others, it is important if you return to your home country and still have this investment. If you are a US citizen, you have an additional option. The US / Dutch tax treaty allows you to make these contributions to preexisting (i.e. you had these before moving to NL) retirement accounts in the US like an IRA. Note that in practice it may be difficult to contribute to an existing Roth IRA because you would need to have earned income after the foreign income tax deduction but less than the maximum income for a Roth contribution.\"" }, { "docid": "175968", "title": "", "text": "\"In a Roth IRA scenario, this $5,000 would be reduced to $3,750 if we assume a (nice and round) 25% tax rate. For the Traditional IRA, the full $5,000 would be invested. No, that's not how it works. Taxes aren't removed from your Roth account. You'll have $5,000 invested either way. The difference is that you'll have a tax deduction if you invest in a traditional IRA, but not a Roth. So you'll \"\"save\"\" $1,250 in taxes up front if you invest in a traditional IRA versus a Roth. The flip side is when you withdraw the money. Since you've already paid tax on the Roth investment, and it grows tax free, you'll pay no tax when you withdraw it. But you'll pay tax on the investment and the gains when you withdraw from a traditional IRA. Using your numbers, you'd pay tax on $2.2MM from the traditional IRA, but NO TAX on $2.2MM from the Roth. At that point, you've saved over $500,000 in taxes. Now if you invested the tax savings from the traditional IRA and it earned the same amount, then yes, you'd end up in the same place in the end, provided you have the same marginal tax rate. But I suspect that most don't invest that savings, and if you withdraw significant amount, you'll likely move into higher tax brackets. In your example, suppose you only had $3,750 of \"\"discretionary\"\" income that you could put toward retirement. You could put $5,000 in a traditional IRA (since you'll get a $1,250 tax deduction), or $3,750 in a Roth. Then your math works out the same. If you invest the same amount in either, though, the math on the Roth is a no-brainer.\"" }, { "docid": "146735", "title": "", "text": "Your question boils down to saving for a house or saving for retirement. Why not do both? If you invest in a Roth 401k or Roth IRA you can withdraw any contributions that are at least 5 years old without penalty (assuming you're willing to put off purchasing a little longer than your original 2-3 years). If you qualify as a first time home buyer (i.e. you haven't owned a home in at least 2 years) you can withdraw investment earnings as well if your distribution is earmarked towards the down payment and is no more than $10000. Although you won't be penalized for using investment earnings for a down payment you will still have to pay taxes on them. So this may be more appealing to someone that has enough contributions to avoid dipping into the investment earnings. The only other downside is that contributions to a Roth investment are not tax deductible like Traditional IRA and 401k contributions are. Instead, they grow tax free and distributions are tax free when you reach retirement age." }, { "docid": "67410", "title": "", "text": "\"The tax code is a hodgepodge of rules that are often tough to explain. The reality is that it's our Congress that writes the tax code, and they often have conflicting goals among themselves. In theory, someone said \"\"How about we force withdrawals at some point. After all, these are retirement accounts, not 'give your kid a huge inheritance account'.\"\" And the discussion continued from there. The age 70-1/2 was arbitrary. 70 happens to be the age for maximum Social Security benefits. But the average retirement age is 63. To make things more confusing, one can easily start taking IRA or 401(k) withdrawals at age 59-1/2, but for 401(k) as early as 55 if you separate from the job at 55 or later. One can also take withdrawals earlier from an IRA with tax, but no penalty using Sec 72(t) rules (such as 72(t)(2)(A)(iv) on Substantially Equal Periodic Payments). To add to the confusion, Roth IRA? No RMDs. Roth 401(k), RMDs once separated from service. Since the money has already been taxed, it's the tax on the growth the government loses. My advice to the reader would be to move the Roth 401(k) to a Roth IRA before 70-1/2. My advice to congress would be to change the code to have the same rules for both accounts. Whether one agrees that a certain rule is 'fair' to them or others is up to them. I think we can agree that the rules are remarkably complex, from origin to execution. And a moving target. You can see just from the history of this site how older questions are often revisited as code changes occur.\"" }, { "docid": "403024", "title": "", "text": "According to the link below, it does appear that you must take an RMD, or Required Minimum Distribution, from your IRA at age 70½, or face a 50% penalty of the RMD AMOUNT that has NOT been taken, which is going to be much less than 50% of your entire account balance. Why specifically this happens would be opinion based on my interpretation of the reasoning behind those that enacted the law. I can tell you penalties like this are used to encourage behavior - you can't just leave your money in a tax-free account forever. The IRA is meant to help you build your savings for retirement, and at age 70½ you should be ready for retirement. This means you must begin withdrawing the money - but that doesn't mean you have to spend it. In the link below, there are outlines on what you can do to satisfy the required minimum distribution. As it specifies, you can take one lump sum, or spread it out over multiple payments, and there's a calculator to identify what your RMD will be. http://www.schwab.com/public/schwab/investing/retirement_and_planning/understanding_iras/withdrawals_and_distributions/age_70_and_a_half_and_over As noted in the linked page, you DO NOT have to take an RMD on a Roth IRA. If this is important to you, you may want to consider Rolling Over your current IRA to a Roth." }, { "docid": "424427", "title": "", "text": "Edited in response to JoeTaxpayer's comment and OP Tim's additional question. To add to and clarify a little what littleadv has said, and to answer OP Tim's next question: As far as the IRS is concerned, you have at most one Individual Retirement Account of each type (Traditional, Roth) though the money in each IRA can be invested with as many different custodians (brokerages, banks, etc.) and different investments as you like. Thus, the maximum $5000 ($6000 for older folks) that you can contribute each year can be split up and invested any which way you like, and when in later years you take a Required Minimum Distribution (RMD) from a Traditional IRA, you can get the money by selling just one of the investments, or from several investments; all that the IRS cares is that the total amount that is distributed to you is at least as large as the RMD. An important corollary is that the balance in your IRA is the sum total of the value of all the investments that various custodians are holding for you in IRA accounts. There is no loss in an IRA until every penny has been withdrawn from every investment in your IRA and distributed to you, thus making your IRA balance zero. As long as you have a positive balance, there is no loss: everything has to come out. After the last distribution from your Roth IRA (the one that empties your entire Roth IRA, no matter where it is invested and reduces your Roth IRA balance (see definition above) to zero), total up all the amounts that you have received as distributions from your Roth IRA. If this is less than the total amount of money you contributed to your Roth IRA (this includes rollovers from a Traditional IRA or Roth 401k etc., but not the earnings within the Roth IRA that you re-invested inside the Roth IRA), you have a loss that can be deducted on Schedule A as a Miscellaneous Deduction subject to the 2% AGI limit. This 2% is not a cap (in the sense that no more than 2% of your AGI can be deducted in this category) but rather a threshold: you can only deduct whatever part of your total Miscellaneous Deductions exceeds 2% of your AGI. Not many people have Miscellaneous Deductions whose total exceeds 2% of their AGI, and so they end up not being able to deduct anything in this category. If you ever made nondeductible contributions to your Traditional IRA because you were ineligible to make a deductible contribution (income too high, pension plan coverage at work etc), then the sum of all these contributions is your basis in your Traditional IRA. Note that your deductible contributions, if any, are not part of the basis. The above rules apply to your basis in your Traditional IRA as well. After the last distribution from your Traditional IRA (the one that empties all your Traditional IRA accounts and reduces your Traditional IRA balance to zero), total up all the distributions that you received (don't forget to include the nontaxable part of each distribution that represents a return of the basis). If the sum total is less than your basis, you have a loss that can be deducted on Schedule A as a Miscellaneous Deduction subject to the 2% AGI threshold. You can only deposit cash into an IRA and take a distribution in cash from an IRA. Now, as JoeTaxpayer points out, if your IRA owns stock, you can take a distribution by having the shares transferred from your IRA account in your brokerage to your personal account in the brokerage. However, the amount of the distribution, as reported by the brokerage to the IRS, is the value of the shares transferred as of the time of the transfer, (more generally the fair market value of the property that is transferred out of the IRA) and this is the amount you report on your income tax return. Any capital gain or loss on those shares remains inside the IRA because your basis (in your personal account) in the shares that came out of the IRA is the amount of the distribution. If you sell these shares at a later date, you will have a (taxable) gain or loss depending on whether you sold the shares for more or less than your basis. In effect, the share transfer transaction is as if you sold the shares in the IRA, took the proceeds as a cash distribution and immediately bought the same shares in your personal account, but you saved the transaction fees for the sale and the purchase and avoided paying the difference between the buying and selling price of the shares as well as any changes in these in the microseconds that would have elapsed between the execution of the sell-shares-in-Tim's-IRA-account, distribute-cash-to-Tim, and buy-shares-in-Tim's-personal account transactions. Of course, your broker will likely charge a fee for transferring ownership of the shares from your IRA to you. But the important point is that any capital gain or loss within the IRA cannot be used to offset a gain or loss in your taxable accounts. What happens inside the IRA stays inside the IRA." }, { "docid": "31462", "title": "", "text": "\"In asnwer to your questions: As @joetaxpayer said, you really should look into a Solo 401(k). In 2017, this allows you to contribute up to $18k/year and your employer (the LLC) to contribute more, up to $54k/year total (subject to IRS rules). 401(k) usually have ROTH and traditional sides, just like IRA. I believe the employer-contributed funds also see less tax burden for both you and your LLC that if that same money had become salary (payroll taxes, etc.). You might start at irs.gov/retirement-plans/one-participant-401k-plans and go from there. ROTH vs. pre-tax: You can mix and match within years and between years. Figure out what income you want to have when you retire. Any year you expect to pay lower taxes (low income, kids, deductions, etc.), make ROTH contributions. Any year you expect high taxes (bonus, high wage, taxable capital gains, etc.), make pre-tax payments. I have had a uniformly bad experience with target date funds across multiple 401(k) plans from multiple plan adminstrators. They just don't perform well (a common problem with almost any actively managed fund). You probably don't want to deal with individual stocks in your retirement accounts, so rather pick passively managed index funds that track various markets segments you care about and just sit on them. For example, your high-risk money might be in fast-growing but volatile industries (e.g. tech, aerospace, medical), your medium-risk money might go in \"\"total market\"\" or S&P 500 index funds, and your low-risk money might go in treasury notes and bonds. The breakdown is up to you, but as an 18 year old you have a ~50 year horizon and so can afford to wait out anything short of another Great Depression (and maybe even that). So you'd want generally you want more or your money in the high-risk high-return category, rebalancing to lower risk investments as you age. Diversifying into real estate, foreign investments, etc. might also make sense but I'm no expert on those.\"" }, { "docid": "144824", "title": "", "text": "There are not as many options here as you fear. If you have no other investments outside this 401K it is even easier. Outside accounts include IRA, Roth IRA, taxable investments (mutual funds, ETF, individual stocks), Employee stock purchase plans. Amount: make sure you put enough in to get all the company match. I assume that in your case the 9% will do so, but check your documents. The company match will be with pre-tax funds. Roth vs Regular 401K? Most people in their lifetime will need a mix of Roth and Regular retirement accounts. You need to determine if it is better for you to pay the tax on your contributions now or later. Which accounts? If you are going to invest in a target date fund, you can ignore the rest of the options. The target date fund is a mixture of investments that will change over the decades. Calculate which one fits your expected retirement date and go with it. If you want to be able to control the mix, then you will need to pick several funds. The selection depends on what non-401K investments you have. Now here is what I considered the best advice. Decide Roth or regular, and just put the money into the most appropriate target date fund with the Roth/regular split you want. Then after the money starts flowing into your account, research the funds involved, the fees for those funds, and how you want to invest. Then move the money into the funds you want. Don't waste another day deciding how to invest. Just get started. The best part of a 401K, besides the match, is that you can move money between funds without worrying about taxes. If you realize that you want to put extra emphasis on the foreign stocks, or Mid-cap; just move the funds and redirect future contributions." } ]

[ { "docid": "272840", "title": "", "text": "Without making specific recommendations, it is worthwhile to point out the differing tax treatments for a Roth IRA: investments in a Roth IRA will not be taxed when you withdraw them during retirement (unless they change the law on that or something crazy). So if you are thinking about investing in some areas with high risk and high potential reward (e.g. emerging market stocks) then the Roth IRA might be the place to do it. That way, if the investment works out, you have more money in the account that won't ever be taxed. We can talk about the possible risks of certain kinds of investments, but this is not an appropriate forum to recommend for or against them specifically. Healthcare stocks are subject to political risk in the current regulatory climate. BRICs are subject to political risks regarding the political and business climate in the relevant nations, and the growth of their economies need not correspond with growth in the companies you hold in your portfolio. Energy stocks are subject to the world economic climate and demand for oil, unless you're talking alternative-energy stocks, which are subject to political risk regarding their subsidies and technological risk regarding whether or not their technologies pan out. It is worth pointing out that any ETF you invest in will have a prospectus, and that prospectus will contain a section discussing the risks which could affect your investment. Read it before investing! :)" } ]

[ { "docid": "332113", "title": "", "text": "You are in the perfect window for making an IRA contribution. The IRS allows you to make IRA contributions for last year until tax day. So you know that for 2014 you didn't have access to a 401K at work. You want to avoid making a deductible IRA contribution for this year (2015) until you are sure that you wont have a 401K at work this year. Take your time and decide if the detectible IRA or the Roth works best for your situation. Having a IRA now will be good becasue you have many years for it to grow. Keep in mind that it is not unusual to have multiple retirement accounts: Current 401K; rolled over into a IRA; Roth IRA... Each has different rules, limits, and benefits. There is no reason to pick one way of investing for retirement becasue you never know if the next employer will have the type of plan you like. I am assuming that your spouse, if you are married, doesn't have access to a 401K; otherwise you would have to consider the applicable limits." }, { "docid": "159197", "title": "", "text": "&gt;I could be wrong but you will still get tax at 10% This isn't true for Roths. If I put 5k (post tax of course) money into a Roth 401k or a Roth IRA I can withdraw that 5k whenever I want penalty and tax free. Now lets say that 5k has grown to 7k and I take out all 7k the first 5k is penalty and tax free but the extra 2k is taxed (with the extra 10% penalty added on). So as long as you don't touch any growth in your roth accounts you can withdraw the principal amount with the same consequences you would experience if you were to take money out of your checking account at your bank. Also money in and IRA does not have to be invested it could be in a liquid position. Now a pre tax retirement account doesn't have the same luxury. If I stick 5k into a traditional IRA and it grows to 7k and I pull that money out the entire ammount gets taxed AND penalized (even the principal amount is subject the 10% penalty). Now if you do a Roth conversion (pre-tax to post-tax retirment account conversion) the principal ammount (the amount you paid taxes on) is still subject to the 10% penalty for 5 years. After the 5 years you can withdraw the converted ammount tax and penalty free (well you already paid the taxes) it would just be the growth that is subject to the penalty." }, { "docid": "137708", "title": "", "text": "First of all, make sure you have an emergency fund. Ideally this should be at least 6 months of living expenses in an easily accessible place. Do you have any credit card debt, school debt, or other debt? Work towards becoming debt free, especially of higher interest debt and debt on things that are only depreciating (cars, for example). If you have extra income, consider putting it towards debt. If you currently have access to a 403b, you should begin investing immediately. If not, look into a Roth IRA. The community has provided suggestions for good places to get one. With a Roth IRA you take post-tax income money and invest it into this retirement account and when you reach retirement age you get it and all the interest as tax-free income. You can't withdraw the principal until retirement age. You should put up to the legal limit into a retirement account - if you can't do this at first work towards this goal. After an emergency fund, becoming debt free, and fully funding your retirement, save for goals such as a house or other things you are working towards. The exact order of doing these things might vary, but in general you need the emergency fund first." }, { "docid": "262322", "title": "", "text": "\"Assuming you are below retirement age, you typically cannot roll money from a Roth IRA into a 401k nor transfer money out of a 401k until you leave the company. Your best bet is to leave your exising roth ira separate from your 401k. A good strategy for retirement accounts is whenever able (typically when you switch jobs) roll your 401k into a \"\"rollover IRA\"\" (not a roth). Then you can manage your investments with more options than the 5-20 funds provided in the 401k. I would recommend against rolling funds into a 401k because of the lack of options in most 401k plans. Also, 401k is pre-tax and Roth is post-tax. Pre and post tax investments don't mix before withdrawal unless you do a conversion of some kind.\"" }, { "docid": "398520", "title": "", "text": "Don’t take the cash deposit whatever you do. This is a retirement savings vehicle after all and you want to keep this money designated as such. You have 3 options: 1) Rollover the old 401k to the new 401k. Once Your new plan is setup you can call who ever runs that plan and ask them how to get started. It will require you filling out a form with the old 401k provider and they’ll transfer the balance of your account directly to the new 401k. 2) Rollover the old 401k to a Traditional IRA. This involves opening a new traditional IRA if you don’t already have one (I assume you don’t). Vanguard is a reddit favorite and I can vouch for them as Well. Other shops like Fidelity and Schwab are also good but since Vanguard is very low cost and has great service it’s usually a good choice especially for beginners. 3) Convert the old 401k to a ROTH IRA. This is essentially the same as Step 2, the difference is you’ll owe taxes on the balance you convert. Why would you voluntarily want to pay taxes f you can avoid them with options 1 or 2? The beauty of the ROTH is you only pay taxes on the money you contribute to the ROTH, then it grows tax free and when you’re retired you get to withdraw it tax free as well. (The money contained in a 401k or a traditional IRA is taxed when you withdraw in retirement). My $.02. 401k accounts typically have higher fees than IRAs, even if they own the same mutual funds the expense ratios are usually more in the 401k. The last 2 times I’ve changed jobs I’ve converted the 401k money into my ROTH IRA. If it’s a small sum of money and/or you can afford to pay the taxes on the money I’d suggest doing the same. You can read up heavily on the pros/cons of ROTH vs Traditional but My personal strategy is to have 2 “buckets” or money when I retire (some in ROTH and some in Traditional). I can withdraw as much money from the Traditional account until I Max out the lowest Tax bracket and then pull any other money I need from the ROTH accounts that are tax free.This allows you to keep taxes fairly low in retirement. If you don’t have a ROTH now this is a great way to start one." }, { "docid": "109305", "title": "", "text": "\"IRA is a tax-deferred account. I.e.: you're not paying any taxes on the income within the account (as long as you don't withdraw it) and you can deduct the investment (with certain limitation on how much, depending on your total AGI). It is taxed when you withdraw it - at ordinary rates for the \"\"traditional\"\" IRA and with 0% rate for ROTH, as long as the withdrawal is qualified (if not qualified - you pay ordinary rate tax for ROTH and additional 10% tax for both on the taxable amounts). The details are a bit complicated (there's deductible IRA, non-deductible IRA, roll-overs, etc etc), but that's the basic. Regular investment accounts are taxed currently on any income, but you get the \"\"better\"\" capital gains rates on many things. So which one is better depends how long your investment is going to be, what is your tax situation now, and what you anticipate it to be later when you retire.\"" }, { "docid": "327237", "title": "", "text": "The short answer to your question is yes. Index funds are about the easiest and most efficient diversified way to invest your money. Vanguard's are among the cheapest and best. Be aware, though, that passive income doesn't mean you do nothing for your money. In the case of investing, what you are doing is bearing risk. That is, you are being paid (on average) to put your money in a situation where you may lose money. If you keep your eye on the long-term prize, then when (not if) you sustain losses in your investment account, you will have the patience to leave the money in there. I'm a little confused by your wording about increasing your salary. Normally we think of index funds as a way to increase our wealth. If you are making new investments, presumably you have more salary than you need right now. Normal index funds will reinvest dividends automatically, so you will see the value of your investments rise but will not see any cash flows per se unless you are selling your holdings. If you want actual cash coming out of your investment, you can use ETF's to achieve the same type of investment and treat the dividends as a supplement to your income. Note, however, that some gains in your ETF will be in the form of capital gains and some will be dividends. Think more like 2% year per in dividend payments and the rest in capital gains. If your objective is to save for retirement, please consider investing through an IRA, Roth IRA, or through your 401(k). No need to give uncle sam a gift from your hard-earned money." }, { "docid": "216243", "title": "", "text": "To your question. Yes. What you propose is typically called the back door Roth. You make the (non-deductible) IRA deposit, and soon after, convert to Roth. As long as you have no other existing IRA, the process is simple, and actually a loophole that's still open. If you have an existing IRA, the conversion may be partially taxed based on untaxed balance. As comments frequently get overlooked, I'm adding @DilipSarwate excellent warning regarding this - Depending on the value of the existing Traditional IRA and its pre-existing basis, if any, the backdoor Roth conversion might be almost completely taxable. Example: Traditional IRA worth $250K with zero basis. New nondeductible contribution increase value to $255.5K and basis $5.5K. Converting $5.5K into a Roth IRA leaves $250K in the Traditional IRA with basis $5381.60. That is, of that $5500 conversion, only $118.40 was nontaxable and so, not only is the original $5500 taxable income to the OP but he also owes taxes on $5381.60 of that $5.5K conversion. In short, discussions of backdoor Roth conversions as a great idea should always be tempered with an acknowledgement that it does not work very well if there is any other money in the Traditional IRA. Once that nondeductible contribution enters a Traditional IRA, it does not come out completely until all your Traditional IRA accounts are drained of all money. All your Traditional IRA money is considered by the IRS to be in a single pot, and you can't set up a Traditional IRA (possibly with a new custodian) via nondeductible contribution, convert just that Traditional IRA account into a Roth IRA account, and claim that the whole conversion amount is nontaxable because all the tax-deferred money is in the other IRAs that you haven't touched at all. Last - you disclosed that you are depositing to a Roth 401(k) to the match. Which prompts me to ask if this is best. If your marginal rate is 25% or higher, you are missing the opportunity to save 'off the top', at that rate, and 'fill the lower brackets' at retirement, or, via conversion, any year before then when you are in a lower bracket for whatever reason. See my answer for Saving for retirement: How much is enough? which addresses this further. From new comments - Won't his Roth 401k contributions max out his overall Roth contributions? No. They are separate numbers, each with own annual limits. Wouldn't this prevent any back-door Roth conversions? The 401(k) has no effect on back door Roth, except for the fact that the 401(k) and high income make the Roth IRA unavailable by normal deposit. Back door is the only door. At the end are you encouraging him to look for a Traditional 401(k) at work to max out, then contributing to a Roth? Yes! Read the linked SE article, and consider the annual withdrawal that would get you to 25%. As I wrote, it would take $2M+ to 'fill' the 15% bracket at retirement." }, { "docid": "389202", "title": "", "text": "The first question is essentially asking for specific investment advice which is off-topic per the FAQ, but I'll take a stab at #2 and #3 (2) If my 401k doesn't change before I leave my job (not planned in the near future), I should roll it over into my Roth IRA after I leave due to these high expense ratios, correct? My advice is that you should roll over a 401K into an IRA the first chance you get (usually when you leave the job). 401K plans are NOTORIOUS for high expense ratios and why leave your money in a plan where you have a limited choice of investments anyway versus a self-directed IRA where you can invest in anything you want? (3) Should I still max contribute with these horrible expense ratios? If they are providing a match, yes. Even with the expense ratios it is hard to beat the immediate return of an employer match. If they aren't matching, the answer is still probably yes for a few reasons: You already are maxing out your ability to contribute to sheltered accounts, so assuming you still want to sock away that money for retirement, the tax benefits are still valuable and probably offset the expense ratios. Although you seem to be an exception, it is hard for most people to be disciplined enough to put money in a retirement account after they have it in their hands (versus auto-deduction from paychecks)." }, { "docid": "565429", "title": "", "text": "My thoughts are your retirement investing priorities should be as follows: So in your case I would not put any money into your 401k until you have maxed out your Roth IRA." }, { "docid": "516777", "title": "", "text": "I rolled mine over from the company I was at into my own brokerage house. You can't roll them into a Roth IRA, so I needed to setup a traditional IRA. There is paperwork your old jobs can provide you. I had to put in some mailing addresses, some account numbers and turn them in. My broker received it, I chose what I wanted to invest it in and that was that. No tax penalty or early withdrawal penalty. The key to avoiding penalties is to have your past employers send the money directly to another retirement fund, not send a check to you." }, { "docid": "371176", "title": "", "text": "First, you need to understand the difference in discussing types of investments and types of accounts. Certificate of Deposits (CDs), money market accounts, mutual funds, and stocks are all examples of types of investments. 401(k), IRA, Roth IRA, and taxable accounts are all examples of types of accounts. In general, those are separate decisions to make. You can invest in any type of investment inside any type of account. So your question really has two different parts: Tax-advantaged retirement accounts vs. Standard taxable accounts FDIC-insured CDs vs. at-risk investments (such as stock mutual funds) Retirement accounts are special accounts allowed by the federal government that allow you to delay (or, in some cases, completely avoid) paying taxes on your investment. The trade-off for these accounts is that, in general, you cannot access any of the money that you put into these accounts until you get to retirement age without paying a steep penalty. These accounts exist to encourage citizens to save for their own retirement. Examples of retirement accounts include 401(k) and IRAs. Standard taxable accounts have no tax advantages, but no restrictions, either. You can put money in and take money out whenever you like. However, anything that your investment earns is taxable each year. Inside any of these accounts, you can invest in FDIC-insured bank accounts, such as savings accounts or CDs, or you can invest in any number of non-insured investments, including money market accounts, bonds, mutual funds, stocks, precious metals, etc. Something you need to understand about investing in general is that your potential returns are directly related to the amount of risk that you take on. Investing in an insured investment, which is guaranteed by the government to never lose its value, will result in the lowest potential investment returns that you can get. Interest-bearing savings accounts are currently paying less than 1% interest. A CD will get you a slightly higher interest rate in exchange for you agreeing not to withdraw your money for a period of time. However, it takes a long time for your investments to grow with these investments. If you are earning 1%, it takes 72 years for your investment to double. If you are willing to take some risk, you can earn much more with your investments. Bonds are often considered quite safe; with a bond, you loan money to a government or corporation, and they pay you back with interest. The risk comes from the possibility that the government or corporation won't pay you back, so it is important to choose a bond from an entity that you trust. Stocks are shares in for-profit companies. Your potential investment gain is unlimited, but it is risky, as stocks can go down in value, and companies can close. However, it is important to note that if you take the largest 500 stocks together (S&P 500), the average value has consistently gone up over the long term. In the last 35 years, this average value has gone up about 11%. At this rate, your investment would double in less than 7 years. To avoid the risk of picking a losing stock, you can invest in a mutual fund, which is a collection of stocks, bonds, or other investments. The idea is that you can, with one investment, invest in many stocks, essentially earning the average performance of all the stocks. There is still risk, as the market can be down as a whole, but you are insulated from any one stock being bad because you are diversified. If you are investing for something in the long-term future, such as retirement, stock mutual funds provide a good rate of return at an acceptably-low level of risk, in my opinion." }, { "docid": "280530", "title": "", "text": "Most people carry a diversity of stock, bond, and commodities in their portfolio. The ratio and types of these investments should be based on your goals and risk tolerance. I personally choose to manage mine through mutual funds which combine the three, but ETFs are also becoming popular. As for where you keep your portfolio, it depends on what you're investing for. If you're investing for retirement you are definitely best to keep as much of your investment as possible in 401k or IRAs (preferably Roth IRAs). Many advisers suggest contributing as much to your 401k as your company matches, then the rest to IRA, and if you over contribute for the IRA back to the 401k. You may choose to skip the 401k if you are not comfortable with the choices your company offers in it (such as only investing in company stock). If you are investing for a point closer than retirement and you still want the risk (and reward potential) of stock I would suggest investing in low tax mutual funds, or eating the tax and investing in regular mutual funds. If you are going to take money out before retirement the penalties of a 401k or IRA make it not worth doing. Technically a savings account isn't investing, but rather a place to store money." }, { "docid": "396257", "title": "", "text": "All the answers that show the equivalency of 401(k) pre-tax and Roth 401(k) post-tax using equivalent contributions are correct assuming equivalent tax rates upon withdrawal. There is some potential gain if your tax rate upon retirement is higher than your working tax rate, but often people calculate a smaller percentage of their working income for their retirement income, which may offset a higher tax-rate anyway. In my mind, the primary advantage of a Roth 401(k) is that it effectively allows you to contribute more for retirement if you are currently maxing out your contributions in a regular 401(k) and IRA and want to contribute more. Doing so can be a big advantage when you are young and can benefit from those additional dollars being put into your retirement account early. This is effectively what is illustrated by the Fidelity calculation, and is something to consider if you are of the mind to aggressively save early for retirement. The reason Roth allows you to contribute more is because traditional IRA contributions are capped. Suppose the cap is $5500. Suppose also you immediately rollover your traditional IRA to a Roth IRA. This is a post-tax contribution, and growth on that is tax-free. If you maxed out your employer pre-tax 401(k) to $17500 and maxed out your IRA, you have maxed out your retirement contributions to $23000. Suppose two doublings, then the 401(k) has grown to $70000, and the IRA has grown to $22000. However, the withdrawal from the 401(k) is taxed, so assuming 25%, the total is $74500 after tax. Now, suppose instead you maxed out your employer Roth 401(k) post-tax instead, so you have put in $17500 post tax. And now, also max out your IRA. Now, all of your $23000 grows tax-free. So upon two doublings, you walk away with $92000. This is because you maxed out your contribution post-tax, meaning it was as if you were allowed to contribute $23333 to your pre-tax 401(k). So if you intend to max out your retirement account contributions, and are looking to contribute even more to retirement accounts, one way is two change over to contributing into the employer Roth 401(k)." }, { "docid": "92442", "title": "", "text": "Is there any benefit to investing in a Roth 401(k) plan, as opposed to a Roth IRA? They have separate contribution limits, so how much you contribute to one does not change the amount you can contribute to the other. Which is relevant to your question because you said the earnings on that account compounded over the next 40 years growing tax-free will be much higher than what I'd save on current taxes on a traditional 401(k). This is only true if you max out your contribution limits. If you start with the same amount of money and have the same marginal tax rate in both years, it doesn't matter which one you pick. Start with $10,000 to invest. With the traditional, you can invest all $10,000. With the Roth, you pay taxes on it and then invest it. Let's assume a tax rate of 25%. So invest $7500. Let's assume that you invest either amount long enough to double four times (forty years at 7% return after inflation is about right). So the traditional has $160,000 and the Roth has $120,000. Now you withdraw them. For simplicity's sake, we'll pretend it's all one year. It's probably over several years, but the math is easier in a single year. With the Roth, you have $120,000. With the traditional, you have to pay tax. Again, let's assume 25%. So that's $40,000, leaving you with $120,000 from the traditional. That is the same amount as the Roth! So it would make sense to If you can max out both, great. You do that for forty years and your retirement will be as financially secure as you can make it. If you can't max them out, the most important thing is the employer match. That's free money. Then you may prefer your Roth IRA to the 401k. Note that you can also roll over your Roth 401k to a Roth IRA. Then you can withdraw your contributions from the Roth IRA without penalty or additional tax. Alternate source. Beyond answering your question, I would still like to reiterate that Roth or traditional does not have a big effect on your investment unless you max them out or you have different tax rates now versus in retirement. It may change other things. For example, you can roll over a Roth 401k to a Roth IRA without paying taxes. And the Roth IRA will act like it was contributed directly. You have to check with your employer what their rollover rules are. They may allow it any time or only at employment separation (when you leave the job). If you do max out your Roth accounts, then they will perform better than the traditional accounts at the same nominal contribution. This is because they are tax free while your returns in the other accounts will have to pay taxes. But it doesn't matter until you hit the limits. Until then, you could just invest the tax savings of the traditional as well as the money you could invest in a Roth." }, { "docid": "84105", "title": "", "text": "The earnings portion will be taxed at your marginal tax rate + 10% penalty. If the total is $100, then the earnings portion is probably not very significant for this to be a concern. But it's something you could put into a Roth IRA and let it compound with the rest of your retirement savings. Depending on your age, the compounding effect of $100 invested early enough tax free can be thousands of dollars at retirement. i.e. You have 60 days to deposit it into a Roth IRA. Don't let that pass you by." }, { "docid": "65567", "title": "", "text": "If you have just started an IRA (presumably with a contribution for 2012), you likely have $5000 in it, or $10,000 if you made a full contribution for 2013 as well. At this time, I would recommend putting it all in a single low-cost mutual fund. Typically, mutual funds that track an index such as the S&P 500 Index have lower costs (annual expense fees) than actively managed funds, and most investment companies offer such mutual funds, with Fidelity, Vanguard, Schwab, to name a few, having very low expenses even among index funds. Later, when you have more money in the account, you can consider diversifying into more funds, buying stocks and bonds, investing in ETFs, etc. Incidentally, if you are just starting out and your Roth IRA is essentially your first investment experience, be aware that you do not need a brokerage account for your Roth IRA until you have more money in the account to invest and specifically want to buy individual stocks and bonds instead of just mutual funds. If you opened a brokerage account for your Roth IRA, close it and transfer the Roth IRA to your choice of mutual fund company; else you will be paying annual fees to the brokerage for maintaining your account, inactivity fees since you won't be doing any trading, etc. The easiest way to do this is to go to the mutual fund company web site and tell them that you want to transfer your IRA to them (not roll over your IRA to them) and they will take care of all the paper work and collecting your money from the brokerage (ditto if your Roth IRA is with a bank or another mutual fund company). Then close your brokerage account." }, { "docid": "439402", "title": "", "text": "Once upon a time, money rolled over from a 401k or 403b plan into an IRA could not be rolled into another 401k or 403b unless the IRA account was properly titled as a Rollover IRA (instead of Traditional IRA - Roth IRAs were still in the future) and the money kept separate (not commingled) with contributions to Traditional IRAs. Much of that has fallen by the way side as the rules have become more relaxed. Also the desire to roll over money into a 401k plan at one's new job has decreased too -- far too many employer-sponsored retirement plans have large management fees and the investments are rarely the best available: one can generally do better keeping ex-401k money outside a new 401k, though of course new contributions from salary earned at the new employer perforce must be put into the employer's 401k. While consolidating one's IRA accounts at one brokerage or one fund family certainly saves on the paperwork, it is worth keeping in mind that putting all one's eggs in one basket might not be the best idea, especially for those concerned that an employee might, like Matilda, take me money and run Venezuela. Another issue is that while one may have diversified investments at the brokerage or fund family, the entire IRA must have the same set of beneficiaries: one cannot leave the money invested in GM stock (or Fund A) to one person and the money invested in Ford stock (or Fund B) to another if one so desires. Thinking far ahead into the future, if one is interested in making charitable bequests, it is the best strategy tax-wise to make these bequests from tax-deferred monies rather than from post-tax money. Since IRAs pass outside the will, one can keep separate IRA accounts with different companies, with, say, the Vanguard IRA having primary beneficiary United Way and the Fidelity IRA having primary beneficiary the American Cancer Society, etc. to achieve the appropriate charitable bequests." }, { "docid": "226298", "title": "", "text": "I would just buy a low-cost diversified equity ETF. VTI is pretty solid. Also, JW are you working or in school? If you are working you should consider opening an IRA or Roth IRA. Also if your employer has a 401k or other retirement plan you can contribute to I would advise doing so." } ]

[ { "docid": "484891", "title": "", "text": "\"A falling exchange rate is an indication of falling confidence in a currency. Countries like Iran or Venezuela, with a managed exchange rate, set their exchange rates at a higher value than the market accepts. Such market expectations may be influenced by poor government management, interventions into markets (such as nationalising businesses) or general instability / scarcity. The governments act to manage that uncertainty by limiting the availability of foreign exchange and pegging the exchange rate. Since there is an inadequate supply of trusted foreign currency people turn to informal exchanges in order to hedge their currency risk. This creates a negative feedback loop. People in government who have access to foreign exchange start to trade on informal markets, pocketing the difference in the official and unofficial rates. The increasing gap between the two rates drives increasing informal market exchange and can result in speculative bubbles. Driving instability (or economic contradiction) is that the massive and increasing difference between the official and market exchange rates becomes a powerful form of rent for government officials. This drives further state-led rent-seeking behaviour and causes the economy to become even more unstable. If you're interested in a more formal academic study of how such parallel markets in currency arise, \"\"Zimbabwe’s Black Market for Foreign Exchange\"\" by Albert Makochekanwa at the University of Pretoria is a useful source.\"" } ]

[ { "docid": "272634", "title": "", "text": "\"The advantage of using a mortgage is that you pay for a house at TODAY's price, using TOMORROW's money. Your question suggests that you rightly observed that it was not a good idea around 2006 (the last peak in housing). That was when prices were at their maximum, and had nowhere to go but down. Some experts think that house prices STILL have further to go on the downside. Meanwhile, wages have been going nowhere during that time. This phenomenon seems to happen about every 40 years or so, the 1930s, the 1970s, and around 2010. At MOST other times, say the 1980s, houses are likely to go up for the \"\"foreseeable\"\" future. At those times, you want to buy the house at \"\"today's\"\" price, then pay for it in future dollars when you are earning more money. The irony is that what most people observe as teenagers is usually the wrong thing to do when they are, say, forty. In 2035, it will probably make sense to have a large mortgage in a bull housing market, which is the opposite of what you observed around 2010. So a better rule is to do at age 40 what made sense about the time you were born (in your case, perhaps the 1990s). Whereas the people born in the early 1970s that got \"\"caught\"\" recently, observed the bull market of the 1980s and 1990s in THEIR teens and twenties, rather than the bear market of the 1970s that took place about the time they were born.\"" }, { "docid": "450577", "title": "", "text": "Most of the information we get about how a company is running its business, in any market, comes from the company. If the information is related to financial statements, it is checked by an external audit, and then provided to the public through official channels. All of these controls are meant to make it very unlikely for a firm to commit fraud or to cook its books. In that sense the controls are successful, very few firms provide fraudulent information to the public compared with the thousands of companies that list in stock markets around the world. Now, there is still a handful of firms that have committed fraud, and it is probable that a few firms are committing fraud right now. But, these companies go to great lengths to keep information about their fraud hidden from both the public and the authorities. All of these factors contribute to such frauds being black swan events to the outside observer. A black swan event is an event that is highly improbable, impossible to foresee with the information available before the event (it can only be analyzed in retrospect), and it has very large impact. The classification of an event as a black swan depends on your perspective. E.g. the Enron collapse was not as unexpected to the Enron executives as it was to its investors. You cannot foresee black swan events, but there are a few strategies that allow you to insure yourself against them. One such strategy is buying out of the money puts in the stocks where you have an investment, the idea being that in the event of a crash - due to fraud or whatever other reason - the profits in your puts would offset the loses on the stock. This strategy however suffers from time and loses a little money every day that the black swan doesn't show up, thanks to theta decay. So while it is not possible to detect fraud before investing, or at least not feasible with the resources and information available to the average investor, it is possible to obtain some degree of protection against it, at a cost. Whether that cost is too high or not, is the million dollar question." }, { "docid": "527148", "title": "", "text": "So you're 23 with no higher graduation, certificates etc which would allow you to study / training but with a high passion for logical thinking and math? Im 31 now, i was in a similar position back then when i was 23. The very best thoughts i want to throw you over: FORGET IT (AT LEAS THIS WAY) - You need cash equity (not borrowed) to even get a foot in the door (read on why) . The fact that you even consider to trade with a few hundred dollar shows how desperate you're, it would very likely result in loss, resignation and mental pain. Let me get you a reality check: If you think you can quadruple your money within months with ease and no risk your wrong - this mindset is gambling - don't end up as gambler. To make 24K a year or 2K a month (taxes are not included) would mean 10% a month on a 20K account which would be almost impossible on a long run (show me a hedge-fund with that performance) - What do you do on draw down months - 3 months no profit would mean you're 8K behind - you wont make a living wit ha 20K account in a western civilization and normal lifestyle. Big question, how do you want to trade? Everything newsfeed / latency based is very hard to compete in. So called technical systems drawing lines, fancy indicators etc are bogus in my opinion (read taleb black swan). Trading/speculation based on fundamentals is a different animal - It to be able to do that you would need to understand the market you trade and what influences it, takes lot time, brainpower , tools ready (ugh, hard to write the picture on my mind). Im 31 years into trading now, seen so many faces come and most of them go in that time , to me it sounds like you quietly hope for a lotto ticket. To speak about hardware, ie the tools you need depends on your trading style (again a hint that a lot more study is needed. If you're really hooked, readreadread and get in touch with people - always question yourself." }, { "docid": "21896", "title": "", "text": "Yes, they're using it as a currency. What they actually have demand for is houses and Lambos, and if bitcoin wasn't available they'd be happy to do it in any other currency. When any other currency goes up it's because there's overall higher demand than supply for it, to buy things you can only buy in a particular currency. A very common example is government bonds of the issuing government for a currency. That's why when the Fed raises the interest rate, the US dollar goes up. It is because at a bond auction the government will only take US dollars so anyone that wants to buy some bonds needs to first buy US dollars. If the interest rate goes up, all things being equal those bonds are relatively more attractive than other countries bonds, and that change in demand increases the demand for the currency, which raises it's price. Note the key thing here - it needs to be something you can only buy (or at least, buy for the cheapest price) in a particular currency. If it's something you can buy with any currency, than that event generally doesn't impact the currency price. Although it's a very important food crop, if the price of rice goes up, it doesn't really impact the USD even though you can buy rice with USD. Here's the tricky part, what can you buy with bitcoin that you can't buy with any other currency?" }, { "docid": "136995", "title": "", "text": "\"As a general rule in many countries, pyramid schemes are illegal, so don't plan on getting rich anytime soon by being involved in one. Anything you earn through such a scheme is subject to forfeiture because it is ill-gotten gains. The entire basis of a pyramid scheme is that the focus is principally on recruiting new \"\"downlines\"\", not selling a product or service. I would strongly advise you to find a different way to riches. Multi-level marketing very rarely makes much money for anyone except the first people in the food chain, and the odds of finding such an early-stage opportunity are exceedingly small. For every successful MLM program there are probably 25 that never make it off the launch pad. Be honest in asking yourself -- if it was really that easy, why wouldn't everyone just get into MLM? It's more hype than substance. Do you know who buys most of the product? The newest people who \"\"drink the Koolaid\"\", because they're convinced they need to have plenty of inventory on hand for their potential customers. I can't tell you how many people I know who spent hundreds or even thousands of dollars on buying product they never managed to sell. It's much tougher than people think, even with a good product.\"" }, { "docid": "481683", "title": "", "text": "\"Here are my reasons as to why bonds are considered to be a reasonable investment. While it is true that, on average over a sufficiently long period of time, stocks do have a high expected return, it is important to realize that bonds are a different type of financial instrument that stocks, and have features that are attractive to certain types of investors. The purpose of buying bonds is to convert a lump sum of currency into a series of future cash flows. This is in and of itself valuable to the issuer because they would prefer to have the lump sum today, rather than at some point in the future. So we generally don't say that we've \"\"lost\"\" the money, we say that we are purchasing a series of future payments, and we would only do this if it were more valuable to us than having the money in hand. Unlike stocks, where you are compensated with dividends and equity to take on the risks and rewards of ownership, and unlike a savings account (which is much different that a bond), where you are only being paid interest for the time value of your money while the bank lends it out at their risk, when you buy a bond you are putting your money at risk in order to provide financing to the issuer. It is also important to realize that there is a much higher risk that stocks will lose value, and you have to compare the risk-adjusted return, and not the nominal return, for stocks to the risk-adjusted return for bonds, since with investment-grade bonds there is generally a very low risk of default. While the returns being offered may not seem attractive to you individually, it is not reasonable to say that the returns offered by the issuer are insufficient in general, because both when the bonds are issued and then subsequently traded on a secondary market (which is done fairly easily), they function as a market. That is to say that sellers always want a higher price (resulting in a lower return), and buyers always want to receive a higher return (requiring a lower price). So while some sellers and buyers will be able to agree on a mutually acceptable price (such that a transaction occurs), there will almost always be some buyers and sellers who also do not enter into transactions because they are demanding a lower/higher price. The fact that a market exists indicates that enough investors are willing to accept the returns that are being offered by sellers. Bonds can be helpful in that as a class of assets, they are less risky than stocks. Additionally, bonds are paid back to investors ahead of equity, so in the case of a failing company or public entity, bondholders may be paid even if stockholders lose all their money. As a result, bonds can be a preferred way to make money on a company or government entity that is able to pay its bills, but has trouble generating any profits. Some investors have specific reasons why they may prefer a lower risk over time to maximizing their returns. For example, a government or pension fund or a university may be aware of financial payments that they will be required to make in a particular year in the future, and may purchase bonds that mature in that year. They may not be willing to take the risk that in that year, the stock market will fall, which could force them to reduce their principal to make the payments. Other individual investors may be close to a significant life event that can be predicted, such as college or retirement, and may not want to take on the risk of stocks. In the case of very large investors such as national governments, they are often looking for capital preservation to hedge against inflation and forex risk, rather than to \"\"make money\"\". Additionally, it is important to remember that until relatively recently in the developed world, and still to this day in many developing countries, people have been willing to pay banks and financial institutions to hold their money, and in the context of the global bond market, there are many people around the world who are willing to buy bonds and receive a very low rate of return on T-Bills, for example, because they are considered a very safe investment due to the creditworthiness of the USA, as well as the stability of the dollar, especially if inflation is very high in the investor's home country. For example, I once lived in an African country where inflation was 60-80% per year. This means if I had $100 today, I could buy $100 worth of goods, but by next year, I might need $160 to buy the same goods I could buy for $100 today. So you can see why simply being able to preserve the value of my money in a bond denominated in USA currency would be valuable in that case, because the alternative is so bad. So not all bondholders want to be owners or make as much money as possible, some just want a safe place to put their money. Also, it is true for both stocks and bonds that you are trading a lump sum of money today for payments over time, although for stocks this is a different kind of payment (dividends), and you only get paid if the company makes money. This is not specific to bonds. In most other cases when a stock price appreciates, this is to reflect new information not previously known, or earnings retained by the company rather than paid out as dividends. Most of the financial instruments where you can \"\"make\"\" money immediately are speculative, where two people are betting against each other, and one has to lose money for the other to make money. Again, it's not reasonable to say that any type of financial instrument is the \"\"worst\"\". They function differently, serve different purposes, and have different features that may or may not fit your needs and preferences. You seem to be saying that you simply don't find bond returns high enough to be attractive to you. That may be true, since different people have different investment objectives, risk tolerance, and preference for having money now versus more money later. However, some of your statements don't seem to be supported by facts. For example, retail banks are not highly profitable as an industry, so they are not making thousands of times what they are paying you. They also need to pay all of their operating expenses, as well as account for default risk and inflation, out of the different between what they lend and what they pay to savings account holders. Also, it's not reasonable to say that bonds are worthless, as I've explained. The world disagrees with you. If they agreed with you, they would stop buying bonds, and the people who need financing would have to lower bond prices until people became interested again. That is part of how markets work. In fact, much of the reason that bond yields are so low right now is that there has been such high global demand for safe investments like bonds, especially from other nations, such that bond issues (especially the US government) have not needed to pay high yields in order to raise money.\"" }, { "docid": "540451", "title": "", "text": "\"Money is money because people believe it is money. By \"\"believe it is money\"\", I mean that they expect they will be able to turn it into useful goods or services (food, rent, houses, truckloads full of iron ore, mining equipment, massages at the spa, helicopter rides, iPads, greenhouses, income streams to support your future retirement, etc). Foreign exchange rates change because people's ideas about how much useful goods or services they can get with various currencies change. For example: if the Zimbabwe government suddenly printed 10 times as much money as used to exist, you probably couldn't use that money to buy as much food at the Zimbabwe-Mart, so you wouldn't be willing to give people as many US-dollars (which can buy food at the US-Mart) for a Zimbabwe-dollar as you used to be able to. (It's not exactly that easy, because - for instance - food in the US is more useful to me than food in Zimbabwe. But people still move around all sorts of things, like oil, or agricultural products, or minerals, or electronics components.) The two main things that affect the value of a currency are the size of the economy that it's tied to (how much stuff there is to get), and how much of the currency there is / how fast it's moving around the economy (which tells you how much money there is to get it with). So most exchange rate shifts reflect a change in people's expectations for a regional economy, or the size of a money supply. (Also, Zimbabwe is doing much better now that it's ditched their own currency - they kept printing trillions of dollars' worth - and just trade in US dollars. Their economy still needs some work, but... better.)\"" }, { "docid": "281419", "title": "", "text": "There are kind of two answers here: the practical reason an acquirer has to pay more for shares than their current trading price and the economic justification for the increase in price. Why must the acquirer must pay a premium as a practical matter? Everyone has a different valuation of a company. The current trading price is the lowest price that any holder of the stock is willing to sell a little bit of stock for and the highest that anyone is willing to buy a little bit for. However, Microsoft needs to buy a controlling share. To do this on the open market they would need to buy all the shares from people who's personal valuation is low, and then a bunch from people whose valuation is higher and so on. The act of buying that much stock would push the price up by buying all the shares from people who are really willing to sell. Moreover, as they buy more and more, the remaining people increase their personal valuation so the price would really shoot up. Acquirers avoid this situation by offering to buy a ton of stock at a substantially higher, single price. Why is Linkedin suddenly worth more than it was yesterday? Microsoft is expecting to be able to use its own infrastructure and tools to make more money with Linkedin than Linkedin would have before. In other words, they believe that the Linkedin division of Microsoft after the merger will be worth more than Linkedin alone was before the merger. This synergistic idea is the theoretical foundation for mergers in general and the main reason people use to argue for a higher price. You could also argue that by expressing an interest in Linkedin, Microsoft may be telling us something it knows about Linkedin's value that maybe we didn't realize before because we aren't as smart and informed as the people on Microsoft's board. But since it's Microsoft that's doing the buying in this case, I'm going to go out on a limb and say this is not the main effect. Given Microsoft's history, the idea that they buy expensive things because they have money to burn is more compelling than the idea that they have an insight into a company's value that we don't." }, { "docid": "117010", "title": "", "text": "\"&gt;Because selling gold and buying dollars has an effect on the market: it reduces the value of gold, and increases the value of dollars. Ah, but with all the business you'd do in gold, you'd constantly be increasing the value of gold. Think of it! I'm pretty sure that most people want to be paid in dollars not simply because of the fact that their taxes have to be paid in it, but because of it's universality. Not everyone has a use for a sack of barley, or a fish, or some gold dust. But you can buy whatever you want with an amount of dollars. &gt;As the value of gold increases over time, the government taxes the increased value as \"\"capital gains tax\"\". It's only taxed at a 15.5% rate, IIRC. You'd probably come out ahead.\"" }, { "docid": "134239", "title": "", "text": "\"The basic idea is that money's worth is dependent on what it can be used to buy. The principal driver of monetary exchange (using one type of currency to \"\"buy\"\" another) is that usually, transactions for goods or services in a particular country must be made using that country's official currency. So, if the U.S. has something very valuable (let's say iPhones) that people in other countries want to buy, they have to buy dollars and then use those dollars to buy the consumer electronics from sellers in the U.S. Each country has a \"\"basket\"\" of things they produce that another country will want, and a \"\"shopping list\"\" of things of value they want from that other country. The net difference in value between the basket and shopping list determines the relative demand for one currency over another; the dollar might gain value relative to the Euro (and thus a Euro will buy fewer dollars) because Europeans want iPhones more than Americans want BMWs, or conversely the Euro can gain strength against the dollar because Americans want BMWs more than Europeans want iPhones. The fact that iPhones are actually made in China kind of plays into it, kind of not; Apple pays the Chinese in Yuan to make them, then receives dollars from international buyers and ships the iPhones to them, making both the Yuan and the dollar more valuable than the Euro or other currencies. The total amount of a currency in circulation can also affect relative prices. Right now the American Fed is pumping billions of dollars a day into the U.S. economy. This means there's a lot of dollars floating around, so they're easy to get and thus demand for them decreases. It's more complex than that (for instance, the dollar is also used as the international standard for trade in oil; you want oil, you pay for it in dollars, increasing demand for dollars even when the United States doesn't actually put any oil on the market to sell), but basically think of different currencies as having value in and of themselves, and that value is affected by how much the market wants that currency.\"" }, { "docid": "499398", "title": "", "text": "\"Do you work in this field or something? You sound like a very passionate apologist. &gt;why shouldn't traders be able to decide (as a group) what the companies are worth? Because often they purposefully distort value so they can either a) buy low and profit or b) sell high and profit. Why are you so anti-government? I'd rather have people I elected and who are accountable to me determining things instead of private and highly selfish interests who represent only themselves. &gt; do you really think that intraday (or even intraweek) prices are really representative of what \"\"the market\"\" thinks a company is valued at? If not, why bother with the charade in the first place? What is the point of wild price fluctuations even throughout a single day, if they, as you admit, do not represent value? The whole concept of short term profiting off of these pointless (and often engineered) market movements is silly, and adds nothing to society whatsoever (the original point of the stock market). Further, that money needs to come from somewhere, and that typically is long term investors who want a pension at some point and don't feel like trading at microsecond timeframes because they do something useful instead. Its disgusting. &gt;compared to the effect of long term buy and holders changing their mind about a company, the effect of any HFT people on the valuation of a stock is practically nothing - like I said, there's just about no evidence of speculators causing significant mispricing over any significant period. So you're saying just because the aggregate effect is small(ish), no one should worry about it? That is the absolute stupidest thing I have ever heard! If I steel a car every other week, who cares right? Millions of cars are made every year, the effect of me stealing 20 or 30 wont change car markets in any noticeable way... Further, speculation in commodities (mainly food) has indeed caused enormous mispricing and incaculabe human suffering in the developing world.\"" }, { "docid": "9906", "title": "", "text": "\"I'm loving this thread, by the way. The answer to your question is yes: the PDE method and the martingale method lead to the same result. I think this is intuitive, since they address the same things (drift, probability, etc). Heath &amp; Schweizer (2000) have a nice paper in the Journal of Applied Probability that shows the (fairly general) circumstances under which the two methods will always have the same result. It's titled \"\"Martingales versus PDEs in Finance: An Equivalence Result with Examples\"\". My argument is that Black-Scholes is really an equilibrium model, not an arbitrage-free model. Despite that, I'm claiming that it is possible to use BS (and any other equilibrium model) in a no-arbitrage manner by incorporating information from other securities, but that this doesn't make the underlying model and its assumptions a no-arbitrage model. I think, basically, what I'm trying to say is that I don't think market completeness is really the issue, but rather that the issue is the difference between the model and reality. Equilibrium models make a statement about what reality *should* be, given some parameters that you're supposed to know with certainty (all bets are off if you have to estimate them). Arbitrage-free models explicitly use external, observed prices, *but do not explain why we observe those prices*. In this context (and using these definitions), I'd say Black-Scholes is clearly an equilibrium model, albeit one built from some arguments that involve arbitrage.\"" }, { "docid": "450132", "title": "", "text": "crank out expensive shares when markets are frothy Corporations go public (sell their shares for the first time) in market conditions that have a lot of liquidity (a lot of people buying shares) and when they have to make the fewest concessions to appease an investing public. When people are greedy and looking to make money without using too much due diligence. Think Netscape's IPO in 1995 or Snapchat's IPO in 2017. They also issue more shares after already being public in similar circumstances. Think Tesla's 1 billion dollar dilution in 2017. Dilution results in the 1 share owning less of the company. So in a less euphoric investing environment, share prices go down in response to dilution. See Viggle's stock for an example, if you can find a chart. issue debt Non-financial companies create bonds and sell bonds. Why is that surprising to you? Cash is cash. This is called corporate bonds or corporate debt. You can buy Apple bonds right now if you want from the same brokers that let you buy stocks. mutual fund investor Bernstein is making a cynical assessment of the markets which carries a lot of truth. Dumping shares on your mom's 401k is a running gag amongst some financial professionals. Basically mutual fund investors are typically the least well researched or most gullible market participants to sell to, influenced by brand name more than company fundamentals, who will balk at the concept of reading a prospectus. Financial professionals and CFOs have more information than their investors and can gain extended advantages because of this. Just take the emotions out of it and make objective assessments." }, { "docid": "367348", "title": "", "text": "\"I feel that OP's question is fundamentally wrong and an understanding of why is important. The stock market, as a whole, in the USA has an average annualized return of 11%. That means that a monkey, throwing darts at a board, can usually turn 100K into over three million in thirty-five years. (The analog I'm drawing is a 30-year old with 100K randomly picking stocks will be a multi-millionaire at 65). So to be \"\"good\"\" at investing in the stock market, you need to be better than a monkey. Most people aren't. Why? What mistakes do people make and how do you avoid them? A very common mistake is to buy high, sell low. This happened before and after the 08's recession. People rushed into the market beforehand as it was reaching its peak, sold when the market bottomed out then ignored the market in years it was getting 20+% returns. A Bogle approach for this is to simply consistently put a part of your income into the market whether it is raining or shining. Paying high fees. Going back to the monkey example, if the monkey charges you a 2% management fees, which is low by Canadian standards, the monkey will cost you one million dollars over the course of the thirty-five years. If the monkey does a pretty good job it is a worthy expenditure. But most humans, including professional stock pickers, are worst than a monkey at picking stocks. Another mistake is adjusting your plan. Many people, when the market was giving bull returns before the 08's crash happily had a large segment of their wealth in stocks. They thought they were risk tolerant. Crash happened, they moved towards bonds. Then bonds returns were comically low while stocks soared. Had they had a plan, almost any consistent plan, they'd have done better. Another genre of issues is just doing stupid things. Don't buy that penny stock. Don't trade like crazy. Don't pay 5$ commission on a 200$ stock order. Don't fail to file your taxes. Another mistake, and this burdens a lot of people, is that your long-term investments are for long-term investing. What a novel idea. You're 401K doesn't exist for you to get a loan for a home. Many people do liquidate their long-term savings. Don't. Especially since people who do make these loans or say \"\"I'll pay myself back later\"\" don't.\"" }, { "docid": "204892", "title": "", "text": "\"I don't think this is \"\"curious\"\" at all. A large part of Bitcoin's value is based on speculation currently, and since it's both a global currency and a relatively small one, global changes can greatly affect it without having a huge impact on the US Dollar (e.g., the article mentions that much of Bitcoin's trade, and therefore its value, is coming from Japan right now). The symmetry you're looking for can also be deceiving when talking about currencies of dramatically different values. The US M2 money supply is worth over $13 trillion (measuring in US Dollars). The Bitcoin money supply is currently worth about $66 billion (also measuring in US Dollars). If Bitcoin spiked 10% and the change in value was completely symmetric with the US dollar, the US dollar would fall in value by only 0.05% (i.e. move $6.6 billion in market cap from the USD to Bitcoin). That's also greatly exaggerating the impact of changes in value of Bitcoin on the US Dollar since Bitcoin and the USD aren't the only currency pair in existence. Far from it, in fact. This is why you see, for example, the Venezuelan Bolivar tank against the US Dollar without feeling immensely more wealthy. People in the US also tend to price things in USD, including foreign currencies, because that's what they're used to doing as they're most familiar with the value of a dollar from everyday experience.\"" }, { "docid": "135216", "title": "", "text": "\"The market capitalization of a stock is the number of shares outstanding (of each stock class), times the price of last trade (of each stock class). In a liquid market (where there are lots of buyers and sellers at all price points), this represents the price that is between what people are bidding for the stock and what people are asking for the stock. If you offer any small amount more than the last price, there will be a seller, and if you ask any small amount less than the last price, there will be a buyer, at least for a small amount of stock. Thus, in a liquid market, everyone who owns the stock doesn't want to sell at least some of their stock for a bit less than the last trade price, and everyone who doesn't have the stock doesn't want to buy some of the stock for a bit more than the last trade price. With those assumptions, and a low-friction trading environment, we can say that the last trade value is a good midpoint of what people think one share is worth. If we then multiply it by the number of shares, we get an approximation of what the company is worth. In no way, shape or form does it not mean that there is 32 billion more invested in the company, or even used to purchase stock. There are situations where a 32 billion market cap swing could mean 32 billion more money was invested in the company: the company issues a pile of new shares, and takes in the resulting money. People are completely neutral about this gathering in of cash in exchange for dilluting shares. So the share price remains unchanged, the company gains 32 billion dollars, and there are now more shares outstanding. Now, in some sense, there is zero dollars currently invested in a stock; when you buy a stock, you no longer have the money, and the money goes to the person who no longer has the stock. The issue here is the use of the continuous tense of \"\"invested in\"\"; the investment was made at some point, but the money doesn't really stay in this continuous state of being. Unless you consider the investment liquid, and the option to take money out being implicit, it being a continuous action doesn't make much sense. Sometimes the money is invested in the company, when the company causes stocks to come into being and sells them. The owners of stocks has invested money in stocks in that they spent that money to buy the stocks, but the total sum of money ever spent on stocks for a given company is not really a useful value. The market capitalization is an approximation, which under the efficient market hypothesis (that markets find the correct price for things nearly instantly) is reasonably accurate, of the value the company has collectively to its shareholders. The efficient market hypothesis isn't accurate, but it is an acceptable rule of thumb. Now, this value -- market capitalization -- is arguably not the total value of a company: other stakeholders include bond holders, labour, management, various contract counter-parties, government and customers. Some companies are structured so that almost all value is captured not by the stock owners, but by contract counter-parties (this is sometimes used for hiding assets or debts). But for most large publically traded companies, it (in theory) shouldn't be far off.\"" }, { "docid": "194030", "title": "", "text": "\"Why do people keep talking about 401K's at work? That is NOT dollar cost averaging. DCA refers to when you have a large sum of money. Do you invest it all at once or spread it out over several smaller purchases over a period of time? There really isn't a \"\"when\"\" should I use it. It is simply a matter of where your preferences lie on the risk/reward scpectrum. DCA has lower risk and lower reward than lump sum investing. In my opinion, I don't like it. DCA only works better than lump sum investing if the price drops. But if you think the price is going to drop, why are you buying the stock in the first place? Example: Your uncle wins the lottery and gives you $50,000. Do you buy $50,000 worth of Apple now, or do you buy $10,000 now and $10,000 a quarter for the next four quarters? If the stock goes up, you will make more with lump-sum(LS) than you will with DCA. If the stock goes down, you will lose more with LS than you will with DCA. If the stock goes up then down, you will lose more with DCA than you will with LS. If the stock goes down then up, you will make more with DCA than you will with LS. So it's a tradeoff. But, like I said, the whole point of you buying the stock is that you think it's going to go up! So why pick the strategy that performs worse in that scenario?\"" }, { "docid": "121543", "title": "", "text": "My wife and I meet in the first few days of each month to create a budget for the coming month. During that meeting we reconcile any spending for the previous month and make sure the amount money in our accounts matches the amount of money in our budget record to the penny. (We use an excel spreadsheet, how you track it matters less than the need to track it and see how much you spent in each category during the previous month.) After we have have reviewed the previous month's spending, we allocate money we made during that previous month to each of the categories. What categories you track and how granular you are is less important than regularly seeing how much you spend so that you can evaluate whether your spending is really matching your priorities. We keep a running total for each category so if we go over on groceries one month, then the following month we have to add more to bring the category back to black as well as enough for our anticipated needs in the coming month. If there is one category that we are consistently underestimating (or overestimating) we talk about why. If there are large purchases that we are planning in the coming month, or even in a few months, we talk about them, why we want them, and we talk about how much we're planning to spend. If we want a new TV or to go on a trip, we may start adding money to the category with no plans to spend in the coming month. The biggest benefit to this process has been that we don't make a lot of impulse purchases, or if we do, they are for small dollar amounts. The simple need to explain what I want and why means I have to put the thought into it myself, and I talk myself out of a lot of purchases during that train of thought. The time spent regularly evaluating what we get for our money has cut waste that wasn't really bringing much happiness. We still buy what we want, but we agree that we want it first." }, { "docid": "464297", "title": "", "text": "If you have money and may need to access it at any time, you should put it in a savings account. It won't return much interest, but it will return some and it is easily accessible. If you have all your emergency savings that you need (at least six months of income), buy index-based mutual funds. These should invest in a broad range of securities including both stocks and bonds (three dollars in stocks for every dollar in bonds) so as to be robust in the face of market shifts. You should not buy individual stocks unless you have enough money to buy a lot of them in different industries. Thirty different stocks is a minimum for a diversified portfolio, and you really should be looking at more like a hundred. There's also considerable research effort required to verify that the stocks are good buys. For most people, this is too much work. For most people, broad-based index funds are better purchases. You don't have as much upside, but you also are much less likely to find yourself holding worthless paper. If you do buy stocks, look for ones where you know something about them. For example, if you've been to a restaurant chain with a recent IPO that really wowed you with their food and service, consider investing. But do your research, so that you don't get caught buying after everyone else has already overbid the price. The time to buy is right before everyone else notices how great they are, not after. Some people benefit from joining investment clubs with others with similar incomes and goals. That way you can share some of the research duties. Also, you can get other opinions before buying, which can restrain risky impulse buys. Just to reiterate, I would recommend sticking to mutual funds and saving accounts for most investors. Only make the move into individual stocks if you're willing to be serious about it. There's considerable work involved. And don't forget diversification. You want to have stocks that benefit regardless of what the overall economy does. Some stocks should benefit from lower oil prices while others benefit from higher prices. You want to have both types so as not to be caught flat-footed when prices move. There are much more experienced people trying to guess market directions. If your strategy relies on outperforming them, it has a high chance of failure. Index-based mutual funds allow you to share the diversification burden with others. Since the market almost always goes up in the long term, a fund that mimics the market is much safer than any individual security can be. Maintaining a three to one balance in stocks to bonds also helps as they tend to move in opposite directions. I.e. stocks tend to be good when bonds are weak and vice versa." } ]

[ { "docid": "443511", "title": "", "text": "\"The main reason people buy dollars (or other currency) on the black market is because they are prevented from exchanging currency on the official government market. Venezuela for example restricts citizens to a maximum number of dollars the citizen can buy or sell per year, depending on various factors such as whether or not the person is studying at a foreign university. If the citizen wants to exchange more dollars than legally allowed, that person must buy or sell at the \"\"black\"\" market rate, rather than through the official/government market.\"" } ]

[ { "docid": "232932", "title": "", "text": "\"In the case of mutual funds, Net Asset Value (NAV) is the price used to buy and sell shares. NAV is just the value of the underlying assets (which are in turn valued by their underlying holdings and future earnings). So if a fund hands out a billion dollars, it stands to reason their NAV*shares (market cap?) is a billion dollars less. Shareholder's net worth is equal in either scenario, but after the dividend is paid they are more liquid. For people who need investment income to live on, dividends are a cheap way to hold stocks and get regular payments, versus having to sell part of your portfolio every month. But for people who want to hold their investment in the market for a long long time, dividends only increase the rate at which you have to buy. For mutual funds this isn't a problem: you buy the funds and tell them to reinvest for free. So because of that, it's a prohibited practice to \"\"sell\"\" dividends to clients.\"" }, { "docid": "495556", "title": "", "text": "\"&gt; If you have five to eight dictators fighting at once You will quickly see these 5 to 8 dictators mutually come to the conclusion that it is not in their interests to \"\"fight it out\"\", but rather, support each other and prevent new-comers. Or, you will see mergers as we saw in the accounting and banking fields. You both knock out a competitor AND increase your market share in the process. This becomes similar to a government-sanctioned monopoly, but instead of one firm, you have 6 or 8, each recognizing that they've got a great position as gatekeepers and rent-seekers. This is similar to how the healthcare and insurance companies really don't DO very much except extract money. They over-bill the hospitals, then over-bill the customers, and profit the huge margins. Or how the government used to do student loans, then instead outsourced to the big banks to do it. Then recently they determined that hte big banks were taking tens of billions of dollars in profit for \"\"running\"\" the program. That's tens of billions of dollars of wealth simply extracted from our taxes. This is why the government under Obama decided to kick out the banker middle-men and simply issue the exact same loans with the exact same rules,a ll by themselves. Why outsource to a middleman when you can run the exact same program with tons less overhead? It's also the reason single-payer healthcare is tons more efficient over the current model, and would save our country trillions over the looong term. Not to mention, the democratization of currency you envision is truly ephemeral, a mirage. The firms the government chooses as suited enough to pay taxes basically means the government still has the final decision on which \"\"currency\"\" (bonds) to accept. What if the government then decides only ONE corp is suited to do this job, or only two? Then it's functionally no different than teh current situation. Right now, the world buys USD bonds at extremely low interest rates, and this helps fund our government and keeps our nations costs very low. Under your scenario, the government is saying \"\"We accept bonds from X, Y, or Z\"\", and so instead the world runs out to buy XYZ bonds at extremely low interest rates. Instead of giving our country the funding it needs, we're actually giving XYZ corps the low interest rates. This is basically the same downfall of letting the big banks run the student loan program: it gives the firms more power, the government less power, costs us more tax dollars, and gives those firms an undeserved higher place on the food chain. I quite simply disagree with it. I would rather our government print the bonds themselves and take the benefit of the low cost of borrowing, rather than giving XYZ corps more favorable funding to continue world-wide expansion and takeover. Furthermore, if XYZ corps are approved by the government for paying tax dollars, what do we do in the case of a fiscal emergency such as 2007 when AIG basically went bankrupt in a period of only a few months? Of course this would be SURE to happen only right AFTER tax day, AFTER the entire country buys AIG bonds, pays the government in AIG bonds, and the executives of AIG pay themselves HUGE bonuses. Then they go bankrupt, and the government is left holding ALL the IOU's which are worthless. And of course, traders, hedgers, goldman sachs, etc, would all know AIG was about to get fucked and would make trillions while the US Gov received all tax receipts in worthless paper. The fact is, with the speed big companies can fall down under the weight of their own contradictions, the danger is all too real that a full year of tax receipts simply disappears.\"" }, { "docid": "439757", "title": "", "text": "Dollar cost averaging moderates risk. But you pay for this by giving up the chance for higher gains. If you took a hundred people and randomly had them fully buy into the market over a decade period, some of those people will do very well (relative to the rest) while others will do very poorly (relatively). If you dollar cost average, your performance would fall into the middle so you don't fall into the bottom (but you won't fall into the top either)." }, { "docid": "205585", "title": "", "text": "\"Here's an answer to a related question I once wrote. I'm reposting here. I can, but it takes a significant amount of time. I'll do a short version which unfortunatley might leave more holes than you like. Basically, traders don't want to barter because it is hard to find the person with precisely the goods you want who wants to trade for the goods you have. Thus the need for \"\"coupons\"\" that represent value in a marketplace. Then you need to decide who gets to create coupons. If too many can issue them, problems arise, and no one trusts the coupons will be good later. Eventually you want one large bank/nation/trader to be able to issue them so everyone has the same level of trust in them, and you don't have the economic inefficiencies of many coupon issuers. Next, the number of coupons needs to be enough to facilitate trade. If the amount of trade increases a lot, and the number of coupons doesn't increase similarly they become worth more, and people start to hoard them. This causes deflation, which causes less investment, which causes less growth, which hurts everyone in the long run. If there are too many coupons added, this causes inflation, which causes people to spent them quicker instead of holding them. For reasons I won't cover here slight, predictable inflation is much better than deflation, so remember inflation is slightly preferred. Note that inflation is often caused not by the number of coupons but by external price changes. Now, for a modern economy to do well, somone has to watch the economy, measure it carefully, and add/subtract coupons into the system as needed. Coupons, like all money, have no real value (whatever that means), but only have value because the holder expects to be able to trade them *later* for goods and services. You cannot eat coupons, use them for shelter (usually!), or wear them, but you want to trade them for such needs. The same is true for paper money, gold, stones, or almost whatever money system one uses. Money in all these forms is merely an IOU tradable for future goods. The Fed is tasked (among other things) with making sure there is precisely enough coupons in the economy to keep trade functioning as well as possible. This is very hard to do since there are external and internal shocks to an economy (think disaster, foreign govts shutting off resources, rapid changes in people's tastes, etc.). Central banks such as the Fed need to be independent of political control, since empirical evidence has shown that politicians tend to add more money to the system than is needed, because the short term gains give them votes, but the long term consequences (rapid inflation, unemployment, lower economic growth) are bad for society. This is why the Fed is largely out of congressional control, and large amounts of empirical evidence across hundreds of years and dozens of cultures shows this to be good. Note: another function of the Fed is to be a lender of last resort to help prevent bank panics that were widespread in the 18th and early 19th century, something that none of us now remember, but it was a real problem. I'll skip that part for now. So now we're at the point where the Fed needs to add/subtract coupons from society. To do this part justice takes significant time to cover all the reasons why various rules are in place (banking reserve requirements, for example), and you cannot learn it from one pass of reading. But I'll try. Instead of being like the majority of internet fools that rail against the system, try to learn the *why* of all this, and you'll be much wiser and understand that it is all a pretty good system. One method they use is the interbank lending rate. Banks have a reserve requirement, which is the ratio of coupons they need to have on hand as a ratio compared to the total coupons depositors lent them. This is usually around 1:10. The amount deposited that they can lend goes to business loans, school loans, mortgage loans, etc., and helps economies grow. Now when a bank on a given day falls short due to too many withdrawals, other banks (or the Fed) offers an overnight loan to meet reserve requirements, and the Fed sets the interest rate, which in turn drives other interest rates in the system. This does not change the money supply very much. Secondly, the Fed sets the reserve requirement, which vastly can change the amount of money available to society. But they change this rate so rarely (all the historical data is on the St. Loius Fed site, among others) that it is not usually an issue. I'll explain below how this can drastically change the money supply though the money multiplier. Thirdly, and this is the part the poster above seems upset about, they conduct open market operations. This is the primary means by which the Fed exercises control over the number of coupons in play. The government, like businesses, like individuals, often needs to borrow money, in theory to invest in wise causes like infrastructure or perhaps money making enterprises such as technology investmeny (and I know what they often use the money for causes many to complain). The government, like companies, offers the sale of various contracts such as bonds to investors, who want a place to park some accumulated coupons for safety, and they get a return plus some interest. So the government sells bonds on the open market to investors, banks, pensions, foreign governments, basically to whomever wishes to purchase them at the market rate, and the government, like many individuals and banks, uses these loans to perform day to day functioning and possible smooth out volatility in spending needs. By law the Fed cannot purchase directly from Treasury. Now, once on the market, these bonds are traded, packaged, resold, etc., since they have inherent value, and since those owning them want to buy/sell them, perhaps before maturity date. This \"\"liquidity\"\" (ability to sell your goods) is necessary - fewer would purchase an item if they could not sell it when they desire. Thus bonds are bought, sold, and traded, and their prices fluctuate based on what the market thinks they are worth, just like any good. Now, the Fed can buy/sell these bonds on the *open market*, like anyone else. So when the Fed wishes to increase the money supply, they can buy bonds that are not \"\"spendable\"\" money and inject money into the system. Note they now hold a bond that had at the time of transaction the same value as the money they injected. Note investors freely bought these from Treasury, meaning the market thought at the time of purchase that this was a good invesement. It is *not* the government merely wishing more money into existance. It is market forces that require more money for trades and is selling goods from the marketplace of (presumably) equal value to the Fed. This increases liquidity, but takes valuable assets from circulation. When the Fed wishes to shrink the money supply, they sell these bonds back into circulation basically by offering better terms than Treasury. In fact, you can find graphs of the Fed operations and see how every December they inject money for more Christmas shpping (need more coupons for more trade) and every January they extract some. So open market transactions, buying and selling goods at market prices in the marketplace along with other traders, is how the Fed injects and removes money from the money supply. This is the primary mechanism that the Fed uses to control the number of coupons in the economy. Finally, a little about reserve requirements and the money multiplier, since it affects so much of the number of coupons in play. This also I must simplify drastically. Each bank needs to hold 1/10 of all deposits in cash. The rest can be lent, which lands in another bank, which again can be lent, etc... Thus each $1 deposited can result in loans totalling 9/10 + (9/10)^2 + (9/10)^3 +... = 9 more dollars. Many people claim that banks are printing money, which is nonsense, since each also has an equal debt to pay to the person they borrowed from. When all loans are paid back there is no net money gain. However, this allows for each $1 the Fed injects by buying bonds for there to be up to $9 in the economy, *if banks all loan to the fullest extent*. Banks tend to want to loan since loaned money makes them profit. Banks used to loan too much and runs on the banks caused significant problems, which is why laws were made to require *all* banks to have the same reserve requirement. Now, when banks get scared and stop loaning, this 9 fold multiplier dries up, and the Fed has much less inpact on being able to target the proper number of coupons to keep the economy smooth. During the recent crash when banks stopped loaning, as each dollar was paid back on debts, there was significant shrinkage of available money for transactions, and this kills the economy. This is the \"\"liquidity crisis\"\". Hope this helps. As I said, this is vastly simplified and I cannot go into all the reasons and historical items needed to understand it fully. It is a vastly complex (and necessarily so) and takes significant study to grasp the genius of it. It's similar to not being able to understand nuances of particle physics in one go, but as you study and work at it you see *why* things go as they do, and you learn all the failed methods (the gold standard is one example) that were thrown out for many good reasons. Cheers.\"" }, { "docid": "244442", "title": "", "text": "\"You make several good points. I'll start with Black-Scholes; the arbitrage argument in Black-Scholes is between the option and a hypothetical and unobserved portfolio with identical cash flows (the replicating portfolio). We then value the replicating portfolio via an equilibrium model. When you use BS, there isn't necessarily *any* observed security whose is guaranteed not imply some arbitrage opportunity, because BS makes no reference to observed prices. A no-arbitrage modification might look like this: \"\"I observe the prices (and implied volatilities) of some options, and use the implied volatilities to price another option (maybe with a different strike). Doing so ensures that there is no arbitrage between my price and the market prices implied by my model.\"\" Realistically, the problem arbitrage-free models are addressing is that our models and assumptions are wrong, even though they're reasonable approximations a lot of the time. A no-arbitrage model removes some set of obvious deficiencies, but at the cost of not being able to explain why things are priced as they are. So, for instance, Vasicek won't reproduce the observed term structure, and Hull-White fixes this, but Hull-White doesn't explain where the term structure comes from (i.e., what the term structure *should* be).\"" }, { "docid": "481312", "title": "", "text": "\"A bond fund will typically own a range of bonds of various durations, in your specific fund: The fund holds high-quality long-term New York municipal bonds with an average duration of approximately 6–10 years So through this fund you get to own a range of bonds and the fund price will behave similar to you owning the bonds directly. The fund gives you a little diversification in terms of durations and typically a bit more liquidity. It also may continuously buy bonds over time so you get some averaging vs. just buying a bond at a given time and holding it to maturity. This last bit is important, over long durations the bond fund may perform quite differently than owning a bond to maturity due to this ongoing refresh. Another thing to remember is that you're paying management fees for the fund's management. As with any bond investment, the longer the duration the more sensitive the price is to change in interest rates because when interest rates change the price will track it. (i.e. compare a change of 1% for a one year duration vs. 1% yearly over 10 years) If I'm correct, why would anyone in the U.S. buy a long-term bond fund in a market like this one, where interest rates are practically bottomed out? That is the multi-trillion dollar question. Bond prices today reflect what \"\"people\"\" are willing to pay for them. Those \"\"people\"\" include the Federal Reserve which through various programs (QE, Operate Twist etc.) has been forcing the interest rates to where they want to see them. If no one believed the Fed would be able to keep interest rates where they want them then the prices would be different but given that investors know the Fed has access to an infinite supply of money it becomes a more difficult decision to bet against that. (aka \"\"Don't fight the Fed\"\"). My personal belief is that rates will come up but I haven't been able to translate that belief into making money ;-) This question is very complex and has to do not only with US policies and economy but with the status of the US currency in the world and the world economy in general. The other saying that comes to mind in this context is that the market can remain irrational (and it certainly seems to be that) longer than you can remain solvent.\"" }, { "docid": "360310", "title": "", "text": "you dont understand the way markets work if you think that. speculators exist in every market. there are FX speculators, does that mean that the the US dollar, yuan, or yen is a game of musical chairs? If an asset or commodity has a use for everyday people, then they are going to buy that asset or commodity. Speculators or traders bring liquidity and reduce volatility to make the price less volatile so everyday people will be able to use it. Bitcoin is a new technology and people are trying to figure out what its value should be. This is r/finance and I have to explain this? Obviously there are many people out there who find value in a decentralized digital currency." }, { "docid": "541032", "title": "", "text": "i would check out why other people make good money on the market when they invest but when i do it the economy goes into a recession. am i the only real person in the world and everyone is a simulation? is it black magic? is it the universe telling me to earn my money in other ways?" }, { "docid": "147663", "title": "", "text": "\"Why is that? It doesn't hurt anyone else nor diminish a finite supply for \"\"real\"\" patients. I think it's ridiculous that something so innocuous is illegal in so many places. People getting medical cards without a serious illness are shifting their business to a regulated market where they're paying taxes instead of supporting a black market, where's the harm? Genuinely curious as I've never met anyone whose held your opinion.\"" }, { "docid": "17173", "title": "", "text": "\"The American Express Centurion Card (the \"\"Black Card\"\") is for extremely wealthy people who like to show off how much they spend. There are no cash back benefits like you have with traditional rewards cards. The benefits are all geared toward spending more money, not saving money. For example, the benefits include a personal travel agent, personal shoppers at high end stores, elite status with airlines and hotels, etc. There are some benefits that you could put a dollar value on. For example, first class upgrades and complementary companion airline tickets. If you like to fly first class and you do a lot of flying, it is conceivable that you could come out ahead. However, someone that does that much flying has probably already achieved elite frequent flyer status and enjoys regular upgrades without the Black card. In my opinion, it is pretty difficult to justify the initiation and annual fees of this card as anything but a luxury.\"" }, { "docid": "311133", "title": "", "text": "\"&gt;So why not talk to your employer, and ask them to pay you in gold dust? Then when tax time comes, just convert some gold dust into the amount of USD in taxes you owe. Because selling gold and buying dollars has an effect on the market: it reduces the value of gold, and increases the value of dollars. Understand? So being forced to use dollars *artificially increases the value of dollars*. The reason we are forced to use Dollars is because the central bank has the monopoly on printing dollars. Without legal tender laws, that monopoly would be worthless. &gt;Of course, you'd have to find farmers and shoemakers and electronic stores willing to accept payment in gold dust as well... As the value of gold increases over time, the government taxes the increased value as \"\"capital gains tax\"\". So gold cannot be money under these circumstances - the government considers it an investment now.\"" }, { "docid": "194030", "title": "", "text": "\"Why do people keep talking about 401K's at work? That is NOT dollar cost averaging. DCA refers to when you have a large sum of money. Do you invest it all at once or spread it out over several smaller purchases over a period of time? There really isn't a \"\"when\"\" should I use it. It is simply a matter of where your preferences lie on the risk/reward scpectrum. DCA has lower risk and lower reward than lump sum investing. In my opinion, I don't like it. DCA only works better than lump sum investing if the price drops. But if you think the price is going to drop, why are you buying the stock in the first place? Example: Your uncle wins the lottery and gives you $50,000. Do you buy $50,000 worth of Apple now, or do you buy $10,000 now and $10,000 a quarter for the next four quarters? If the stock goes up, you will make more with lump-sum(LS) than you will with DCA. If the stock goes down, you will lose more with LS than you will with DCA. If the stock goes up then down, you will lose more with DCA than you will with LS. If the stock goes down then up, you will make more with DCA than you will with LS. So it's a tradeoff. But, like I said, the whole point of you buying the stock is that you think it's going to go up! So why pick the strategy that performs worse in that scenario?\"" }, { "docid": "238024", "title": "", "text": "Just before a crash or at the start of the crash most of the smart money would have gotten out, the remaining technical traders would be out by the time the market has dropped 10 to 15%, and some of them would be shorting their positions by now. Most long-term buy and hold investors would stick to their guns and stay in for the long haul. Some will start to get nervous and have sleepless nights when the markets have fallen 30%+ and look to get out as well. Others stay in until they cannot stand it anymore. And some will stick it out throughout the downturn. So who are the buyers at this stage? Some are the so called bargain hunters that buy when the market has fallen over 30% (only to sell again when it falls another 20%), or maybe buy more (because they think they are dollar cost averaging and will make a packet when the price goes back up - if and when it does). Some are those with stops covering their short positions, whilst others may be fund managers and individuals looking to rebalance their portfolios. What you have to remember during both an uptrend and a downtrend the price does not move straight up or straight down. If we take the downtrend for instance, it will have lower lows and lower highs (that is the definition of a downtrend). See the chart below of the S&P 500 during the GFC falls. As you can see just before it really started falling in Jan 08 there was ample opportunity for the smart money and the technical traders to get out of the market as the price drops below the 200 MA and it fails to make a higher peak. As the price falls from Jan 08 to Mar 08 you suddenly start getting some movement upwards. This is the bargain hunters who come into the market thinking the price is a bargain compared to 3 months ago, so they start buying and pushing the price up somewhat for a couple of months before it starts falling again. The reason it falls again is because the people who wanted to sell at the start of the year missed the boat, so are taking the opportunity to sell now that the prices have increased a bit. So you get this battle between the buyers (bulls) and seller (bears), and of course the bears are winning during this downtrend. That is why you see more sharper falls between Aug to Oct 08, and it continues until the lows of Mar 09. In short it has got to do with the phycology of the markets and how people's emotions can make them buy and/or sell at the wrong times." }, { "docid": "87057", "title": "", "text": "The currency market, more often referred as Forex or FX, is the decentralized market through which the currencies are exchanged. To trade currencies, you have to go through a broker or an ECN. There are a lot's of them, you can find a (small) list of brokers here on Forex Factory. They will allow you to take very simple position on currencies. For example, you can buy EUR/USD. By doing so, you will make money if the EUR/USD rate goes up (ie: Euro getting stronger against the US dollar) and lose money if the EUR/USD rate goes down (ie: US dollar getting stronger against the Euro). In reality, when you are doing such transaction the broker: borrows USD, sell it to buy EUR, and place it into an Euro account. They will charge you the interest rate on the borrowed currency (USD) and gives you the interest and the bought currency (EUR). So, if you bought a currency with high interest rate against one with low interest rate, you will gain the interest rate differential. But if you sold, you will lose the differential. The fees from the brokers are likely to be included in the prices at which you buy and sell currencies and in the interest rates that they will charge/give you. They are also likely to gives you big leverage to invest far more than the money that you deposited in their accounts. Now, about how to make money out of this market... that's speculation, there are no sure gains about it. And telling you what you should do is purely subjective. But, the Forex market, as any market, is directed by the law of supply and demand. Amongst what impacts supply and demands there are: Also, and I don't want to judge your friends, but from experience, peoples are likely to tell you about their winning transaction and not about their loosing ones." }, { "docid": "259313", "title": "", "text": "\"Anyone that currently owns a business of any size is a slave to pretty much anyone else. We are told who to hire, how much to pay, how much of the profits we must give to \"\"pay our fair share\"\", who we must serve and by what measure of quality, what prices we may charge (in many cases) and so on. What you and people like you do not get is that those of us that enjoy starting businesses have lost our taste for it. We're sick of working twice as hard as our employees and then being told we don't \"\"give back\"\" enough. I would NEVER not hire or serve someone on the basis of their color, religion, sexuality, and so forth. Why? Because finding great people is hard enough, why reduce the potential population further with biotry and silliness. BUT, I would also never hire a person BECAUSE of those things. I don't care if you're black and feel like you're entitled to special consideration because your great-great-great-great grandfather was enslaved. A) I don't care. B) I had nothing to do with it. C) You're not entitled to squat unless you've earned it. Ditto Native Americans, women, homosexuals, people that are overweight, or any one of a dozen other manufactured excuses for not being willing to be measured by - as per MLK - the content of your character, not the color of your skin (or whatever). In the mean time I have been on strike. I am not starting another business or hiring another person until this nonsense gets put under control. I made that committment the day the Worst President In My Lifetime - Mr Hoax And Shame - got elected. Guess what? There are lots of people like me and you're not going to see an improving unemployment picture until you quit squeezing us with this PC, feel good stupidity. And you know what? If you do end the EEOC lunacy, what will happen? People of all flavors who are persons of character and ability will flourish and the low life white trash, black ghetto scum, drug addict losers that support the ideological left will ... starve. And that's just fine with me so long as they do not block traffic.\"" }, { "docid": "410887", "title": "", "text": "\"I'll answer this question: \"\"Why do intraday traders close their position at then end of day while most gains can be done overnight (buy just before the market close and sell just after it opens). Is this observation true for other companies or is it specific to apple ?\"\" Intraday traders often trade shares of a company using intraday leverage provided by their firm. For every $5000 dollars they actually have, they may be trading with $100,000, 20:1 leverage as an example. Since a stock can also decrease in value, substantially, while the markets are closed, intraday traders are not allowed to keep their highly leveraged positions opened. Probabilities fail in a random walk scenario, and only one failure can bankrupt you and the firm.\"" }, { "docid": "106128", "title": "", "text": "\"You have a good thing going. One of the luxuries of being invested in an index fund for the long term is that you don't have to sweat the inevitable short term dips in the market. Instead, look at the opportunity that presents itself on market dips: now your monthly investment is getting in at a lower price. \"\"Buy low, sell high.\"\" \"\"Don't lose money.\"\" These are common mantras for long term investment mentality. 5-8 years is plenty of time -- I'd call it \"\"medium-term\"\". As you get closer to your goals (~2-3 years out) you should start slowly moving money out of your index fund and start dollar cost averaging out into cash or short-term bonds (but that's another question). Keep putting money in, wait, and sell high. If it's not high, wait another year or two to buy the house. A lot of people do the opposite for their entire lives: buying high, panic selling on the dips, then buying again when it goes up. That's bad! I recommend a search on \"\"dollar cost averaging\"\", which is exactly what you are doing right now with your monthly investments.\"" }, { "docid": "540451", "title": "", "text": "\"Money is money because people believe it is money. By \"\"believe it is money\"\", I mean that they expect they will be able to turn it into useful goods or services (food, rent, houses, truckloads full of iron ore, mining equipment, massages at the spa, helicopter rides, iPads, greenhouses, income streams to support your future retirement, etc). Foreign exchange rates change because people's ideas about how much useful goods or services they can get with various currencies change. For example: if the Zimbabwe government suddenly printed 10 times as much money as used to exist, you probably couldn't use that money to buy as much food at the Zimbabwe-Mart, so you wouldn't be willing to give people as many US-dollars (which can buy food at the US-Mart) for a Zimbabwe-dollar as you used to be able to. (It's not exactly that easy, because - for instance - food in the US is more useful to me than food in Zimbabwe. But people still move around all sorts of things, like oil, or agricultural products, or minerals, or electronics components.) The two main things that affect the value of a currency are the size of the economy that it's tied to (how much stuff there is to get), and how much of the currency there is / how fast it's moving around the economy (which tells you how much money there is to get it with). So most exchange rate shifts reflect a change in people's expectations for a regional economy, or the size of a money supply. (Also, Zimbabwe is doing much better now that it's ditched their own currency - they kept printing trillions of dollars' worth - and just trade in US dollars. Their economy still needs some work, but... better.)\"" }, { "docid": "499398", "title": "", "text": "\"Do you work in this field or something? You sound like a very passionate apologist. &gt;why shouldn't traders be able to decide (as a group) what the companies are worth? Because often they purposefully distort value so they can either a) buy low and profit or b) sell high and profit. Why are you so anti-government? I'd rather have people I elected and who are accountable to me determining things instead of private and highly selfish interests who represent only themselves. &gt; do you really think that intraday (or even intraweek) prices are really representative of what \"\"the market\"\" thinks a company is valued at? If not, why bother with the charade in the first place? What is the point of wild price fluctuations even throughout a single day, if they, as you admit, do not represent value? The whole concept of short term profiting off of these pointless (and often engineered) market movements is silly, and adds nothing to society whatsoever (the original point of the stock market). Further, that money needs to come from somewhere, and that typically is long term investors who want a pension at some point and don't feel like trading at microsecond timeframes because they do something useful instead. Its disgusting. &gt;compared to the effect of long term buy and holders changing their mind about a company, the effect of any HFT people on the valuation of a stock is practically nothing - like I said, there's just about no evidence of speculators causing significant mispricing over any significant period. So you're saying just because the aggregate effect is small(ish), no one should worry about it? That is the absolute stupidest thing I have ever heard! If I steel a car every other week, who cares right? Millions of cars are made every year, the effect of me stealing 20 or 30 wont change car markets in any noticeable way... Further, speculation in commodities (mainly food) has indeed caused enormous mispricing and incaculabe human suffering in the developing world.\"" } ]

[ { "docid": "475756", "title": "", "text": "\"As a Venezuelan who used to buy USD, I believe there is not better explanation than the one given to someone who actually lives and works here in Venezuela. Back in 1998 when Hugo Chavez took the presidency, we had a good economy. Fast forward 10 years laters and you could see how poor management, corruption and communist measurements had wreaked havoc in our Economy. It was because most of the money (USD) coming in Venezuela were not invested here but instead, given away to \"\"pimp countries\"\" like Cuba. Remember, communism lasts while you have money. Back then we had an Oil Barrel going over 100$ and crazy amounts of money were coming in the country. However, little to no money was invested in the country itself. That is why some of the richest people with bank account in Swiss are Venezuelans who stole huge amounts of Oil Money. I know this is a lot to take in, but all of this led to Venezuelan economy being the worst in The American Continent and because there is not enough money inside the country to satisfy the inner market, people would pay overprice to have anything that is bought abroad. You have to consider that only a very small amount of people can actually buy USD here in Venezuela. Back in 2013 I was doing it, I could buy about 80 usd/month with my monthly income. However, nowdays that's nearly impossible for about 99% of Venezuelans. To Illustrate. Minimum wage = 10.000 bolivares / month Black market exchange rate (As of January 2016) = 900bs per 1usd 10.000/900 = 11,11 usd. <<< that is what about 50% of Venezuelans earn every month. That's why this happens: http://i.imgur.com/dPOC2e3.jpg The guy is holding a huge stack of money of the highest Venezuelan note, which he got from exchanging only 100 usd. I am a computer science engineer, the monthly income for someone like me is about 30.000 bolivares --- so that is about 34$ a month. oh dear! So finally, answering your question Q: Why do people buy USD even at this unfavorable rate? A: There are many reasons but being the main 2 the following 1.- Inflation in Venezuela is crazy high. The inflation from 2014-2015 was 241%. Which means that having The Venezuelan currency (Bolivares) in your bank account makes no sense... in two weeks you won't be able to buy half of the things you used to with the same amount of money. 2.- A huge amount of Venezuelans dream with living abroad (me included) why, you ask? well sir, it is certain that life in this country is not the best: I hope you can understand better why people in 3rd world countries and crappy economies buy USD even at an unfavorable rate. The last question was: Q: Why would Venezuela want to block the sale of dollars? A: Centralized currency management is an Economic Measure that should last 6 months tops. (This was Argentina's case in 2013) but at this point, reverting that would take quite a few years. However, Turukawa's wikipedia link explains that very well. Regards.\"" } ]

[ { "docid": "9906", "title": "", "text": "\"I'm loving this thread, by the way. The answer to your question is yes: the PDE method and the martingale method lead to the same result. I think this is intuitive, since they address the same things (drift, probability, etc). Heath &amp; Schweizer (2000) have a nice paper in the Journal of Applied Probability that shows the (fairly general) circumstances under which the two methods will always have the same result. It's titled \"\"Martingales versus PDEs in Finance: An Equivalence Result with Examples\"\". My argument is that Black-Scholes is really an equilibrium model, not an arbitrage-free model. Despite that, I'm claiming that it is possible to use BS (and any other equilibrium model) in a no-arbitrage manner by incorporating information from other securities, but that this doesn't make the underlying model and its assumptions a no-arbitrage model. I think, basically, what I'm trying to say is that I don't think market completeness is really the issue, but rather that the issue is the difference between the model and reality. Equilibrium models make a statement about what reality *should* be, given some parameters that you're supposed to know with certainty (all bets are off if you have to estimate them). Arbitrage-free models explicitly use external, observed prices, *but do not explain why we observe those prices*. In this context (and using these definitions), I'd say Black-Scholes is clearly an equilibrium model, albeit one built from some arguments that involve arbitrage.\"" }, { "docid": "439757", "title": "", "text": "Dollar cost averaging moderates risk. But you pay for this by giving up the chance for higher gains. If you took a hundred people and randomly had them fully buy into the market over a decade period, some of those people will do very well (relative to the rest) while others will do very poorly (relatively). If you dollar cost average, your performance would fall into the middle so you don't fall into the bottom (but you won't fall into the top either)." }, { "docid": "311133", "title": "", "text": "\"&gt;So why not talk to your employer, and ask them to pay you in gold dust? Then when tax time comes, just convert some gold dust into the amount of USD in taxes you owe. Because selling gold and buying dollars has an effect on the market: it reduces the value of gold, and increases the value of dollars. Understand? So being forced to use dollars *artificially increases the value of dollars*. The reason we are forced to use Dollars is because the central bank has the monopoly on printing dollars. Without legal tender laws, that monopoly would be worthless. &gt;Of course, you'd have to find farmers and shoemakers and electronic stores willing to accept payment in gold dust as well... As the value of gold increases over time, the government taxes the increased value as \"\"capital gains tax\"\". So gold cannot be money under these circumstances - the government considers it an investment now.\"" }, { "docid": "279865", "title": "", "text": "So like any market, the housing market will *on average* trend upward. But the extreme prices we're seeing in Toronto or San Francisco are not part of the normal market growth. There's a lot of factors that can affect housing outside of just increased demand. Here's a few of the big ones. 1) Low-Interest Rates: Since (2008? I think) interests rates have been really low, meaning mortgages are really low. If you can borrow money at 4% and the inflation rate is 8%, you've borrowed expensive dollars and are paying back in cheap dollars. 2)NIMBY (Not in my back yard): If you have enough land to build 10 houses or one 100 apartment building, what do you build? Theoretically the apartment building, but in reality, the people that already paid for their million dollar house, don't want a giant apartment complex bringing down the value of the neighborhood and ruining their views. So they pass laws preventing new and bigger buildings, meaning higher prices for the homes that already exist. And as a bonus, it's easier on the city to have 10 people who make a million dollars a year than a 100 people who make 100,000 a year. Foreign investment: So there's a lot of places where people have money, but because of corruption or shaky economies, it's not safe to hold it there. So you buy properties in the U.S. or Canada because you know no one's going to seize it and it's (generally) not going to lose value. So you end up with foreign dollars competing with the local markets for housing, driving the price up." }, { "docid": "221169", "title": "", "text": "\"First of all, just for the sake of clarity, the Federal Reserve doesn't actually \"\"print\"\" money - that's the job of the BEP. What they do is they buy US Treasury bonds - i.e., loan money to the US government. The money they do it with are created \"\"from thin air\"\" - just by adding some numbers in certain accounts, thus it is described as \"\"printing money\"\". The US government then spends the money however it wishes to. The idea is that this money is injected into the economy - since the only way the US government can use the money from these loans is to spend them on buying something or give it to some people that would spend them. As it is a loan, sometime in the future the US government would pay these loans back, and in this moment the Fed would decide - if they want to \"\"contract\"\" the supply of money back, they just \"\"destroy\"\" the money they've got, by erasing the numbers they created before. They could also do it by selling the bonds they hold on the open market and then again \"\"destroy\"\" the money they got as proceeds, thus lowering the amount of money existing in the economy. This way the Fed can control how much money is out there and thus supposedly influence inflation and economic activity. The Fed could also inject money in the economy by buying any assets after creating the money - for example, right now they own about a trillion dollars worth of various mortgage-based securities. But since buying specific security would probably give unfair advantage to the issuers and owners of this security, usually US treasury bonds if what they buy. The side effect of increased supply of money denominated in dollars would be, as you noted, devaluation of dollars compared to other currencies.\"" }, { "docid": "482963", "title": "", "text": "If someone owns a house that is not paid off...can someone buy it by taking another mortgage? Yes, but I'm not sure why you think the buyer would need to take another mortgage to buy it. If someone sells their home for X dollars, then the buyer needs X dollars to buy the house. How they get that money (use cash, take out a mortgage) is up to them. During the closing process, a portion of the funds generated from the sale are diverted to pay off the seller's loan and any leftover funds after closing are pocketed by the seller. What kind of offer would be most sensible? I assume that in this case the current owner of the house would want to make a profit. The amount that the house is sold for is determined by the market value of their home, not by the size of the mortgage they have left to pay off. You make the same offer whether they own their home or have a mortgage." }, { "docid": "419298", "title": "", "text": "\"Is playing the lottery a wise investment? --Probably not. Is playing the lottery an investment at all? --Probably not though I'll make a remark on that further below. Does it make any sense to play the lottery in order to improve your total asset allocation? --If you follow the theory of the Black Swan, it actually might. Let me elaborate. The Black Swan theory says that events that we consider extremely improbable can have an extreme impact. So extreme, in fact, that its value would massively outweigh the combined value of all impacts of all probable events together. In statistical terms, we are speaking about events on the outer limits of the common probablity distribution, so called outliers that have a high impact. Example: If you invest $2000 on the stock market today, stay invested for 20 years, and reinvest all earnings, it is probable within a 66% confidence interval that you will have an 8 % expected return (ER) per year on average, giving you a total of roughly $9300. That's very much simplified, of course, the actual number can be very different depending on the deviations from the ER and when they happen. Now let's take the same $2000 and buy weekly lottery tickets for 20 years. For the sake of simplicity I will forgo an NPV calculation and assume one ticket costs roughly $2. If you should win, which would be an entirely improbable event, your winnings would by far outweigh your ER from investing the same amount. When making models that should be mathematically solvable, these outliers are usually not taken into consideration. Standard portfolio management (PM) theory is only working within so called confidence intervals up to 99% - everything else just wouldn't be practical. In other words, if there is not at least a 1% probability a certain outcome will happen, we'll ignore it. In practice, most analysts take even smaller confidence intervals, so they ignore even more. That's the reason, though, why no object that would fall within the realms of this outer limit is an investment in terms of the PM theory. Or at least not a recommendable one. Having said all that, it still might improve your position if you add a lottery ticket to the mix. The Black Swan theory specifically does not only apply to the risk side of things, but also on the chance side. So, while standard PM theory would not consider the lottery ticket an investment, thus not accept it into the asset allocation, the Black Swan theory would appreciate the fact that there is minimal chance of huge success. Still, in terms of valuation, it follows the PM theory. The lottery ticket, while it could be part of some \"\"investment balance sheet\"\", would have to be written off to 0 immediately and no expected value would be attached to it. Consequently, such an investment or gamble only makes sense if your other, safe investments give you so much income that you can easily afford it really without having to give up anything else in your life. In other words, you have to consider it money thrown out of the window. So, while from a psychological perspective it makes sense that especially poorer people will buy a lottery ticket, as Eric very well explained, it is actually the wealthier who should consider doing so. If anyone. :)\"" }, { "docid": "135216", "title": "", "text": "\"The market capitalization of a stock is the number of shares outstanding (of each stock class), times the price of last trade (of each stock class). In a liquid market (where there are lots of buyers and sellers at all price points), this represents the price that is between what people are bidding for the stock and what people are asking for the stock. If you offer any small amount more than the last price, there will be a seller, and if you ask any small amount less than the last price, there will be a buyer, at least for a small amount of stock. Thus, in a liquid market, everyone who owns the stock doesn't want to sell at least some of their stock for a bit less than the last trade price, and everyone who doesn't have the stock doesn't want to buy some of the stock for a bit more than the last trade price. With those assumptions, and a low-friction trading environment, we can say that the last trade value is a good midpoint of what people think one share is worth. If we then multiply it by the number of shares, we get an approximation of what the company is worth. In no way, shape or form does it not mean that there is 32 billion more invested in the company, or even used to purchase stock. There are situations where a 32 billion market cap swing could mean 32 billion more money was invested in the company: the company issues a pile of new shares, and takes in the resulting money. People are completely neutral about this gathering in of cash in exchange for dilluting shares. So the share price remains unchanged, the company gains 32 billion dollars, and there are now more shares outstanding. Now, in some sense, there is zero dollars currently invested in a stock; when you buy a stock, you no longer have the money, and the money goes to the person who no longer has the stock. The issue here is the use of the continuous tense of \"\"invested in\"\"; the investment was made at some point, but the money doesn't really stay in this continuous state of being. Unless you consider the investment liquid, and the option to take money out being implicit, it being a continuous action doesn't make much sense. Sometimes the money is invested in the company, when the company causes stocks to come into being and sells them. The owners of stocks has invested money in stocks in that they spent that money to buy the stocks, but the total sum of money ever spent on stocks for a given company is not really a useful value. The market capitalization is an approximation, which under the efficient market hypothesis (that markets find the correct price for things nearly instantly) is reasonably accurate, of the value the company has collectively to its shareholders. The efficient market hypothesis isn't accurate, but it is an acceptable rule of thumb. Now, this value -- market capitalization -- is arguably not the total value of a company: other stakeholders include bond holders, labour, management, various contract counter-parties, government and customers. Some companies are structured so that almost all value is captured not by the stock owners, but by contract counter-parties (this is sometimes used for hiding assets or debts). But for most large publically traded companies, it (in theory) shouldn't be far off.\"" }, { "docid": "464502", "title": "", "text": "So far we have a case for yes and no. I believe the correct answer is... maybe. You mention that most of your expenses are in dollars which is definitely correct, but there is an important complication that I will try to simplify greatly here. Many of the goods you buy are priced on the international market (a good example is oil) or are made from combinations of these goods. When the dollar is strong the price of oil is low but when the dollar is weak the price of oil is high. However, when you buy stuff like services (think a back massage) then you pay the person in dollars and the person you are paying just wants dollars so the strength of the dollar doesn't really matter. Most people's expenses are a mix of things that are priced internationally and locally with a bias toward local expenses. If they also have a mix of investments some of which are international and depend on the strength of the dollar and some are domestic and do not, then they don't have to worry much about the strength/weakness of the dollar later when they sell their investments and buy what they want. If the dollar is weak than the international goods will be more expensive, but at the same time international part of their portfolio will be worth more. If you plan on retiring in a different country or have 100% of your investments in emerging market stocks than it is worth thinking about either currency hedging or changing your investment mix. However, for many people a good mix of domestic and international investments covers much of the risk that their currency will weaken while offering the benefits of diversification. The best part is you don't need to guess if the dollar will get stronger or weaker. tl;dr: If you want your portfolio to not depend on currency moves then hedge. If you want your retirement to not depend on currency moves then have a good mix of local and unhedged international investments." }, { "docid": "464297", "title": "", "text": "If you have money and may need to access it at any time, you should put it in a savings account. It won't return much interest, but it will return some and it is easily accessible. If you have all your emergency savings that you need (at least six months of income), buy index-based mutual funds. These should invest in a broad range of securities including both stocks and bonds (three dollars in stocks for every dollar in bonds) so as to be robust in the face of market shifts. You should not buy individual stocks unless you have enough money to buy a lot of them in different industries. Thirty different stocks is a minimum for a diversified portfolio, and you really should be looking at more like a hundred. There's also considerable research effort required to verify that the stocks are good buys. For most people, this is too much work. For most people, broad-based index funds are better purchases. You don't have as much upside, but you also are much less likely to find yourself holding worthless paper. If you do buy stocks, look for ones where you know something about them. For example, if you've been to a restaurant chain with a recent IPO that really wowed you with their food and service, consider investing. But do your research, so that you don't get caught buying after everyone else has already overbid the price. The time to buy is right before everyone else notices how great they are, not after. Some people benefit from joining investment clubs with others with similar incomes and goals. That way you can share some of the research duties. Also, you can get other opinions before buying, which can restrain risky impulse buys. Just to reiterate, I would recommend sticking to mutual funds and saving accounts for most investors. Only make the move into individual stocks if you're willing to be serious about it. There's considerable work involved. And don't forget diversification. You want to have stocks that benefit regardless of what the overall economy does. Some stocks should benefit from lower oil prices while others benefit from higher prices. You want to have both types so as not to be caught flat-footed when prices move. There are much more experienced people trying to guess market directions. If your strategy relies on outperforming them, it has a high chance of failure. Index-based mutual funds allow you to share the diversification burden with others. Since the market almost always goes up in the long term, a fund that mimics the market is much safer than any individual security can be. Maintaining a three to one balance in stocks to bonds also helps as they tend to move in opposite directions. I.e. stocks tend to be good when bonds are weak and vice versa." }, { "docid": "367348", "title": "", "text": "\"I feel that OP's question is fundamentally wrong and an understanding of why is important. The stock market, as a whole, in the USA has an average annualized return of 11%. That means that a monkey, throwing darts at a board, can usually turn 100K into over three million in thirty-five years. (The analog I'm drawing is a 30-year old with 100K randomly picking stocks will be a multi-millionaire at 65). So to be \"\"good\"\" at investing in the stock market, you need to be better than a monkey. Most people aren't. Why? What mistakes do people make and how do you avoid them? A very common mistake is to buy high, sell low. This happened before and after the 08's recession. People rushed into the market beforehand as it was reaching its peak, sold when the market bottomed out then ignored the market in years it was getting 20+% returns. A Bogle approach for this is to simply consistently put a part of your income into the market whether it is raining or shining. Paying high fees. Going back to the monkey example, if the monkey charges you a 2% management fees, which is low by Canadian standards, the monkey will cost you one million dollars over the course of the thirty-five years. If the monkey does a pretty good job it is a worthy expenditure. But most humans, including professional stock pickers, are worst than a monkey at picking stocks. Another mistake is adjusting your plan. Many people, when the market was giving bull returns before the 08's crash happily had a large segment of their wealth in stocks. They thought they were risk tolerant. Crash happened, they moved towards bonds. Then bonds returns were comically low while stocks soared. Had they had a plan, almost any consistent plan, they'd have done better. Another genre of issues is just doing stupid things. Don't buy that penny stock. Don't trade like crazy. Don't pay 5$ commission on a 200$ stock order. Don't fail to file your taxes. Another mistake, and this burdens a lot of people, is that your long-term investments are for long-term investing. What a novel idea. You're 401K doesn't exist for you to get a loan for a home. Many people do liquidate their long-term savings. Don't. Especially since people who do make these loans or say \"\"I'll pay myself back later\"\" don't.\"" }, { "docid": "412257", "title": "", "text": "In other words, to a first-order approximation, the S&P 500 is always at an all-time high. I'm going to run with this observation a bit. The crash of '87 was remarkable. It was a drop of 1/3 in a short time, yet, when one looked at the year, the Dow was up nearly 5% with dividends included. A one-year Rip Van Winkler would have woken up thinking it an unremarkable year. I actually recall a conversation I had on Aug 25th 1987. I was discussing the market with a colleague over lunch, and while I didn't call the top that day, I remarked that it didn't matter much, that 5-10 years later just staying in the market would have been the right thing. Compare this 87-95 chart to the longer term chart derobert shows. In his chart, this is all but a blip. In my chart you can see it took about 3-1/2 years to be in the black, as the market then shot up from there. A dollar cost averager would not have bought at that short term high, well not more than a tiny bit. The best I can do to conclude is to say I'd never just buy in all at once. You buy in over time, X% of your income each month, and if you have a chunk to invest, smooth it out over a few years." }, { "docid": "450132", "title": "", "text": "crank out expensive shares when markets are frothy Corporations go public (sell their shares for the first time) in market conditions that have a lot of liquidity (a lot of people buying shares) and when they have to make the fewest concessions to appease an investing public. When people are greedy and looking to make money without using too much due diligence. Think Netscape's IPO in 1995 or Snapchat's IPO in 2017. They also issue more shares after already being public in similar circumstances. Think Tesla's 1 billion dollar dilution in 2017. Dilution results in the 1 share owning less of the company. So in a less euphoric investing environment, share prices go down in response to dilution. See Viggle's stock for an example, if you can find a chart. issue debt Non-financial companies create bonds and sell bonds. Why is that surprising to you? Cash is cash. This is called corporate bonds or corporate debt. You can buy Apple bonds right now if you want from the same brokers that let you buy stocks. mutual fund investor Bernstein is making a cynical assessment of the markets which carries a lot of truth. Dumping shares on your mom's 401k is a running gag amongst some financial professionals. Basically mutual fund investors are typically the least well researched or most gullible market participants to sell to, influenced by brand name more than company fundamentals, who will balk at the concept of reading a prospectus. Financial professionals and CFOs have more information than their investors and can gain extended advantages because of this. Just take the emotions out of it and make objective assessments." }, { "docid": "117010", "title": "", "text": "\"&gt;Because selling gold and buying dollars has an effect on the market: it reduces the value of gold, and increases the value of dollars. Ah, but with all the business you'd do in gold, you'd constantly be increasing the value of gold. Think of it! I'm pretty sure that most people want to be paid in dollars not simply because of the fact that their taxes have to be paid in it, but because of it's universality. Not everyone has a use for a sack of barley, or a fish, or some gold dust. But you can buy whatever you want with an amount of dollars. &gt;As the value of gold increases over time, the government taxes the increased value as \"\"capital gains tax\"\". It's only taxed at a 15.5% rate, IIRC. You'd probably come out ahead.\"" }, { "docid": "245355", "title": "", "text": "\"I can, but it takes a significant amount of time. I'll do a short version which unfortunatley might leave more holes than you like. Basically, traders don't want to barter because it is hard to find the person with precisely the goods you want who wants to trade for the goods you have. Thus the need for \"\"coupons\"\" that represent value in a marketplace. Then you need to decide who gets to create coupons. If too many can issue them, problems arise, and no one trusts the coupons will be good later. Eventually you want one large bank/nation/trader to be able to issue them so everyone has the same level of trust in them, and you don't have the economic inefficiencies of many coupon issuers. Next, the number of coupons needs to be enough to facilitate trade. If the amount of trade increases a lot, and the number of coupons doesn't increase similarly they become worth more, and people start to hoard them. This causes deflation, which causes less investment, which causes less growth, which hurts everyone in the long run. If there are too many coupons added, this causes inflation, which causes people to spent them quicker instead of holding them. For reasons I won't cover here slight, predictable inflation is much better than deflation, so remember inflation is slightly preferred. Note that inflation is often caused not by the number of coupons but by external price changes. Now, for a modern economy to do well, somone has to watch the economy, measure it carefully, and add/subtract coupons into the system as needed. Coupons, like all money, have no real value (whatever that means), but only have value because the holder expects to be able to trade them *later* for goods and services. You cannot eat coupons, use them for shelter (usually!), or wear them, but you want to trade them for such needs. The same is true for paper money, gold, stones, or almost whatever money system one uses. Money in all these forms is merely an IOU tradable for future goods. The Fed is tasked (among other things) with making sure there is precisely enough coupons in the economy to keep trade functioning as well as possible. This is very hard to do since there are external and internal shocks to an economy (think disaster, foreign govts shutting off resources, rapid changes in people's tastes, etc.). Central banks such as the Fed need to be independent of political control, since empirical evidence has shown that politicians tend to add more money to the system than is needed, because the short term gains give them votes, but the long term consequences (rapid inflation, unemployment, lower economic growth) are bad for society. This is why the Fed is largely out of congressional control, and large amounts of empirical evidence across hundreds of years and dozens of cultures shows this to be good. Note: another function of the Fed is to be a lender of last resort to help prevent bank panics that were widespread in the 18th and early 19th century, something that none of us now remember, but it was a real problem. I'll skip that part for now. So now we're at the point where the Fed needs to add/subtract coupons from society. To do this part justice takes significant time to cover all the reasons why various rules are in place (banking reserve requirements, for example), and you cannot learn it from one pass of reading. But I'll try. Instead of being like the majority of internet fools that rail against the system, try to learn the *why* of all this, and you'll be much wiser and understand that it is all a pretty good system. One method they use is the interbank lending rate. Banks have a reserve requirement, which is the ratio of coupons they need to have on hand as a ratio compared to the total coupons depositors lent them. This is usually around 1:10. The amount deposited that they can lend goes to business loans, school loans, mortgage loans, etc., and helps economies grow. Now when a bank on a given day falls short due to too many withdrawals, other banks (or the Fed) offers an overnight loan to meet reserve requirements, and the Fed sets the interest rate, which in turn drives other interest rates in the system. This does not change the money supply very much. Secondly, the Fed sets the reserve requirement, which vastly can change the amount of money available to society. But they change this rate so rarely (all the historical data is on the St. Loius Fed site, among others) that it is not usually an issue. I'll explain below how this can drastically change the money supply though the money multiplier. Thirdly, and this is the part the poster above seems upset about, they conduct open market operations. This is the primary means by which the Fed exercises control over the number of coupons in play. The government, like businesses, like individuals, often needs to borrow money, in theory to invest in wise causes like infrastructure or perhaps money making enterprises such as technology investmeny (and I know what they often use the money for causes many to complain). The government, like companies, offers the sale of various contracts such as bonds to investors, who want a place to park some accumulated coupons for safety, and they get a return plus some interest. So the government sells bonds on the open market to investors, banks, pensions, foreign governments, basically to whomever wishes to purchase them at the market rate, and the government, like many individuals and banks, uses these loans to perform day to day functioning and possible smooth out volatility in spending needs. By law the Fed cannot purchase directly from Treasury. Now, once on the market, these bonds are traded, packaged, resold, etc., since they have inherent value, and since those owning them want to buy/sell them, perhaps before maturity date. This \"\"liquidity\"\" (ability to sell your goods) is necessary - fewer would purchase an item if they could not sell it when they desire. Thus bonds are bought, sold, and traded, and their prices fluctuate based on what the market thinks they are worth, just like any good. Now, the Fed can buy/sell these bonds on the *open market*, like anyone else. So when the Fed wishes to increase the money supply, they can buy bonds that are not \"\"spendable\"\" money and inject money into the system. Note they now hold a bond that had at the time of transaction the same value as the money they injected. Note investors freely bought these from Treasury, meaning the market thought at the time of purchase that this was a good invesement. It is *not* the government merely wishing more money into existance. It is market forces that require more money for trades and is selling goods from the marketplace of (presumably) equal value to the Fed. This increases liquidity, but takes valuable assets from circulation. When the Fed wishes to shrink the money supply, they sell these bonds back into circulation basically by offering better terms than Treasury. In fact, you can find graphs of the Fed operations and see how every December they inject money for more Christmas shpping (need more coupons for more trade) and every January they extract some. So open market transactions, buying and selling goods at market prices in the marketplace along with other traders, is how the Fed injects and removes money from the money supply. This is the primary mechanism that the Fed uses to control the number of coupons in the economy. Finally, a little about reserve requirements and the money multiplier, since it affects so much of the number of coupons in play. This also I must simplify drastically. Each bank needs to hold 1/10 of all deposits in cash. The rest can be lent, which lands in another bank, which again can be lent, etc... Thus each $1 deposited can result in loans totalling 9/10 + (9/10)^2 + (9/10)^3 +... = 9 more dollars. Many people claim that banks are printing money, which is nonsense, since each also has an equal debt to pay to the person they borrowed from. When all loans are paid back there is no net money gain. However, this allows for each $1 the Fed injects by buying bonds for there to be up to $9 in the economy, *if banks all loan to the fullest extent*. Banks tend to want to loan since loaned money makes them profit. Banks used to loan too much and runs on the banks caused significant problems, which is why laws were made to require *all* banks to have the same reserve requirement. Now, when banks get scared and stop loaning, this 9 fold multiplier dries up, and the Fed has much less inpact on being able to target the proper number of coupons to keep the economy smooth. During the recent crash when banks stopped loaning, as each dollar was paid back on debts, there was significant shrinkage of available money for transactions, and this kills the economy. This is the \"\"liquidity crisis\"\". Hope this helps. As I said, this is vastly simplified and I cannot go into all the reasons and historical items needed to understand it fully. It is a vastly complex (and necessarily so) and takes significant study to grasp the genius of it. It's similar to not being able to understand nuances of particle physics in one go, but as you study and work at it you see *why* things go as they do, and you learn all the failed methods (the gold standard is one example) that were thrown out for many good reasons. Cheers.\"" }, { "docid": "495556", "title": "", "text": "\"&gt; If you have five to eight dictators fighting at once You will quickly see these 5 to 8 dictators mutually come to the conclusion that it is not in their interests to \"\"fight it out\"\", but rather, support each other and prevent new-comers. Or, you will see mergers as we saw in the accounting and banking fields. You both knock out a competitor AND increase your market share in the process. This becomes similar to a government-sanctioned monopoly, but instead of one firm, you have 6 or 8, each recognizing that they've got a great position as gatekeepers and rent-seekers. This is similar to how the healthcare and insurance companies really don't DO very much except extract money. They over-bill the hospitals, then over-bill the customers, and profit the huge margins. Or how the government used to do student loans, then instead outsourced to the big banks to do it. Then recently they determined that hte big banks were taking tens of billions of dollars in profit for \"\"running\"\" the program. That's tens of billions of dollars of wealth simply extracted from our taxes. This is why the government under Obama decided to kick out the banker middle-men and simply issue the exact same loans with the exact same rules,a ll by themselves. Why outsource to a middleman when you can run the exact same program with tons less overhead? It's also the reason single-payer healthcare is tons more efficient over the current model, and would save our country trillions over the looong term. Not to mention, the democratization of currency you envision is truly ephemeral, a mirage. The firms the government chooses as suited enough to pay taxes basically means the government still has the final decision on which \"\"currency\"\" (bonds) to accept. What if the government then decides only ONE corp is suited to do this job, or only two? Then it's functionally no different than teh current situation. Right now, the world buys USD bonds at extremely low interest rates, and this helps fund our government and keeps our nations costs very low. Under your scenario, the government is saying \"\"We accept bonds from X, Y, or Z\"\", and so instead the world runs out to buy XYZ bonds at extremely low interest rates. Instead of giving our country the funding it needs, we're actually giving XYZ corps the low interest rates. This is basically the same downfall of letting the big banks run the student loan program: it gives the firms more power, the government less power, costs us more tax dollars, and gives those firms an undeserved higher place on the food chain. I quite simply disagree with it. I would rather our government print the bonds themselves and take the benefit of the low cost of borrowing, rather than giving XYZ corps more favorable funding to continue world-wide expansion and takeover. Furthermore, if XYZ corps are approved by the government for paying tax dollars, what do we do in the case of a fiscal emergency such as 2007 when AIG basically went bankrupt in a period of only a few months? Of course this would be SURE to happen only right AFTER tax day, AFTER the entire country buys AIG bonds, pays the government in AIG bonds, and the executives of AIG pay themselves HUGE bonuses. Then they go bankrupt, and the government is left holding ALL the IOU's which are worthless. And of course, traders, hedgers, goldman sachs, etc, would all know AIG was about to get fucked and would make trillions while the US Gov received all tax receipts in worthless paper. The fact is, with the speed big companies can fall down under the weight of their own contradictions, the danger is all too real that a full year of tax receipts simply disappears.\"" }, { "docid": "21306", "title": "", "text": "According to your post, you bought seven shares of VBR at $119.28 each on August 23rd. You paid €711,35. Now, on August 25th, VBR is worth $120.83. So you have But you want to know what you have in EUR, not USD. So if I ask Google how much $845.81 is in EUR, it says €708,89. That's even lower than what you're seeing. It looks like USD has fallen in value relative to EUR. So while the stock price has increased in dollar terms, it has fallen in euro terms. As a result, the value that you would get in euros if you sold the stock has fallen from the price that you paid. Another way of thinking about this is that your price per share was €101,72 and is now €101,33. That's actually a small drop. When you buy and sell in a different currency that you don't actually want, you add the currency risk to your normal risk. Maybe that's what you want to do. Or maybe you would be better off sticking to euro-denominated investments. Usually you'd do dollar-denominated investments if some of your spending was in dollars. Then if the dollar goes up relative to the euro, your investment goes up with it. So you can cash out and make your purchases in dollars without adding extra money. If you make all your purchases in euros, I would normally recommend that you stick to euro-denominated investments. The underlying asset might be in the US, but your fund could still be in Europe and list in euros. That's not to say that you can't buy dollar-denominated investments with euros. Clearly you can. It's just that it adds currency risk to the other risks of the investment. Unless you deliberately want to bet that USD will rise relative to EUR, you might not want to do that. Note that USD may rise over the weekend and put you back in the black. For that matter, even if USD continues to fall relative to the EUR, the security might rise more than that. I have no opinion on the value of VBR. I don't actually know what that is, as it doesn't matter for the points I was making. I'm not saying to sell it immediately. I'm saying that you might prefer euro-denominated investments when you buy in the future. Again, unless you are taking this particular risk deliberately." }, { "docid": "410887", "title": "", "text": "\"I'll answer this question: \"\"Why do intraday traders close their position at then end of day while most gains can be done overnight (buy just before the market close and sell just after it opens). Is this observation true for other companies or is it specific to apple ?\"\" Intraday traders often trade shares of a company using intraday leverage provided by their firm. For every $5000 dollars they actually have, they may be trading with $100,000, 20:1 leverage as an example. Since a stock can also decrease in value, substantially, while the markets are closed, intraday traders are not allowed to keep their highly leveraged positions opened. Probabilities fail in a random walk scenario, and only one failure can bankrupt you and the firm.\"" }, { "docid": "204892", "title": "", "text": "\"I don't think this is \"\"curious\"\" at all. A large part of Bitcoin's value is based on speculation currently, and since it's both a global currency and a relatively small one, global changes can greatly affect it without having a huge impact on the US Dollar (e.g., the article mentions that much of Bitcoin's trade, and therefore its value, is coming from Japan right now). The symmetry you're looking for can also be deceiving when talking about currencies of dramatically different values. The US M2 money supply is worth over $13 trillion (measuring in US Dollars). The Bitcoin money supply is currently worth about $66 billion (also measuring in US Dollars). If Bitcoin spiked 10% and the change in value was completely symmetric with the US dollar, the US dollar would fall in value by only 0.05% (i.e. move $6.6 billion in market cap from the USD to Bitcoin). That's also greatly exaggerating the impact of changes in value of Bitcoin on the US Dollar since Bitcoin and the USD aren't the only currency pair in existence. Far from it, in fact. This is why you see, for example, the Venezuelan Bolivar tank against the US Dollar without feeling immensely more wealthy. People in the US also tend to price things in USD, including foreign currencies, because that's what they're used to doing as they're most familiar with the value of a dollar from everyday experience.\"" } ]

[ { "docid": "598807", "title": "", "text": "Pros: Cons: Before the housing bubble the conventional wisdom was to buy as much home as you could afford, thereby borrowing as much you can afford. Because variable rates lead to lower mortgages, they were preferred by many as you could buy more house. This of course lead to many people losing their home and many thousands of dollars. A bubble is not necessary to trigger a chain of events that can lead to loss of a home. If an interest only borrower is late on a payment, this often triggers a rate increase. Couple that with some other things that can happen negatively, and you are up $hit's creek. IMO it is not wise." } ]

[ { "docid": "171253", "title": "", "text": "Intuit Quicken. Pros: Cons:" }, { "docid": "525576", "title": "", "text": "There are quite a few ways; each has its own pro's and con's SWIFT: Fast reliable payment. Higher Charges. If payments are large and routine the charges can be less Remittance Service: Ideal for person to person transfer. Can be used by Companies to transfer to Individuals. Less Faster compared to SWIFT. Quite Cheaper compared to SWIFT Check's: Long time is getting it cleared in India. Typically around month. Quite Cheap. Almost NIL charges." }, { "docid": "272008", "title": "", "text": "\"Yes when I place an order with my broker they send it out to the exchange. - For individual investors, what are some cons and pros of trading on the exchanges directly versus indirectly via brokers? I may be mistaken(I highly doubt it), but from my understanding you cannot trade directly through an exchange as a retail investor. BATS allows membership but it is only for Your firm must be a registered broker-dealer, registered with a Self Regulatory Organization (SRO) and connected with a clearing firm. No apple (aapl) is listed on the NASDAQ so trades go through the NASDAQ for aapl. Caterpillar Inc (CAT) is listed on the NYSE so trades go through the NYSE. The exchange you trade on is dependent on the security, if it is listed on the NYSE then you trade on the NYSE. As a regular investor you will be going through a broker. When looking to purchase a security it is more important to know about the company and less important to know what exchange it is listed on. Since there are rules a company must comply with for it to be listed on certain exchanges, it does make a difference but that is more the case when speaking about a stock listed Over the Counter(OTC) or NYSE. It is not important when asking NYSE or NASDAQ? Selecting a broker is something that's dependent on your needs. You should ask your self, \"\"whats important to me?\"\", \"\"Do I want apps(IE: iPhone, android)?\"\" \"\"Do I need fancy trading tools?\"\". Generally all the brokers you listed will most likely do the trick for you. Some review sites: Brokerage Review Online Broker Review 2012 Barron's 2012 Online Broker Review\"" }, { "docid": "111266", "title": "", "text": "When economies are strong, it is particularly alluring to have a single currency as it makes trade and tourism simpler and helps reduce costs. The problem comes when individual member economies get into trouble. Because the Eurozone is a loose grouping of nations, there is no direct equivalent of the US Federal government to coordinate a response, there is instead an odd mixture of National and Central government that makes it harder to get a unified approach to the economy (OK, it's maybe not so different to the US in reality). This lack of flexibility means that some of the key levers of international finance are compromised, for example a weak economy can't float its currency to improve exports. Similarly individual country's interest rates can't be adjusted to balance spending. I suspect the main reason though is political and based on concepts of sovereignty and national pride. The UK does the majority of its trade with the Eurozone, so the pros would possibly outweigh the cons, but the UK as a whole (and some of our papers in particular) have always regarded Europe with suspicion. Most Brits only speak English and find France and Germany a strange and obtuse place. The (almost) common language makes it easier to relate to the US and Canada than our near neighbours. It seems the perception amongst the political establishment is that any attempt to join the Euro is political suicide, while that is the case it is unlikely to happen. Purely from a personal perspective, I'd welcome the Euro except it means a lot of the products I routinely buy would become a lot more expensive if price is 'harmonised'. For an example compare the price of the iPod Touch in the UK (£209.99) to France(€299). The French pay £262 at the current exchange rate, which is close to 25% more. Ouch. See also my question about Canada adopting the US Dollar" }, { "docid": "212162", "title": "", "text": "PROS: Price stability, confidence in the market, manipulation of money supply for direct monetary policy transmission, not having politicians conduct short sighted policy so they can get reelected, etc. CONS: No checks/balances, few people control of the largest economy in the world, not democratic" }, { "docid": "392124", "title": "", "text": "\"I think it really depends on what work/lifestyle you are looking for. I'm sure your more than capable of going down either route, but you should weigh up the pros and cons of each A consultant would be great, you'd be your own boss and you have overall say on how your business/career plans out, but be prepared to put in a hell of a lot of work to get it off the ground. Long hours, little time for social/family etc. But in the long run it'll pay off Employee, no worries about running your company, just turn up and perform your duties. You'll get the whole benefit package: healthcare/pension etc. You can probably go on expense paid training courses etc It depends, do you want to just be an employee working \"\"for the man\"\" or do you want to be \"\"the man\"\"? I wish you luck in whatever you do! :D\"" }, { "docid": "309200", "title": "", "text": "A terrific resource is this article. To summarize the points given: PROS: CONS: There is no generic yes or no answer as to whether you ought to max out your 401(k)s. If you are a sophisticated investor, then saving the income for investing could be a better alternative. Long term capital gains are taxed at 15% in the US, so if you buy and hold on to good companies that reinvest their earnings, then the share price keeps going up and you'll save a lot of money that would go in taxes. If you're not a very good investor, however, then 401(k)s make a lot of sense. If you're going to end up setting up some asset allocation and buying ETFs and rebalancing or having a manager rebalance for you every year or so, then you might as well take the 401(k) option and lower your taxable income. Point #1 is simply wrong, because companies that reinvest earnings and growing for a long time are essentially creating tax-free gains for you, which is even better than tax-deferred gains. Nonetheless, most people have neither the time nor the interest to research companies and for them, the 401(k) makes more sense." }, { "docid": "80272", "title": "", "text": "I'm currently using Halifax. Pros: Cons: I'm might start using TD Waterhouse in future, as they claim to have no admin charge." }, { "docid": "521095", "title": "", "text": "\"The major pros tend to be: The major cons tend to be: Being in California, you've got state income tax to worry about as well. It might be worth using some of that extra cash to hire someone who knows what they're doing to handle your taxes the first year, at least. I've always maxed mine out, because it's always seemed like a solid way to make a few extra dollars. If you can live without the money in your regular paycheck, it's always seemed that the rewards outweighed the risks. I've also always immediately sold the stock, since I usually feel like being employed at the company is enough \"\"eggs in that basket\"\" without holding investments in the same company. (NB: I've participated in several of these ESPP programs at large international US-based software companies, so this is from my personal experience. You should carefully review the terms of your ESPP before signing up, and I'm a software engineer and not a financial advisor.)\"" }, { "docid": "384626", "title": "", "text": "\"A Tweep friend asked me a similar question. In her case it was in the larger context of a marriage and house purchase. In reply I wrote a detail article Student Loans and Your First Mortgage. The loan payment easily fit between the generally accepted qualifying debt ratios, 28% for house/36 for all debt. If the loan payment has no effect on the mortgage one qualifies for, that's one thing, but taking say $20K to pay it off will impact the house you can buy. For a 20% down purchase, this multiplies up to $100k less house. Or worse, a lower down payment percent then requiring PMI. Clearly, I had a specific situation to address, which ultimately becomes part of the list for \"\"pay off student loan? Pro / Con\"\" Absent the scenario I offered, I'd line up debt, highest to lowest rate (tax adjusted of course) and hack away at it all. It's part of the big picture like any other debt, save for the cases where it can be cancelled. Personal finance is exactly that, personal. Advisors (the good ones) make their money by looking carefully at the big picture and not offering a cookie-cutter approach.\"" }, { "docid": "94710", "title": "", "text": "PenFed Platinum Cashback Rewards Visa Card is another good choice. Pros: Cons:" }, { "docid": "534471", "title": "", "text": "This sounds a lot like an Equity-indexed Annuity. They date from about 1996 (there is a bit of skepticism about them, as they are tricky to understand for the typical investor). For instance, an equity indexed annuity pays a portion of the gain in an index (like S&P 500) when the stock market rises, and guarantees you won't lose if it falls. In an arbitrage sense, it is roughly equivalent to buying a mixture of bonds and index (call) options. There are a lot of complicated 'tweaks' on these, such as annual ratchet/annual reset, interest caps, etc. There is quite a bit of debate about whether they are too good to be true, so I'd read a few articles with pros and cons before buying one. These are also commonly called FIA (Fixed indexed annuities)." }, { "docid": "349684", "title": "", "text": "this is not necessarily true. sometimes it makes sense for a public company to go private. usually a private equity firm will buy up the shares. the private equity firm would usually be financed by a bank and the cash flow from the company will help pay off the financing. there are pros and cons to both private and public companies. a pro for a private company is the reduced regulation and there is no need to follow sarbanes-oxley act." }, { "docid": "210688", "title": "", "text": "Gruelling. The most difficult thing I ever did. Everything they say about it is true. I wrote 5 times, passed 3 times and failed twice. It took 4 years. Would I do it again - probably not. I'd do a year or 2 year MBA instead. WIth an MBA there is more certainty of completion than CFA. with the CFA many people give up after years of trying. MBA costs much more, CFA is so cheap I'd say its pretty much free (relative to MBA of course). So pros and cons - gotta weigh 'em." }, { "docid": "374518", "title": "", "text": "\"Unfortunately I don't think any of the online personal finance applications will do what you're asking. Most (if not all) online person finance software uses a combination of partnerships with the banks themselves and \"\"screen scraping\"\" to import your data. This simplifies things for the user but is typically limited to whenever the service was activated. Online personal finance software is still relatively young and doesn't offer the depth available in a desktop application (yet). If you are unwilling to part with historical data you spent years accumulating you are better off with a desktop application. Online Personal Finance Software Pros Cons Desktop Personal Finance Software Pros Cons In my humble opinion the personal finance software industry really needs a hybrid approach. A desktop application that is synchronized with a website. Offering the stability and tools of a desktop application with the availability of a web application.\"" }, { "docid": "224320", "title": "", "text": "You need a blog, or a thread of your own. I want to learn about this, and you appear to be quite knowledgeable and thorough in your explanations. Would it be possible for you to make a thread, or reply, or pm explaining some of the pro's and cons of fiat money?" }, { "docid": "209716", "title": "", "text": "Well, you can just say that 1 dollar contributed = one share and pay out dividends based on number of shares. That makes it pretty easy to make things fair based. There are pros and cons with this pooling approach." }, { "docid": "315571", "title": "", "text": "\"One option might be to set up a separate bank account and a separate credit card account, which you would use only for your ebay transactions. I have a friend who does a lot of selling on ebay, and this is exactly what she did. It's reasonable to want to protect your personal finances from any complications that might arise with PayPal and/or ebay. But since you definitely have to provide a bank account and c.c. number (there's no way around this), the best solution might be to set up separate \"\"ebay-only\"\" accounts. And be sure not to link them to any of your personal accounts, for added protection. If you're planning to do a lot of selling, this is probably a good idea anyway just for record-keeping purposes. If you do a lot of selling on ebay, you might consider setting up a \"\"merchant account\"\". There are some limitations on international transactions (currently you can't sell to residents of UK, Australia, or France), and payment processing is a few days slower. But there seem to be fewer fees/risks/etc associated with a merchant account. I don't know much more about it, but here's an article from an ebay seller, including pros and cons of PayPal vs. merchant accounts. http://www.ebay.com/gds/Selling-on-eBay-without-PayPal/10000000021351301/g.html\"" }, { "docid": "417457", "title": "", "text": "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." } ]

[ { "docid": "134764", "title": "", "text": "\"Given the current low interest rates - let's assume 4% - this might be a viable option for a lot of people. Let's also assume that your actual interest rate after figuring in tax considerations ends up at around 3%. I think I am being pretty fair with the numbers. Now every dollar that you save each month based on the savings and invest with a higher net return of greater than 3% will in fact be \"\"free money\"\". You are basically betting on your ability to invest over the 3%. Even if using a conservative historical rate of return on the market you should net far better than 3%. This money would be significant after 10 years. Let's say you earn an average of 8% on your money over the 10 years. Well you would have an extra $77K by doing interest only if you were paying on average of $500 a month towards interest on a conventional loan. That is a pretty average house in the US. Who doesn't want $77K (more than you would have compared to just principal). So after 10 years you have the same amount in principal plus $77k given that you take all of the saved money and invest it at the constraints above. I would suggest that people take interest only if they are willing to diligently put away the money as they had a conventional loan. Another scenario would be a wealthier home owner (that may be able to pay off house at any time) to reap the tax breaks and cheap money to invest. Pros: Cons: Sidenote: If people ask how viable is this. Well I have done this for 8 years. I have earned an extra 110K. I have smaller than $500 I put away each month since my house is about 30% owned but have earned almost 14% on average over the last 8 years. My money gets put into an e-trade account automatically each month from there I funnel it into different funds (diversified by sector and region). I literally spend a few minutes a month on this and I truly act like the money isn't there. What is also nice is that the bank will account for about half of this as being a liquid asset when I have to renegotiate another loan.\"" } ]

[ { "docid": "445198", "title": "", "text": "Pro: - Faces less redemption pressure and hence the Fund Manager can focus more on long term gains rather than immediate gains. - Works well in emerging markets. - Less churn out in case the market falls sharply, there by making more money in long run. Cons: - No additional money to invest/take advantage of market situation. - Less liquid for investor as he is locked in for a period." }, { "docid": "315571", "title": "", "text": "\"One option might be to set up a separate bank account and a separate credit card account, which you would use only for your ebay transactions. I have a friend who does a lot of selling on ebay, and this is exactly what she did. It's reasonable to want to protect your personal finances from any complications that might arise with PayPal and/or ebay. But since you definitely have to provide a bank account and c.c. number (there's no way around this), the best solution might be to set up separate \"\"ebay-only\"\" accounts. And be sure not to link them to any of your personal accounts, for added protection. If you're planning to do a lot of selling, this is probably a good idea anyway just for record-keeping purposes. If you do a lot of selling on ebay, you might consider setting up a \"\"merchant account\"\". There are some limitations on international transactions (currently you can't sell to residents of UK, Australia, or France), and payment processing is a few days slower. But there seem to be fewer fees/risks/etc associated with a merchant account. I don't know much more about it, but here's an article from an ebay seller, including pros and cons of PayPal vs. merchant accounts. http://www.ebay.com/gds/Selling-on-eBay-without-PayPal/10000000021351301/g.html\"" }, { "docid": "348614", "title": "", "text": "\"Setting a certain % of income for pension actually depends on person. \"\"Always pay yourself first\"\" This is the quote which I love the most and which I am currently following. If you are planning to do 8%, then why don't you stretch a little bit more to 10%. I suggest you to do monthly review. If you can stretch more, increase % a little more by challenging yourself. This is rewarding. For pension plan, there is SRS Supplementary Retirement Plan where foreigners can also set aside of their money. This is long term plan and you can enjoy tax relief too. The catch is you can only withdraw the money when you reach certain age. Otherwise, you have to pay tax again (certain %) once you decide to withdraw. Serveral banks in Singapore offers to open this account. I suggest to compare pro and cons. If you are planning to work in Singapore for quite long, you may wish to consider this. Useful links http://www.mof.gov.sg/MOF-For/Individuals/Supplementary-Retirement-Scheme-SRS https://blog.moneysmart.sg/budgeting/is-the-supplementary-retirement-scheme-a-waste-of-your-time-and-money/\"" }, { "docid": "375748", "title": "", "text": "Hence new employer pays a part of the salary as per diem compensation along with regular salary and says that per-diem compensation is non-taxable. Per-diem is not taxable. But that is not what you're describing. It appears that either you or the prospective employer, misunderstood what per-diem is. As per US law is it legally allowed non taxable per diem compensation to employees? Yes. What are the pros and cons of having per diem compensation? Per-diem is not compensation. It is not part of your salary. It is not part of your employment contract. If I have to report my salary to any one like banks, insurance companies, do I need to include Per diem compensation or not? No, because it is not compensation. Back to the first item: Per-diem is paid to you during business trips when you're away from your (tax) home. It is not part of your compensation, and is only allowed for business trips. Contract work on site for any prolonged period of time (1 year or more, as a definitive rule, but can be less) is not a business trip. For that period of time your tax home becomes that location, so you're not away. You're home. You should discuss it with a licensed tax adviser (EA/CPA licensed in your State), but it seems to me that either you misunderstood something, or your prospective employer is trying to evade taxes (both yours and his) by disguising part of your compensation as per-diem. It is very likely that when you get caught, the employer will just issue you 1099 on the amounts and leave you hanging." }, { "docid": "309200", "title": "", "text": "A terrific resource is this article. To summarize the points given: PROS: CONS: There is no generic yes or no answer as to whether you ought to max out your 401(k)s. If you are a sophisticated investor, then saving the income for investing could be a better alternative. Long term capital gains are taxed at 15% in the US, so if you buy and hold on to good companies that reinvest their earnings, then the share price keeps going up and you'll save a lot of money that would go in taxes. If you're not a very good investor, however, then 401(k)s make a lot of sense. If you're going to end up setting up some asset allocation and buying ETFs and rebalancing or having a manager rebalance for you every year or so, then you might as well take the 401(k) option and lower your taxable income. Point #1 is simply wrong, because companies that reinvest earnings and growing for a long time are essentially creating tax-free gains for you, which is even better than tax-deferred gains. Nonetheless, most people have neither the time nor the interest to research companies and for them, the 401(k) makes more sense." }, { "docid": "111266", "title": "", "text": "When economies are strong, it is particularly alluring to have a single currency as it makes trade and tourism simpler and helps reduce costs. The problem comes when individual member economies get into trouble. Because the Eurozone is a loose grouping of nations, there is no direct equivalent of the US Federal government to coordinate a response, there is instead an odd mixture of National and Central government that makes it harder to get a unified approach to the economy (OK, it's maybe not so different to the US in reality). This lack of flexibility means that some of the key levers of international finance are compromised, for example a weak economy can't float its currency to improve exports. Similarly individual country's interest rates can't be adjusted to balance spending. I suspect the main reason though is political and based on concepts of sovereignty and national pride. The UK does the majority of its trade with the Eurozone, so the pros would possibly outweigh the cons, but the UK as a whole (and some of our papers in particular) have always regarded Europe with suspicion. Most Brits only speak English and find France and Germany a strange and obtuse place. The (almost) common language makes it easier to relate to the US and Canada than our near neighbours. It seems the perception amongst the political establishment is that any attempt to join the Euro is political suicide, while that is the case it is unlikely to happen. Purely from a personal perspective, I'd welcome the Euro except it means a lot of the products I routinely buy would become a lot more expensive if price is 'harmonised'. For an example compare the price of the iPod Touch in the UK (£209.99) to France(€299). The French pay £262 at the current exchange rate, which is close to 25% more. Ouch. See also my question about Canada adopting the US Dollar" }, { "docid": "224320", "title": "", "text": "You need a blog, or a thread of your own. I want to learn about this, and you appear to be quite knowledgeable and thorough in your explanations. Would it be possible for you to make a thread, or reply, or pm explaining some of the pro's and cons of fiat money?" }, { "docid": "301609", "title": "", "text": "KMyMoney Pros: Cons:" }, { "docid": "115111", "title": "", "text": "\"You can shop for a mortgage rate without actually submitting a mortgage application. Unfortunately, the U.S. Government has made it illegal for the banks to give you a \"\"good faith estimate\"\" of the mortgage cost and terms without submitting a mortgage application. On the other hand, government regulations make the \"\"good faith estimates\"\" somewhat misleading. (For one thing, they rarely are good for estimating how much money you will need to \"\"bring to the closing table\"\".) My understanding is that in the United States, multiple credit checks within a two-week period while shopping for a mortgage are combined to ding your credit rating only once. You need the following information to shop for a mortgage: A realistic \"\"appraisal value\"\". Unless your market is going up quickly, a fair purchase price is usually close enough. Your expected loan amount (which you or a banker can estimate based on your down payment and likely closing costs). Your middle credit score, for purposes of mortgage applications. (If you have a co-borrower, such as a spouse, many banks use the lower of the two persons' middle credit score). The annual property tax cost for the property, taking into account the new purchase price. The annual cost of homeowners' insurance. The annual cost of homeowners' association dues. Your minimum monthly payments on all debt. Banks tend to round up the minimum payments. Also, banks care whether any of that debt is secured by real estate. Your monthly income. Banks usually include just the amount for which you can show that you are currently in the job, with regular paychecks and tax withholding, and that you have been in similar jobs (or training for such jobs) for the last two full years. Banks usually subtract out any business losses that show up on tax returns. There are special rules for alimony and child support payments. The loan terms you want, such as a 15-year fixed rate or 30-year fixed rate. The amount of points you are willing to pay. Many banks are willing to lower your \"\"note rate\"\" by 0.125% if you pay 0.5% up-front. The pros and cons of paying points is a good topic for another question. Whether you want a so-called \"\"no-fee\"\" or \"\"no-closing cost\"\" loan. These loans cost less up-front, but have a higher \"\"note rate\"\". Unless you ask for a \"\"no-fee\"\" or \"\"no-closing cost\"\" loan, most banks have similar charges for things like: So the big differences are usually in: As discussed above, you can come up with a simple number for (roughly) comparing fixed-rate mortgage loan offers. Take the loan origination (and similar) fees, and divide them by the loan amount. Divide that percentage by 4. Add that percentage to the \"\"note rate\"\" for a loan with \"\"no points\"\". Use that last adjusted note rate to compare offers. (This method works because you have the choice of using up-front savings to pay \"\"points\"\" to lower the \"\"note rate\"\".) Notice that once you have your middle credit score, you can ask other lenders to estimate the information above without actually submitting another loan application. Because the mortgage market fluctuates, you should compare rates on the same morning of the same day. You might want to check with three lenders, to see if your real estate agent's friend is competitive:\"" }, { "docid": "83238", "title": "", "text": "\"Two types of people: (1) Suckers (2) People who feel that investment advisors/brokers make too little money and want to help out by paying insane commissions. Think I'm kidding. Check out this article: \"\"Variable Annuity Pros and Cons\"\" Seriously, for 99% of us, they are a raw deal for everyone except the person selling them.\"" }, { "docid": "180311", "title": "", "text": "I like You Need A Budget (YNAB) Pros: Cons:" }, { "docid": "384626", "title": "", "text": "\"A Tweep friend asked me a similar question. In her case it was in the larger context of a marriage and house purchase. In reply I wrote a detail article Student Loans and Your First Mortgage. The loan payment easily fit between the generally accepted qualifying debt ratios, 28% for house/36 for all debt. If the loan payment has no effect on the mortgage one qualifies for, that's one thing, but taking say $20K to pay it off will impact the house you can buy. For a 20% down purchase, this multiplies up to $100k less house. Or worse, a lower down payment percent then requiring PMI. Clearly, I had a specific situation to address, which ultimately becomes part of the list for \"\"pay off student loan? Pro / Con\"\" Absent the scenario I offered, I'd line up debt, highest to lowest rate (tax adjusted of course) and hack away at it all. It's part of the big picture like any other debt, save for the cases where it can be cancelled. Personal finance is exactly that, personal. Advisors (the good ones) make their money by looking carefully at the big picture and not offering a cookie-cutter approach.\"" }, { "docid": "174784", "title": "", "text": "CrimsonX did a great job highlighting the primary pros and cons of HSAs, so I won't go into detail there. However, I did want to point out another pro - HSAs are (or can be) easy to manage. You said: Is this a better way to approach health care costs instead of itemizing health care expenses on yearly federal taxes? I'm not sure which company you are looking at establishing your HSA with, but with mine I have a debit card that I use when paying for medical care and then at the end of the year I get a 1099-SA that provides the amount of money spent on qualified purchases that calendar year. Yes, there are a few extra boxes I need to fill in for my 1040 come tax time, but I don't need to itemize my healthcare costs over the year. It really is pretty simple and straightforward. Also, one con that is worth noting is that you become much more sensitive to healthcare costs due to the high deductible healthcare plan an HSA requires. For example, in all the years we've had an HSA we've not yet met our deductible, which means we pay out of pocket for any non-routine doctor visits. (The health insurer pays 100% of routine visits, like my wife's annual, well-baby check ups for the little one, and so on.) So, when you're feeling really sick and think a doctor's visit would be warranted, you have to make a decision: After being faced with this decision a time or two you will start to envy those who have just a $20 copay! Of course, that's just an emotional con. Each year I run the numbers on how much we spent per year on out of pocket plus premiums and compare it to what it would cost in premiums for an HMO-type plan, and the HSA plan always comes ahead. (In part because we are a pretty healthy family and I work for myself so do not get to enjoy group discount rates.) But I thought it worth mentioning because there are certainly times when I know I need to see a doctor or specialist and I cringe because I know I am going to be slapped with a big bill in the not too distant future!" }, { "docid": "380382", "title": "", "text": "An offset account is simply a savings account which is linked to a loan account. Instead of earning interest in the savings account and thus having to pay tax on the interest earned, it reduces the amount of interest you have to pay on the loan. Example of a 100% offset account: Loan Amount $100,000, Offset Balance $20,000; you pay interest on the loan based on an effective $80,000 loan balance. Example of a 50% offset account: Loan Account $100,000, Offset Balance $20,000; you pay interest on the loan based on an effective $90,000 loan balance. The benefit of an offset account is that you can put all your income into it and use it to pay all your expenses. The more the funds in the offset account build up the less interest you will pay on your loan. You are much better off having the offset account linked to the larger loan because once your funds in the offset increase over $50,000 you will not receive any further benefit if it is linked to the smaller loan. So by offsetting the larger loan you will end up saving the most money. Also, something extra to think about, if you are paying interest only your loan balance will not change over the interest only period and your interest payments will get smaller and smaller as your offset account grows. On the other hand, if you are paying principal and interest then your loan balance will reduce much faster as your offset account increases. This is because with principal and interest you have a minimum amount to pay each month (made up of a portion of principal and a portion of interest). As the offset account grows you will be paying less interest, so a larger portion of the principal is paid off each month." }, { "docid": "110465", "title": "", "text": "\"Consider that there are some low-probability, high-impact risk factors involved with property management. For example, an old house has lead paint and may have illegal modifications, unknown to you, that pose some hazard. All of your \"\"pros\"\" are logical, and the cons are relatively minor. Just consult an attorney to look for potential landmines.\"" }, { "docid": "560213", "title": "", "text": "Think I had to sign an NDA on pricing w them so can't get specific. Depends if you want realtime or just historical data. Historical obviously cheaper, realtime more. The prices aren't crushing though, one of cheapest tick data vendors around. You get pros and cons to that though - data is time stamped at 25ms and sent over WAN. But they also have self healing tapes w backfill etc so if your server knocks offline for a while you fill the gap when back up etc." }, { "docid": "28942", "title": "", "text": "Mint.com—Easy solution to provide insight into finances. Pros: Cons:" }, { "docid": "210688", "title": "", "text": "Gruelling. The most difficult thing I ever did. Everything they say about it is true. I wrote 5 times, passed 3 times and failed twice. It took 4 years. Would I do it again - probably not. I'd do a year or 2 year MBA instead. WIth an MBA there is more certainty of completion than CFA. with the CFA many people give up after years of trying. MBA costs much more, CFA is so cheap I'd say its pretty much free (relative to MBA of course). So pros and cons - gotta weigh 'em." }, { "docid": "454584", "title": "", "text": "Having been both I see the pros and cons Employers: I personally hated all the paperwork. Government forms, legal protection, insurance, taxes, payroll, accounting, year ends, bank accounts, inventory tracking, expenses. The best bosses don't worry about the product, they worry about maintaining an environment that is good for the product. Good employees who are happy will make good products that you can sell to customers who are happy with your company. I personally went back to employee because I wanted to go home at night and forget about work. Employers cannot do that." } ]

[ { "docid": "486525", "title": "", "text": "The advantage of interest only mortgages is that they can increase your cashflow as you are only paying the interest and not any part of the principle. We have most of our investment loans on interest only for 10 years. When we got the loans about 6 to 7 years ago our LVR was only 60% and the property prices have increased by about 40% in that time. We also place our excess cashflow into offset accounts linked to the investment loans, so there is extra cash available in case things go bad. The disadvantage of interest only mortgages is that you are not paying off any principal for the length of the interest only period. If you are over extended this could cause problems as you need to rely totally on the price of the property going up for your equity to increase. As you are currently paying mortgage insurance leads me to believe your LVR is above 80%, so you would not have much equity available in your home. With an interest only loan this could pose you some problems. You should never try to over extend yourself, the slightest thing that goes wrong could get you into financial troubles. Always try to have some buffer to help you stay on your feet if circumstances do change for the worst." } ]

[ { "docid": "591323", "title": "", "text": "\"The catch with any exchange service is that you're going to involve some sort of business and they're going to want to get paid for their service. These services all come with their own exchange rates, fees, waiting periods, or requirements to even use said service. Commonly, pros towards one of those comes at the cost of another— e.g. fast transfers have higher fees or worse exchange rates. Over the past few months I needed a service and ended up using USForex. Since you're going from CAD to USD, you'd likely need to use CanadianForex. Pros: Cons: Overall, this option was far better than the $97.00 I was quoted from WesternUnion; or the $25.00-45.00 I was quoted from BMO Harris, which would have required I open a saving account with them. I wasn't provided a clean exchange rate between these two to know how all three compared. The only bit of advice I can say with any service is compare exchange rates. If you're transferring more than a few hundred dollars, the exchange rate can be seen as a \"\"hidden\"\" fee when it's unreasonably low. I'm not affiliated with or accommodated by any of the exchange services mentioned.\"" }, { "docid": "133644", "title": "", "text": "Is this an employee stock purchase plan (ESPP)? If so, and there is no required holding period, selling right away is essentially a guaranteed bonus with minimal risk. One caveat is that sometimes it takes a while to actually receive the shares at your brokerage, and in the meantime your company may have an earnings report that could cause the share price to drop. If your discount is only 5%, for example, a bad earnings report could easily wipe that out. The only other cons I can think of is ESPP contributions being withheld from you for months (albeit for a virtually guaranteed return), and it complicates your taxes a bit. On the flip side, another pro is that after you sell the shares, you are more likely to invest that money rather than spend it." }, { "docid": "484825", "title": "", "text": "Older folk might wish to let the dividends and cap gains be paid in cash, and use that cash towards their RMDs (required distributions). If you are investing in mutual funds and wish to keep adding to the funds you've selected, the reinvestment is a simple way to avoid having to visit the account and make a new purchase. In other words, you invest $5500, buy the fund, and X years from now, you simply have more shares of the fund but no cash o worry about. The pro is as mentioned, and the con is really for the 70-1/2+ people who will need to take their RMDs. (Although even they can take the RMD in kind, as fund shares)" }, { "docid": "272008", "title": "", "text": "\"Yes when I place an order with my broker they send it out to the exchange. - For individual investors, what are some cons and pros of trading on the exchanges directly versus indirectly via brokers? I may be mistaken(I highly doubt it), but from my understanding you cannot trade directly through an exchange as a retail investor. BATS allows membership but it is only for Your firm must be a registered broker-dealer, registered with a Self Regulatory Organization (SRO) and connected with a clearing firm. No apple (aapl) is listed on the NASDAQ so trades go through the NASDAQ for aapl. Caterpillar Inc (CAT) is listed on the NYSE so trades go through the NYSE. The exchange you trade on is dependent on the security, if it is listed on the NYSE then you trade on the NYSE. As a regular investor you will be going through a broker. When looking to purchase a security it is more important to know about the company and less important to know what exchange it is listed on. Since there are rules a company must comply with for it to be listed on certain exchanges, it does make a difference but that is more the case when speaking about a stock listed Over the Counter(OTC) or NYSE. It is not important when asking NYSE or NASDAQ? Selecting a broker is something that's dependent on your needs. You should ask your self, \"\"whats important to me?\"\", \"\"Do I want apps(IE: iPhone, android)?\"\" \"\"Do I need fancy trading tools?\"\". Generally all the brokers you listed will most likely do the trick for you. Some review sites: Brokerage Review Online Broker Review 2012 Barron's 2012 Online Broker Review\"" }, { "docid": "417457", "title": "", "text": "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." }, { "docid": "138113", "title": "", "text": "Idk if I would ask on reddit, personal finance will tell you the only way is joint bank accounts and relationship advice will tell you to break up. Personally I will always want my own bank account, with a joint account for a mortgage or utilities. I think it depends on if you are both financially savvy, if one of you aren't you might want to have a joint account to keep an eye on spending. I think this site give you a good pro/con: https://www.thebalance.com/should-you-have-joint-or-separate-bank-accounts-1289664" }, { "docid": "94710", "title": "", "text": "PenFed Platinum Cashback Rewards Visa Card is another good choice. Pros: Cons:" }, { "docid": "525576", "title": "", "text": "There are quite a few ways; each has its own pro's and con's SWIFT: Fast reliable payment. Higher Charges. If payments are large and routine the charges can be less Remittance Service: Ideal for person to person transfer. Can be used by Companies to transfer to Individuals. Less Faster compared to SWIFT. Quite Cheaper compared to SWIFT Check's: Long time is getting it cleared in India. Typically around month. Quite Cheap. Almost NIL charges." }, { "docid": "382452", "title": "", "text": "Theres obviously a ton of licensing/certifications that go into an insurance company. I'm wondering anyone has experience with a start up or small insurance company and can speak to the pros and cons of it. More specifically, is there a certain rule about how much money should be set aside as float assuming a policy limit of 10 million? I'd imagine it depends on the type of coverage to a large degree. Just beginning to start the process of researching this based on an unexpected bit of news/opportunity. Thanks." }, { "docid": "140567", "title": "", "text": "Insurance in India is offered by Private companies as well [ICICI, Maxbupa, SBI, Max and tons of other companies]. These are priavte companies, as Insurance sectors one has to look for long term stability, not everyone can just open an Insurance company, there are certain capital requirements. Initially the shareholding pattern was that Indian company should have a majority shareholding, any foreign company can have only 26% share's. This limit has now been extended to 49%, so while the control of the private insurance company will still be with Indian's the foreign companies can invest upto 49%. It's a economic policy decission and the outcome whether positive or negative will be known after 10 years of implemenation :) Pro's: - Brings more funds into the Insurance segment, there by bringing strength to the company - Better global practise on risk & data modelling may reduce premium for most - Innovation in product offering - More Foreign Exchange for country that is badly needed. Con's: - The Global companies may hike premium to make more profits. - They may come up with complex products that common man will not understand and will lead to loss - They may take back money anytime as they are here for profit and not for cause. Pension today is offered only by Government Companies. There is a move to allow private companies to offer pension. Today life insurance companies can launch Pension schemes, however on maturity the annuity amount needs to be invested into LIC to get an annuity [monthly pension]." }, { "docid": "349684", "title": "", "text": "this is not necessarily true. sometimes it makes sense for a public company to go private. usually a private equity firm will buy up the shares. the private equity firm would usually be financed by a bank and the cash flow from the company will help pay off the financing. there are pros and cons to both private and public companies. a pro for a private company is the reduced regulation and there is no need to follow sarbanes-oxley act." }, { "docid": "560213", "title": "", "text": "Think I had to sign an NDA on pricing w them so can't get specific. Depends if you want realtime or just historical data. Historical obviously cheaper, realtime more. The prices aren't crushing though, one of cheapest tick data vendors around. You get pros and cons to that though - data is time stamped at 25ms and sent over WAN. But they also have self healing tapes w backfill etc so if your server knocks offline for a while you fill the gap when back up etc." }, { "docid": "395379", "title": "", "text": "I've kind of been there myself. I stretched my finances for the deposit on a house, and lived off my credit card for a few months to build up what I was short on the deposit. Add some unexpected car repairs, and I ended up with £10k on the card. The problem I had then was that interest on the card ran at around 20%, and although I could meet the interest payments I couldn't clear the £10k. I simply went and talked to my bank. In the UK there are some clear rules about banks giving customers a chance to restructure their debts. That's the BANK doing it, not some shady loan-shark. We went through my finances and established that in principle it was repayable. So I got a 2-year unsecured loan at around 5%, cleared the card, and spent the next 2 years paying off a loan that I could afford. My credit score is still aces. Forget the loan-sharks. Talk to your bank. If they're crap, talk to another bank. If no bank is going to help you, consider bankrupcy as per advice above. Debt restructuring companies are ALWAYS a con, no exceptions." }, { "docid": "500769", "title": "", "text": "\"Pros for WHOM? Cons for WHOM? Whether the Federal Reserve is good or not really depends on WHO you are (i.e. where in the \"\"inflate/debase the money supply\"\" you are positioned, and how that affects your position in the debt/asset game). Because the impacts of just about everything the Fed (or any central bank or government/cartel manipulated \"\"fiat\"\" money supply) does... affect you significantly different depending on where you are in regards to those things.\"" }, { "docid": "590013", "title": "", "text": "This one is pretty interesting in light of this OP's article (bold emphasis mine): &gt;“Mediocre company” Former Employee in Park City, UT – **Reviewed Sep 1, 2010** &gt;Pros – Convenient location, employee covered parking, ski passes (sometimes), competitive pay. &gt;Cons – Corporate Management has no idea what's happening on the local level. **Owner of company sends emails to all employees with his political views, including who you should vote for during election season.** Health insurance premium is more expensive than I have ever paid elsewhere. &gt;**Advice to Senior Management – Keep your political opinions to yourself.** Trust your local GM's and managers." }, { "docid": "268699", "title": "", "text": "Ok. I'll ask - Does the job offer a 401(k)? Matching deposits? You see, the answers given depend on your risk tolerance. There are two schools of thought, one extreme will tell you not to start investing until you have the emergency fund set up, the other, start from day one. I accept there are pros and cons to either approach. But - if you have access to a matched 401(k), even a conservative, risk-adverse approach might agree that a 100% match (on the first say 5% of your income) is preferable to saving in a low return emergency fund. If the emergency occurs, a low interest loan for the need is a cheap way out. Since the money goes in pre-tax and is matched, being able to borrow out half (IRS rules) effectively lets you borrow more than you deposited out of pocket. And the word emergency implies a low occurrence event. Deposit to the match and start the emergency fund in another account. If no matched 401(k) at work, the other two answers are great. Edit - To clarify, and answer a comment below - say the risk isn't just a money emergency, but job loss. $1000 deposited to the 401(k) cost $850 out of pocket, assuming 15% bracket. After the match, it's $2000. After the job loss, if this is withdrawn, if the 15% still applies (it may be 10% or even 0%) the net is $1700 less the 10% penalty, or $1500 back in your pocket. There are those who will say they are just not comfortable running an emergency account so lean, I understand that. For the OP here, $800/mo is nearly $10,000 per year. If even half of that can be deposited pre-tax and matched, the account will grow very quickly and there would still be cash on the side." }, { "docid": "174784", "title": "", "text": "CrimsonX did a great job highlighting the primary pros and cons of HSAs, so I won't go into detail there. However, I did want to point out another pro - HSAs are (or can be) easy to manage. You said: Is this a better way to approach health care costs instead of itemizing health care expenses on yearly federal taxes? I'm not sure which company you are looking at establishing your HSA with, but with mine I have a debit card that I use when paying for medical care and then at the end of the year I get a 1099-SA that provides the amount of money spent on qualified purchases that calendar year. Yes, there are a few extra boxes I need to fill in for my 1040 come tax time, but I don't need to itemize my healthcare costs over the year. It really is pretty simple and straightforward. Also, one con that is worth noting is that you become much more sensitive to healthcare costs due to the high deductible healthcare plan an HSA requires. For example, in all the years we've had an HSA we've not yet met our deductible, which means we pay out of pocket for any non-routine doctor visits. (The health insurer pays 100% of routine visits, like my wife's annual, well-baby check ups for the little one, and so on.) So, when you're feeling really sick and think a doctor's visit would be warranted, you have to make a decision: After being faced with this decision a time or two you will start to envy those who have just a $20 copay! Of course, that's just an emotional con. Each year I run the numbers on how much we spent per year on out of pocket plus premiums and compare it to what it would cost in premiums for an HMO-type plan, and the HSA plan always comes ahead. (In part because we are a pretty healthy family and I work for myself so do not get to enjoy group discount rates.) But I thought it worth mentioning because there are certainly times when I know I need to see a doctor or specialist and I cringe because I know I am going to be slapped with a big bill in the not too distant future!" }, { "docid": "348614", "title": "", "text": "\"Setting a certain % of income for pension actually depends on person. \"\"Always pay yourself first\"\" This is the quote which I love the most and which I am currently following. If you are planning to do 8%, then why don't you stretch a little bit more to 10%. I suggest you to do monthly review. If you can stretch more, increase % a little more by challenging yourself. This is rewarding. For pension plan, there is SRS Supplementary Retirement Plan where foreigners can also set aside of their money. This is long term plan and you can enjoy tax relief too. The catch is you can only withdraw the money when you reach certain age. Otherwise, you have to pay tax again (certain %) once you decide to withdraw. Serveral banks in Singapore offers to open this account. I suggest to compare pro and cons. If you are planning to work in Singapore for quite long, you may wish to consider this. Useful links http://www.mof.gov.sg/MOF-For/Individuals/Supplementary-Retirement-Scheme-SRS https://blog.moneysmart.sg/budgeting/is-the-supplementary-retirement-scheme-a-waste-of-your-time-and-money/\"" }, { "docid": "115111", "title": "", "text": "\"You can shop for a mortgage rate without actually submitting a mortgage application. Unfortunately, the U.S. Government has made it illegal for the banks to give you a \"\"good faith estimate\"\" of the mortgage cost and terms without submitting a mortgage application. On the other hand, government regulations make the \"\"good faith estimates\"\" somewhat misleading. (For one thing, they rarely are good for estimating how much money you will need to \"\"bring to the closing table\"\".) My understanding is that in the United States, multiple credit checks within a two-week period while shopping for a mortgage are combined to ding your credit rating only once. You need the following information to shop for a mortgage: A realistic \"\"appraisal value\"\". Unless your market is going up quickly, a fair purchase price is usually close enough. Your expected loan amount (which you or a banker can estimate based on your down payment and likely closing costs). Your middle credit score, for purposes of mortgage applications. (If you have a co-borrower, such as a spouse, many banks use the lower of the two persons' middle credit score). The annual property tax cost for the property, taking into account the new purchase price. The annual cost of homeowners' insurance. The annual cost of homeowners' association dues. Your minimum monthly payments on all debt. Banks tend to round up the minimum payments. Also, banks care whether any of that debt is secured by real estate. Your monthly income. Banks usually include just the amount for which you can show that you are currently in the job, with regular paychecks and tax withholding, and that you have been in similar jobs (or training for such jobs) for the last two full years. Banks usually subtract out any business losses that show up on tax returns. There are special rules for alimony and child support payments. The loan terms you want, such as a 15-year fixed rate or 30-year fixed rate. The amount of points you are willing to pay. Many banks are willing to lower your \"\"note rate\"\" by 0.125% if you pay 0.5% up-front. The pros and cons of paying points is a good topic for another question. Whether you want a so-called \"\"no-fee\"\" or \"\"no-closing cost\"\" loan. These loans cost less up-front, but have a higher \"\"note rate\"\". Unless you ask for a \"\"no-fee\"\" or \"\"no-closing cost\"\" loan, most banks have similar charges for things like: So the big differences are usually in: As discussed above, you can come up with a simple number for (roughly) comparing fixed-rate mortgage loan offers. Take the loan origination (and similar) fees, and divide them by the loan amount. Divide that percentage by 4. Add that percentage to the \"\"note rate\"\" for a loan with \"\"no points\"\". Use that last adjusted note rate to compare offers. (This method works because you have the choice of using up-front savings to pay \"\"points\"\" to lower the \"\"note rate\"\".) Notice that once you have your middle credit score, you can ask other lenders to estimate the information above without actually submitting another loan application. Because the mortgage market fluctuates, you should compare rates on the same morning of the same day. You might want to check with three lenders, to see if your real estate agent's friend is competitive:\"" } ]

[ { "docid": "260383", "title": "", "text": "\"The main disadvantage is that interest rates are higher for the interest-only loan. It's higher risk to the bank, since the principal outstanding is higher for longer. According to the New York Times, \"\"Interest rates are usually an eighth- to a half-percentage point higher than on fully amortized jumbo loans.\"\" They're also tougher to qualify for, and fewer lenders offer them, again due to the risk to the bank. Since you can always put extra towards the principal, strictly speaking, these are the only downsides. The upside, of course, is that you can make a lower payment each month. The question is what are you doing with this? If this is the only way you can afford the payments, there's a good chance the house is too expensive for you. You're not building equity in the home, and you have the risk of being underwater if the house price goes down. If you're using the money for other things, or you have variable income, it might be a different story. For the former, reinvesting in a business you own might be a reason, if you're cognizant of the risks. For the latter, salespeople on commission, or financial industry types who get most of their income in bonuses, can benefit from the flexibility.\"" } ]

[ { "docid": "315571", "title": "", "text": "\"One option might be to set up a separate bank account and a separate credit card account, which you would use only for your ebay transactions. I have a friend who does a lot of selling on ebay, and this is exactly what she did. It's reasonable to want to protect your personal finances from any complications that might arise with PayPal and/or ebay. But since you definitely have to provide a bank account and c.c. number (there's no way around this), the best solution might be to set up separate \"\"ebay-only\"\" accounts. And be sure not to link them to any of your personal accounts, for added protection. If you're planning to do a lot of selling, this is probably a good idea anyway just for record-keeping purposes. If you do a lot of selling on ebay, you might consider setting up a \"\"merchant account\"\". There are some limitations on international transactions (currently you can't sell to residents of UK, Australia, or France), and payment processing is a few days slower. But there seem to be fewer fees/risks/etc associated with a merchant account. I don't know much more about it, but here's an article from an ebay seller, including pros and cons of PayPal vs. merchant accounts. http://www.ebay.com/gds/Selling-on-eBay-without-PayPal/10000000021351301/g.html\"" }, { "docid": "251376", "title": "", "text": "It takes a long time to bring these sort of cases to trial because of their complexity and the large sums of money that companies have to delay the process. It takes political will to go after these types of crimes. From the politics to building a case, it just seems to me that five years is a very short time frame. I don't know how or why it was set at five years, but due to what we know now, it might be a better idea to extend the statue, if the pros outweigh the cons." }, { "docid": "180311", "title": "", "text": "I like You Need A Budget (YNAB) Pros: Cons:" }, { "docid": "436548", "title": "", "text": "It's no coincidence that the companies really putting muscle behind this are some of the biggest in the world (Google, IBM, EY). As the article points out, they're bypassing colleges altogether to better access the best available talent. With the mega resources those companies have, all training can be provided on site. There's no need to wait 3-5 years to hire when they can do it now. There are definitely pros and cons to this, but it certainly levels the playing field. In theory, someone from a inner-city ghetto may outperform an ivy league graduate in a well-designed competency test, proving their worth based on merit rather than money. I expect it's something that will slowly begin to catch on as more businesses spot the opportunity." }, { "docid": "110465", "title": "", "text": "\"Consider that there are some low-probability, high-impact risk factors involved with property management. For example, an old house has lead paint and may have illegal modifications, unknown to you, that pose some hazard. All of your \"\"pros\"\" are logical, and the cons are relatively minor. Just consult an attorney to look for potential landmines.\"" }, { "docid": "300242", "title": "", "text": "What should I do? Weigh your options and decide which education investment lines up better with your goals. Some of the costs from pursuing a degree at the more reputable university may include: However there are probably some benefits to pursuing a degree at this university: You will know best which of these apply to you in addition to any pros or cons not mentioned. You need to evaluate each one in order to make a decision." }, { "docid": "496096", "title": "", "text": "\"The fact that dividends grow in perpetuity does not prevent one from calculating duration. In fact, many academic papers look at exactly this problem, such as Lewin and Satchell. This Wilmott thread discusses some of the pros and cons of the concept in some detail. PS: Although I was already broadly familiar with the literature and I use the duration of equities in some of my every-day work as a professional working in finance, I found the links above doing a simple google search for \"\"equity duration.\"\"\"" }, { "docid": "565762", "title": "", "text": "It might be worth talking to a mortgage broker, even if you don't actually end up doing business with them. Upfront Mortgage Brokers explained Finding an upfront broker near you In a nutshell, upfront brokers disclose what they are paid for their services openly and transparently. Many brokers don't, and you can't be too careful. But a consultation should be free. An experienced broker can help you to navigate the pros and cons mentioned by the other responders. Personally, I would never do business with a broker who can't/won't show me a rate sheet on the day of the lock. That's my personal acid test. You might be surprised by what the broker has to say regarding your situation. That was my experience, anyway." }, { "docid": "352552", "title": "", "text": "\"As @BrenBarn points out, when people say \"\"they like having a mortgage because they get the benefit of writing off the interest\"\" they typically mean as opposed to renting. You can deduct interest and real estate (property) tax payments, as well as some closing costs in the year you purchase the home. You are also building equity (instead of helping your landlord build his or her equity). Take for example a single person paying $1,000/month to rent an apartment. This is not deductible. He has $1,800 a year in other expenditures that would otherwise be deductible (charitable contributions, etc.), but he doesn't itemize because it isn't more than the $6,100 standard deduction, so it doesn't matter. He takes out a mortgage for $150,000 at 6% over a 30-year term to buy a similarly-appointed home. His new mortgage payment is about $900/month, plus he puts $100/month into an escrow account for property taxes, roughly totaling his former rent payment. Over the first full year, he pays about $9,000 in deductible mortgage interest and $1,200 in deductible real estate taxes. And because he is now itemizing, he can also write off the aforementioned $1,800. At a top marginal tax rate of 25%, he shaved nearly $1,500 (.25 * (9000 + 1200 + 1800 - 6100)) off his federal income tax bill -- with the same living expenses! This is a simple example with some arbitrary numbers to prove the point, and there are a lot of other pros and cons to buying vs. renting. But again, this is probably what they mean when you hear this. Others have covered the overpaying angle, and there are a bunch of other Money.SE posts on the same or similar subjects.\"" }, { "docid": "212162", "title": "", "text": "PROS: Price stability, confidence in the market, manipulation of money supply for direct monetary policy transmission, not having politicians conduct short sighted policy so they can get reelected, etc. CONS: No checks/balances, few people control of the largest economy in the world, not democratic" }, { "docid": "445198", "title": "", "text": "Pro: - Faces less redemption pressure and hence the Fund Manager can focus more on long term gains rather than immediate gains. - Works well in emerging markets. - Less churn out in case the market falls sharply, there by making more money in long run. Cons: - No additional money to invest/take advantage of market situation. - Less liquid for investor as he is locked in for a period." }, { "docid": "374518", "title": "", "text": "\"Unfortunately I don't think any of the online personal finance applications will do what you're asking. Most (if not all) online person finance software uses a combination of partnerships with the banks themselves and \"\"screen scraping\"\" to import your data. This simplifies things for the user but is typically limited to whenever the service was activated. Online personal finance software is still relatively young and doesn't offer the depth available in a desktop application (yet). If you are unwilling to part with historical data you spent years accumulating you are better off with a desktop application. Online Personal Finance Software Pros Cons Desktop Personal Finance Software Pros Cons In my humble opinion the personal finance software industry really needs a hybrid approach. A desktop application that is synchronized with a website. Offering the stability and tools of a desktop application with the availability of a web application.\"" }, { "docid": "382452", "title": "", "text": "Theres obviously a ton of licensing/certifications that go into an insurance company. I'm wondering anyone has experience with a start up or small insurance company and can speak to the pros and cons of it. More specifically, is there a certain rule about how much money should be set aside as float assuming a policy limit of 10 million? I'd imagine it depends on the type of coverage to a large degree. Just beginning to start the process of researching this based on an unexpected bit of news/opportunity. Thanks." }, { "docid": "262546", "title": "", "text": "\"Outside of broadly hedging interest rate risk as I mentioned in my other answer, there may be a way that you could do what you are asking more directly: You may be able to commit to purchasing a house/condo in a pre-construction phase, where your bank may be willing to lock in a mortgage for you at today's rates. The mortgage wouldn't actually be required until you take ownership from the builder, but the rates would be set in advance. Some caveats for this approach: (1) You would need to know the house/condo you want to move into in advance, and you would be committing to that move today. (2) The bank may not be willing to commit to rates that far in advance. (3) Construction would likely take far less than 5 years, unless you are buying a condo (which is the reason I mention condos specifically). (4) You are also committing to the price you are paying for your property. This hedges you somewhat against price fluctuation in your future area, but because you currently own property, you are already somewhat hedged against property price fluctuation, meaning this is taking on additional risk. The 'savings' associated with this plan as they relate to your original question (which are really just hedging against interest rate fluctuations) are far outweighed by the external pros and cons associated with buying property in advance like this. By that I mean - if it was something else you were already considering, this might be a (small) tick in the \"\"Pro\"\" column, but otherwise is far too committal / complex to be considered for interest rate hedging on its own.\"" }, { "docid": "444941", "title": "", "text": "\"This election only applies to payments that you make within 120 days of your having received loan money. These wouldn't be required payments, which is why they are called \"\"early\"\" payments. For example, let's say that you've just received $10,000 from your lender for a new loan. One month later, you pay $500 back. This election decides how that $500 will be applied. The first choice, \"\"Apply as Refund,\"\" means that you are essentially returning some of the money that you initially borrowed. It's like you never borrowed it. Instead of a $10,000 loan, it is now a $9,500 loan. The accrued interest will be recalculated for the new loan amount. The second choice, \"\"Apply as Payment,\"\" means that your payment will first be applied to any interest that has accrued, then applied to the principal. While you are in school, you don't need to make payments on student loans. However, interest is accruing from the day you get the money. This interest is simple interest, which means that the interest is only based on the loan principal; the interest is not compounding, and you are not paying interest on interest. After you leave school and your grace period expires, you enter repayment, and you have to start making payments. At this point, all the interest that has accrued from the time you first received the money until now is capitalized. This means that the interest is added to your loan principal, and interest will now be calculated on this new, larger amount. To avoid this, you can pay the interest as you go before it is capitalized, which will save you from having to pay even more interest later on. As to which method is better, just as they told you right on the form, the \"\"Apply as Refund\"\" method will save you the most money in the long run. However, as I said at the beginning, this election only applies if you make a payment within 120 days from receiving loan funds. Since you are already out of school and in repayment, I don't think it matters at all what you select here. For any students reading this and thinking about loans, I want to issue a warning. Student loans can ruin people later in life. If you truly feel that taking out a loan is the only way you'll be able to get the education you need, minimize these as much as possible. Borrow as little as possible, pay as much as you can as early as you can, and plan on knocking these out ASAP. Great Lakes has a few pages that discuss these topics:\"" }, { "docid": "560213", "title": "", "text": "Think I had to sign an NDA on pricing w them so can't get specific. Depends if you want realtime or just historical data. Historical obviously cheaper, realtime more. The prices aren't crushing though, one of cheapest tick data vendors around. You get pros and cons to that though - data is time stamped at 25ms and sent over WAN. But they also have self healing tapes w backfill etc so if your server knocks offline for a while you fill the gap when back up etc." }, { "docid": "272008", "title": "", "text": "\"Yes when I place an order with my broker they send it out to the exchange. - For individual investors, what are some cons and pros of trading on the exchanges directly versus indirectly via brokers? I may be mistaken(I highly doubt it), but from my understanding you cannot trade directly through an exchange as a retail investor. BATS allows membership but it is only for Your firm must be a registered broker-dealer, registered with a Self Regulatory Organization (SRO) and connected with a clearing firm. No apple (aapl) is listed on the NASDAQ so trades go through the NASDAQ for aapl. Caterpillar Inc (CAT) is listed on the NYSE so trades go through the NYSE. The exchange you trade on is dependent on the security, if it is listed on the NYSE then you trade on the NYSE. As a regular investor you will be going through a broker. When looking to purchase a security it is more important to know about the company and less important to know what exchange it is listed on. Since there are rules a company must comply with for it to be listed on certain exchanges, it does make a difference but that is more the case when speaking about a stock listed Over the Counter(OTC) or NYSE. It is not important when asking NYSE or NASDAQ? Selecting a broker is something that's dependent on your needs. You should ask your self, \"\"whats important to me?\"\", \"\"Do I want apps(IE: iPhone, android)?\"\" \"\"Do I need fancy trading tools?\"\". Generally all the brokers you listed will most likely do the trick for you. Some review sites: Brokerage Review Online Broker Review 2012 Barron's 2012 Online Broker Review\"" }, { "docid": "417457", "title": "", "text": "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." }, { "docid": "380382", "title": "", "text": "An offset account is simply a savings account which is linked to a loan account. Instead of earning interest in the savings account and thus having to pay tax on the interest earned, it reduces the amount of interest you have to pay on the loan. Example of a 100% offset account: Loan Amount $100,000, Offset Balance $20,000; you pay interest on the loan based on an effective $80,000 loan balance. Example of a 50% offset account: Loan Account $100,000, Offset Balance $20,000; you pay interest on the loan based on an effective $90,000 loan balance. The benefit of an offset account is that you can put all your income into it and use it to pay all your expenses. The more the funds in the offset account build up the less interest you will pay on your loan. You are much better off having the offset account linked to the larger loan because once your funds in the offset increase over $50,000 you will not receive any further benefit if it is linked to the smaller loan. So by offsetting the larger loan you will end up saving the most money. Also, something extra to think about, if you are paying interest only your loan balance will not change over the interest only period and your interest payments will get smaller and smaller as your offset account grows. On the other hand, if you are paying principal and interest then your loan balance will reduce much faster as your offset account increases. This is because with principal and interest you have a minimum amount to pay each month (made up of a portion of principal and a portion of interest). As the offset account grows you will be paying less interest, so a larger portion of the principal is paid off each month." } ]

[ { "docid": "209974", "title": "", "text": "They believe that it reduces the risk that Revenue Canada will deem you to be an employee and make them pay a whole pile of tax, EI, CPP and so on that should have been paid if you had been hired as an employee. It's my recollection that the employer gets dinged for both the employee and employer share of those withholdings (and generally the employer's share is larger than yours) so they really want to prevent it. There's a Revenue Canada publication about whether you're an employee or not. There's nothing on it about being incorporated, but still employers feel more protected when their contracts are incorporated. We did work as a sole proprietorship at the very beginning, so that we could deduct our losses against employment income earned earlier in the year, before we started the business. You can find clients who will take you on. We incorporated once the losses were over with (basically we had bought the equipment and office supplies we needed to get started.) It's a simple and relatively inexpensive thing to do, and gives clients a sense of protection. It won't protect you from your own poor decisions since you'll be a director of the firm." } ]

[ { "docid": "148141", "title": "", "text": "\"In essence the problem that the OP identified is not that the FX market itself has poor liquidity but that retail FX brokerage sometimes have poor counterparty risk management. The problem is the actual business model that many FX brokerages have. Most FX brokerages are themselves customers of much larger money center banks that are very well capitalized and provide ample liquidity. By liquidity I mean the ability to put on a position of relatively decent size (long EURUSD say) at any particular time with a small price impact relative to where it is trading. For spot FX, intraday bid/ask spreads are extremely small, on the order of fractions of pips for majors (EUR/USD/GBP/JPY/CHF). Even in extremely volatile situations it rarely becomes much larger than a few pips for positions of 1 to 10 Million USD equivalent notional value in the institutional market. Given that retail traders rarely trade that large a position, the FX spot market is essentially very liquid in that respect. The problem is that there are retail brokerages whose business model is to encourage excessive trading in the hopes of capturing that spread, but not guaranteeing that it has enough capital to always meet all client obligations. What does get retail traders in trouble is that most are unaware that they are not actually trading on an exchange like with stocks. Every bid and ask they see on the screen the moment they execute a trade is done against that FX brokerage, and not some other trader in a transparent central limit order book. This has some deep implications. One is the nifty attribute that you rarely pay \"\"commission\"\" to do FX trades unlike in stock trading. Why? Because they build that cost into the quotes they give you. In sleepy markets, buyers and sellers cancel out, they just \"\"capture\"\" that spread which is the desired outcome when that business model functions well. There are two situations where the brokerage's might lose money and capital becomes very important. In extremely volatile markets, every one of their clients may want to sell for some reason, this forces the FX brokers to accumulate a large position in the opposite side that they have to offload. They will trade in the institutional market with other brokerages to net out their positions so that they are as close to flat as possible. In the process, since bid/ask spreads in the institutional market is tighter than within their own brokerage by design, they should still make money while not taking much risk. However, if they are not fast enough, or if they do not have enough capital, the brokerage's position might move against them too quickly which may cause them lose all their capital and go belly up. The brokerage is net flat, but there are huge offsetting positions amongst its clients. In the example of the Swiss Franc revaluation in early 2015, a sudden pop of 10-20% would have effectively meant that money in client accounts that were on the wrong side of the trade could not cover those on the other side. When this happens, it is theoretically the brokerage's job to close out these positions before it wipes out the value of the client accounts, however it would have been impossible to do so since there were no prices in between the instantaneous pop in which the brokerage could have terminated their client's losing positions, and offload the risk in the institutional market. Since it's extremely hard to ask for more money than exist in the client accounts, those with strong capital positions simply ate the loss (such as Oanda), those that fared worse went belly up. The irony here is that the more leverage the brokerage gave to their clients, the less money would have been available to cover losses in such an event. Using an example to illustrate: say client A is long 1 contract at $100 and client B is short 1 contract at $100. The brokerage is thus net flat. If the brokerage had given 10:1 leverage, then there would be $10 in each client's account. Now instantaneously market moves down $10. Client A loses $10 and client B is up $10. Brokerage simply closes client A's position, gives $10 to client B. The brokerage is still long against client B however, so now it has to go into the institutional market to be short 1 contract at $90. The brokerage again is net flat, and no money actually goes in or out of the firm. Had the brokerage given 50:1 leverage however, client A only has $2 in the account. This would cause the brokerage close client A's position. The brokerage is still long against client B, but has only $2 and would have to \"\"eat the loss\"\" for $8 to honor client B's position, and if it could not do that, then it technically became insolvent since it owes more money to its clients than it has in assets. This is exactly the reason there have been regulations in the US to limit the amount of leverage FX brokerages are allowed to offer to clients, to assure the brokerage has enough capital to pay what is owed to clients.\"" }, { "docid": "208261", "title": "", "text": "\"What makes a \"\"standard\"\" raise depends on how well the economy is doing, how well your particular industry is doing, and how well your employer is doing. All these things change constantly, so anyone who says, \"\"a good raise is 5%\"\" or whatever number is being simplistic. Even if true when he said it, it won't necessarily be true next year, or this year in a different industry, etc. The thing to do is to look for salary surveys that are reasonably current and applicable. If today, in your industry, the average annual raise is 3% -- again, just making up a number -- then that's what you should think of as \"\"standard\"\". If you want a number, okay: In general, as a first-draft number, I look for a raise that's 2% or so above the current inflation rate. Yes, of course I'd LIKE to get a 20% raise every year, but that's not going to happen in real life. On the other hand if a company gives me raises that don't keep pace with inflation, than barring special circumstances I'm going to be looking for another job. But there are all sorts of special circumstances. If the economy is in a depression and unemployment in my field is 50%, I'll probably figure I'm lucky to have a job at all and not be too worried about raises. If the economy is booming and all my friends are getting 10% and 20% raises, then I'll want that too. As others have said, in the United States at least, the best way to get a pay raise is to change jobs. I think most American companies are absolutely stupid about this. They don't want to give current employees big raises, so they let them quit, and then hire replacements at a much higher salary than they were paying the guy they just drove to quit. And the replacement doesn't know the company and may have a lot to learn before he is fully productive. And then they congratulate themselves that they kept raises this year to only 3% -- even though total salaries paid went up by 10% because the new hires demanded higher salaries. They actively punish employees for staying with the company. (Reminds me of an article I read in a business magazine by an executive of a cell phone company. He bemoaned the fact that in the cell phone industry it is very hard to keep customers: they are constantly switching to other vendors. And I thought, Duh, maybe it's because you offer big discounts for the first year or two, and after that you jack your prices up through the roof. You actively punish your customers for staying with you more than 2 years, and then you wonder why customers leave after 2 years.) Oh, if you do change jobs: Absolutely do not buy a line of \"\"we'll start you off with this lower salary but don't worry because you'll get a big raise in a year\"\". When you're looking for a job, it's very easy to turn down a poor offer. Once you have taken a job, leaving to get another job is a big decision and a lot of work. So you have way more bargaining power on starting salary than on raises. And the company knows it and is trying to take advantage of it. Also consider not just percentage increase but what you're making now versus what other people with similar experience are making. If people comparable to you are making $50k and you're making $30k, you're more likely to get a big raise than if you're already making $80k. If the company says, \"\"We just don't have the budget to give you a raise\"\", the key question is, \"\"Is that true?\"\" If the company is tottering on the edge of bankruptcy and trying to cut costs everywhere, then even if they know you're a good and productive employee, they may really just not have the money to give you a good raise. But if business is booming, this could just be an excuse. It might be an excuse for \"\"we're trying to bleed employees white so the CEO can get another million dollar bonus this year\"\". Or it might be a euphemism for \"\"you're really not a very useful employee and we're seriously thinking of firing you, no way we're going to give you a raise for the little bit of work you do when you bother to show up\"\". My final word: Be realistic. What matters isn't what you want or think you need, but what you are worth to the company, and what other people with similar skills are willing to work for. If you are doing work that brings in $20k per year for the company, there is no way they are going to pay you more than $20k for very long. You can go on and on about how expensive it is these days to pay the mortgage and pay medical bills and feed your 10 children and support your cocaine addiction, but none of that is relevant to what you are worth to the company. Likewise if there are millions of people out there who would love to have your job for $20k, if you demand a lot more than that they're going to fire you and hire one of them. Conversely, if you're bringing in $100k a year for the company, they'll be willing to pay you a substantial percentage of that.\"" }, { "docid": "550374", "title": "", "text": "It really depends on the client though. A large listed company that suddenly changes from a Big 4 auditor to a much smaller one is quite suspect. Sure some Big 4 partners can just sign off with their eyes closed but if something goes wrong, I can guarantee you that the other partners would be more than happy to kick them out. Auditors generally aren't reluctant to give an unqualified opinion. It's just that when they do, it normally means that the client is so far gone it's not worth dealing with them anymore. If your client refuses to change his accounts and you worry he will drag you and your multi million dollar business down, thats when the unqualified opinion comes in." }, { "docid": "296734", "title": "", "text": "\"It's been a while but I've worked with a few Indians in the past. One guy was a manager - very smart and a great guy but he micro-managed his people to death - literally checking on them multiple times an hour throughout the day. Several Americans that worked for him quit because they couldn't take it anymore although the liked him personally. Then I went to another place that used several H1B programmers and DBAs. I had to manage a few of them and learned quickly why he worked the way he did. They were all smart and hard workers but I would give the Indian workers a general task to accomplish and they would always enthusiastically say yes and disappear into their cubicles to work. I would swing by a few hours later (expecting things to be moving along or done) and would often find that if they had hit a snag, they would stop, sit, and wait for someone to come check on them for further direction. If they did in fact complete the task, they would still just sit there and wait for me to come check on them to tell me they were done. It was really crazy. I also found that even if they had no idea what I wanted, they would say \"\"yes\"\" and go back to their desk, so I had to start having them give me an overview of what they would do to solve the problem before I let them go off and start working. I assume it's a cultural thing but it drove me nuts until I learned how to keep them moving. TL;DR: Managing them was like herding cats.\"" }, { "docid": "292051", "title": "", "text": "\"Your first and second paragraphs are two different cases. Moving money between a checking account and a savings account will credit Cash and debit Cash, making a GL transaction unnecessary, unless the amounts in the two bank accounts are tracked as two separate GL accounts. You might have account 1001 (Cash-Checking) and account 1002 (Cash-Savings). In that case, a movement of money between these two accounts should be tracked by a transaction between the GL accounts; credit checking, debit savings. It won't affect your balance sheet, but depending on your definition of liquidity of assets it might affect working capital on your statement of cash flows (if you consider the savings account \"\"illiquid\"\" then money moved to it is a decrease in working capital). Basically, what you are creating with your \"\"store credit\"\" accounts for each client is an \"\"unearned revenue\"\" account. When clients pay you cash for work you haven't done yet, or you refund money for a return as \"\"store credit\"\" instead of cash, the credit is a liability account, balancing an increase in cash, inventory, or an expense (if you're giving credit for free, perhaps due to a mistake on your part, you would debit a \"\"Store Credit Expense\"\" account). This can be split out client-by-client in the GL if you wish, avoiding the need for a holding account. The way you want to do it, you'd have a \"\"Client Holding\"\" account. It must be unique in the GL and to the client, and yes, it is a liability account. To transfer to holding, you simply debit Unearned Revenue and credit Client Holding, logging the transaction as \"\"transfer of client store credit\"\" or similar (moving liability to liability; balance sheet doesn't change). Then, as you sell goods or services to the client, you debit Accounts Receivable and credit Revenue, then to record the payment you credit AR and debit Client Holding (up to its current credit balance, after which the client pays you Cash and you debit that, or the client still owes you). To zero out a remaining balance on the Holding account, debit Client Holding and credit Unearned Revenue. I don't think the Holding account, the way you want to use it, is a good idea. If you want to track each customer's store credit balance with a GL account, then create specialized Unearned Revenue accounts for each client who gets a store credit, named for the client and containing their balance (zero or otherwise). If you don't care about it at the GL level, then pool it in one Unearned Revenue account (have one Store Credit account if you must), and track individual amounts off the books.\"" }, { "docid": "593197", "title": "", "text": "\"Can the companies from USA give job to me (I am from New Zealand)? Job as being employee - may be tricky. This depends on the labor laws in New Zealand, but most likely will trigger \"\"nexus\"\" clause and will force the employer to register in the country, which most won't want to do. Instead you can be hired as a contractor (i.e.: being self-employed, from NZ legal perspective). If so, what are the legal documents i have to provide to the USA for any taxes? If you're employed as a contractor, you'll need to provide form W8-BEN to your US employer on which you'll have to certify your tax status. Unless you're a US citizen/green card holder, you're probably a non-US person for tax purposes, and as such will not be paying any tax in the US as long as you work in New Zealand. If you travel to the US for work, things may become tricky, and tax treaties may be needed. Will I have to pay tax to New Zealand Government? Most likely, as a self-employed. Check how this works locally. As for recommendations, since these are highly subjective opinions that may change over time, they're considered off-topic here. Check on Yelp, Google, or any local NZ professional review site.\"" }, { "docid": "593705", "title": "", "text": "This is a big and complex topic, but it's one I think people get wrong a lot. There's a lot of ways to treat a child's pocket money: Tell a kid that they're getting $10/week allowance. Help them keep it safe, but don't give them access to it: Put it in a drawer in your office, or a piggie bank on a high shelf. Encourage them to save up for a big purchase. Help them decide what to spend it on. When they find something they want, talk it over with them to make sure it's right for them. This seems like a good approach, because it encourages thrift, long term thinking, savings, and other important elements of real life. But it's a TERRIBLE idea. All it does is make the child think of it as if it wasn't really their money. The child gets no benefits from this, and will certainly not learn anything about savings. Give the kid $10/week. Full stop. This seems like a bad idea, because the kid is just going to waste it. Which they will. :) That's the point! There's NO way to learn except by experience. Try and shift control of discretionary spending to the child as and when appropriate. Give them some money for clothes, or a present for their birthday, and let them spend it. If they're going to be spending all day at some event, give them money for lunch. And if they misspend it - tough! No kid is going to starve in one day because the spend their lunch money at a video arcade, but they will learn a valuable lesson. :) You have to be careful here of two mistakes. First, only do this for truly discretionary spending. If your kid needs clothes for school, then you better make sure they actually buy it. Second, make sure that you don't end up filling in the gaps. What you're teaching here is opportunity costs, and that won't work if your child gets to have his cake and eat it too. (Or go to the movies and STILL get that new Xbox game.) Have them get a job. And, it should go without saying, give them control of the money. It's incredibly tempting to force them to save, be responsible, etc. But all this does is force them to look responsible...for as long as their under your thumb. Nothing will impart the lessons about why being responsible is important like being irresponsible. And it's sure as hell better to learn that lesson with some paper route money when your 14 than with your rent money when your 24..." }, { "docid": "403491", "title": "", "text": "I can't speak authoritavely about enforceability. I've done some work on arbitration clauses for a client and worked on a major litigation case where we were trying to invalidate some arbitration clauses and arguing duress (but we ended up settling before it went to court). I believe common some law concepts would work (they are contracts after all), but the FAA is usually read to preempt some typical defenses. I also know in some jurisdictions the enforceability of an arbitration cause is put to arbitration itself, which is a barrier to getting some sort of collective action going and effectively cools a lot of litigation. It may very well be that Uber's arbitration agreements are unenforceable, but there is a lot of rage on Reddit over Uber's use of arbitration clauses, and I only wanted to bring up the fact that companies use them all the time" }, { "docid": "159987", "title": "", "text": "\"Absolutely hilarious, why would a times editor approve releasing such a ridiculous article? I'm not going to bother to write out an argument. I do want to note I just find it hilarious a company like Google that's been publicly acknowledging their lackings in diversity and set strategies &amp; initiatives to address it, while honestly admitting their progress, is getting skewered by the hot-take fanatics. ..while you look at the industry, and it's so much worse. Microsoft, AWS, IBM, Oracle, etc. have the same problems, most of them worse (though not 100%, so please correct me). I saw an actual Microsoft recruiter, not a contractor, post on LinkedIn, \"\"hey ladies, google just released a memo that they don't respect women. come work at microsoft\"\" ...That's when I realized for a lot of people this has become about other things....\"" }, { "docid": "73844", "title": "", "text": "A small business consultant works with clients on strategy, planning and problem solving, and helps clients develop Business consultant skills and knowledge. These topics range from designing a business model or marketing plan, to determining which marketing techniques to use and how to use them. You'll often help clients learn how to plan and implement projects. A small business consultant gives advice, teaches skills, and brainstorms with the client to produce practical results and enhance strategic thinking." }, { "docid": "20372", "title": "", "text": "\"Alright, I will go through bullet point by bullet point and try to best figure out what you will be doing in layman's terms. Please bear in mind that I do not work for a hedge fund, but rather a much larger entity, so a lot of the work you will be doing is pre-populated: &gt;Roles = In this role, the individual will be the main point of contact for the client on all things related to understanding their trading profit &amp; loss and how their valuations have been sourced. In addition, the Product Controller will work with internal partner areas to ensure all required processes have been performed to verify the valuation accuracy of the client’s portfolio. From my understanding you will act as the middle man between the client and the analyst. As such here is how a real interaction may go: Client X calls, you answer - \"\"Hello, iDade's office, how can I assist you?\"\" Client X asks, \"\"Hey iDadeMarshall I was curious what my capital gains were on my FB purchase?\"\" iDade: \"\"Ok, let me pull up your account, just a moment. It seems as though your current capital are $30,000 (*LOL*) on your FB purchase.\"\" Client X: \"\"Hmm, well do I have any significant loses that I may be able to sell off to off-set the tax on the capital gains?\"\" iDade: \"\"Why yes you do, it seems AAPL has taken a mighty tumble, would you like to sell a position to assist you in offsetting?\"\" Client X: \"\"Why that would be great. Thanks for your help.\"\" The conversation could go on, and that is a pretty deep conversation for the level you are going in, but I have had conversations like these before. The second part of the bullet just means that you will be checking and rechecking the grunt work of the analyst, and in some places actually performing the grunt work. The work will most likely be along the lines of finding returns for different time periods. Popular desired time periods are inception, ytd, qtd, 1yr, 2yr, etc. Remember all of these time periods are not good stand alone; they must be compared to a relevant benchmark. For instance, you would not want to compare the Barclays Intermediate Ag to an equity portfolio. The most common benchmark for an equity portfolio is going to be the S&amp;P 500, but you have to look at where the portfolio is focused. If it is a SCV you may want to look more towards something like the IJS (iShares S&amp;P SmallCap 600 Value Index). In the end always remember that any number you come up with is always relative to a benchmark. A plain return number is useless. &gt;Knowledge/Skills = Knowledge of cash and derivative products across various markets • Knowledge of pricing and valuation • Knowledge of profit and loss reporting and related attribution analysis Pretty much they just want to make sure that if a client asks about a forward/future contract as well as any swap/option that you understand what they are. This bullet points screams “I KNOW WHAT I AM DOING EVEN THOUGH NOBODY KNOWS WHAT IS GOING ON IN THE ECONOMY.” Be up on your current events have a personal conjecture about what you feel is going to happen moving forward, but do not convey it. If you know that the unemployment was the main driver behind today’s poor market then you will be good for the day, because that will suffice for any call in that relates to “why is the market down?” One of my favorite quotes about the current economy is as follows: “Anyone around here, who isn't confused about what’s going on, doesn't understand.\"\" As scary as it is, that is the honest truth. Nobody knows what is about to happen and if anyone tells you they do, they are lying and you need to run away, quickly. I am assuming you know how to calculate profit and loss – I don’t really know of a *special* way to twist the numbers around. &gt;Major Duties = Managing the daily P&amp;L process for one or more client trading desks o Daily review of Quality Control checks o Working with trading desk(s) on P&amp;L differences/inquiries o Working with offshore Product Control Team (India) on QC process o Delivering a final daily (and month-end) P&amp;L statement to the client • Understanding and explaining the key drivers behind the P&amp;L movements • Preparing/Managing monthly (or more frequently as required) price verification process and associated reporting • Updating and maintaining pricing policy for each financial type that is included in the consultant’s P&amp;L reporting • Ad/hoc projects to meet and enhance client deliverables All this means is that you will be sending out the due diligence to the client and you will ensure you are using the proper closing price and include any deposits/withdrawals during the month into your calculation. The main point is knowing the reasons the price moved throughout the day/month. KEEP UP on current events and make sure that you understand a vast knowledge of economic data. For what your day-to-day activity may be, I can walk you through it. Let’s say you get in at 8am. You will get in at 8, read economic data/recent news articles until about 10; from there you will update client A-F P/L worksheet until about noon. You will eat a quick lunch until about 1230 and continue on the grind of E-M until about 4. From 4-5 you will reread what happened at the end of the day and an overall economic activity report for the day. You may stay until 8 or 9 (if you are in a banking hub/NYC), but a lot of the older guys will leave at this time. This is your time to shine. Stay as late as you can and pump out as much work as you can. As for your interview, they may ask you what will be a good play for the next 6 months to a year – you should respond with common themes in the market. The most common theme is the dividend growth play. A ton of people are not predicting large amount of growth for the next 5-10 years, I believe I read something earlier that JPM lowered their growth forecasts by about 30% recently, so dividends IS the play. Dividend payers are generally well established companies (blue chip) that have a strong foothold in their respective industry/sector. There are a ton of funds sprouting out everywhere to follow this trend (you could throw out a few funds for brownie points, I’ll give you some – MADVX and VDIGX are pretty common). I hope this helps and let me know if anything wasn’t clear (wrote it pretty quickly). I am off to have a drink or two or three, I’ll check this in the morning though.\"" }, { "docid": "26672", "title": "", "text": "\"This isn't negotiations anymore. They are trying to change the deal after the fact. Stop negotiating and tell them they are bound to the agreement they signed. They are leaning on you because they know you are small and likely can't fight them. Document every conversation. Do not allow them to keep pushing after they've signed the agreement. They accepted your bid (after giving your pricing to a competitor, which is shitty and should have been your first red flag). Then they started working on you. At that point your answer should have been \"\"we have a verbal agreement of x services for y price. A different scope of work is not scalable and would require a new quote.\"\" At this point you can either accept that they will continue to beat you up, or you can jam the contract down their throats until they agree or walk away. I've been in a situation like this before. A major multinational asked for bid pricing that was agreed to be estimated only based on very loose requirements. Then they handed us a contract with that pricing included as \"\"not to exceed\"\". We ended up walking away. It sounds like you may want to do the same if you can. Big companies often will have legal and payables departments that basically exist to fight any obligation to pay out money. In our case shortly after we ran into someone in our industry who'd worked with that company, and they said to assume that company would reject 30% of all invoices we sent. If nothing else, to delay payment just a bit longer so they could keep earning interest on the money. Also, in the future I wouldn't turn away work until you are under a signed contract for a big project like this. You can't rely on such a contract to come through. If they drag feet and your schedule is full that's on them, or you bring in additional help or subcontract the work to deliver.\"" }, { "docid": "502242", "title": "", "text": "Get the perfect team to inspect the home before buying, it is a big investment to buy the house in a better place. In that case, we will help you. Now, no need to go anywhere in Australia. The Assured Building Inspections have wonderful experience of the inspection the building, now we are expert in this work. Always, we provide the affordable service for our clients. It is a mandatory procedure for each homeowner, we are a good protection organization inside the Australia. There is lots of inspection service company in Australia, however, they may be not proper certified in this work. It is one among most inspector and trustable corporation. We are specializing the most problems in property inspections and reports. Our impartial opinions, provide our clients with the self assurance and peace of thoughts they need to do properly knowledgeable." }, { "docid": "343080", "title": "", "text": "Neither of those links disagree with me to be honest. And the first one seems conservative relative to other reporting. &gt; I mean yes, you’re all there together, but if you and I are doing ostensibly the same (and possibly dangerous) work, you’re getting rich and I’m not…. I was once in their place too (presuming we are talking about military). They know that. Any anger I have seen from military people is from either senior enlisted (who are mad that they didn't get out and make a better life for themselves) - and senior enlisted are lower on the totem pole than security contractors so no one gives a fuck about their gripes - and some officers. The best part about being on the top of the security contractor food chain is that you worked for the State Department so you could be openly shitty to military people who copped an attitude of any sort. &gt;Strange also that taxpayers don’t care more about this, although….perhaps not. The amount of bullshit is just too overwhelming. I'm not sure there's a lot to care about. If you asked a random person if they would be willing to go through 4-8 years of military to have a potential shot at getting a job that pays like that one did, but it's in the most violent city on Earth, I imagine they would answer with a resounding no. &gt;Sounds like you could tell lets of stories about the women, though I’m not sure I want to hear them after a good lunch, and I’m pretty sure you don’t want to remember. Good choice." }, { "docid": "135896", "title": "", "text": "\"What was the true reason they wanted to use my accounts for? We wouldn't know the true reason. The scammer can do multiple things. What exactly he would do in your case ... I am very eager to know what a person was up to who would give to me so much information about themselves. I know some of you will jump on the chance to yell \"\"it was not their true address\"\", but.... it is where they wanted me to send the cards to. And I was to give proof of my identification ie; a copy of my drivers license, my articles of incorporation and the real estate development project prospectus. Also they were only willing to work with certain banks ie; Citibank, Bank of America etc. I can not understand what they were doing wanting such access to accounts that had no money in them save the amount I used to open them with. It looks more like they would open accounts under your name, but they would be controlling the accounts. i.e. what goes in and out. i.e. they would be able to deposit and withdraw from a new account they set-up. They would want to use this account for illegal activities, so that if caught, the account opening paper trail leads to you. Even if they gave you an address, it could be rental. Like they have copies of your Company registration and ID proofs, they can use these to get another rental property ... and then send letters to some and ask them to met there.\"" }, { "docid": "12655", "title": "", "text": "\"A very interesting topic, as I am moving to the US in a month. I realise this thread is old but its been helpful to me. My observations from my home country \"\"Before we judge anyone who doesn't use direct deposit or who prefers to be paid in cold hard cash, consider that direct deposit is a luxury of stability. Steady job, home, etc. Direct deposit doesn't make sense for a contractor or day labourer who expect to work for a different person each day or week\"\" --- well here a contractor would still be paid by a direct deposit, even if he was working for many different people. On the invoice the contractor provides Bank account details, and customer logs onto their internet banking and pays electronically. It is a a very simple process and is the preferred method of payment by most businesses even small contractors. Many accounting software programs are linked to bank accounts and can quickly reconcile accounts for small business. Many businesses will not accept a cheque in Australia anymore as they are considered to be a higher risk. I started work in 1994 and have never received any payment except via direct deposit.\"" }, { "docid": "267158", "title": "", "text": "\"The issues are larger than taxes. If one of you receives the check, then breaks off 25% of it for themselves and sends three checks out to each of you that will be indicated on that person's taxes. You three will then all recognize your portion of the income on your taxes and it's all settled. It's no big deal, it's a bit rag-tag but it'll get the job done. I've done little ad-hoc partnership work with people this way and it's not a problem. This is why you should really be more formal. What if this entity contracting you guys sues you? Who has the liability, if only one of you was paid? What if the money is sent to one of you and that person dies before paying you? What if you all get another client? What if this contracting entity has another project? The partnership needs to have the liability. The partnership needs to receive the money. The partnership needs to be named on whatever contract you all sign. The partnership can be a straight partnership, or maybe the four of you take a 25% stake in an LLC or Inc arrangement. Minimally, you should sit down with your partners so everyone knows everyone else's responsibilities, and you should write it all down. It probably sounds like overkill, and I'm sure your partners are you buddies and \"\"we're tight and nothing bad could come between us.\"\" I've done some partnership work with more than one friend, we've always been fine. Some ventures are successful, some aren't; I'm still very good friends with all of them. Writing things down manages expectations and when money starts moving around, everyone is happier when everyone has a solid expectation of who gets what.\"" }, { "docid": "567964", "title": "", "text": "\"&gt; That's not a taxi regulation, that's just a driving regulation: all vehicles must be insured. Are you saying that Uber/Lyft aren't even following the laws of the road? When you're driving to a call, you're working as a cab driver, or if you don't like that label, you're operating a commercial vehicle. Regular car insurance does not cover operating a vehicle for the purposes of transporting people, a.k.a. driving a taxi. There is special insurance for taxi companies because they have much higher liability and likelihood of being in an accident, thus the premiums are higher. Uber/Lyft drivers do not have this type of insurance individually, but Uber/Lyft each have a \"\"$1m insurance policy\"\" in case their drivers are in accidents **when they are loaded**. It doesn't cover them between calls. When an Uber/Lyft driver gets in an accident between calls, their insurance isn't going to cover it because they were operating a taxi, or a vehicle that transports people for money. Their insurance will drop their policy, and they will be liable for the damages, which they likely won't be able to pay out of pocket or they wouldn't be driving for Uber/Lyft in the first place. &gt; Taxi regulations actually allow red-lining by restricting service areas: \"\"sorry, I don't go to x town - I'm only licensed for y town.\"\" Even with the regulations, taxis do it anyway. That's why they ask for your destination before they give you an ETA on pickup You have no idea what red-lining is. &gt; Rate-setting isn't a good thing. Yes, it is actually. It keeps the prices stable and manageable. Without prices would drastically increase, which seems to be a big complaint in this thread. &gt; Yep. The taxi regulations should largely be repealed: they've outlived their usefulness Again, you don't have a fucking clue what you're talking about. Many cities have tried to deregulate their cab industries and all but one in the US has returned to some form of regulation. It's been a complete shit show every time. Service quality went down and prices went up. See, the thing people in this thread people don't get is I actually know how cab drivers think because I personally know 200 of them. They would absolutely love to have the industry deregulated because then they wouldn't have to take drunk assholes that call for a cab, they could just take the decently sober guy offering them an extra $20. They wouldn't have to drive to the shitty parts of town where they're most likely to get robbed. They wouldn't even have to give rides to shady looking people who are probably going to bail on their fare. Got a wheelchair? Fuck if anyone wants to lift that into the trunk. You want that short ride that only goes three blocks because you're wearing your hootchy skirt with 6\"\" heels? Why bother? Oh it's 2am on New Year's Eve/Day and you want a ride? And you're freezing your ass off? Ok, how about $80? No? Well the guy behind you with his girlfriend crying will pay it. He won't like it, but it beats being stuck downtown all night.\"" }, { "docid": "406340", "title": "", "text": "\"Tough spot. I'm guessing the credit cards are a personal line of credit in their name and not the company's (the fact that the business can be liquidated separately from your parents means they did at least set up an LLC or similar business entity). Using personal debt to save a company that could have just been dissolved at little cost to their personal credit and finances was, indeed, a very bad move. The best possible end to this scenario for you and your parents would be if your parents could get the debt transferred to the LLC before dissolving it. At this point, with the company in such a long-standing negative situation, I would doubt that any creditor would give the business a loan (which was probably why your parents threw their own good money after bad with personal CCs). They might, in the right circumstances, be able to convince a judge to effectively transfer the debt to the corporate entity before liquidating it. That puts the debt where it should have been in the first place, and the CC companies will have to get in line. That means, in turn, that the card issuers will fight any such motion or decision tooth and nail, as long as there's any other option that gives them more hope of recovering their money. Your parents' only prayer for this to happen is if the CCs were used for the sole purpose of business expenses. If they were living off the CCs as well as using them to pay business debts, a judge, best-case, would only relieve the debts directly related to keeping the business afloat, and they'd be on the hook for what they had been living on. Bankruptcy is definitely an option. They will \"\"re-affirm\"\" their commitment to paying the mortgage and any other debts they can, and under a Chapter 13 the judge will then remand negotiations over what total portion of each card's balance is paid, over what time, and at what rate, to a mediator. Chapter 13 bankruptcy is the less damaging form to your parent's credit; they are at least attempting to make good on the debt. A Chapter 7 would wipe it away completely, but your parents would have to prove that they cannot pay the debt, by any means, and have no hope of ever paying the debt by any means. If they have any retirement savings, anything in their name for grandchildren's college funds, etc, the judge and CC issuers will point to it like a bird dog. Apart from that, their house is safe due to Florida's \"\"homestead\"\" laws, but furniture, appliances, clothing, jewelry, cars and other vehicles, pretty much anything of value that your parents cannot defend as being necessary for life, health, or the performance of whatever jobs they end up taking to dig themselves out of this, are all subject to seizure and auction. They may end up just selling the house anyway because it's too big for what they have left (or will ever have again). I do not, under any circumstance, recommend you putting your own finances at risk in this. You may gift money to help, or provide them a place to live while they get back on their feet, but do not \"\"give till it hurts\"\" for this. It sounds heartless, but if you remove your safety net to save your parents, then what happens if you need it? Your parents aren't going to be able to bail you out, and as a contractor, if you're effectively \"\"doing business as\"\" Reverend Gonzo Contracting, you don't have the debt shield your parents had. It looks like housing's faltering again due to the news that the Fed's going to start backing off; you could need that money to weather a \"\"double-dip\"\" in the housing sector over the next few months, and you may need it soon.\"" } ]

[ { "docid": "371886", "title": "", "text": "The matching funds are free money, so it is a very good idea to take that money off the table. Look at it as free 100% return: you deposit $1000, your employer matches that $1000, you now have $2000 in your 401(k). (Obviously, I'm keeping things simple. Vesting schedules mean that the employer match isn't yours to keep immediately, but rather after some time; usually in chunks.) Beyond the employer match, you need to consider what is available for investment in a 401(k). Typically, your options are more limited then in an IRA. The cost of the 401(k) should be considered, as it isn't trivial for most. (The specifics will of course vary, but in large IRA accounts are cheaper.) So, it's about the opportunity costs. Up to the employer match, it doesn't matter as much that your investment choices are more limited in a 401(k), because you're getting 100% return just on the matching funds. Once that is exhausted, you have more opportunity for returns, due to having more options available to you, by going with an account that provides more choices. The overall principle here is that you have to look at the whole picture. This is similar to the notion that you should pay-down your high interest debt before investing, because from the perspective of investing the interest you're paying represent a loss, or negative return on investment, since money is going out of your accounts. Specific to your question, you have to consider the various types of investment vehicles available to you. It is not just about 401(k) and IRA accounts. You may also consider a straight brokerage account, a savings account, CDs, etc. The costs and returns that you can typically expect are your guides through the available choices." } ]

[ { "docid": "595875", "title": "", "text": "If it were my money, I wouldn't put it in a 401(k) for this purpose. If you were working at a company that provided 401(k) matching, then it might be worth it to put the money in your employer's 401(k) because the employer chips in based on what you put in. But you're self-employed, so there's no matching unless you match it yourself. (Correct?) So, given that there's no matching, a 401(k) arrangement would have more restrictions than a non-tax-advantaged account (like a bank account, or a taxable money market account). This would be taxable in the year you earn the money, but then that's it. If you're expecting to pull out the money pre-retirement, I wouldn't put it in in the first place." }, { "docid": "24231", "title": "", "text": "If one makes say, $10K/mo, and the company will match the first 5% dollar for dollar, a 10%/mo deposit of $1K/mo will see a $500/mo match. If the employee manages to request 90% get put into the 401(k), after 2 months, he's done. If the company wished, they could continue the $500/mo match, I agree. They typically don't and in fact, the 'true up' you mention isn't even required, one is fortunate to get it. Many companies that match are going the other way, matching only after the year is over. Why? Why does any company do anything? To save money. I used to make an attempt to divide my deposit over the year to max out the 401(k) in December and get the match real time, not a true up." }, { "docid": "525322", "title": "", "text": "\"The same author wrote in that article “they have a trillion? Really?” But that’s what happens when ten million dollars compounds at 2% over 200 years. Really? 2% compounded over 200 years produces a return of 52.5X, multiply that by 10M and you have $525 million. The author is off by a factor of nearly 2000 fold. Let's skip this minor math error. The article is not about 401(k)s. His next line is \"\"The whole myth of savings is gone.\"\" And the article itself, \"\"10 Reasons You Have To Quit Your Job In 2014\"\" is really a manifesto about why working for the man is not the way to succeed long term. And in that regard, he certainly makes good points. I've read this author over the years, and respect his views. 9 of the 10 points he lists are clear and valuable. This one point is a bit ambiguous and falls into the overgeneraluzation \"\"Our 401(k) have failed us.\"\" But keep in mind, even the self employed need to save, and in fact, have similar options to those working for others. I have a Solo 401(k) for my self employment income. To be clear, there are good 401(k) accounts and bad. The 401(k) with fees above 1%/yr, and no matching, awful. The 401(k) I have from my job before I retired has an S&P index with .02%/yr cost. (That's $200/$million invested per year.) The 401(k) is not dead.\"" }, { "docid": "92442", "title": "", "text": "Is there any benefit to investing in a Roth 401(k) plan, as opposed to a Roth IRA? They have separate contribution limits, so how much you contribute to one does not change the amount you can contribute to the other. Which is relevant to your question because you said the earnings on that account compounded over the next 40 years growing tax-free will be much higher than what I'd save on current taxes on a traditional 401(k). This is only true if you max out your contribution limits. If you start with the same amount of money and have the same marginal tax rate in both years, it doesn't matter which one you pick. Start with $10,000 to invest. With the traditional, you can invest all $10,000. With the Roth, you pay taxes on it and then invest it. Let's assume a tax rate of 25%. So invest $7500. Let's assume that you invest either amount long enough to double four times (forty years at 7% return after inflation is about right). So the traditional has $160,000 and the Roth has $120,000. Now you withdraw them. For simplicity's sake, we'll pretend it's all one year. It's probably over several years, but the math is easier in a single year. With the Roth, you have $120,000. With the traditional, you have to pay tax. Again, let's assume 25%. So that's $40,000, leaving you with $120,000 from the traditional. That is the same amount as the Roth! So it would make sense to If you can max out both, great. You do that for forty years and your retirement will be as financially secure as you can make it. If you can't max them out, the most important thing is the employer match. That's free money. Then you may prefer your Roth IRA to the 401k. Note that you can also roll over your Roth 401k to a Roth IRA. Then you can withdraw your contributions from the Roth IRA without penalty or additional tax. Alternate source. Beyond answering your question, I would still like to reiterate that Roth or traditional does not have a big effect on your investment unless you max them out or you have different tax rates now versus in retirement. It may change other things. For example, you can roll over a Roth 401k to a Roth IRA without paying taxes. And the Roth IRA will act like it was contributed directly. You have to check with your employer what their rollover rules are. They may allow it any time or only at employment separation (when you leave the job). If you do max out your Roth accounts, then they will perform better than the traditional accounts at the same nominal contribution. This is because they are tax free while your returns in the other accounts will have to pay taxes. But it doesn't matter until you hit the limits. Until then, you could just invest the tax savings of the traditional as well as the money you could invest in a Roth." }, { "docid": "525645", "title": "", "text": "HCE is defined as being above 120k$ or in the top 20 % of the company. The exact cutoff point might be different for each company. Typically, only the base salary is considered for that, but it's the company's (and 401(k)-plan's) decision. The IRS does not require HCE treatment; the IRS requires that 401(k) plans have a 'fair' distribution of usage between all employees. Very often, employees with lower income save (over-proportionally) less in their 401(k), and there is a line where the 401(k) plan is no longer acceptable to the IRS. HCE is a way for companies to ensure this forced balance; by limiting the amount of 401(k) savings for HCE, the companies ensure that the share of all contributions by below-HCE is appropriate. They will calculate/define the HCE cutoff point so that the required distribution is surely achieved. One of the consequences is that when you move over the HCE cutoff point, you can suddenly save a lot less in your 401(k). Nothing can be done about that. See this IRS page: https://www.irs.gov/retirement-plans/plan-participant-employee/definitions Highly Compensated Employee - An individual who: Owned more than 5% of the interest in the business at any time during the year or the preceding year, regardless of how much compensation that person earned or received, or For the preceding year, received compensation from the business of more than $115,000 (if the preceding year is 2014; $120,000 if the preceding year is 2015 or 2016), and, if the employer so chooses, was in the top 20% of employees when ranked by compensation." }, { "docid": "452592", "title": "", "text": "You are already doing everything you can. If your employer does not have a 401(k) you are limited to investing in a Roth or a traditional IRA (Roth is post tax money, traditional IRA gives you a deduction so it is essentially pre tax money). The contribution limits are the same for both and contributing to either adds to the limit (so you can't duplicate). CNN wrote an article on some other ways to save: One thing you may want to bring up with your employer is that they could set up a SEP-IRA. This allows them to set a % (up to 25%) that they contribute pre-tax to an IRA for everyone at the company that has worked there at least 3 years. If you are at a small company, maybe everyone with that kind of seniority would take an equivalent pay cut to get the automatic retirement contribution? (Note that a SEP-IRA has to apply to everyone equally percentage wise that has worked there for 3 years, and the employer makes the contribution, not you)." }, { "docid": "272223", "title": "", "text": "\"The original question was aimed at early payment on a student loan at 6%. Let's look at some numbers. Note, the actual numbers were much lower, I've increased the debt to a level that's more typical, as well as more likely to keep the borrower worried, and \"\"up at night.\"\" On a $50K loan, we see 2 potential payoffs. A 6 year accelerated payoff which requires $273.54 extra per month, and the original payoff, with a payment of $555.10. Next, I show the 6 year balance on the original loan terms, $23,636.44 which we would need to exceed in the 401(k) to consider we made the right choice. The last section reflects the 401(k) balance with different rates of return. I purposely offer a wide range of returns. Even if we had another 'lost decade' averaging -1%/yr, the 401(k) balance is more than 50% higher than the current loan debt. At a more reasonable 6% average, it's double. (Note: The $273.54 deposit should really be adjusted, adding 33% if one is in the 25% bracket, or 17.6% if 15% bracket. That opens the can of worms at withdrawal. But let me add, I coerced my sister to deposit to the match, while married and a 25%er. Divorced, and disabled, her withdrawals are penalty free, and $10K is tax free due to STD deduction and exemption.) Note: The chart and text above have been edited at the request of a member comment. What about an 18% credit card? Glad you asked - The same $50K debt. It's tough to imagine a worse situation. You budgeted and can afford $901, because that's the number for a 10 year payoff. Your spouse says she can grab a extra shift and add $239/mo to the plan, because that' the number to get to a 6 year payoff. The balance after 6 years if we stick to the 10 year plan? $30,669.82. The 401(k) balances at varying rates of return again appear above. A bit less dramatic, as that 18% is tough, but even at a negative return the 401(k) is still ahead. You are welcome to run the numbers, adjust deposits for your tax rate and same for withdrawals. You'll see -1% is still about break-even. To be fair, there are a number of variables, debt owed, original time for loan to be paid, rate of loan, rate of return assumed on the 401(k), amount of potential extra payment, and the 2 tax rates, going in, coming out. Combine a horrific loan rate (the 18%) with a longer payback (15+ years) and you can contrive a scenario where, in fact, even the matched funds have trouble keeping up. I'm not judging, but I believe it's fair to say that if one can't find a budget that allows them to pay their 18% debt over a 10 year period, they need more help that we can offer here. I'm only offering the math that shows the power of the matched deposit. From a comment below, the one warning I'd offer is regarding vesting. The matched funds may not be yours immediately. Companies are allowed to have a vesting schedule which means your right to this money may be tiered, at say, 20%/year from year 2-6, for example. It's a good idea to check how your plan handles this. On further reflection, the comments of David Wallace need to be understood. At zero return, the matched money will lag the 18% payment after 4 years. The reason my chart doesn't reflect that is the match from the deposits younger than 4 years is still making up for that potential loss. I'd maintain my advice, to grab the match regardless, as there are other factors involved, the more likely return of ~8%, the tax differential should one lose their job, and the hope that one would get their act together and pay the debt off faster.\"" }, { "docid": "104934", "title": "", "text": "Please note that if you are self employed, then the profit sharing limit for both the SEP and Solo 401(k) is 20% of compensation, not 25%. There is no need for a SEP-IRA in this case. In addition to the 401(k) at work, you have a solo-401(k) for your consulting business. You can contribute $18,000 on the employee side across the two 401(k) plans however you wish. You can also contribute profit sharing up to 20% of compensation in your solo 401(k) plan. However, the profit sharing limit aggregates across all plans for your consulting business. If you max that out in your solo 401(k), then you cannot contribute to the SEP IRA. In other words, the solo 401(k) dominates the SEP IRA in terms of contributions and shares a limit on the profit-sharing contribution. If you have a solo 401(k), there is never a reason to have a SEP for the same company. Example reference: Can I Contribute to a solo 401(k) and SEP for the same company?" }, { "docid": "352794", "title": "", "text": "\"First of all, one thing that is very important: Match is always better than no match. So, you should definitely use that match on your HSA if you've already maxed out the company match on your 401(k). In fact, for most people there won't be much reason to invest in your 401(k) above the company match at all. If, for example, your company matches only up to 5%, and you want to invest 15% of income into retirement, you ought to open an IRA instead (Roth or standard depending on your situation) and put the extra 10% in there. Beyond that, you're right, HSA's (the accounts themselves) have all the benefits of a 401(k). I wouldn't invest there for retirement instead an IRA, though. There is just no reason. The only built-in downside of an HSA is the HDHP attachment, which may be undesirable to some employees or in certain situations. If you want to get down to raw dollar figures and your company is offering both a standard health plan and a HDHP+HSA, the calculation will be dependent on the premiums and benefits of each and your projected costs of your health care (which is always a crystal ball estimation anyway). Those costs and benefits can vary wildly, from a completely obvious choice on either the HDHP or standard plan, or pretty much a wash where you decide based on your comfort level with a high deductible. To illustrate... Standard plan: Your company might offer a standard plan that costs you $100 out of pocket for an individual. That means you pay a minimum of $1200 a year for health care. Most plans will have copays (a flat amount like $15 you pay for standard doctor consultations), a deductible (you pay 100% of fees up to this, co-pays don't count), a percentage you pay beyond the deductible (20% is typical), and a maximum (like $1000 per individual per year - beyond this, up to a \"\"lifetime\"\" maximum benefit of like $2 million, you won't be charged anything). In a standard plan where you have no expenses, you might pay $1200 a year plus a couple co-pays, for a total of $1230. In a bad year with surgery, you might max out, so $1200 + $30 + $1000 = $2230. HDHP/HSA: These plans are very different. You might still pay a premium, I.E. $30 a month. They will still have a deductible and maximum, but they might be the same amount. You will probably not have copays (I didn't when I had one, but I could be wrong), which means a standard doctor visit will cost more like $80-100. In a good year, this will mean that you pocket $500 from your company, but pay back $360 in premiums. A couple doctor visits would mean there's only $300 left in your account at the end of the year. But, that's still a net cost of only $60, compared to $1230. Big win! In a bad year, you would end up out of pocket the max (say $2000) plus premiums, minus the $500, for a total of $1860. In this case, still better than the standard plan. The important difference will come in an in-between year. You will reach the max quicker on an HDHP than you will on a standard plan. With a family, where all of these numbers are higher, and you have more people to be getting sick/injured this might make the standard plan a better benefit. However, since whatever you build up in an HSA account stays with you forever, while you're single and have only your own health to be concerned about, that is probably a good choice. When you have a family, things might change and you switch to a standard plan, but you still have that war-chest to offset copays and hospital visits in future years. I was forced onto an HSA for 2 years with a smaller company. They had a really good contribution, $2500 if I remember right, and we saved up big time. Later, when my wife was pregnant, we were on a low-deductible standard plan and paid all our fees out of the HSA. It worked out great. I say, as long as the averaged yearly expected costs make sense after doing calculations illustrated above, go for it!\"" }, { "docid": "42301", "title": "", "text": "You can only contribute up to 5% of your salary? Odd. Usually 401(k) contributions are limited to some dollar amount in the vicinity of $15,000 or so a year. Normal retirement guidelines suggest that putting away 10-15% of your salary is enough that you probably won't need to worry much when you retire. 5% isn't likely to be enough, employer match or no. I'd try to contribute 10-15% of my salary. I think you're reading the rules wrong. I'm almost certain. It's definitely worth checking. If you're not, you should seriously consider supplementing this saving with a Roth IRA or just an after-tax account. So. If you're with Fidelity and don't know what to do, look for a target date fund with a date near your retirement (e.g. Target Retirement 2040) and put 100% in there until you have a better idea of what going on. All Fidelity funds have pretty miserable expense ratios, even their token S&P500 index fund from another provider, so you might as let them do some leg work and pick your asset allocation for you. Alternatively, look for the Fidelity retirement planner tools on their website to suggest an asset allocation. As a (very rough) rule of thumb, as you're saving for retirement you'll want to have N% of your portfolio in bonds and the rest in stocks, where N is your age in years. Your stocks should probably be split about 70% US and 30% rest-of-world, give or take, and your US stocks should be split about 64% large-cap, 28% mid-cap and 8% small-cap (that's basically how the US stock market is split)." }, { "docid": "357555", "title": "", "text": "If you plan to continue contributing to a 401(k) and are no longer self-employed, then you need to start a new 401(k) at your new business. You can't contribute to the old one any more. About the money in the old one, you have a few options. If both 401(k) plans have good investment options and low fees, then there's little reason to think one of these strategies is better than the other. If, like me, at least one of your 401(k) providers has very few available funds and those funds have high expense ratios, then it's a good idea to move your money where the investments are best. As a rule, IRA's are better than 401(k) plans because most IRA's will allow you to invest in practically anything you want while most 401(k) plans only allow you to invest in the funds that have taken your company's HR people to the best lobster dinners or went to the same school as them. Most organizations do an absolutely horrible job at selecting a reasonable set of funds because the decision-makers generally have no finance background and no incentive to do a good job. For that reason I like IRA's. Of course, some solo 401(k) plans are also very good so just leaving it where it is may be best for you. This has the added advantage of being ready to go if you end up self-employed again at some point." }, { "docid": "591168", "title": "", "text": "\"You have a few options: Option #1 - Leave the money where it is If your balance is over $5k - you should be able to leave the money in your former-employer's 401(k). The money will stay there and continue to be invested in the funds that you elect to invest in. You should at the very least be receiving quarterly statements for the account. Even better - you should have access to some type of an online account where you can transfer your investments, rebalance your account, conform to target, etc. If you do not have online account access than I'm sure you can still transfer investments and make trades via a paper form. Just reach out to the 401(k) TPA or Recordkeeper that administers your plan. Their contact info is on the quarterly statements you should be receiving. Option #2 - Rollover the money into your current employer's 401(k) plan. This is the option that I tend to recommend the most. Roll the money over into your current employer's 401(k) plan - this way all the money is in the same place and is invested in the funds that you elect. Let's say you wanted to transfer your investments to a new fund lineup. Right now - you have to fill out the paperwork or go through the online process twice (for both accounts). Moving the money to your current-employer's plan and having all the money in the same place eliminates this redundancy, and allows you to make one simple transfer of all your assets. Option #3 - Roll the money from your former-employer's plan into an IRA. This is a cool option, because now you have a new IRA with a new set of dollar limits. You can roll the money into a separate IRA - and contribute an additional $5,500 (or $6,500 if you are 50+ years of age). So this is cool because it gives you a chance to save even more for retirement. Many IRA companies give you a \"\"sign on bonus\"\" where if you rollover your former-employers 401(k)...they will give you a bonus (typically a few hundred bucks - but hey its free money!). Other things to note: Take a look at your plan document from your former-employer's 401(k) plan. Take a look at the fees. Compare the fees to your current-employer's plan. There could be a chance that the fees from your former-employer's plan are much higher than your current-employer. So this would just be yet another reason to move the money to your current-employer's plan. Don't forget you most likely have a financial advisor that oversees your current-employer's 401(k) plan. This financial advisor also probably takes fees from your account. So use his services! You are probably already paying for it! Talk to your HR at your employer and ask who the investment advisor is. Call the advisor and set up an appointment to talk about your retirement and financial goals. Ask him for his advice - its always nice talking to someone with experience face to face. Good luck with everything!\"" }, { "docid": "402523", "title": "", "text": "HSAs are very similar to IRAs. Any investment returns grow tax-deferred and once you reach age 59 1/2 65, you can withdraw the funds for any purpose (subject to ordinary income tax), just like a traditional IRA. If you can afford to do so, I would recommend you to pay medical expenses out-of-pocket and let the funds in your HSA accumulate and grow. In general, the best way to allocate your funds is in the following order: Contribute to a 401(k) if your employer matches funds at a substantial rate Pay off high-interest debt (8% of more in current environment in 2011) Contribute to an IRA (traditional or Roth) Contribute to an HSA Contribute to a 401(k) without the benefit of employer matching One advantage of HSAs versus IRAs is that you don't have to have earned income (salary or self-employment income) in order to contribute. If you derive income solely from rents, interest or dividends, you can contribute the maximum amount ($3,050 for individuals in 2011) and get a full deduction from your income (Of course, you will need to maintain a high-deductible health plan in order to qualify). One downside of HSAs is the lack of competitively priced providers. Wells Fargo offers HSAs for free, but only allows you to keep your funds in cash, earning a very measly interest rate, or invest them in rather mediocre and expensive Wells Fargo mutual funds. Vanguard, known for its low-fee investment options, provides HSAs through a partner company, but the account maintenance charges are still quite high. Overall, HSAs are a worthwhile option as part of your investment plan." }, { "docid": "301194", "title": "", "text": "\"I assume you get your information from somewhere where they don't report the truth. I'm sorry if mentioning Fox News offended you, it was not my intention. But the way the question is phrased suggests that you know nothing about what \"\"pension\"\" means. So let me explain. 403(b) is not a pension account. Pension account is generally a \"\"defined benefit\"\" account, whereas 403(b)/401(k) and similar - are \"\"defined contribution\"\" accounts. The difference is significant: for pensions, the employer committed on certain amount to be paid out at retirement (the defined benefit) regardless of how much the employee/employer contributed or how well the account performed. This makes such an arrangement a liability. An obligation to pay. In other words - debt. Defined contribution on the other hand doesn't create such a liability, since the employer is only committed for the match, which is paid currently. What happens to your account after the employer deposited the defined contribution (the match) - is your problem. You manage it to the best of your abilities and whatever you have there when you retire - is yours, the employer doesn't owe you anything. Here's the problem with pensions: many employers promised the defined benefit, but didn't do anything about actually having money to pay. As mentioned, such a pension is essentially a debt, and the retiree is a debt holder. What happens when employer cannot pay its debts? Employer goes bankrupt. And when bankrupt - debtors are paid only part of what they were owed, and that includes the retirees. There's no-one raiding pensions. No-one goes to the bank with a gun and demands \"\"give me the pension money\"\". What happened was that the employers just didn't fund the pensions. They promised to pay - but didn't set aside any money, or set aside not enough. Instead, they spent it on something else, and when the time came that the retirees wanted their money - they didn't have any. That's what happened in Detroit, and in many other places. 403(b) is in fact the solution to this problem. Instead of defined benefit - the employers commit on defined contribution, and after that - it's your problem, not theirs, to have enough when you're retired.\"" }, { "docid": "1366", "title": "", "text": "If you can afford to put money in your 401(k) account, I would say at least you should invest enough to get your employer's matching fund. It's free money, why not get it?" }, { "docid": "2103", "title": "", "text": "My perspective is from the US. Many employers offer 401(k)s and you can always contribute to an IRA for either tax deferred or tax free investment growth. If you're company offers a 401(k) match you should always contribute the maximum amount they max or you're leaving money on the table. Companies can't always support pensions and it isn't the best idea to rely on one entirely for retirement unless your pension is from the federal government. Even states such as Illinois are going through extreme financial difficulties due to pension funding issues. It's only going to get worse and if you think pension benefit accrual isn't going to be cut eventually you'll have another thing coming. I'd be worried if I was a state employee in the middle of my career with no retirement savings outside of my pension. Ranting: Employees pushed hard for some pretty absurd commitments and public officials let the public down by giving in. It seems a little crazy to me that someone can work for the state until they're in their 50's and then earn 70% of their 6 figure salary for the rest of their life. Something needs to be done but I'd be surprised if anyone has the political will to make tough choices now before thee options get much much worse and these states are forced to make a decision." }, { "docid": "534837", "title": "", "text": "One should fund a 401(k) or matched retirement account up to the match, even if you have other debt. Long term, you will come out ahead, but you must be disciplined in making the payments. If one wants to point out the risk in a 401(k), I'd suggest the money need not be invested in stocks, there's always a short term safe option." }, { "docid": "520924", "title": "", "text": "I would definitely recommend contributing to an IRA. You don't know for sure you'll get hired full-time and be eligible for the 401(k) with match, so you should save for retirement on your own. I would recommend Roth over Traditional IRA in your situation, because let's say you do get hired full-time. Since the company offers a retirement plan, your 2015 Traditional IRA contribution would no longer be deductible at your income level (assuming you're single), and non-deductible Traditional IRAs aren't a very good deal (see here and here). If there's a decent chance you would get hired, this factor would override the pre-tax versus post-tax debate for me. At your income level you could go either way on that anyway. A Solo 401(k) would be worth looking into if you wanted to increase your contribution limit beyond what IRAs offer, but given that it sounds like you're just starting out saving for retirement, and you may be eligible for a 401(k) soon, it's probably overkill at this point." }, { "docid": "231662", "title": "", "text": "\"Before anything, I see that no one mentioned the one thing about 401(k) accounts that's just shy of magic - The matching deposit. In 2015, 42% of companies offered a dollar for dollar match on deposits. Can't beat that. (Note - to respond to Xalorous' comment, the $18K OP deposits can be nearly any percent of his income. The typical match is 'up to' 6% of gross income. If that's the case, the 401(k) deposits are doubled. But say he makes $100K. The $18K deposit will see a $6K match. This adds a layer of complexity to the answer that I preferred to avoid, as I show with no match at all, and no change in tax brackets, the deferral alone shows value to the investor.) On to the main answer - Let's pull out a spreadsheet - We start with $10,000, and assume the 25% bracket. This gives a choice of $10,000 in the 401(k) or $7500 in the taxable account. Next, let 20 years pass, with 10% return each year. The 401(k) sees the full 10% and after 20 years, $67K. The taxable account owner waits to get the 15% cap gain rate and adjusts portfolio, thus seeing an 8.5% return each year and carrying no ongoing gains. After 20 years of 8.5% returns, he has $38K net. The 401(k) owner on withdrawal pays the 25% tax and has $50K, still more than 25% more money that the taxable account. Because transactions within the account were all tax deferred. EDIT - With respect to davmp's comment, I'll offer the other extreme - In his comment, he (rightly) objected that I chose to trade every year, although I did assign the long term 15% cap gain rate, he felt the annual trade was my attempt to game the analysis. Above, I offer his extreme case, a 10% return each year, no trade, no dividend. Just a cap gain at the end. The 401(k) still wins. I also left the tax (on the 401(k)) at withdrawal at 25%, when in fact, much, if not all will be taxed at 15% or lower, which would put the net at $57K or 30% above the taxable account final withdrawal. The next issue I'd bring up is that the 401(k) is taken out at the top (marginal) tax rate, e.g. a single filer with taxable income over $37,650 (in 2016) would save 25% on that 401(k) deduction. Of course if the deduction pulls you under that line, I'd go Roth or taxable. But, withdrawals start at zero. Today, a single retiree has a standard deduction ($4050) and exemption ($6300) for a total $10,350 \"\"zero bracket\"\" with the next $9275 taxed at 10%. This points to needing $500K in pre tax accounts before withdrawals each year would get you past the 10% bracket. (This comes from the suggestion of using 4% as an annual withdrawal rate). Last - the tax discussion has 2 major points in time, deposit and withdrawal, of course. But, the answers here all ignore all the time in between. In between, you see that for any number of reasons, you'll drop from the 25% bracket to 15% that year. That's the time to convert a bit of money to Roth and 'top off' the 15% bracket. It can happen due to job loss, marriage with new spouse either not working or having lower income, new baby, house purchase, etc. Or in-between, a disability put you out of work. That permits you to take money out with no penalty, and little chance of paying even the 25% that you paid going in. This, from personal experience with a family member, funded a 401(k) with 28% money. Then divorced and disabled, able to take the $10K/yr to supplement worker's comp (non taxed) income.\"" } ]

[ { "docid": "163834", "title": "", "text": "In addition to George Marian's excellent advice, I'll add that if you're hitting the limits on IRA contributions, then you'd go back to your 401(k). So, put enough into your 401(k) to get the match, then max out IRA contributions to give you access to more and better investment options, then go back to your 401(k) until you top that out as well, assuming you have that much available to invest for retirement." } ]

[ { "docid": "565684", "title": "", "text": "The Mad Fientist has an article on this. He gives these following benefits: He also gives the caveat that your employer may not match things in their entirety. Like you mentioned, this mostly applies to 401(k)s and not to HSAs where the employer tends to contribute a fixed amount (in my experience). Anecdotally, my wife and I front-load our IRAs; but not our HSA and 401(k) because we don't have that option. In the comment section of the linked article, several big-name early retirees confess to front-loading before it was cool." }, { "docid": "507476", "title": "", "text": "If you're simply trading with your own money and have not incorporated, then you are not eligible for a solo 401(k). Nerdwallet has an excellent Q&A on the topic here for example. Solo 401(k) is only allowed to be funded with earned income, and capital gains are not earned income. From the IRS page on One Participant 401(k) plans: Elective deferrals up to 100% of compensation (“earned income” in the case of a self-employed individual) up to the annual contribution limit Earned income is defined by the IRS here: But not including: Even more clearly, that page notes: There are two ways to get earned income: You work for someone who pays you or You own or run a business or farm Capital gains are certainly neither of these. Now, I have read several articles suggesting one way to go about using the Solo 401k. All of them suggest that you would need to incorporate in some fashion that would require a Schedule C tax return, though, and be trading with the company's money rather than your own, and then pay yourself a wage from that. In that case you would be eligible for a Solo 401(k), and you might even be better off as a result of all that maneuvering (even though you'll be taxed at a higher rate for any income you do keep, likely, and have to pay self-employment tax)." }, { "docid": "57526", "title": "", "text": "\"Yes, this is restricted by law. In plain language, you can find it on the IRS website (under the heading \"\"When Can a Retirement Plan Distribute Benefits?\"\"): 401(k), profit-sharing, and stock bonus plans Employee elective deferrals (and earnings, except in a hardship distribution) -- the plan may permit a distribution when you: •terminate employment (by death, disability, retirement or other severance from employment); •reach age 59½; or •suffer a hardship. Employer profit-sharing or matching contributions -- the plan may permit a distribution of your vested accrued benefit when you: •terminate employment (by death, disability, retirement or other severance from employment); •reach the age specified in the plan (any age); or •suffer a hardship or experience another event specified in the plan. Form of benefit - the plan may pay benefits in a single lump-sum payment as well as offer other options, including payments over a set period of time (such as 5 or 10 years) or a purchased annuity with monthly lifetime payments. Source: https://www.irs.gov/retirement-plans/plan-participant-employee/when-can-a-retirement-plan-distribute-benefits If you want to actually see it in the law, check out 26 USC 401(k)(2)(B)(i), which lists the circumstances under which a distribution can be made. You can get the full text, for example, here: https://www.law.cornell.edu/uscode/text/26/401 I'm not sure what to say about the practice of the company that you mentioned in your question. Maybe the law was different then?\"" }, { "docid": "231012", "title": "", "text": "I'd hazard that Jim is mostly worried that people are getting ripped off by high employer 401(k) fund fees. A lot of employers offer funds with fees over 1% a year. This sounds low-ish if you don't realize that the real (inflation-adjusted) return for the fund will probably average out to about 4%, so it's really something like a quarter of your earnings gone. With an IRA, you don't have to do that. You can get an IRA provider which offers good, cheap index funds and the like (cough Vanguard cough). Fund fees will probably be closer to 0.1%-ish. HOWEVER. The maximum IRA contribution in 2013 will be $5,500. The maximum for a 401(k) contribution will be $17,500. That extra capacity is enough to recommend a 401(k) over an IRA for many people. These people may be best served by putting money into the 401(k) and then rolling it over into a rollover IRA when they change jobs. Also, certain people have retirement plans which offer them good cheap index funds. These people probably don't need to worry quite as much. Finally, having two accounts is more complicated. Please contact someone who knows more about taxes than I am to figure out what limitations apply for contributing to both IRAs and 401(k)s in the same year." }, { "docid": "531051", "title": "", "text": "I completely agree with Pete that a 401(k) loan is not the answer, but I have an alternate proposal: Reduce your 401(k) contribution down to the 4% that you get a match on. If you are cash poor now and have debts to be cleaned up, those need to be addressed before retirement savings. You'll have plenty of time to make up the lost savings after you get the debts paid off. If your company matches 50% (meaning you have to contribute 8% to get the 4% match), then consider temporarily stopping your 401(k) altogether. A 100% match is very hard to give up, but a 50% match is less difficult. You have plenty of years left ahead of you to make up the lost match. Plus, the pain of knowing you're leaving money on the table will incentivize you to get the loans paid as quickly as possible. It seems to me that I would be reducing middle to high interest debt while also saving myself $150 per month. No, you'd be deferring $150 per month for an additional two years, and not reducing debt at all, just moving it to a different lender. Interest rate is not your problem. Right now you're paying less than $30 per month in interest on these 3 loans and about $270 in principal, and at the current rate should have them paid off in about 2 years. You're wanting to extend these loans to 4 years by borrowing from your retirement savings. I would buckle down, reduce expenses wherever possible (cable? cell phone? coffee? movies? restaurants?) until you get these debts paid off. You make $70,000 per year, or almost $6,000 per month. I bet if you try hard enough you can come up with $1,100 fairly quickly. Then the next $1,200 should come twice as fast. Then attack the next $4,000. (You can argue whether the $1,200 should come first because of the interest rate, but in the end it doesn't matter - either one should be paid off very quickly, so the interest saved is negligible) Maybe you can get one of them paid off, get yourself some breathing room, then loosen up a little bit, but extending the pain for an additional two years is not wise. Some more drastic measures:" }, { "docid": "222836", "title": "", "text": "It sounds like you're comparing (1) the backdoor Roth IRA and (2) the mega backdoor Roth. Although the names are similar they are considerably different, and not mutually exclusive. The goal of the backdoor Roth IRA is to contribute to a Roth IRA even if you are over the income limits. This is accomplished by contributing to a non-deductible Traditional IRA and then converting to Roth. Both of these steps have no income limit (unlike a direct Roth IRA contribution, which does), and only the earnings (which should be minimal) will be taxed. More info here (mirror). The goal of the mega backdoor Roth is to get a lot of money into Roth accounts through salary deferral. This is accomplished by making non-Roth after-tax contributions to your 401(k) after exhausting the $18,000 limit (in 2017) for pre-tax + Roth employee contributions. The after-tax contributions (potentially up to $36,000 for 2017) can be rolled over to the Roth 401(k) or to a Roth IRA, while the earnings can be rolled over to the pre-tax 401(k) or a Traditional IRA, or taxed like regular income and converted to Roth along with the contributions. More info here (mirror)." }, { "docid": "402523", "title": "", "text": "HSAs are very similar to IRAs. Any investment returns grow tax-deferred and once you reach age 59 1/2 65, you can withdraw the funds for any purpose (subject to ordinary income tax), just like a traditional IRA. If you can afford to do so, I would recommend you to pay medical expenses out-of-pocket and let the funds in your HSA accumulate and grow. In general, the best way to allocate your funds is in the following order: Contribute to a 401(k) if your employer matches funds at a substantial rate Pay off high-interest debt (8% of more in current environment in 2011) Contribute to an IRA (traditional or Roth) Contribute to an HSA Contribute to a 401(k) without the benefit of employer matching One advantage of HSAs versus IRAs is that you don't have to have earned income (salary or self-employment income) in order to contribute. If you derive income solely from rents, interest or dividends, you can contribute the maximum amount ($3,050 for individuals in 2011) and get a full deduction from your income (Of course, you will need to maintain a high-deductible health plan in order to qualify). One downside of HSAs is the lack of competitively priced providers. Wells Fargo offers HSAs for free, but only allows you to keep your funds in cash, earning a very measly interest rate, or invest them in rather mediocre and expensive Wells Fargo mutual funds. Vanguard, known for its low-fee investment options, provides HSAs through a partner company, but the account maintenance charges are still quite high. Overall, HSAs are a worthwhile option as part of your investment plan." }, { "docid": "471472", "title": "", "text": "A 401(k) is just a container. Like real-world containers (those that are usually made out of metal), you can put (almost) anything you want in it. Signing up for your employer's match is a great thing to do. Getting into the habit of saving a significant portion of your take-home pay early in your career is even better; doing so will put you lightyears ahead of lots of people by the time you approach retirement age. Even if you love your job, that will give you options you otherwise wouldn't have. There is no real reason why you can't start out by putting your retirement money in a short-term money-market fund within that 401(k). By doing so you will only earn a pittance, probably not even enough to keep up with inflation in today's economic environment, but at this point in your (savings and investment) career, that doesn't really matter much. What really matters is getting into the habit of setting that money aside every single time you get paid and not thinking much of it. And that's a lot easier if you start out early, especially at a time when you likely have received a significant net pay increase (salaried job vs college student). I know, everyone says to get the best return you can. But if you are just starting out, and feel the need to be conservative, then don't be afraid to at least start out that way. You can always rebalance into investment classes that have the potential for higher return -- and correspondingly higher volatility -- in a few years. In the meantime, you will have built a pretty nice capital that you can move into the stock market eventually. The exact rate of return you get in the first decade matters a lot less than how much money you set aside regularly and that you keep contributing. See for example Your Investment Plan Means Nothing If You Don’t Do This by Matt Becker (no affiliation), which illustrates how it takes 14 years for saving 5% at a consistent 10% return to beat saving 10% at a consistent 0% return. So look through what's being offered in terms of low-risk investments within that 401(k). Go ahead and pick a money-market fund or a bond fund if you want to start out easy. If it gets you into the habit of saving and sticking with it, then the overall return will beat the daylights out of the return you would get from a good stock market fund if you stop contributing after a year or two. Especially (but not only) if you do pick an interest-bearing investment, do make sure to pick one that has as low fees as you can possibly find for what you want, because otherwise the fees are going to eat a lot into your potential returns, benefiting the bank or investment house rather than yourself. Just keep an open mind, and very strongly consider shifting at least some of your investments into the stock market as you grow more comfortable over the next several years. You can always keep a portion of your money in various interest-bearing investments to act as a cushion in case the market slumps." }, { "docid": "79888", "title": "", "text": "This is called an in-plan Roth conversion and is discussed by the IRS here. If your 401(k) has a Roth option then it likely also has a provision to convert pre-tax dollars, but you'll have to check with the administrator to be sure. They could also potentially limit the type of money that can be converted. But most likely you should be able to convert any amount you want, and since it's all pre-tax (your contributions, employer matching, and earnings), it doesn't really matter which money is converted because it's all equivalent. One caveat is you won't able to convert any employer matching that hasn't fully vested." }, { "docid": "51086", "title": "", "text": "\"The primary tax-sheltered investing vehicles in Canada include: The RRSP. You can contribute up to 18% of your prior year's earned income, up to a limit ($24,930 in 2015, plus past unused contribution allowance) and receive an income tax deduction for your contributions. In an RRSP, investments grow on a tax-deferred basis. No tax is due until you begin withdrawals. When you withdraw funds, the withdrawn amount will be taxed at marginal income tax rates in effect at that time. The RRSP is similar to the U.S. \"\"traditional\"\" IRA, being an individual account with pre-tax contributions, tax-deferred growth, and ordinary tax rates applied to withdrawals. Yet, RRSPs have contribution limits higher than IRAs; higher, even, than U.S. 401(k) employee contribution limits. But, the RRSP is dissimilar to the IRA and 401(k) since an individual's annual contribution allowance isn't use-it-or-lose-it—unused allowance accumulates. The TFSA. Once you turn 18, you can put in up to $5,500 each year, irrespective of earned income. Like the RRSP, contribution room accumulates. If you were 18 in 2009 (when TFSAs were introduced) you'd be able to contribute $36,500 if you'd never contributed to one before. Unlike the RRSP, contributions to a TFSA are made on an after-tax basis and you pay no tax when you withdraw money. The post-tax nature of the TFSA and completely tax-free withdrawals makes them comparable to Roth-type accounts in the U.S.; i.e. while you won't get a tax deduction for contributing, you won't pay tax on earnings when withdrawn. Yet, unlike U.S. Roth-type accounts, you are not required to use the TFSA strictly for retirement savings—there is no penalty for pre-retirement withdrawal of TFSA funds. There are also employer-sponsored defined benefit (DB) and defined contribution (DC) retirement pension plans. Generally, employees who participate in these kinds of plans have their annual RRSP contribution limits reduced. I won't comment on these kinds of plans other than to say they exist and if your employer has one, check it out—many employees lose out on free money by not participating. The under-appreciated RESP. Typically used for education savings. A lifetime $50,000 contribution limit per beneficiary, and you can put that all in at once if you're not concerned about maximizing grants (see below). No tax deduction for contributions, but investments grow on a tax-deferred basis. Original contributions can be withdrawn tax-free. Qualified educational withdrawals of earnings are taxed as regular income in the hands of the beneficiary. An RESP beneficiary is typically a child, and in a child's case the Canadian federal government provides matching grant money (called CESG) of 20% on the first $2500 contributed each year, up to age 18, to a lifetime maximum of $7200 per beneficiary. Grant money is subject to additional conditions for withdrawal. While RESPs are typically used to save for a child's future education, there's nothing stopping an adult from opening an RESP for himself. If you've never had one, you can deposit $50,000 of after-tax money to grow on a tax-deferred basis for up to 36 years ... as far as I understand. An adult RESP will not qualify for CESG. Moreover, if you use the RESP strictly as a tax shelter and don't make qualified educational withdrawals when the time comes, your original contributions still come out free of tax but you'll pay ordinary income tax plus 20% additional tax on the earnings portion. That's the \"\"catch\"\"*. *However, if at that time you have accumulated sufficient RRSP contribution room, you may move up to $50,000 of your RESP earnings into your RRSP without any tax consequences (i.e. also avoiding the 20% additional tax) at time of transfer. Perhaps there's something above you haven't considered. Still, be sure to do your own due diligence and to consult a qualified, experienced, and conflict-free financial advisor for advice particular to your own situation.\"" }, { "docid": "360533", "title": "", "text": "This is an older question but things have changed. Its a common misconception on what the contribution cap is. A few things. In 2014, the IRS did not adjust the maximum contribution from the previous year which include 401(k) accounts, 403(b) accounts, most 457 plans, and Thrift Savings Plans, will be $18,000, up $500 from $17,500. Savers and investors aged 50 or older can take advantage of a catch-up contribution. In 2015, taxpayers who meet this age-based criterion can contribute an additional $6,000 above the regular maximum of $18,000, thus you can contribute a maximum of $24,000 into these tax-advantaged accounts. The total contribution limit, including employer contributions, has increased to $53,000 You can actually contribute up to 53k (including matching) so the exact amount you contribute from your actual income may end up being more or less than 24k. If you get a poor employer match you can actually contribute more but it would go in as after tax dollars and not claim the tax deduction. Note: after tax does NOT equal Roth. However if your a high salaried individual you can use this as a potential loop hole for funding a Roth IRA. Chances are if your making enough money to contribute 53k Total Contributions then your not going to qualify for a roth. However once you retire (or possibly before depending on the plan withdraw terms) you can roll the after tax money into a Roth IRA. This is a gray area on the tax policy. The IRS may come back and change their mind about this. If considering this option talk to a tax adviser." }, { "docid": "499606", "title": "", "text": "To answer your question: As far as what's available in addition to your 401(k) at work (most financial types will say to contribute up to the match first), you may qualify for a Roth IRA (qualification is based on income), if not, then you may have to go with a Traditional IRA. You and your husband can each have one and contribute up to the limit each year. After that, you could get just a straight up mutual fund, and/or contribute up to limit on your 401(k). My two cents: This may sound counter-intuitive (and I'm sure some folks will disagree), but instead of contributing to your 401(k) now, take whatever that amount is, and use it to pay extra on the car loan. Also take the extra being paid on the mortgage and pay it on the car loan too. Once the car loan is paid off, then set aside 15% of your gross income and use that amount to start your retirement investing. Any additional money beyond this can then go into the mortgage. Once it's paid off, then you can take the extra you were paying, plus the mortgage and invest that amount into mutual funds. You may want to check out Chris Hogan's Retire Inspired book or podcast as well." }, { "docid": "124042", "title": "", "text": "Yours two funds are redundant. Both are designed to have a mix of bonds and stocks and allow you to put all your money in them. Pick the one that has the lowest fees and stick with that (I didn't look at the funds you didn't select...they didn't look great either). Although all your funds have high fees, some are higher than others, so don't ignore fees. When you have decided on your portfolio weights, prioritize your money thus: Contribute enough to your 401(k) to get the full match from your employer Put everything else toward paying off that credit card until you have 0 balance. It's ok to use the card, but let it be little enough that you pay your statement balance off each month so you pay no interest. Then set aside some savings and invest any retirement money into a Roth IRA. At your income level your taxes are low so Roth is better than traditional IRA or 401(k). If you max out your Roth, put any other retirement savings in your 401(k)." }, { "docid": "147889", "title": "", "text": "With a match, the 401(k) becomes the priority, up to that match, often ahead of other high interest debt. Without the match, the analysis is more about the cost within the 401(k). The 401(k) is a tax deferred account (let's not go on a tangent to Roth 401(k)) so ideally, you'd be skimming off money at 25% and saving it till you retire, so some of it is taxed at 0, 10, 15%. If the fees in the 401(k) are say 1.5% between the underlying funds and management fee, it doesn't take long to wipe out the potential 10 or 15% you are trying to gain. Yes, there's a risk that cap gain rates go away, but with today's tax law, the long term rate is 15%. So that money put into a long term low cost ETF will have reinvested dividends taxed at 15% and upon sale, a 15% rate on the gains. There are great index ETFs with sub - .1% annual cost. My simple answer is - If the total cost in that 401(k) is .5% or higher, I'd pass. Save the money in an outside account, using IRAs as best you can. (The exact situation needs to be looked at very carefully. In personal finance, there's a lot of 'grey'. For example, a frequent job changer can view the 401(k) as a way of saving pretax, knowing the fee will only last 2 years, and will end with a transfer to the IRA)" }, { "docid": "449828", "title": "", "text": "\"Your retirement PLAN is a lifelong plan and shouldn't be tied to your employer status. Max out your 401(k) contribution to the maximum that your employer matches (that's a 100% ROI!) and as much as you can afford. When you leave the work force rollover your 401(k) to an IRA account (e.g.: you can create an IRA account with any of the online brokerage firms Schwab, E-Trade, Sharebuilder, or go with a brick-and-mortar firm like JP Morgan, Stifel Nicolaus, etc.). You should have a plan: How much money do you need/month for your expenses? Accounting for inflation, how much is that going to be at retirement (whatever age you plan to retire)? How much money do you need to have so that 4.5% of that money will provide for your annual living expenses? That's your target retirement amount of savings. Now figure out how to get to that target. Rule #1 Invest early and invest often! The more money you can sock away early in your career the more time that money has to grow. If you aren't comfortable allocating your investments yourself then you could go with a Targeted Retirement Fund. These funds have a general \"\"date\"\" for retirement and the assets are allocated as appropriate for the amount of risk appropriate for the time to retirement.\"" }, { "docid": "525645", "title": "", "text": "HCE is defined as being above 120k$ or in the top 20 % of the company. The exact cutoff point might be different for each company. Typically, only the base salary is considered for that, but it's the company's (and 401(k)-plan's) decision. The IRS does not require HCE treatment; the IRS requires that 401(k) plans have a 'fair' distribution of usage between all employees. Very often, employees with lower income save (over-proportionally) less in their 401(k), and there is a line where the 401(k) plan is no longer acceptable to the IRS. HCE is a way for companies to ensure this forced balance; by limiting the amount of 401(k) savings for HCE, the companies ensure that the share of all contributions by below-HCE is appropriate. They will calculate/define the HCE cutoff point so that the required distribution is surely achieved. One of the consequences is that when you move over the HCE cutoff point, you can suddenly save a lot less in your 401(k). Nothing can be done about that. See this IRS page: https://www.irs.gov/retirement-plans/plan-participant-employee/definitions Highly Compensated Employee - An individual who: Owned more than 5% of the interest in the business at any time during the year or the preceding year, regardless of how much compensation that person earned or received, or For the preceding year, received compensation from the business of more than $115,000 (if the preceding year is 2014; $120,000 if the preceding year is 2015 or 2016), and, if the employer so chooses, was in the top 20% of employees when ranked by compensation." }, { "docid": "371886", "title": "", "text": "The matching funds are free money, so it is a very good idea to take that money off the table. Look at it as free 100% return: you deposit $1000, your employer matches that $1000, you now have $2000 in your 401(k). (Obviously, I'm keeping things simple. Vesting schedules mean that the employer match isn't yours to keep immediately, but rather after some time; usually in chunks.) Beyond the employer match, you need to consider what is available for investment in a 401(k). Typically, your options are more limited then in an IRA. The cost of the 401(k) should be considered, as it isn't trivial for most. (The specifics will of course vary, but in large IRA accounts are cheaper.) So, it's about the opportunity costs. Up to the employer match, it doesn't matter as much that your investment choices are more limited in a 401(k), because you're getting 100% return just on the matching funds. Once that is exhausted, you have more opportunity for returns, due to having more options available to you, by going with an account that provides more choices. The overall principle here is that you have to look at the whole picture. This is similar to the notion that you should pay-down your high interest debt before investing, because from the perspective of investing the interest you're paying represent a loss, or negative return on investment, since money is going out of your accounts. Specific to your question, you have to consider the various types of investment vehicles available to you. It is not just about 401(k) and IRA accounts. You may also consider a straight brokerage account, a savings account, CDs, etc. The costs and returns that you can typically expect are your guides through the available choices." }, { "docid": "591168", "title": "", "text": "\"You have a few options: Option #1 - Leave the money where it is If your balance is over $5k - you should be able to leave the money in your former-employer's 401(k). The money will stay there and continue to be invested in the funds that you elect to invest in. You should at the very least be receiving quarterly statements for the account. Even better - you should have access to some type of an online account where you can transfer your investments, rebalance your account, conform to target, etc. If you do not have online account access than I'm sure you can still transfer investments and make trades via a paper form. Just reach out to the 401(k) TPA or Recordkeeper that administers your plan. Their contact info is on the quarterly statements you should be receiving. Option #2 - Rollover the money into your current employer's 401(k) plan. This is the option that I tend to recommend the most. Roll the money over into your current employer's 401(k) plan - this way all the money is in the same place and is invested in the funds that you elect. Let's say you wanted to transfer your investments to a new fund lineup. Right now - you have to fill out the paperwork or go through the online process twice (for both accounts). Moving the money to your current-employer's plan and having all the money in the same place eliminates this redundancy, and allows you to make one simple transfer of all your assets. Option #3 - Roll the money from your former-employer's plan into an IRA. This is a cool option, because now you have a new IRA with a new set of dollar limits. You can roll the money into a separate IRA - and contribute an additional $5,500 (or $6,500 if you are 50+ years of age). So this is cool because it gives you a chance to save even more for retirement. Many IRA companies give you a \"\"sign on bonus\"\" where if you rollover your former-employers 401(k)...they will give you a bonus (typically a few hundred bucks - but hey its free money!). Other things to note: Take a look at your plan document from your former-employer's 401(k) plan. Take a look at the fees. Compare the fees to your current-employer's plan. There could be a chance that the fees from your former-employer's plan are much higher than your current-employer. So this would just be yet another reason to move the money to your current-employer's plan. Don't forget you most likely have a financial advisor that oversees your current-employer's 401(k) plan. This financial advisor also probably takes fees from your account. So use his services! You are probably already paying for it! Talk to your HR at your employer and ask who the investment advisor is. Call the advisor and set up an appointment to talk about your retirement and financial goals. Ask him for his advice - its always nice talking to someone with experience face to face. Good luck with everything!\"" }, { "docid": "335991", "title": "", "text": "I would always suggest rolling over 401(k) plans to traditional IRAs when possible. Particularly, assuming there is enough money in them that you can get a fee-free account at somewhere like Fidelity or Vanguard. This is for a couple of reasons. First off, it opens up your investment choices significantly and can allow you significantly reduced expenses related to the account. You may be able to find a superior offering from Vanguard or Fidelity to what your employer's 401(k) plan allows; typically they only allow a small selection of funds to choose from. You also may be able to reduce the overhead fees, as many 401(k) plans charge you an administrative fee for being in the plan separate from the funds' costs. Second, it allows you to condense 401(k)s over time; each time you change employers, you can rollover your 401(k) to your regular IRA and not have to deal with a bunch of different accounts with different passwords and such. Even if they're all at the same provider, odds are you will have to use separate accounts. Third, it avoids issues if your employer goes out of business. While 401(k) plans are generally fully funded (particularly for former employers who you don't have match or vesting concerns with), it can be a pain sometimes when the plan is terminated to access your funds - they may be locked for months while the bankruptcy court works things out. Finally, employers sometimes make it expensive for you to stay in - particularly if you do have a very small amount. Don't assume you're allowed to stay in the former employer's 401(k) plan fee-free; the plan will have specific instructions for what to do if you change employers, and it may include being required to leave the plan - or more often, it could increase the fees associated with the plan if you stay in. Getting out sometimes will save you significantly, even with a low-cost plan." } ]

[ { "docid": "231012", "title": "", "text": "I'd hazard that Jim is mostly worried that people are getting ripped off by high employer 401(k) fund fees. A lot of employers offer funds with fees over 1% a year. This sounds low-ish if you don't realize that the real (inflation-adjusted) return for the fund will probably average out to about 4%, so it's really something like a quarter of your earnings gone. With an IRA, you don't have to do that. You can get an IRA provider which offers good, cheap index funds and the like (cough Vanguard cough). Fund fees will probably be closer to 0.1%-ish. HOWEVER. The maximum IRA contribution in 2013 will be $5,500. The maximum for a 401(k) contribution will be $17,500. That extra capacity is enough to recommend a 401(k) over an IRA for many people. These people may be best served by putting money into the 401(k) and then rolling it over into a rollover IRA when they change jobs. Also, certain people have retirement plans which offer them good cheap index funds. These people probably don't need to worry quite as much. Finally, having two accounts is more complicated. Please contact someone who knows more about taxes than I am to figure out what limitations apply for contributing to both IRAs and 401(k)s in the same year." } ]

[ { "docid": "453936", "title": "", "text": "While you can borrow money from a 401(k) for your home down payment, there are disadvantages, including but not limited to: The 401(k) is designed as a way to save for retirement. Smaller contributions and balances (due to the loan) in your account will add up and significantly reduce your balance over time. If you lose your job you will have to pay back the loan quickly, within 60 days. Interest on the 401(k) loan is also not tax-deductible, even if you're using it to pay for a home. My advice: max out any employer contributions to your 401(k) because it's free money. After that, extra savings for a house should be in a separate account." }, { "docid": "105557", "title": "", "text": "Great questions -- the fact that you're thinking about it is what's most important. I think a priority should be maximizing any employer match in your 401(k) because it's free money. Second would be paying off high interest debt because it's a big expense. Everything else is a matter of setting good financial habits so I think the order of importance will vary from person to person. (That's why I ordered the priorities the way I did: employer matching is the easiest way to get more income with no additional work, and paying down high-interest debt is the best way to lower your long-term expenses.) After that, continue to maximize your income and savings, and be frugal with your expenses. Avoid debt. Take a vacation once in a while, too!" }, { "docid": "514357", "title": "", "text": "You cannot withdraw funds from a 401(k) while still employed with your company. To access your contributions, that would be treated as a loan against the 401(k), in which case you'd pay an upfront fee, and then have to repay the amount loaned, plus interest, over a set period of time. (In essence, you are paying back yourself.) Typically, there is also a minimum amount you must take out as a loan. Should you leave the job and still have an outstanding loan against your 401(k), it will be treated as a withdrawal after a certain date, at which point a 10% penalty plus taxes applies, unless you pay back the full amount of the loan remaining before that certain date. Your friends should seriously consider contributing the minimum amount necessary to get that full 50% matching amount. It's free money. As you said, it's like leaving money on the table." }, { "docid": "216243", "title": "", "text": "To your question. Yes. What you propose is typically called the back door Roth. You make the (non-deductible) IRA deposit, and soon after, convert to Roth. As long as you have no other existing IRA, the process is simple, and actually a loophole that's still open. If you have an existing IRA, the conversion may be partially taxed based on untaxed balance. As comments frequently get overlooked, I'm adding @DilipSarwate excellent warning regarding this - Depending on the value of the existing Traditional IRA and its pre-existing basis, if any, the backdoor Roth conversion might be almost completely taxable. Example: Traditional IRA worth $250K with zero basis. New nondeductible contribution increase value to $255.5K and basis $5.5K. Converting $5.5K into a Roth IRA leaves $250K in the Traditional IRA with basis $5381.60. That is, of that $5500 conversion, only $118.40 was nontaxable and so, not only is the original $5500 taxable income to the OP but he also owes taxes on $5381.60 of that $5.5K conversion. In short, discussions of backdoor Roth conversions as a great idea should always be tempered with an acknowledgement that it does not work very well if there is any other money in the Traditional IRA. Once that nondeductible contribution enters a Traditional IRA, it does not come out completely until all your Traditional IRA accounts are drained of all money. All your Traditional IRA money is considered by the IRS to be in a single pot, and you can't set up a Traditional IRA (possibly with a new custodian) via nondeductible contribution, convert just that Traditional IRA account into a Roth IRA account, and claim that the whole conversion amount is nontaxable because all the tax-deferred money is in the other IRAs that you haven't touched at all. Last - you disclosed that you are depositing to a Roth 401(k) to the match. Which prompts me to ask if this is best. If your marginal rate is 25% or higher, you are missing the opportunity to save 'off the top', at that rate, and 'fill the lower brackets' at retirement, or, via conversion, any year before then when you are in a lower bracket for whatever reason. See my answer for Saving for retirement: How much is enough? which addresses this further. From new comments - Won't his Roth 401k contributions max out his overall Roth contributions? No. They are separate numbers, each with own annual limits. Wouldn't this prevent any back-door Roth conversions? The 401(k) has no effect on back door Roth, except for the fact that the 401(k) and high income make the Roth IRA unavailable by normal deposit. Back door is the only door. At the end are you encouraging him to look for a Traditional 401(k) at work to max out, then contributing to a Roth? Yes! Read the linked SE article, and consider the annual withdrawal that would get you to 25%. As I wrote, it would take $2M+ to 'fill' the 15% bracket at retirement." }, { "docid": "224434", "title": "", "text": "My answer would be yes. In addition, I'm not sure that anything requires you to roll your current 401(k) into a new one if you don't like the investment options. Keeping existing funds in your current 401(k) if you like their investment options might make sense for you (though they obviously wouldn't be adding funds once you're no longer an employee). As for the terms of the potential new 401(k), the matching percentage and vesting schedule match what I've seen at past employers. My current employer offers the same terms, but there's no vesting schedule." }, { "docid": "55954", "title": "", "text": "(Note: The OP does not state whether the employer-sponsored retirement savings are pre-tax or post-tax (such as a Roth 401(k)). The following answer assumes the more common case of a pre-tax plan.) This is a bad idea, IMHO. IRS Pub 970 lists exceptions to the 10% early withdrawal penalty for educational expenses. This doesn't include, as far as I can tell, student loan payments. So withdrawing from your retirement account would incur both income tax and penalties. Even if there were an exception, you'd still have to pay income taxes, which, depending on the amount and your income, could be at a higher marginal rate than you are currently paying. If you really want the debt gone as soon as possible, why not reduce the amount you contribute to the retirement plan (but not below the amount that gets you the maximum employer match) and use that money to increase your monthly payments to the student loan? Note that, if you do this, you will pay taxes on income that would have been tax-deferred in order to save money on interest, so there's still a trade-off. (One more thing: rather than rolling over to your new company's plan, you could roll over to a self-directed Traditional IRA.)" }, { "docid": "219907", "title": "", "text": "I'll respect the mod's suggestion. I'd answer with a warning. The concept of 401(k) pretax saving is to save at a high rate, while working, and withdraw at a lower rate. An annual expense pushing 1% or higher is likely to negate the benefit of the account over time. If your employer offers the Roth 401(k), I'd suggest using that for your deposits, and only up to the match. Then invest outside the 401(k). In the 25% bracket, it's good to have a mix of both pre and post tax retirement money." }, { "docid": "52438", "title": "", "text": "\"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.\"" }, { "docid": "499606", "title": "", "text": "To answer your question: As far as what's available in addition to your 401(k) at work (most financial types will say to contribute up to the match first), you may qualify for a Roth IRA (qualification is based on income), if not, then you may have to go with a Traditional IRA. You and your husband can each have one and contribute up to the limit each year. After that, you could get just a straight up mutual fund, and/or contribute up to limit on your 401(k). My two cents: This may sound counter-intuitive (and I'm sure some folks will disagree), but instead of contributing to your 401(k) now, take whatever that amount is, and use it to pay extra on the car loan. Also take the extra being paid on the mortgage and pay it on the car loan too. Once the car loan is paid off, then set aside 15% of your gross income and use that amount to start your retirement investing. Any additional money beyond this can then go into the mortgage. Once it's paid off, then you can take the extra you were paying, plus the mortgage and invest that amount into mutual funds. You may want to check out Chris Hogan's Retire Inspired book or podcast as well." }, { "docid": "534837", "title": "", "text": "One should fund a 401(k) or matched retirement account up to the match, even if you have other debt. Long term, you will come out ahead, but you must be disciplined in making the payments. If one wants to point out the risk in a 401(k), I'd suggest the money need not be invested in stocks, there's always a short term safe option." }, { "docid": "380615", "title": "", "text": "401(k) can come in traditional and Roth forms, as can IRAs. Roth IRA money is not locked away for 40 years, only the earnings are locked away, and earnings can also be withdrawn for special cases. You might not be able to invest in an IRA if your income is too high, and if you don't get a match for your 401(k), that might not be the best option either. The biggest advantage of the 401(k) is the match (if it exists) if there's no match, the second biggest advantage is the tax deferral. If you are in a low tax bracket, that isn't as big of an advantage either. I would say that there are plenty of reasons why you might not max out the 401(k) for savings, but it's pretty easy to max out the Roth IRA if that makes more sense, so there aren't a lot of reasons why not." }, { "docid": "402523", "title": "", "text": "HSAs are very similar to IRAs. Any investment returns grow tax-deferred and once you reach age 59 1/2 65, you can withdraw the funds for any purpose (subject to ordinary income tax), just like a traditional IRA. If you can afford to do so, I would recommend you to pay medical expenses out-of-pocket and let the funds in your HSA accumulate and grow. In general, the best way to allocate your funds is in the following order: Contribute to a 401(k) if your employer matches funds at a substantial rate Pay off high-interest debt (8% of more in current environment in 2011) Contribute to an IRA (traditional or Roth) Contribute to an HSA Contribute to a 401(k) without the benefit of employer matching One advantage of HSAs versus IRAs is that you don't have to have earned income (salary or self-employment income) in order to contribute. If you derive income solely from rents, interest or dividends, you can contribute the maximum amount ($3,050 for individuals in 2011) and get a full deduction from your income (Of course, you will need to maintain a high-deductible health plan in order to qualify). One downside of HSAs is the lack of competitively priced providers. Wells Fargo offers HSAs for free, but only allows you to keep your funds in cash, earning a very measly interest rate, or invest them in rather mediocre and expensive Wells Fargo mutual funds. Vanguard, known for its low-fee investment options, provides HSAs through a partner company, but the account maintenance charges are still quite high. Overall, HSAs are a worthwhile option as part of your investment plan." }, { "docid": "424841", "title": "", "text": "If your budget allows for it, max out both plans! However, in my opinion, you're on the right path: The advantage of also contributing to the Roth 401(k) in this case would be: This second point is the main reason that you should also invest in a 401(k), using that as a retirement savings vehicle alongside your Roth IRA. One caveat is that you should ensure that you'll have sufficient savings so that you won't need to dip into either plan - it'd be a shame to reduce the investment base from which you can grow your savings tax free. Personally, I'd view my contributions in the Roth IRA as an emergency fund to be used only in the direst circumstances." }, { "docid": "412", "title": "", "text": "The details of the 401(k) are critical to the decision. A high cost (the expenses charged within the) 401(k) - I would deposit only to the match, and I'd be sure to get the entire match offered. In which case, that $3000 might be good to have available if you start out with a tight budget. Low cost 401(k) w/match - a no-brainer, deposit what you can afford. Roth 401(k) w/match - same rules for expenses apply, with the added note to use Roth when getting started and in a lower bracket. Yes, it makes sense to have both. You should note, depositing to the Roth now is riskless. The account, not the investment. If you decide next year you didn't want it, you can withdraw the deposit with no penalty or tax. Edit to respond to updated question - there are two pieces to the Roth deposit issue. The deposit itself, which puts the $3000 earned income into tax sheltered account, and the choice to invest. These two are sequential and you can take your time in between. I'm not sure what you mean by the dividend timing. In an IRA or 401(k) the dividend isn't taxed, so it's a non-issue. In a cash account, you might quickly have a small tax issue, but this doesn't come into the picture in the tax deferred accounts." }, { "docid": "222836", "title": "", "text": "It sounds like you're comparing (1) the backdoor Roth IRA and (2) the mega backdoor Roth. Although the names are similar they are considerably different, and not mutually exclusive. The goal of the backdoor Roth IRA is to contribute to a Roth IRA even if you are over the income limits. This is accomplished by contributing to a non-deductible Traditional IRA and then converting to Roth. Both of these steps have no income limit (unlike a direct Roth IRA contribution, which does), and only the earnings (which should be minimal) will be taxed. More info here (mirror). The goal of the mega backdoor Roth is to get a lot of money into Roth accounts through salary deferral. This is accomplished by making non-Roth after-tax contributions to your 401(k) after exhausting the $18,000 limit (in 2017) for pre-tax + Roth employee contributions. The after-tax contributions (potentially up to $36,000 for 2017) can be rolled over to the Roth 401(k) or to a Roth IRA, while the earnings can be rolled over to the pre-tax 401(k) or a Traditional IRA, or taxed like regular income and converted to Roth along with the contributions. More info here (mirror)." }, { "docid": "57526", "title": "", "text": "\"Yes, this is restricted by law. In plain language, you can find it on the IRS website (under the heading \"\"When Can a Retirement Plan Distribute Benefits?\"\"): 401(k), profit-sharing, and stock bonus plans Employee elective deferrals (and earnings, except in a hardship distribution) -- the plan may permit a distribution when you: •terminate employment (by death, disability, retirement or other severance from employment); •reach age 59½; or •suffer a hardship. Employer profit-sharing or matching contributions -- the plan may permit a distribution of your vested accrued benefit when you: •terminate employment (by death, disability, retirement or other severance from employment); •reach the age specified in the plan (any age); or •suffer a hardship or experience another event specified in the plan. Form of benefit - the plan may pay benefits in a single lump-sum payment as well as offer other options, including payments over a set period of time (such as 5 or 10 years) or a purchased annuity with monthly lifetime payments. Source: https://www.irs.gov/retirement-plans/plan-participant-employee/when-can-a-retirement-plan-distribute-benefits If you want to actually see it in the law, check out 26 USC 401(k)(2)(B)(i), which lists the circumstances under which a distribution can be made. You can get the full text, for example, here: https://www.law.cornell.edu/uscode/text/26/401 I'm not sure what to say about the practice of the company that you mentioned in your question. Maybe the law was different then?\"" }, { "docid": "394549", "title": "", "text": "\"The company itself doesn't benefit. In most cases, it's an expense as the match that many offer is going to cost the company some percent of salary. As Mike said, it's part of the benefit package. Vacation, medical, dental, cafeteria plans (i.e. both flexible spending and dependent care accounts, not food), stock options, employee stock purchase plans, defined contribution or defined benefit pension, and the 401(k) or 403(b) for teachers. Each and all of these are what one should look at when looking at \"\"total compensation\"\". You allude to the lack of choices in the 401(k) compared to other accounts. Noted. And that lack of choice should be part of your decision process as to how you choose to invest for retirement. If the fess/selection is bad enough, you need to be vocal about it and request a change. Bad choices + no match, and maybe the account should be avoided, else just deposit to the match. Note - Keith thanks for catching and fixing one typo, I just caught another.\"" }, { "docid": "452592", "title": "", "text": "You are already doing everything you can. If your employer does not have a 401(k) you are limited to investing in a Roth or a traditional IRA (Roth is post tax money, traditional IRA gives you a deduction so it is essentially pre tax money). The contribution limits are the same for both and contributing to either adds to the limit (so you can't duplicate). CNN wrote an article on some other ways to save: One thing you may want to bring up with your employer is that they could set up a SEP-IRA. This allows them to set a % (up to 25%) that they contribute pre-tax to an IRA for everyone at the company that has worked there at least 3 years. If you are at a small company, maybe everyone with that kind of seniority would take an equivalent pay cut to get the automatic retirement contribution? (Note that a SEP-IRA has to apply to everyone equally percentage wise that has worked there for 3 years, and the employer makes the contribution, not you)." }, { "docid": "357555", "title": "", "text": "If you plan to continue contributing to a 401(k) and are no longer self-employed, then you need to start a new 401(k) at your new business. You can't contribute to the old one any more. About the money in the old one, you have a few options. If both 401(k) plans have good investment options and low fees, then there's little reason to think one of these strategies is better than the other. If, like me, at least one of your 401(k) providers has very few available funds and those funds have high expense ratios, then it's a good idea to move your money where the investments are best. As a rule, IRA's are better than 401(k) plans because most IRA's will allow you to invest in practically anything you want while most 401(k) plans only allow you to invest in the funds that have taken your company's HR people to the best lobster dinners or went to the same school as them. Most organizations do an absolutely horrible job at selecting a reasonable set of funds because the decision-makers generally have no finance background and no incentive to do a good job. For that reason I like IRA's. Of course, some solo 401(k) plans are also very good so just leaving it where it is may be best for you. This has the added advantage of being ready to go if you end up self-employed again at some point." } ]

[ { "docid": "145716", "title": "", "text": "\"Early this year I wrote an article Are you 401(k)o’ed? I described the data from a 401(k) expense survey and the punchline was that the average large retirement plan (over 1000 participants) expense was 1.08%, and for smaller plans it rose to 1.24%. As I commented below, if one's goal is to make deposits with income that avoid a tax of 25%, and hope to withdraw it at retirement at 15%, it doesn't take long for a 1% fee to completely negate the benefit of pretax savings. These numbers are averages, in the same article, I mention (ok, I brag) that my company plan has an S&P fund that costs .05%. That's 1% over 20 years. The sound bite of \"\"deposit to the match\"\" needs to be followed by \"\"depending on the choice of investments and their expenses\"\" within the 401(k). Every answer here has added excellent points, fennec's last sentence shouldn't be ignored, there's a phaseout for IRA deductibility, and another for Roth eligibility. For Married filing joint, IRA deduction starts to be lost at $92K, and Roth deposit disallowed at $173K. This adds a bit to the complexity of the decision, but doesn't change the implication of the 1%+ 401(k) fees.\"" } ]

[ { "docid": "301194", "title": "", "text": "\"I assume you get your information from somewhere where they don't report the truth. I'm sorry if mentioning Fox News offended you, it was not my intention. But the way the question is phrased suggests that you know nothing about what \"\"pension\"\" means. So let me explain. 403(b) is not a pension account. Pension account is generally a \"\"defined benefit\"\" account, whereas 403(b)/401(k) and similar - are \"\"defined contribution\"\" accounts. The difference is significant: for pensions, the employer committed on certain amount to be paid out at retirement (the defined benefit) regardless of how much the employee/employer contributed or how well the account performed. This makes such an arrangement a liability. An obligation to pay. In other words - debt. Defined contribution on the other hand doesn't create such a liability, since the employer is only committed for the match, which is paid currently. What happens to your account after the employer deposited the defined contribution (the match) - is your problem. You manage it to the best of your abilities and whatever you have there when you retire - is yours, the employer doesn't owe you anything. Here's the problem with pensions: many employers promised the defined benefit, but didn't do anything about actually having money to pay. As mentioned, such a pension is essentially a debt, and the retiree is a debt holder. What happens when employer cannot pay its debts? Employer goes bankrupt. And when bankrupt - debtors are paid only part of what they were owed, and that includes the retirees. There's no-one raiding pensions. No-one goes to the bank with a gun and demands \"\"give me the pension money\"\". What happened was that the employers just didn't fund the pensions. They promised to pay - but didn't set aside any money, or set aside not enough. Instead, they spent it on something else, and when the time came that the retirees wanted their money - they didn't have any. That's what happened in Detroit, and in many other places. 403(b) is in fact the solution to this problem. Instead of defined benefit - the employers commit on defined contribution, and after that - it's your problem, not theirs, to have enough when you're retired.\"" }, { "docid": "525645", "title": "", "text": "HCE is defined as being above 120k$ or in the top 20 % of the company. The exact cutoff point might be different for each company. Typically, only the base salary is considered for that, but it's the company's (and 401(k)-plan's) decision. The IRS does not require HCE treatment; the IRS requires that 401(k) plans have a 'fair' distribution of usage between all employees. Very often, employees with lower income save (over-proportionally) less in their 401(k), and there is a line where the 401(k) plan is no longer acceptable to the IRS. HCE is a way for companies to ensure this forced balance; by limiting the amount of 401(k) savings for HCE, the companies ensure that the share of all contributions by below-HCE is appropriate. They will calculate/define the HCE cutoff point so that the required distribution is surely achieved. One of the consequences is that when you move over the HCE cutoff point, you can suddenly save a lot less in your 401(k). Nothing can be done about that. See this IRS page: https://www.irs.gov/retirement-plans/plan-participant-employee/definitions Highly Compensated Employee - An individual who: Owned more than 5% of the interest in the business at any time during the year or the preceding year, regardless of how much compensation that person earned or received, or For the preceding year, received compensation from the business of more than $115,000 (if the preceding year is 2014; $120,000 if the preceding year is 2015 or 2016), and, if the employer so chooses, was in the top 20% of employees when ranked by compensation." }, { "docid": "58103", "title": "", "text": "\"The \"\"Deferral\"\" for the 401k means that you're not collecting your pay immediately, but instead diverting it to a retirement account (Roth 401k in this case). This article defines deferral well: What is the difference between a regular 401(k) deferral (pre-tax) and a Roth 401(k) deferral? Under either a regular 401(k) deferral or a Roth 401(k) deferral, you make a deferral contribution by electing to set aside part of your pay (by either a certain percentage or a certain dollar amount). For a regular 401(k) deferral, the taxable wages on your W-2 are reduced by the deferral contribution; therefore, you pay less current income tax. However, you will eventually pay tax on these contributions and earnings when the plan distributes the regular 401(k) deferrals and earnings to you. The result is that the tax on the regular 401(k) deferrals and earnings is only postponed. A Roth 401(k) deferral is an after-tax contribution, which means you must pay current income tax on the deferral. Since you have already paid tax on the deferral, you won’t pay tax on it again when you receive a distribution of your Roth 401(k) deferral. In addition, if you satisfy cer tain distribution conditions, then you won’t have to pay tax on the earnings either. This means that the distribution of the Roth 401(k) earnings can be tax free not just tax postponed. Traditionally, this deferred compensation typically was directed to a 401k, but now that Roth 401k is another available option, deferred compensation can be directed there as well.\"" }, { "docid": "31462", "title": "", "text": "\"In asnwer to your questions: As @joetaxpayer said, you really should look into a Solo 401(k). In 2017, this allows you to contribute up to $18k/year and your employer (the LLC) to contribute more, up to $54k/year total (subject to IRS rules). 401(k) usually have ROTH and traditional sides, just like IRA. I believe the employer-contributed funds also see less tax burden for both you and your LLC that if that same money had become salary (payroll taxes, etc.). You might start at irs.gov/retirement-plans/one-participant-401k-plans and go from there. ROTH vs. pre-tax: You can mix and match within years and between years. Figure out what income you want to have when you retire. Any year you expect to pay lower taxes (low income, kids, deductions, etc.), make ROTH contributions. Any year you expect high taxes (bonus, high wage, taxable capital gains, etc.), make pre-tax payments. I have had a uniformly bad experience with target date funds across multiple 401(k) plans from multiple plan adminstrators. They just don't perform well (a common problem with almost any actively managed fund). You probably don't want to deal with individual stocks in your retirement accounts, so rather pick passively managed index funds that track various markets segments you care about and just sit on them. For example, your high-risk money might be in fast-growing but volatile industries (e.g. tech, aerospace, medical), your medium-risk money might go in \"\"total market\"\" or S&P 500 index funds, and your low-risk money might go in treasury notes and bonds. The breakdown is up to you, but as an 18 year old you have a ~50 year horizon and so can afford to wait out anything short of another Great Depression (and maybe even that). So you'd want generally you want more or your money in the high-risk high-return category, rebalancing to lower risk investments as you age. Diversifying into real estate, foreign investments, etc. might also make sense but I'm no expert on those.\"" }, { "docid": "233794", "title": "", "text": "\"It's going to be quite a challenge to give a definitive answer to any \"\"Why\"\" question about law, and especially so for a question about tax law. One would need to try to dig up statements made by the legislators (and/or their aides) crafting and debating the law. As it is, tax law is already inconsistent in many ways. (Why are there people who can't contribute to a Roth IRA directly but can contribute to a Traditional and then immediately convert it to Roth? Why are maximum limits for 401(k) plans and IRAs separate rather than being one combined \"\"retirement\"\" savings maximum?) In the absence of some specific legislative statements saying that it was set up this way for some specific purpose, one must assume that it was written with the some goals as all tax law: As a compromise between various ideas, trying to accomplish some specific purpose. Feel free to add in some level of inefficiency and it being hard to completely understand the entirely of the tax law, which leads to things perhaps not being as \"\"tidy\"\" as one might hope for. But there's no reason to think that the people crafting the tax advantages for HSA plans had any reason to use 401(k) plans as a template, or wanted them to accomplish the same goals.\"" }, { "docid": "55954", "title": "", "text": "(Note: The OP does not state whether the employer-sponsored retirement savings are pre-tax or post-tax (such as a Roth 401(k)). The following answer assumes the more common case of a pre-tax plan.) This is a bad idea, IMHO. IRS Pub 970 lists exceptions to the 10% early withdrawal penalty for educational expenses. This doesn't include, as far as I can tell, student loan payments. So withdrawing from your retirement account would incur both income tax and penalties. Even if there were an exception, you'd still have to pay income taxes, which, depending on the amount and your income, could be at a higher marginal rate than you are currently paying. If you really want the debt gone as soon as possible, why not reduce the amount you contribute to the retirement plan (but not below the amount that gets you the maximum employer match) and use that money to increase your monthly payments to the student loan? Note that, if you do this, you will pay taxes on income that would have been tax-deferred in order to save money on interest, so there's still a trade-off. (One more thing: rather than rolling over to your new company's plan, you could roll over to a self-directed Traditional IRA.)" }, { "docid": "577837", "title": "", "text": "You can't get a loan from an IRA. You cannot get a loan from your 401(k) plan with your previous employer; 401(k) plans do not give loans to ex-employees, only current employees. Thus, if you want to have the flexibility of getting a loan from the money in the 401(k) plan with your ex-employer, your only option is to roll it over into the 401(k) plan of your current employer. But be aware of the negatives in doing so, some of which are discussed in the answers to Why would you not want to rollover a previous employer's 401(k) when changing jobs?." }, { "docid": "224434", "title": "", "text": "My answer would be yes. In addition, I'm not sure that anything requires you to roll your current 401(k) into a new one if you don't like the investment options. Keeping existing funds in your current 401(k) if you like their investment options might make sense for you (though they obviously wouldn't be adding funds once you're no longer an employee). As for the terms of the potential new 401(k), the matching percentage and vesting schedule match what I've seen at past employers. My current employer offers the same terms, but there's no vesting schedule." }, { "docid": "75766", "title": "", "text": "They are mutually exclusive. Provided you meet the income limits you can contribute to both. Employer match do not count toward the 18K. On the other hand traditional IRA and Roth IRA are inclusive. So if single and making having a MAGI under 118K, you could do the 18K of your own money into a 401(k), and $5,500 into a Roth. You can put in $23,500 of your own money with the employer match on top of that." }, { "docid": "514357", "title": "", "text": "You cannot withdraw funds from a 401(k) while still employed with your company. To access your contributions, that would be treated as a loan against the 401(k), in which case you'd pay an upfront fee, and then have to repay the amount loaned, plus interest, over a set period of time. (In essence, you are paying back yourself.) Typically, there is also a minimum amount you must take out as a loan. Should you leave the job and still have an outstanding loan against your 401(k), it will be treated as a withdrawal after a certain date, at which point a 10% penalty plus taxes applies, unless you pay back the full amount of the loan remaining before that certain date. Your friends should seriously consider contributing the minimum amount necessary to get that full 50% matching amount. It's free money. As you said, it's like leaving money on the table." }, { "docid": "360533", "title": "", "text": "This is an older question but things have changed. Its a common misconception on what the contribution cap is. A few things. In 2014, the IRS did not adjust the maximum contribution from the previous year which include 401(k) accounts, 403(b) accounts, most 457 plans, and Thrift Savings Plans, will be $18,000, up $500 from $17,500. Savers and investors aged 50 or older can take advantage of a catch-up contribution. In 2015, taxpayers who meet this age-based criterion can contribute an additional $6,000 above the regular maximum of $18,000, thus you can contribute a maximum of $24,000 into these tax-advantaged accounts. The total contribution limit, including employer contributions, has increased to $53,000 You can actually contribute up to 53k (including matching) so the exact amount you contribute from your actual income may end up being more or less than 24k. If you get a poor employer match you can actually contribute more but it would go in as after tax dollars and not claim the tax deduction. Note: after tax does NOT equal Roth. However if your a high salaried individual you can use this as a potential loop hole for funding a Roth IRA. Chances are if your making enough money to contribute 53k Total Contributions then your not going to qualify for a roth. However once you retire (or possibly before depending on the plan withdraw terms) you can roll the after tax money into a Roth IRA. This is a gray area on the tax policy. The IRS may come back and change their mind about this. If considering this option talk to a tax adviser." }, { "docid": "73344", "title": "", "text": "\"Unless your 401(k) plan is particularly good (i.e. good fund choices with low fees), you probably want to contribute enough to get the maximum match from your employer, then contribute to an IRA through a low-cost brokerage like Vanguard or Fidelity, then contribute more to your 401(k). As JoeTaxpayer said, contributions to a Roth IRA can be withdrawn tax- and penalty-free, so they are useful for early retirement. But certainly use your 401(k) as well--the tax benefits almost certainly outweigh the difficulty in accessing your money. JB King's link listing ways to access retirement money before the traditional age is fairly exhaustive. One of the main ways you may want to consider that hasn't been highlighted yet is IRS section 72(t) i.e. substantially equal periodic payments (SEPP). With this rule you can withdraw early from retirement plans without penalties. You have a few different ways of calculating the withdrawal amount. The main risk is you have to keep withdrawing that amount for the greater of five years or until you reach age 59½. In your case this is is only 4-5 years, which isn't too bad. Finally, in addition to being able to withdraw from a Roth IRA tax- and penalty-free, you can do the same for Roth conversions, provided 5 years have passed. So after you leave a job, you can rollover 401(k) money to a traditional IRA, then convert to a Roth IRA (the caveat being you have to pay taxes on the amount as income at this point). But after 5 years you can access the money without penalty, and no taxes since they've already been paid. This is commonly called a \"\"Roth conversion ladder\"\".\"" }, { "docid": "222836", "title": "", "text": "It sounds like you're comparing (1) the backdoor Roth IRA and (2) the mega backdoor Roth. Although the names are similar they are considerably different, and not mutually exclusive. The goal of the backdoor Roth IRA is to contribute to a Roth IRA even if you are over the income limits. This is accomplished by contributing to a non-deductible Traditional IRA and then converting to Roth. Both of these steps have no income limit (unlike a direct Roth IRA contribution, which does), and only the earnings (which should be minimal) will be taxed. More info here (mirror). The goal of the mega backdoor Roth is to get a lot of money into Roth accounts through salary deferral. This is accomplished by making non-Roth after-tax contributions to your 401(k) after exhausting the $18,000 limit (in 2017) for pre-tax + Roth employee contributions. The after-tax contributions (potentially up to $36,000 for 2017) can be rolled over to the Roth 401(k) or to a Roth IRA, while the earnings can be rolled over to the pre-tax 401(k) or a Traditional IRA, or taxed like regular income and converted to Roth along with the contributions. More info here (mirror)." }, { "docid": "79888", "title": "", "text": "This is called an in-plan Roth conversion and is discussed by the IRS here. If your 401(k) has a Roth option then it likely also has a provision to convert pre-tax dollars, but you'll have to check with the administrator to be sure. They could also potentially limit the type of money that can be converted. But most likely you should be able to convert any amount you want, and since it's all pre-tax (your contributions, employer matching, and earnings), it doesn't really matter which money is converted because it's all equivalent. One caveat is you won't able to convert any employer matching that hasn't fully vested." }, { "docid": "163834", "title": "", "text": "In addition to George Marian's excellent advice, I'll add that if you're hitting the limits on IRA contributions, then you'd go back to your 401(k). So, put enough into your 401(k) to get the match, then max out IRA contributions to give you access to more and better investment options, then go back to your 401(k) until you top that out as well, assuming you have that much available to invest for retirement." }, { "docid": "145864", "title": "", "text": "\"As the comments above have been trying to get across, the prospective employer is offering to pay you for the bonus/unvested compensation that you would be losing by jumping ship right now to go work for them. They are not offering to buy any securities that you already hold, regardless of whether they're profitable or unprofitable. Example 1. You participate in your current company's 401(k), and your company matches your contributions at 50%. However, the matching funds are not yours immediately; they vest in 20%/year increments until you have been at the company for 5 years. Let's say you've been there for 3 years and have contributed $50K to the plan. Your company has matched you at $25K, but only 60% of that ($15K) has vested. If you leave right now for the new employer, you're leaving $10K behind. So the new employer might offer to \"\"buy out\"\" (i.e. pay you) that $10K to help encourage you to switch now. You might then counter their offer by pointing out that if you stay where you are that $10K is coming to you tax-deferred, whereas their $10K signing bonus would be taxed. So you ask for $15K instead. Example 2. You work for a Wall Street investment bank. Each December you receive a performance bonus. Since you began working there, your three yearly bonuses have been (in chronological order) $500K, $750K, and $1M. It's June, so you've worked halfway towards your next bonus. You have a lot of incentive to NOT leave your current employer. A competing employer may offer to \"\"buy you out\"\" of your anticipated bonus by giving you a $1.25M signing bonus (since you'd almost certainly not be eligible for a performance bonus during your first year there). You might negotiate with them and say \"\"I'm on track for $2M this year\"\", and then they would figure out if you're really worth that much to them. So you can see this all has to do with the prospective employer trying to compensate you for any income you're already counting on receiving from your current employer. By jumping ship now you would be foregoing that guaranteed/expected income, so the competitor wants to remove that anchor that might be holding you back from making the move. Stocks/options that you already own are irrelevant to the prospective employer. Since you wouldn't be giving those up by changing jobs, there's no reason for them to factor into the equation.\"" }, { "docid": "102291", "title": "", "text": "Separate from some of the other considerations such as the legality, it is likely going to be worth your will if you employer has company matching even if you have to pay the early withdraw penalty because the matching funds from your employer can be viewed as gains on the money deposited. For example, using round numbers to make the math easy: No 401(k) Deposit With 401(k) Deposit So as you can see there is a benefit to deferring some of the earnings to the 401(k) account due to the employer matching but the actual dollar amount that you would be able to take home will be different based upon your own circumstances. Depending upon what the take home would be at the end of the day the percentage return may or may not be worth the time involved with doing the paperwork. However, all of this only applies if you have to pull the money out early as once you hit 59.5 years old you can start withdrawing the money without the tax penalty in which case the returns on your initial deposit will be much more." }, { "docid": "591168", "title": "", "text": "\"You have a few options: Option #1 - Leave the money where it is If your balance is over $5k - you should be able to leave the money in your former-employer's 401(k). The money will stay there and continue to be invested in the funds that you elect to invest in. You should at the very least be receiving quarterly statements for the account. Even better - you should have access to some type of an online account where you can transfer your investments, rebalance your account, conform to target, etc. If you do not have online account access than I'm sure you can still transfer investments and make trades via a paper form. Just reach out to the 401(k) TPA or Recordkeeper that administers your plan. Their contact info is on the quarterly statements you should be receiving. Option #2 - Rollover the money into your current employer's 401(k) plan. This is the option that I tend to recommend the most. Roll the money over into your current employer's 401(k) plan - this way all the money is in the same place and is invested in the funds that you elect. Let's say you wanted to transfer your investments to a new fund lineup. Right now - you have to fill out the paperwork or go through the online process twice (for both accounts). Moving the money to your current-employer's plan and having all the money in the same place eliminates this redundancy, and allows you to make one simple transfer of all your assets. Option #3 - Roll the money from your former-employer's plan into an IRA. This is a cool option, because now you have a new IRA with a new set of dollar limits. You can roll the money into a separate IRA - and contribute an additional $5,500 (or $6,500 if you are 50+ years of age). So this is cool because it gives you a chance to save even more for retirement. Many IRA companies give you a \"\"sign on bonus\"\" where if you rollover your former-employers 401(k)...they will give you a bonus (typically a few hundred bucks - but hey its free money!). Other things to note: Take a look at your plan document from your former-employer's 401(k) plan. Take a look at the fees. Compare the fees to your current-employer's plan. There could be a chance that the fees from your former-employer's plan are much higher than your current-employer. So this would just be yet another reason to move the money to your current-employer's plan. Don't forget you most likely have a financial advisor that oversees your current-employer's 401(k) plan. This financial advisor also probably takes fees from your account. So use his services! You are probably already paying for it! Talk to your HR at your employer and ask who the investment advisor is. Call the advisor and set up an appointment to talk about your retirement and financial goals. Ask him for his advice - its always nice talking to someone with experience face to face. Good luck with everything!\"" }, { "docid": "169232", "title": "", "text": "A good general rule is to save 15% of your income for retirement. As for where you put it: Put as much as it takes to maximize your employer match into your 401(k), but no more. The employer match is free money, and you can't beat free money If you still haven't put in 15%, put the rest into a Roth IRA. By historical standards, taxes are pretty low today. They are almost certainly going to be higher in retirement, especially since you likely won't have the deductions in retirement that you may have now (kids, mortgage, etc). If you've maxed our the allowed contribution for your Roth and still haven't saved 15%, put the rest in a traditional IRA." } ]

[ { "docid": "411910", "title": "", "text": "\"Unfortunately, I missed most of segment and I didn't get to understand the Why? To begin with, Cramer is an entertainer and his business is pushing stocks. If you put money into mutual funds (which most 401k plans limit your investments to), then you are not purchasing his product. Also, many 401k plans have limited selections of funds, and many of those funds are not good performers. While his stock-picking track record is much better than mine, his isn't that great. He does point out that there are a lot of fees (mostly hidden) in 401k accounts. If you read your company's 5500 filing (especialy Schedule A), you can determine just how much your plan administrators are paying themselves. If paying excessive fees is your concern, then you should be rolling over your 401k into your IRA when you quit (or the employer-match vests, which ever is later). Finally, Cramer thinks that most of his audience will max out their IRA contributions and have only a little bit left for their 401k. I'm most definately \"\"not most people\"\" as I'm maxing out both my 401k and IRA contributions.\"" } ]

[ { "docid": "301194", "title": "", "text": "\"I assume you get your information from somewhere where they don't report the truth. I'm sorry if mentioning Fox News offended you, it was not my intention. But the way the question is phrased suggests that you know nothing about what \"\"pension\"\" means. So let me explain. 403(b) is not a pension account. Pension account is generally a \"\"defined benefit\"\" account, whereas 403(b)/401(k) and similar - are \"\"defined contribution\"\" accounts. The difference is significant: for pensions, the employer committed on certain amount to be paid out at retirement (the defined benefit) regardless of how much the employee/employer contributed or how well the account performed. This makes such an arrangement a liability. An obligation to pay. In other words - debt. Defined contribution on the other hand doesn't create such a liability, since the employer is only committed for the match, which is paid currently. What happens to your account after the employer deposited the defined contribution (the match) - is your problem. You manage it to the best of your abilities and whatever you have there when you retire - is yours, the employer doesn't owe you anything. Here's the problem with pensions: many employers promised the defined benefit, but didn't do anything about actually having money to pay. As mentioned, such a pension is essentially a debt, and the retiree is a debt holder. What happens when employer cannot pay its debts? Employer goes bankrupt. And when bankrupt - debtors are paid only part of what they were owed, and that includes the retirees. There's no-one raiding pensions. No-one goes to the bank with a gun and demands \"\"give me the pension money\"\". What happened was that the employers just didn't fund the pensions. They promised to pay - but didn't set aside any money, or set aside not enough. Instead, they spent it on something else, and when the time came that the retirees wanted their money - they didn't have any. That's what happened in Detroit, and in many other places. 403(b) is in fact the solution to this problem. Instead of defined benefit - the employers commit on defined contribution, and after that - it's your problem, not theirs, to have enough when you're retired.\"" }, { "docid": "289064", "title": "", "text": "\"If you are the sole owner (or just you and your spouse) and expect to be that way for a few years, consider the benefits of an individual 401(k). The contribution limits are higher than an IRA, and there are usually no fees involved. You can google \"\"Individual 401k\"\" and any of the major investment firms (Fidelity, Schwab, etc) will set one up free of charge. This option gives you a lot of freedom to decide how much money to put away without any plan management fees. The IRS site has all the details in an article titled One-Participant 401(k) Plans. Once you have employees, if you want to set up a retirement plan for them, you'll need to switch to a traditional, employer-sponsored 401k, which will involve some fees on your part. I seem to recall $2k/yr in fees when I had a sponsored 401(k) for my company, and I'm sure this varies widely. If you have employees and don't feel a need to have a company-wide retirement plan, you can set up your own personal IRA and simply not offer a company plan to your employees. The IRA contribution limits are lower than an individual 401(k), but setting it up is easy and fee-free. So basically, if you want to spend $0 on plan management fees, get an individual 401(k) if you are self-employed, or an IRA for yourself if you have employees.\"" }, { "docid": "335991", "title": "", "text": "I would always suggest rolling over 401(k) plans to traditional IRAs when possible. Particularly, assuming there is enough money in them that you can get a fee-free account at somewhere like Fidelity or Vanguard. This is for a couple of reasons. First off, it opens up your investment choices significantly and can allow you significantly reduced expenses related to the account. You may be able to find a superior offering from Vanguard or Fidelity to what your employer's 401(k) plan allows; typically they only allow a small selection of funds to choose from. You also may be able to reduce the overhead fees, as many 401(k) plans charge you an administrative fee for being in the plan separate from the funds' costs. Second, it allows you to condense 401(k)s over time; each time you change employers, you can rollover your 401(k) to your regular IRA and not have to deal with a bunch of different accounts with different passwords and such. Even if they're all at the same provider, odds are you will have to use separate accounts. Third, it avoids issues if your employer goes out of business. While 401(k) plans are generally fully funded (particularly for former employers who you don't have match or vesting concerns with), it can be a pain sometimes when the plan is terminated to access your funds - they may be locked for months while the bankruptcy court works things out. Finally, employers sometimes make it expensive for you to stay in - particularly if you do have a very small amount. Don't assume you're allowed to stay in the former employer's 401(k) plan fee-free; the plan will have specific instructions for what to do if you change employers, and it may include being required to leave the plan - or more often, it could increase the fees associated with the plan if you stay in. Getting out sometimes will save you significantly, even with a low-cost plan." }, { "docid": "17166", "title": "", "text": "According to the 401K information from the IRS' website, it seems that you could seemingly get away with a salary as low as $53,000. It's tough, and I'd suggest speaking with an Accounting professional to get the clear answers, because as Brick's answer suggests, the IRS isn't super clear about it. An excerpt from a separate page regarding 401K contributions: The annual additions paid to a participant’s account cannot exceed the lesser of: There are separate, smaller limits for SIMPLE 401(k) plans. Example 1: Greg, 46, is employed by an employer with a 401(k) plan and he also works as an independent contractor for an unrelated business. Greg sets up a solo 401(k) plan for his independent contracting business. Greg contributes the maximum amount to his employer’s 401(k) plan for 2015, $18,000. Greg would also like to contribute the maximum amount to his solo 401(k) plan. He is not able to make further elective deferrals to his solo 401(k) plan because he has already contributed his personal maximum, $18,000. He has enough earned income from his business to contribute the overall maximum for the year, $53,000. Greg can make a nonelective contribution of $53,000 to his solo 401(k) plan. This limit is not reduced by the elective deferrals under his employer’s plan because the limit on annual additions applies to each plan separately. https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-401k-and-profit-sharing-plan-contribution-limits" }, { "docid": "102291", "title": "", "text": "Separate from some of the other considerations such as the legality, it is likely going to be worth your will if you employer has company matching even if you have to pay the early withdraw penalty because the matching funds from your employer can be viewed as gains on the money deposited. For example, using round numbers to make the math easy: No 401(k) Deposit With 401(k) Deposit So as you can see there is a benefit to deferring some of the earnings to the 401(k) account due to the employer matching but the actual dollar amount that you would be able to take home will be different based upon your own circumstances. Depending upon what the take home would be at the end of the day the percentage return may or may not be worth the time involved with doing the paperwork. However, all of this only applies if you have to pull the money out early as once you hit 59.5 years old you can start withdrawing the money without the tax penalty in which case the returns on your initial deposit will be much more." }, { "docid": "360533", "title": "", "text": "This is an older question but things have changed. Its a common misconception on what the contribution cap is. A few things. In 2014, the IRS did not adjust the maximum contribution from the previous year which include 401(k) accounts, 403(b) accounts, most 457 plans, and Thrift Savings Plans, will be $18,000, up $500 from $17,500. Savers and investors aged 50 or older can take advantage of a catch-up contribution. In 2015, taxpayers who meet this age-based criterion can contribute an additional $6,000 above the regular maximum of $18,000, thus you can contribute a maximum of $24,000 into these tax-advantaged accounts. The total contribution limit, including employer contributions, has increased to $53,000 You can actually contribute up to 53k (including matching) so the exact amount you contribute from your actual income may end up being more or less than 24k. If you get a poor employer match you can actually contribute more but it would go in as after tax dollars and not claim the tax deduction. Note: after tax does NOT equal Roth. However if your a high salaried individual you can use this as a potential loop hole for funding a Roth IRA. Chances are if your making enough money to contribute 53k Total Contributions then your not going to qualify for a roth. However once you retire (or possibly before depending on the plan withdraw terms) you can roll the after tax money into a Roth IRA. This is a gray area on the tax policy. The IRS may come back and change their mind about this. If considering this option talk to a tax adviser." }, { "docid": "577837", "title": "", "text": "You can't get a loan from an IRA. You cannot get a loan from your 401(k) plan with your previous employer; 401(k) plans do not give loans to ex-employees, only current employees. Thus, if you want to have the flexibility of getting a loan from the money in the 401(k) plan with your ex-employer, your only option is to roll it over into the 401(k) plan of your current employer. But be aware of the negatives in doing so, some of which are discussed in the answers to Why would you not want to rollover a previous employer's 401(k) when changing jobs?." }, { "docid": "531051", "title": "", "text": "I completely agree with Pete that a 401(k) loan is not the answer, but I have an alternate proposal: Reduce your 401(k) contribution down to the 4% that you get a match on. If you are cash poor now and have debts to be cleaned up, those need to be addressed before retirement savings. You'll have plenty of time to make up the lost savings after you get the debts paid off. If your company matches 50% (meaning you have to contribute 8% to get the 4% match), then consider temporarily stopping your 401(k) altogether. A 100% match is very hard to give up, but a 50% match is less difficult. You have plenty of years left ahead of you to make up the lost match. Plus, the pain of knowing you're leaving money on the table will incentivize you to get the loans paid as quickly as possible. It seems to me that I would be reducing middle to high interest debt while also saving myself $150 per month. No, you'd be deferring $150 per month for an additional two years, and not reducing debt at all, just moving it to a different lender. Interest rate is not your problem. Right now you're paying less than $30 per month in interest on these 3 loans and about $270 in principal, and at the current rate should have them paid off in about 2 years. You're wanting to extend these loans to 4 years by borrowing from your retirement savings. I would buckle down, reduce expenses wherever possible (cable? cell phone? coffee? movies? restaurants?) until you get these debts paid off. You make $70,000 per year, or almost $6,000 per month. I bet if you try hard enough you can come up with $1,100 fairly quickly. Then the next $1,200 should come twice as fast. Then attack the next $4,000. (You can argue whether the $1,200 should come first because of the interest rate, but in the end it doesn't matter - either one should be paid off very quickly, so the interest saved is negligible) Maybe you can get one of them paid off, get yourself some breathing room, then loosen up a little bit, but extending the pain for an additional two years is not wise. Some more drastic measures:" }, { "docid": "104934", "title": "", "text": "Please note that if you are self employed, then the profit sharing limit for both the SEP and Solo 401(k) is 20% of compensation, not 25%. There is no need for a SEP-IRA in this case. In addition to the 401(k) at work, you have a solo-401(k) for your consulting business. You can contribute $18,000 on the employee side across the two 401(k) plans however you wish. You can also contribute profit sharing up to 20% of compensation in your solo 401(k) plan. However, the profit sharing limit aggregates across all plans for your consulting business. If you max that out in your solo 401(k), then you cannot contribute to the SEP IRA. In other words, the solo 401(k) dominates the SEP IRA in terms of contributions and shares a limit on the profit-sharing contribution. If you have a solo 401(k), there is never a reason to have a SEP for the same company. Example reference: Can I Contribute to a solo 401(k) and SEP for the same company?" }, { "docid": "69042", "title": "", "text": "From a long-term planning point of view, is the bump in salary worth not having a 401(k)? In this case, absolutely. At $30k/year, the 4% company match comes to about $1,200 per year. To get that you need to save $1,200 yourself, so your gross pay after retirement contributions is about $28,800. Now you have an offer making $48,000. If you take the new job, you can put $2,400 in retirement (to get to an equivalent retirement rate), and now your gross pay after retirement contributions is $45,600. Now if the raise in salary were not as high, or you were getting a match that let you exceed the individual contribution max, the math might be different, but in this case you can effectively save the company match yourself and still be way ahead. Note that there are MANY other factors that may also be applicable as to whether to take this job or not (do you like the work? The company? The coworkers? The location? Is there upward mobility? Are the benefits equivalent?) but not taking a 67% raise just because you're losing a 4% 401(k) match is not a wise decision." }, { "docid": "222836", "title": "", "text": "It sounds like you're comparing (1) the backdoor Roth IRA and (2) the mega backdoor Roth. Although the names are similar they are considerably different, and not mutually exclusive. The goal of the backdoor Roth IRA is to contribute to a Roth IRA even if you are over the income limits. This is accomplished by contributing to a non-deductible Traditional IRA and then converting to Roth. Both of these steps have no income limit (unlike a direct Roth IRA contribution, which does), and only the earnings (which should be minimal) will be taxed. More info here (mirror). The goal of the mega backdoor Roth is to get a lot of money into Roth accounts through salary deferral. This is accomplished by making non-Roth after-tax contributions to your 401(k) after exhausting the $18,000 limit (in 2017) for pre-tax + Roth employee contributions. The after-tax contributions (potentially up to $36,000 for 2017) can be rolled over to the Roth 401(k) or to a Roth IRA, while the earnings can be rolled over to the pre-tax 401(k) or a Traditional IRA, or taxed like regular income and converted to Roth along with the contributions. More info here (mirror)." }, { "docid": "55954", "title": "", "text": "(Note: The OP does not state whether the employer-sponsored retirement savings are pre-tax or post-tax (such as a Roth 401(k)). The following answer assumes the more common case of a pre-tax plan.) This is a bad idea, IMHO. IRS Pub 970 lists exceptions to the 10% early withdrawal penalty for educational expenses. This doesn't include, as far as I can tell, student loan payments. So withdrawing from your retirement account would incur both income tax and penalties. Even if there were an exception, you'd still have to pay income taxes, which, depending on the amount and your income, could be at a higher marginal rate than you are currently paying. If you really want the debt gone as soon as possible, why not reduce the amount you contribute to the retirement plan (but not below the amount that gets you the maximum employer match) and use that money to increase your monthly payments to the student loan? Note that, if you do this, you will pay taxes on income that would have been tax-deferred in order to save money on interest, so there's still a trade-off. (One more thing: rather than rolling over to your new company's plan, you could roll over to a self-directed Traditional IRA.)" }, { "docid": "514357", "title": "", "text": "You cannot withdraw funds from a 401(k) while still employed with your company. To access your contributions, that would be treated as a loan against the 401(k), in which case you'd pay an upfront fee, and then have to repay the amount loaned, plus interest, over a set period of time. (In essence, you are paying back yourself.) Typically, there is also a minimum amount you must take out as a loan. Should you leave the job and still have an outstanding loan against your 401(k), it will be treated as a withdrawal after a certain date, at which point a 10% penalty plus taxes applies, unless you pay back the full amount of the loan remaining before that certain date. Your friends should seriously consider contributing the minimum amount necessary to get that full 50% matching amount. It's free money. As you said, it's like leaving money on the table." }, { "docid": "2103", "title": "", "text": "My perspective is from the US. Many employers offer 401(k)s and you can always contribute to an IRA for either tax deferred or tax free investment growth. If you're company offers a 401(k) match you should always contribute the maximum amount they max or you're leaving money on the table. Companies can't always support pensions and it isn't the best idea to rely on one entirely for retirement unless your pension is from the federal government. Even states such as Illinois are going through extreme financial difficulties due to pension funding issues. It's only going to get worse and if you think pension benefit accrual isn't going to be cut eventually you'll have another thing coming. I'd be worried if I was a state employee in the middle of my career with no retirement savings outside of my pension. Ranting: Employees pushed hard for some pretty absurd commitments and public officials let the public down by giving in. It seems a little crazy to me that someone can work for the state until they're in their 50's and then earn 70% of their 6 figure salary for the rest of their life. Something needs to be done but I'd be surprised if anyone has the political will to make tough choices now before thee options get much much worse and these states are forced to make a decision." }, { "docid": "52438", "title": "", "text": "\"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.\"" }, { "docid": "449828", "title": "", "text": "\"Your retirement PLAN is a lifelong plan and shouldn't be tied to your employer status. Max out your 401(k) contribution to the maximum that your employer matches (that's a 100% ROI!) and as much as you can afford. When you leave the work force rollover your 401(k) to an IRA account (e.g.: you can create an IRA account with any of the online brokerage firms Schwab, E-Trade, Sharebuilder, or go with a brick-and-mortar firm like JP Morgan, Stifel Nicolaus, etc.). You should have a plan: How much money do you need/month for your expenses? Accounting for inflation, how much is that going to be at retirement (whatever age you plan to retire)? How much money do you need to have so that 4.5% of that money will provide for your annual living expenses? That's your target retirement amount of savings. Now figure out how to get to that target. Rule #1 Invest early and invest often! The more money you can sock away early in your career the more time that money has to grow. If you aren't comfortable allocating your investments yourself then you could go with a Targeted Retirement Fund. These funds have a general \"\"date\"\" for retirement and the assets are allocated as appropriate for the amount of risk appropriate for the time to retirement.\"" }, { "docid": "31462", "title": "", "text": "\"In asnwer to your questions: As @joetaxpayer said, you really should look into a Solo 401(k). In 2017, this allows you to contribute up to $18k/year and your employer (the LLC) to contribute more, up to $54k/year total (subject to IRS rules). 401(k) usually have ROTH and traditional sides, just like IRA. I believe the employer-contributed funds also see less tax burden for both you and your LLC that if that same money had become salary (payroll taxes, etc.). You might start at irs.gov/retirement-plans/one-participant-401k-plans and go from there. ROTH vs. pre-tax: You can mix and match within years and between years. Figure out what income you want to have when you retire. Any year you expect to pay lower taxes (low income, kids, deductions, etc.), make ROTH contributions. Any year you expect high taxes (bonus, high wage, taxable capital gains, etc.), make pre-tax payments. I have had a uniformly bad experience with target date funds across multiple 401(k) plans from multiple plan adminstrators. They just don't perform well (a common problem with almost any actively managed fund). You probably don't want to deal with individual stocks in your retirement accounts, so rather pick passively managed index funds that track various markets segments you care about and just sit on them. For example, your high-risk money might be in fast-growing but volatile industries (e.g. tech, aerospace, medical), your medium-risk money might go in \"\"total market\"\" or S&P 500 index funds, and your low-risk money might go in treasury notes and bonds. The breakdown is up to you, but as an 18 year old you have a ~50 year horizon and so can afford to wait out anything short of another Great Depression (and maybe even that). So you'd want generally you want more or your money in the high-risk high-return category, rebalancing to lower risk investments as you age. Diversifying into real estate, foreign investments, etc. might also make sense but I'm no expert on those.\"" }, { "docid": "128077", "title": "", "text": "\"The question you should be asking yourself is this: \"\"Why am I putting money into a 401(k)?\"\" For many people, the answer is to grow a (large) nest egg and save for future retirement expenses. Investors are balancing risk and potential reward, so the asset categories you're putting your 401(k) contribution towards will be a reflection on how much risk you're willing to take. Per a US News & World Report article: Ultimately, investors would do well to remember one of the key tenants of investing: diversify. The narrower you are with your investments, the greater your risk, says Vanguard's Bruno: \"\"[Diversification] doesn't ensure against a loss, but it does help lessen a significant loss.\"\" Generally, investing in your employer's stock in your 401(k) is considered very risk. In fact, one Forbes columnist recommends not putting any money into company stock. FINRA notes: Simply stated, if you put too many eggs in one basket, you can expose yourself to significant risk. In financial terms, you are under-diversified: you have too much of your holdings tied to a single investment—your company's stock. Investing heavily in company stock may seem like a good thing when your company and its stock are doing well. But many companies experience fluctuations in both operational performance and stock price. Not only do you expose yourself to the risk that the stock market as a whole could flounder, but you take on a lot of company risk, the risk that an individual firm—your company—will falter or fail. In simpler terms, if you invest a large portion of your 401(k) funds into company stock, if your company runs into trouble, you could lose both your job AND your retirement investments. For the other investment assets/vehicles, you should review a few things: Personally, I prefer to keep my portfolio simple and just pick just a few options based on my own risk tolerance. From your fund examples, without knowing specifics about your financial situation and risk tolerance, I would have created a portfolio that looks like this when I was in my 20's: I avoided the bond and income/money market funds because the growth potential is too low for my investing horizon. Like some of the other answers have noted, the Target Date funds invest in other funds and add some additional fee overhead, which I'm trying to avoid by investing primarily in index funds. Again, your risk tolerance and personal preference might result in a completely different portfolio mix.\"" }, { "docid": "507476", "title": "", "text": "If you're simply trading with your own money and have not incorporated, then you are not eligible for a solo 401(k). Nerdwallet has an excellent Q&A on the topic here for example. Solo 401(k) is only allowed to be funded with earned income, and capital gains are not earned income. From the IRS page on One Participant 401(k) plans: Elective deferrals up to 100% of compensation (“earned income” in the case of a self-employed individual) up to the annual contribution limit Earned income is defined by the IRS here: But not including: Even more clearly, that page notes: There are two ways to get earned income: You work for someone who pays you or You own or run a business or farm Capital gains are certainly neither of these. Now, I have read several articles suggesting one way to go about using the Solo 401k. All of them suggest that you would need to incorporate in some fashion that would require a Schedule C tax return, though, and be trading with the company's money rather than your own, and then pay yourself a wage from that. In that case you would be eligible for a Solo 401(k), and you might even be better off as a result of all that maneuvering (even though you'll be taxed at a higher rate for any income you do keep, likely, and have to pay self-employment tax)." } ]

[ { "docid": "395840", "title": "", "text": "If you exceed the income limit for deducting a traditional IRA (which is very low if you are covered by a 401(k) ), then your IRA options are basically limited to a Roth IRA. The Cramer person probably meant to compare 401(k) and IRA from the same pre-/post-tax-ness, so i.e. Traditional 401(k) vs. Traditional IRA, or Roth 401(k) vs. Roth IRA. Comparing a Roth investment against a Traditional investment goes into a whole other topic that only confuses what is being discussed here. So if deducting a traditional IRA is ruled out, then I don't think Cramer's advice can be as simply applied regarding a Traditional 401(k). (However, by that logic, and since most people on 401(k) have Traditional 401(k), and if you are covered by a 401(k) then you cannot deduct a Traditional IRA unless you are super low income, that would mean Cramer's advice is not applicable in most situations. So I don't really know what to think here.)" } ]

[ { "docid": "394549", "title": "", "text": "\"The company itself doesn't benefit. In most cases, it's an expense as the match that many offer is going to cost the company some percent of salary. As Mike said, it's part of the benefit package. Vacation, medical, dental, cafeteria plans (i.e. both flexible spending and dependent care accounts, not food), stock options, employee stock purchase plans, defined contribution or defined benefit pension, and the 401(k) or 403(b) for teachers. Each and all of these are what one should look at when looking at \"\"total compensation\"\". You allude to the lack of choices in the 401(k) compared to other accounts. Noted. And that lack of choice should be part of your decision process as to how you choose to invest for retirement. If the fess/selection is bad enough, you need to be vocal about it and request a change. Bad choices + no match, and maybe the account should be avoided, else just deposit to the match. Note - Keith thanks for catching and fixing one typo, I just caught another.\"" }, { "docid": "461933", "title": "", "text": "\"So you are paying taxes on your contributions regardless, the timing is just different. I am failing to see why would a person get an IRA, instead of just putting the same amount of money into a mutual fund (like Vanguard) or something like that. What am I missing? You are failing to consider the time value of money. Getting $1 now is more valuable to you than a promise to get $1 in a year, even though the nominal amount is the same. With a certain amount of principal now, you can invest it and it will (likely) grow into a bigger amount of money (principal + earnings) at a later time, and we can consider the two to have approximately equivalent value (the principal now has the same value as the principal + earnings later). With pre-tax money in Traditional IRA, the principal + earnings are taxed once at the time of withdrawal. Assuming the same flat rate of tax at contribution and withdrawal, this is equivalent to Roth IRA, where the principal is taxed at the time of contribution, because the principal now has the same value as the principal + earnings later, so the same rate of tax on the two have the same value of tax, even though when you look at nominal amounts, it might seem you are paying a lot less tax with Roth IRA (since the earnings are never \"\"taxed\"\"). With actual numbers, if we take a $1000 pre-tax contribution to Traditional IRA, it grows at 5% for 10 years, and a 25% flat rate tax, we are left with $1000 * 1.05^10 * 0.75 = $1221.67. With the same $1000 pre-tax contribution (so after 25% tax it's a $750 after-tax contribution) to a Roth IRA, growing at the same 5% for 10 years, and no tax at withdrawal, we are left with $1000 * 0.75 * 1.05^10 = $1221.67. You can see they are equivalent even though the nominal amount of tax is different (the lower amount of tax paid now is equivalent to the bigger amount of tax later). With a taxable investment which you will not buy and sell until you take it out, you contribute with after-tax money, and when you take it out, the \"\"earnings\"\" portion is subject to capital-gains tax. But remember that the principal + earnings later is equivalent to the principal now, which is already all taxed once, and if we tax the \"\"earnings\"\" portion later, that is effectively taxing a portion of the money again. Another way to look at it is the contribution is just like the Roth IRA, but the withdrawal is worse because you have to pay capital-gains tax instead of no tax. You can take the same numbers as for the Roth IRA, $1000 * 0.75 * 1.05^10 = $1221.67, but where the $1221.67 - $750 = $471.67 is \"\"earnings\"\" and is taxed again at, say, a 15% capital-gains rate, so you lose another $70.75 in tax and are left with $1150.92. You would need a capital-gains tax rate of 0% to match the advantage of the pre-tax Traditional IRA or Roth IRA. After-tax money in Traditional IRA has a similar problem -- the contribution is after tax, but after it grows into principal + earnings, the \"\"earnings\"\" part is taxed again, except it is worse than the capital-gains case because it is taxed as regular income. Like above, you can take the same numbers as for the Roth IRA, $1000 * 0.75 * 1.05^10 = $1221.67, but where the $471.67 \"\"earnings\"\" is taxed again at 25%, so you lose another $117.92 in tax and are left with $1103.75. So although the nominal amount of tax paid is the same as for pre-tax money in Traditional IRA, it ends up being a lot worse. (Everything I said above about pre-tax money in Traditional IRA, after-tax money in Traditional IRA, and Roth IRA, also applies to pre-tax money in Traditional 401(k), after-tax money in Traditional 401(k), and Roth 401(k), respectively.) Regarding the question you raise in the title of your question, why someone would get contribute to a Traditional IRA if they already have a 401(k), the answer is, mostly, they wouldn't. First, note that if you merely have a 401(k) account but neither you nor your employer contributes to it during the year, then that doesn't prevent you from deducting Traditional IRA contributions for that year, so basically you can contribute to one or the other; so if you only want to contribute below the IRA contribution limit, and don't need the bigger 401(k) contribution limit, and the IRA's investment options are more attractive to you than your 401(k)'s, then it might make sense for you to contribute to only Traditional IRA. If you or your employer is already contributing to your 401(k) during the year, then you cannot deduct your Traditional IRA contributions unless your income is very low, and if your income is really that low, you are in such a low tax bracket that Roth IRA may be more advantageous for you. If you make a Traditional IRA contribution but cannot deduct it, it is a non-deductible Traditional IRA contribution, i.e. it becomes after-tax money in a Traditional IRA, which as I showed in the section above has much worse tax situation in the long run because its earnings are pre-tax and thus taxed again. However, there is one good use for non-deductible Traditional IRA contributions, and that is as one step in a \"\"backdoor Roth IRA contribution\"\". Basically, there is an income limit for being able to make Roth IRA contributions, but there is no income limit for being able to make Traditional IRA contributions or for being able to convert money from Traditional IRA to Roth IRA. So what you can do is make a (non-deductible) Traditional IRA contribution, and then immediately convert it to Roth IRA, and if you did not previously have any pre-tax money in Traditional IRAs, this achieves the same as a regular Roth IRA contribution, with the same tax treatment, but you can do it at any income level.\"" }, { "docid": "105557", "title": "", "text": "Great questions -- the fact that you're thinking about it is what's most important. I think a priority should be maximizing any employer match in your 401(k) because it's free money. Second would be paying off high interest debt because it's a big expense. Everything else is a matter of setting good financial habits so I think the order of importance will vary from person to person. (That's why I ordered the priorities the way I did: employer matching is the easiest way to get more income with no additional work, and paying down high-interest debt is the best way to lower your long-term expenses.) After that, continue to maximize your income and savings, and be frugal with your expenses. Avoid debt. Take a vacation once in a while, too!" }, { "docid": "219907", "title": "", "text": "I'll respect the mod's suggestion. I'd answer with a warning. The concept of 401(k) pretax saving is to save at a high rate, while working, and withdraw at a lower rate. An annual expense pushing 1% or higher is likely to negate the benefit of the account over time. If your employer offers the Roth 401(k), I'd suggest using that for your deposits, and only up to the match. Then invest outside the 401(k). In the 25% bracket, it's good to have a mix of both pre and post tax retirement money." }, { "docid": "335991", "title": "", "text": "I would always suggest rolling over 401(k) plans to traditional IRAs when possible. Particularly, assuming there is enough money in them that you can get a fee-free account at somewhere like Fidelity or Vanguard. This is for a couple of reasons. First off, it opens up your investment choices significantly and can allow you significantly reduced expenses related to the account. You may be able to find a superior offering from Vanguard or Fidelity to what your employer's 401(k) plan allows; typically they only allow a small selection of funds to choose from. You also may be able to reduce the overhead fees, as many 401(k) plans charge you an administrative fee for being in the plan separate from the funds' costs. Second, it allows you to condense 401(k)s over time; each time you change employers, you can rollover your 401(k) to your regular IRA and not have to deal with a bunch of different accounts with different passwords and such. Even if they're all at the same provider, odds are you will have to use separate accounts. Third, it avoids issues if your employer goes out of business. While 401(k) plans are generally fully funded (particularly for former employers who you don't have match or vesting concerns with), it can be a pain sometimes when the plan is terminated to access your funds - they may be locked for months while the bankruptcy court works things out. Finally, employers sometimes make it expensive for you to stay in - particularly if you do have a very small amount. Don't assume you're allowed to stay in the former employer's 401(k) plan fee-free; the plan will have specific instructions for what to do if you change employers, and it may include being required to leave the plan - or more often, it could increase the fees associated with the plan if you stay in. Getting out sometimes will save you significantly, even with a low-cost plan." }, { "docid": "42301", "title": "", "text": "You can only contribute up to 5% of your salary? Odd. Usually 401(k) contributions are limited to some dollar amount in the vicinity of $15,000 or so a year. Normal retirement guidelines suggest that putting away 10-15% of your salary is enough that you probably won't need to worry much when you retire. 5% isn't likely to be enough, employer match or no. I'd try to contribute 10-15% of my salary. I think you're reading the rules wrong. I'm almost certain. It's definitely worth checking. If you're not, you should seriously consider supplementing this saving with a Roth IRA or just an after-tax account. So. If you're with Fidelity and don't know what to do, look for a target date fund with a date near your retirement (e.g. Target Retirement 2040) and put 100% in there until you have a better idea of what going on. All Fidelity funds have pretty miserable expense ratios, even their token S&P500 index fund from another provider, so you might as let them do some leg work and pick your asset allocation for you. Alternatively, look for the Fidelity retirement planner tools on their website to suggest an asset allocation. As a (very rough) rule of thumb, as you're saving for retirement you'll want to have N% of your portfolio in bonds and the rest in stocks, where N is your age in years. Your stocks should probably be split about 70% US and 30% rest-of-world, give or take, and your US stocks should be split about 64% large-cap, 28% mid-cap and 8% small-cap (that's basically how the US stock market is split)." }, { "docid": "55954", "title": "", "text": "(Note: The OP does not state whether the employer-sponsored retirement savings are pre-tax or post-tax (such as a Roth 401(k)). The following answer assumes the more common case of a pre-tax plan.) This is a bad idea, IMHO. IRS Pub 970 lists exceptions to the 10% early withdrawal penalty for educational expenses. This doesn't include, as far as I can tell, student loan payments. So withdrawing from your retirement account would incur both income tax and penalties. Even if there were an exception, you'd still have to pay income taxes, which, depending on the amount and your income, could be at a higher marginal rate than you are currently paying. If you really want the debt gone as soon as possible, why not reduce the amount you contribute to the retirement plan (but not below the amount that gets you the maximum employer match) and use that money to increase your monthly payments to the student loan? Note that, if you do this, you will pay taxes on income that would have been tax-deferred in order to save money on interest, so there's still a trade-off. (One more thing: rather than rolling over to your new company's plan, you could roll over to a self-directed Traditional IRA.)" }, { "docid": "360533", "title": "", "text": "This is an older question but things have changed. Its a common misconception on what the contribution cap is. A few things. In 2014, the IRS did not adjust the maximum contribution from the previous year which include 401(k) accounts, 403(b) accounts, most 457 plans, and Thrift Savings Plans, will be $18,000, up $500 from $17,500. Savers and investors aged 50 or older can take advantage of a catch-up contribution. In 2015, taxpayers who meet this age-based criterion can contribute an additional $6,000 above the regular maximum of $18,000, thus you can contribute a maximum of $24,000 into these tax-advantaged accounts. The total contribution limit, including employer contributions, has increased to $53,000 You can actually contribute up to 53k (including matching) so the exact amount you contribute from your actual income may end up being more or less than 24k. If you get a poor employer match you can actually contribute more but it would go in as after tax dollars and not claim the tax deduction. Note: after tax does NOT equal Roth. However if your a high salaried individual you can use this as a potential loop hole for funding a Roth IRA. Chances are if your making enough money to contribute 53k Total Contributions then your not going to qualify for a roth. However once you retire (or possibly before depending on the plan withdraw terms) you can roll the after tax money into a Roth IRA. This is a gray area on the tax policy. The IRS may come back and change their mind about this. If considering this option talk to a tax adviser." }, { "docid": "352757", "title": "", "text": "\"I highly doubt this was a mistake. In the event of a corporate merger/buyout, changes to employee 401(k) plans are usually hashed out as part of the M&A agreement. The choices made in the agreement depend on numerous factors, so it may be difficult to predict what happens to your plan in situations like this. A quick online search reveals a few articles, e.g. this one from expertplan.com, that list the three most common consequences for retirement plans: It sounds like the company that purchased your employer agreed to immediately vest employees in employer 401(k) contributions as part of the purchase agreement. Without knowing the details of the merger/buyout, I can't say this for sure, but this sounds like a plausible way to keep employees of the purchased company content. Rather than roll it over, does it make sense to wait for that company to be purchased, in the hopes that a similar \"\"mistake\"\" occurs? Since this doesn't sound like a mistake, but rather a part of the buyout agreement, I don't think it's something you should count on in the future. It may be very likely, or it could be a relatively rare occurrence that happened to be part of this purchase agreement. I don't believe the Employee Retirement Income Security Act regulates what can or can't be done to your 401(k) in a buyout, except that the company is required to inform you of any changes (and obviously, the new 401(k) plan must conform to ERISA as well).\"" }, { "docid": "57526", "title": "", "text": "\"Yes, this is restricted by law. In plain language, you can find it on the IRS website (under the heading \"\"When Can a Retirement Plan Distribute Benefits?\"\"): 401(k), profit-sharing, and stock bonus plans Employee elective deferrals (and earnings, except in a hardship distribution) -- the plan may permit a distribution when you: •terminate employment (by death, disability, retirement or other severance from employment); •reach age 59½; or •suffer a hardship. Employer profit-sharing or matching contributions -- the plan may permit a distribution of your vested accrued benefit when you: •terminate employment (by death, disability, retirement or other severance from employment); •reach the age specified in the plan (any age); or •suffer a hardship or experience another event specified in the plan. Form of benefit - the plan may pay benefits in a single lump-sum payment as well as offer other options, including payments over a set period of time (such as 5 or 10 years) or a purchased annuity with monthly lifetime payments. Source: https://www.irs.gov/retirement-plans/plan-participant-employee/when-can-a-retirement-plan-distribute-benefits If you want to actually see it in the law, check out 26 USC 401(k)(2)(B)(i), which lists the circumstances under which a distribution can be made. You can get the full text, for example, here: https://www.law.cornell.edu/uscode/text/26/401 I'm not sure what to say about the practice of the company that you mentioned in your question. Maybe the law was different then?\"" }, { "docid": "231012", "title": "", "text": "I'd hazard that Jim is mostly worried that people are getting ripped off by high employer 401(k) fund fees. A lot of employers offer funds with fees over 1% a year. This sounds low-ish if you don't realize that the real (inflation-adjusted) return for the fund will probably average out to about 4%, so it's really something like a quarter of your earnings gone. With an IRA, you don't have to do that. You can get an IRA provider which offers good, cheap index funds and the like (cough Vanguard cough). Fund fees will probably be closer to 0.1%-ish. HOWEVER. The maximum IRA contribution in 2013 will be $5,500. The maximum for a 401(k) contribution will be $17,500. That extra capacity is enough to recommend a 401(k) over an IRA for many people. These people may be best served by putting money into the 401(k) and then rolling it over into a rollover IRA when they change jobs. Also, certain people have retirement plans which offer them good cheap index funds. These people probably don't need to worry quite as much. Finally, having two accounts is more complicated. Please contact someone who knows more about taxes than I am to figure out what limitations apply for contributing to both IRAs and 401(k)s in the same year." }, { "docid": "73344", "title": "", "text": "\"Unless your 401(k) plan is particularly good (i.e. good fund choices with low fees), you probably want to contribute enough to get the maximum match from your employer, then contribute to an IRA through a low-cost brokerage like Vanguard or Fidelity, then contribute more to your 401(k). As JoeTaxpayer said, contributions to a Roth IRA can be withdrawn tax- and penalty-free, so they are useful for early retirement. But certainly use your 401(k) as well--the tax benefits almost certainly outweigh the difficulty in accessing your money. JB King's link listing ways to access retirement money before the traditional age is fairly exhaustive. One of the main ways you may want to consider that hasn't been highlighted yet is IRS section 72(t) i.e. substantially equal periodic payments (SEPP). With this rule you can withdraw early from retirement plans without penalties. You have a few different ways of calculating the withdrawal amount. The main risk is you have to keep withdrawing that amount for the greater of five years or until you reach age 59½. In your case this is is only 4-5 years, which isn't too bad. Finally, in addition to being able to withdraw from a Roth IRA tax- and penalty-free, you can do the same for Roth conversions, provided 5 years have passed. So after you leave a job, you can rollover 401(k) money to a traditional IRA, then convert to a Roth IRA (the caveat being you have to pay taxes on the amount as income at this point). But after 5 years you can access the money without penalty, and no taxes since they've already been paid. This is commonly called a \"\"Roth conversion ladder\"\".\"" }, { "docid": "301194", "title": "", "text": "\"I assume you get your information from somewhere where they don't report the truth. I'm sorry if mentioning Fox News offended you, it was not my intention. But the way the question is phrased suggests that you know nothing about what \"\"pension\"\" means. So let me explain. 403(b) is not a pension account. Pension account is generally a \"\"defined benefit\"\" account, whereas 403(b)/401(k) and similar - are \"\"defined contribution\"\" accounts. The difference is significant: for pensions, the employer committed on certain amount to be paid out at retirement (the defined benefit) regardless of how much the employee/employer contributed or how well the account performed. This makes such an arrangement a liability. An obligation to pay. In other words - debt. Defined contribution on the other hand doesn't create such a liability, since the employer is only committed for the match, which is paid currently. What happens to your account after the employer deposited the defined contribution (the match) - is your problem. You manage it to the best of your abilities and whatever you have there when you retire - is yours, the employer doesn't owe you anything. Here's the problem with pensions: many employers promised the defined benefit, but didn't do anything about actually having money to pay. As mentioned, such a pension is essentially a debt, and the retiree is a debt holder. What happens when employer cannot pay its debts? Employer goes bankrupt. And when bankrupt - debtors are paid only part of what they were owed, and that includes the retirees. There's no-one raiding pensions. No-one goes to the bank with a gun and demands \"\"give me the pension money\"\". What happened was that the employers just didn't fund the pensions. They promised to pay - but didn't set aside any money, or set aside not enough. Instead, they spent it on something else, and when the time came that the retirees wanted their money - they didn't have any. That's what happened in Detroit, and in many other places. 403(b) is in fact the solution to this problem. Instead of defined benefit - the employers commit on defined contribution, and after that - it's your problem, not theirs, to have enough when you're retired.\"" }, { "docid": "367272", "title": "", "text": "One thing you didn't mention is whether the 401(k) offers a match. If it does, this is a slam-dunk. The $303 ($303, right?) is $3636/yr that will be doubled on deposit. It's typical for the first 5% of one's salary to capture the match, so this is right there. In 15 years, you'll still owe $76,519. But 15 * $7272 is $109,080 in your 401(k) even without taking any growth into account. The likely value of that 401(k) is closer to $210K, using 8% over that 15 years, (At 6%, it drops to 'only' $176K, but as I stated, the value of the match is so great that I'd jump right on that.) If you don't get a match of any kind, I need to edit / completely rip my answer. It morphs into whether you feel that 15 years (Really 30) the market will exceed the 4% cost of that money. Odds are, it will. The worst 15 year period this past century 2000-2014 still had a CAGR of 4.2%." }, { "docid": "52438", "title": "", "text": "\"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.\"" }, { "docid": "396257", "title": "", "text": "All the answers that show the equivalency of 401(k) pre-tax and Roth 401(k) post-tax using equivalent contributions are correct assuming equivalent tax rates upon withdrawal. There is some potential gain if your tax rate upon retirement is higher than your working tax rate, but often people calculate a smaller percentage of their working income for their retirement income, which may offset a higher tax-rate anyway. In my mind, the primary advantage of a Roth 401(k) is that it effectively allows you to contribute more for retirement if you are currently maxing out your contributions in a regular 401(k) and IRA and want to contribute more. Doing so can be a big advantage when you are young and can benefit from those additional dollars being put into your retirement account early. This is effectively what is illustrated by the Fidelity calculation, and is something to consider if you are of the mind to aggressively save early for retirement. The reason Roth allows you to contribute more is because traditional IRA contributions are capped. Suppose the cap is $5500. Suppose also you immediately rollover your traditional IRA to a Roth IRA. This is a post-tax contribution, and growth on that is tax-free. If you maxed out your employer pre-tax 401(k) to $17500 and maxed out your IRA, you have maxed out your retirement contributions to $23000. Suppose two doublings, then the 401(k) has grown to $70000, and the IRA has grown to $22000. However, the withdrawal from the 401(k) is taxed, so assuming 25%, the total is $74500 after tax. Now, suppose instead you maxed out your employer Roth 401(k) post-tax instead, so you have put in $17500 post tax. And now, also max out your IRA. Now, all of your $23000 grows tax-free. So upon two doublings, you walk away with $92000. This is because you maxed out your contribution post-tax, meaning it was as if you were allowed to contribute $23333 to your pre-tax 401(k). So if you intend to max out your retirement account contributions, and are looking to contribute even more to retirement accounts, one way is two change over to contributing into the employer Roth 401(k)." }, { "docid": "128077", "title": "", "text": "\"The question you should be asking yourself is this: \"\"Why am I putting money into a 401(k)?\"\" For many people, the answer is to grow a (large) nest egg and save for future retirement expenses. Investors are balancing risk and potential reward, so the asset categories you're putting your 401(k) contribution towards will be a reflection on how much risk you're willing to take. Per a US News & World Report article: Ultimately, investors would do well to remember one of the key tenants of investing: diversify. The narrower you are with your investments, the greater your risk, says Vanguard's Bruno: \"\"[Diversification] doesn't ensure against a loss, but it does help lessen a significant loss.\"\" Generally, investing in your employer's stock in your 401(k) is considered very risk. In fact, one Forbes columnist recommends not putting any money into company stock. FINRA notes: Simply stated, if you put too many eggs in one basket, you can expose yourself to significant risk. In financial terms, you are under-diversified: you have too much of your holdings tied to a single investment—your company's stock. Investing heavily in company stock may seem like a good thing when your company and its stock are doing well. But many companies experience fluctuations in both operational performance and stock price. Not only do you expose yourself to the risk that the stock market as a whole could flounder, but you take on a lot of company risk, the risk that an individual firm—your company—will falter or fail. In simpler terms, if you invest a large portion of your 401(k) funds into company stock, if your company runs into trouble, you could lose both your job AND your retirement investments. For the other investment assets/vehicles, you should review a few things: Personally, I prefer to keep my portfolio simple and just pick just a few options based on my own risk tolerance. From your fund examples, without knowing specifics about your financial situation and risk tolerance, I would have created a portfolio that looks like this when I was in my 20's: I avoided the bond and income/money market funds because the growth potential is too low for my investing horizon. Like some of the other answers have noted, the Target Date funds invest in other funds and add some additional fee overhead, which I'm trying to avoid by investing primarily in index funds. Again, your risk tolerance and personal preference might result in a completely different portfolio mix.\"" }, { "docid": "69042", "title": "", "text": "From a long-term planning point of view, is the bump in salary worth not having a 401(k)? In this case, absolutely. At $30k/year, the 4% company match comes to about $1,200 per year. To get that you need to save $1,200 yourself, so your gross pay after retirement contributions is about $28,800. Now you have an offer making $48,000. If you take the new job, you can put $2,400 in retirement (to get to an equivalent retirement rate), and now your gross pay after retirement contributions is $45,600. Now if the raise in salary were not as high, or you were getting a match that let you exceed the individual contribution max, the math might be different, but in this case you can effectively save the company match yourself and still be way ahead. Note that there are MANY other factors that may also be applicable as to whether to take this job or not (do you like the work? The company? The coworkers? The location? Is there upward mobility? Are the benefits equivalent?) but not taking a 67% raise just because you're losing a 4% 401(k) match is not a wise decision." }, { "docid": "1366", "title": "", "text": "If you can afford to put money in your 401(k) account, I would say at least you should invest enough to get your employer's matching fund. It's free money, why not get it?" } ]

[ { "docid": "445971", "title": "", "text": "\"Back-testing itself is flawed. \"\"Past performance is no guarantee of future results\"\" is an important lesson to understand. Market strategies of one kind or another work until they don't. Edited in -- AssetPlay.net provides a tool that's halfway to what you are looking for. It only goes back to 1972, however. Just to try it, I compared 100% S&P to a 60/40 blend of S&P with 5 yr t-bills (a misnamed asset, 5 yr treasuries are 'notes' not 'bills') I found the mix actually had a better return with lower volatility. Now, can I count on that to work moving forward? Rates fell during most of this entire period so bonds/notes both looked pretty good. This is my point regarding the backtest concept. GeniusTrader appears more sophisticated, but command line work on PCs is beyond me. It may be worth a look for you, JP. ETF Replay appears to be another backtest tool. It has its drawbacks, however, (ETFs only)\"" } ]

[ { "docid": "153660", "title": "", "text": "\"For a non-ETF mutual fund, you can only buy shares of the mutual fund from the mutual fund itself (at a price that the mutual fund will reveal only at the end of the day) and can only shares back to the mutual fund (again at a price that the mutual fund will reveal only at the end of the day). There is no open market in the sense that you cannot put in a bid to buy, say, 100 shares of VFINX at $217 per share through a brokerage, and if there is a seller willing to sell 100 shares of VFINX to you at $217, then the sale is consummated and you are now the proud owner of 100 shares of VFINX. The only buyer or seller of VFINX is the mutual find itself, and you tell it that you \"\"want to buy 100 shares of VFINX and please take the money out of my checking account\"\". If this order is entered before the markets close at 4 pm, the mutual fund determines its share price as of the end of the day, opens a new account for you and puts 100 shares of VFINX in it (or adds 100 shares of VFINX to your already existing pile of shares) and takes the purchase price out of your checking account via an ACH transfer. Similarly for redeeming/selling shares of VFINX that you own (and these are held in an account at the mutual fund itself, not by your brokerage): you tell the mutual fund to that you \"\"wish to redeem 100 shares and please send the proceeds to my bank account\"\" and the mutual fund does this at the end of the day, and the money appears in your bank account via ACH transfer two or three days later. Generally, these transactions do not need to be for round lots of multiples of 100 shares for efficiency; most mutual fund will gladly sell you fractional shares down to a thousandth of a share. In contrast, shares of an exchange-traded fund (ETF) are just like stock shares in that they can be bought and sold on the open market and your broker will charge you fees for buying and selling them. Selling fractional shares on the open market is generally not possible, and trading in round lots is less expensive. Also, trades occur at all times of the stock exchange day, not just at the end of the day as with non-ETF funds, and the price can fluctuate during the day too. Many non-ETF mutual funds have an ETF equivalent: VOO is the symbol for Vanguard's S&P 500 Index ETF while VFINX is the non-ETF version of the same index fund. Read more about the differences between ETFs and mutual funds, for example, here.\"" }, { "docid": "93836", "title": "", "text": "\"Because ETFs, unlike most other pooled investments, can be easily shorted, it is possible for institutional investors to take an arbitrage position that is long the underlying securities and short the ETF. The result is that in a well functioning market (where ETF prices are what they should be) these institutional investors would earn a risk-free profit equal to the fee amount. How much is this amount, though? ETFs exist in a very competitive market. Not only do they compete with each other, but with index and mutual funds and with the possibility of constructing one's own portfolio of the underlying. ETF investors are very cost-conscious. As a result, ETF fees just barely cover their costs. Typically, ETF providers do not even do their own trading. They issue new shares only in exchange for a bundle of the underlying securities, so they have almost no costs. In order for an institutional investor to make money with the arbitrage you describe, they would need to be able to carry it out for less than the fees earned by the ETF. Unlike the ETF provider, these investors face borrowing and other shorting costs and limitations. As a result it is not profitable for them to attempt this. Note that even if they had no costs, their maximum upside would be a few basis points per year. Lots of low-risk investments do better than that. I'd also like to address your question about what would happen if there was an ETF with exorbitant fees. Two things about your suggested outcome are incorrect. If short sellers bid the price down significantly, then the shares would be cheap relative to their stream of future dividends and investors would again buy them. In a well-functioning market, you can't bid the price of something that clearly is backed by valuable underlying assets down to near zero, as you suggest in your question. Notice that there are limitations to short selling. The more shares are short-sold, the more difficult it is to locate share to borrow for this purpose. At first brokers start charging additional fees. As borrowable shares become harder to find, they require that you obtain a \"\"locate,\"\" which takes time and costs money. Finally they will not allow you to short at all. Unlimited short selling is not possible. If there was an ETF that charged exorbitant fees, it would fail, but not because of short sellers. There is an even easier arbitrage strategy: Investors would buy the shares of the ETF (which would be cheaper than the value of the underlying because of the fees) and trade them back to the ETF provider in exchange for shares of the underlying. This would drain down the underlying asset pool until it was empty. In fact, it is this mechanism (the ability to trade ETF shares for shares of the underlying and vice versa) that keeps ETF prices fair (within a small tolerance) relative to the underlying indices.\"" }, { "docid": "299690", "title": "", "text": "\"As other people have indicated, traditional IRAs are tax deductable for a particular year. Please note, though, that traditional IRAs are tax deferred (not tax-free) accounts, meaning that you'll have to pay taxes on any money you take out later regardless of why you're making the withdrawal. (A lot of people mistakenly call them tax free, which they're not). There is no such thing as a \"\"tax-free\"\" retirement account. Really, in terms of Roth vs. Traditional IRAs, it's \"\"pay now or pay later.\"\" With the exception of special circumstances like this, I recommend investing exclusively in Roth IRAs for money that you expect to grow much (or that you expect to produce substantial income over time). Just to add a few thoughts on what to actually invest in once you open your IRA, I strongly agree with the advice that you invest mostly in low-cost mutual funds or index funds. The advantage of an open-ended mutual fund is that it's easier to purchase them in odd increments and you may be able to avoid at least some purchase fees, whereas with an ETF you have to buy in multiples of that day's asking price. For example, if you were investing $500 and the ETF costs $200 per share, you could only purchase 2 shares, leaving $100 uninvested (minus whatever fee your broker charged for the purchase). The advantage of an ETF is that it's easy to buy or sell quickly. Usually, when you add money to a mutual fund, it'll take a few days for it to hit your account, and when you want to sell it'll similarly take a few days for you to get your money; when I buy an ETF the transaction can occur almost instantly. The fees can also be lower (if the ETF is just a passive index fund). Also, there's a risk with open-ended mutual funds that if too many people pull money out at once the managers could be forced to sell stocks at an unfavorable price.\"" }, { "docid": "237450", "title": "", "text": "From an article I wrote a while back: “Dalbar Inc., a Boston-based financial services research firm, has been measuring the effects of investors’ decisions to buy, sell, and switch into and out of mutual funds since 1984. The key finding always has been that the average investor earns significantly less than the return reported by their funds. (For the 20 years ended Dec. 31, 2006, the average stock fund investor earned a paltry 4.3 average annual compounded return compared to 11.8 percent for the Standard & Poor’s 500 index.)” It's one thing to look at the indexes. But quite another to understand what other investors are actually getting. The propensity to sell low and buy high is proven by the data Dalbar publishes. And really makes the case to go after the magic S&P - 0.09% gotten from an ETF." }, { "docid": "87722", "title": "", "text": "In my opinion, if you are doing long-term investing, this is a non-issue. The difference of hours in being able to trade an ETF during the day vs. only being able to trade a traditional mutual fund at day-end is irrelevant if you are holding the investment for a long time. If you are engaging in day trading, market timing, or other advanced/controversial trading practices, then I suppose it could make a difference. For the way I invest (index funds, long-term, set-it-and-forget-it), ETFs have no advantage over traditional mutual funds." }, { "docid": "243797", "title": "", "text": "\"MD-Tech's answer is correct. Let me only point out that there are easier ways to invest in the DJIA index without having to buy individual stocks. You can buy a mutual fund or ETF that will track the index and your return will be almost identical to the performance of the underlying index. It's \"\"almost\"\" identical because the fund will take a small management fee, you will have to pay annual taxes on capital gains (if you hold the investment in a taxable account), and because the fund has to actually invest in the underlying stocks, there will be small differences due to rounding and timing of the fund's trades. You also ask: Assuming that I calculated those numbers correctly, is this gain approximately better, equal to, or worse than an average investment for that timespan? While people argue about the numbers, index funds tend to do better than average (depends on what you call \"\"average\"\", of course). They do better than most actively managed funds, too. And since they have low management fees, index funds are often considered to be an important part of a long-term investment portfolio because they require very little activity on your part other than buying and holding.\"" }, { "docid": "377186", "title": "", "text": "If you want to invest in the stock market, whether over a shorter period of 1 to 2 years or over a longer period of 10 or 20 years or longer you need to take some precautions and have a written investment plan with a risk management strategy incorporated in your plan. Others have said that 1 to 2 years is too short to invest in the stock market as the stock market can have a correction and fall by 50%. But it doesn't matter if you invest for 1 year or if you invest for 50 years, the stock market can still fall by 50% just before you plan to withdraw your funds. What you need to figure out is a way to get out before the market falls by 40% to 50%. A simple way to do this is to use technical indicators to warn you when a market trend is starting to change and that it is time to get out of the market. Two simple indicators you can use on a market index are the Rate of Change (ROC) indicator and the 100 week Moving Average (MA). Below is a 10 year weekly chart of the S&P500 with these two indicators charted. They show good times to get into the market and good times to get out. If you are using the 100 week MA you would buy in when the price crosses above the MA line and sell when the price crosses below the MA line. If you are using the ROC indicator you would buy in when the ROC indicator crosses above the zero line and sell when the ROC indicator crosses below the zero line. So your investment plan could be to buy an Index ETF representing the S&P500 when the ROC moves above zero and sell when it crosses below zero. You can also place a trailing stop loss of 10% to protect you in case of a sudden fall over a couple of days. You can manage your investments in as little as 10 minutes per week by checking the chart once per week and adjusting your stop loss order. If you want to progressively add to your investment each month you could check the charts and only add any new funds if both the ROC is above zero and sloping upwards. Another option for adding new funds could be if the price is above the MA and moving further away from the MA. All these rules should be incorporated into your investment plan so that you are not basing your decisions based on emotions. There are many other Technical Analysis Indicators you could also learn about to make better educated decisions about your stock market investments. However, what I have provided here is enough for anyone to test over different indexes and time frames and do their own paper trading on to gain some confidence before placing any real money on the table." }, { "docid": "479420", "title": "", "text": "Mutual funds buy (and sell) shares in companies in accordance with the policies set forth in their prospectus, not according to the individual needs of an investor, that is, when you invest money in (or withdraw money from) a mutual fund, the manager buys or sells whatever shares that, in the manager's judgement, will be the most appropriate ones (consistent with the investment policies). Thus, a large-cap mutual fund manager will not buy the latest hot small-cap stock that will likely be hugely profitable; he/she must choose only between various large capitalization companies. Some exchange-traded funds are fixed baskets of stocks. Suppose you will not invest in a company X as a matter of principle. Unless a mutual fund prospectus says that it will not invest in X, you may well end up having an investment in X at some time because the fund manager bought shares in X. With such an ETF, you know what is in the basket, and if the basket does not include stock in X now, it will not own stock in X at a later date. Some exchange-traded funds are constructed based on some index and track the index as a matter of policy. Thus, you will not be investing in X unless X becomes part of the index because Standard or Poor or Russell or somebody changed their minds, and the ETF buys X in order to track the index. Finally, some ETFs are exactly like general mutual funds except that you can buy or sell ETF shares at any time at the price at the instant that your order is executed whereas with mutual funds, the price of the mutual fund shares that you have bought or sold is the NAV of the mutual fund shares for that day, which is established based on the closing prices at the end of the trading day of the stocks, bonds etc that the fund owns. So, you might end up owning stock in X at any time based on what the fund manager thinks about X." }, { "docid": "87238", "title": "", "text": "what reason would I have in buying an ETF? Apart from the efforts, the real reason is the ticket size. One can't buy shares in fraction. To truly reflect the index in equal weight, the amount to invest will be in multiples of millions [depending on the Index and the stock composition] This related question should help you understand why it is difficult even for large fund house to exactly mimic the index. Why do passive ETFs require so much trading (and incur costs)?" }, { "docid": "49168", "title": "", "text": "The creation mechanism for ETF's ensures that the value of the underlying stocks do not diverge significantly from the Fund's value. Authorized participants have a strong incentive to arbitrage any pricing differences and create/redeem blocks of stock/etf until the prices are back inline. Contrary to what was stated in a previous answer, this mechanism lowers the cost of management of ETF's when compared to mutual funds that must access the market on a regular basis when any investors enter/exit the fund. The ETF only needs to create/redeem in a wholesale basis, this allows them to operate with management fees that are much lower than those of a mutual fund. Expenses Due to the passive nature of indexed strategies, the internal expenses of most ETFs are considerably lower than those of many mutual funds. Of the more than 900 available ETFs listed on Morningstar in 2010, those with the lowest expense ratios charged about .10%, while those with the highest expenses ran about 1.25%. By comparison, the lowest fund fees range from .01% to more than 10% per year for other funds. (For more on mutual fund feeds, read Stop Paying High Fees.)" }, { "docid": "117049", "title": "", "text": "\"It's easy for me to look at an IRA, no deposits or withdrawal in a year, and compare the return to some index. Once you start adding transactions, not so easy. Here's a method that answers your goal as closely as I can offer: SPY goes back to 1993. It's the most quoted EFT that replicates the S&P 500, and you specifically asked to compare how the investment would have gone if you were in such a fund. This is an important distinction, as I don't have to adjust for its .09% expense, as you would have been subject to it in this fund. Simply go to Yahoo, and start with the historical prices. Easy to do this on a spreadsheet. I'll assume you can find all your purchases inc dates & dollars invested. Look these up and treat those dollars as purchases of SPY. Once the list is done, go back and look up the dividends, issues quarterly, and on the dividend date, add the shares it would purchase based on that day's price. Of course, any withdrawals get accounted for the same way, take out the number of SPY shares it would have bought. Remember to include the commission on SPY, whatever your broker charges. If I've missed something, I'm sure we'll see someone point that out, I'd be happy to edit that in, to make this wiki-worthy. Edit - due to the nature of comments and the inability to edit, I'm adding this here. Perhaps I'm reading the question too pedantically, perhaps not. I'm reading it as \"\"if instead of doing whatever I did, I invested in an S&P index fund, how would I have performed?\"\" To measure one's return against a benchmark, the mechanics of the benchmarks calculation are not needed. In a comment I offer an example - if there were an ETF based on some type of black-box investing for which the investments were not disclosed at all, only day's end pricing, my answer above still applies exactly. The validity of such comparisons is a different question, but the fact that the formulation of the EFT doesn't come into play remains. In my comment below which I removed I hypothesized an ETF name, not intending it to come off as sarcastic. For the record, if one wishes to start JoesETF, I'm ok with it.\"" }, { "docid": "352557", "title": "", "text": "Use a currency ETF. there are many. Specific to your question there is WisdomTree Dreyfus Brazilian Real Fund (BZF) I don't happen to find a currency ETF for Thailand, so the closest you could come to a Thai currency fund would be something that's an Index fund ETF that is based on an index in the Thai Market such as: MSCI Thailand Investable Market Index Fund Because that fund is investing in an index of stocks that trade on the Thai market, you are in effect investing in something denominated in Baht. This is spelled out in the prospectus where it discusses 'currency risk'. The problem is that you are however not investing in just the currency, but rather a broad index of stocks denominated in that currency. Still to the extent the market holds fairly steady, you get much the same effect of investing in just the currency. to the extent the market is moving, you get the net effect of what the thai market does, plus how the bhat trades relative to the dollar." }, { "docid": "128048", "title": "", "text": "\"When you invest in an S&P500 index fund that is priced in USD, the only major risk you bear is the risk associated with the equity that comprises the index, since both the equities and the index fund are priced in USD. The fund in your question, however, is priced in EUR. For a fund like this to match the performance of the S&P500, which is priced in USD, as closely as possible, it needs to hedge against fluctuations in the EUR/USD exchange rate. If the fund simply converted EUR to USD then invested in an S&P500 index fund priced in USD, the EUR-priced fund may fail to match the USD-priced fund because of exchange rate fluctuations. Here is a simple example demonstrating why hedging is necessary. I assumed the current value of the USD-priced S&P500 index fund is 1,600 USD/share. The exchange rate is 1.3 USD/EUR. If you purchase one share of this index using EUR, you would pay 1230.77 EUR/share: If the S&P500 increases 10% to 1760 USD/share and the exchange rate remains unchanged, the value of the your investment in the EUR fund also increases by 10% (both sides of the equation are multiplied by 1.1): However, the currency risk comes into play when the EUR/USD exchange rate changes. Take the 10% increase in the price of the USD index occurring in tandem with an appreciation of the EUR to 1.4 USD/EUR: Although the USD-priced index gained 10%, the appreciation of the EUR means that the EUR value of your investment is almost unchanged from the first equation. For investments priced in EUR that invest in securities priced in USD, the presence of this additional currency risk mandates the use of a hedge if the indexes are going to track. The fund you linked to uses swap contracts, which I discuss in detail below, to hedge against fluctuations in the EUR/USD exchange rate. Since these derivatives aren't free, the cost of the hedge is included in the expenses of the fund and may result in differences between the S&P500 Index and the S&P 500 Euro Hedged Index. Also, it's important to realize that any time you invest in securities that are priced in a different currency than your own, you take on currency risk whether or not the investments aim to track indexes. This holds true even for securities that trade on an exchange in your local currency, like ADR's or GDR's. I wrote an answer that goes through a simple example in a similar fashion to the one above in that context, so you can read that for more information on currency risk in that context. There are several ways to investors, be they institutional or individual, can hedge against currency risk. iShares offers an ETF that tracks the S&P500 Euro Hedged Index and uses a over-the-counter currency swap contract called a month forward FX contract to hedge against the associated currency risk. In these contracts, two parties agree to swap some amount of one currency for another amount of another currency, at some time in the future. This allows both parties to effectively lock in an exchange rate for a given time period (a month in the case of the iShares ETF) and therefore protect themselves against exchange rate fluctuations in that period. There are other forms of currency swaps, equity swaps, etc. that could be used to hedge against currency risk. In general, two parties agree to swap one quantity, like a EUR cash flow, payments of a fixed interest rate, etc. for another quantity, like a USD cash flow, payments based on a floating interest rate, etc. In many cases these are over-the-counter transactions, there isn't necessarily a standardized definition. For example, if the European manager of a fund that tracks the S&P500 Euro Hedged Index is holding euros and wants to lock in an effective exchange rate of 1.4 USD/EUR (above the current exchange rate), he may find another party that is holding USD and wants to lock in the respective exchange rate of 0.71 EUR/USD. The other party could be an American fund manager that manages a USD-price fund that tracks the FTSE. By swapping USD and EUR, both parties can, at a price, lock in their desired exchange rates. I want to clear up something else in your question too. It's not correct that the \"\"S&P 500 is completely unrelated to the Euro.\"\" Far from it. There are many cases in which the EUR/USD exchange rate and the level of the S&P500 index could be related. For example: Troublesome economic news in Europe could cause the euro to depreciate against the dollar as European investors flee to safety, e.g. invest in Treasury bills. However, this economic news could also cause US investors to feel that the global economy won't recover as soon as hoped, which could affect the S&P500. If the euro appreciated against the dollar, for whatever reason, this could increase profits for US businesses that earn part of their profits in Europe. If a US company earns 1 million EUR and the exchange rate is 1.3 USD/EUR, the company earns 1.3 million USD. If the euro appreciates against the dollar to 1.4 USD/EUR in the next quarter and the company still earns 1 million EUR, they now earn 1.4 million USD. Even without additional sales, the US company earned a higher USD profit, which is reflected on their financial statements and could increase their share price (thus affecting the S&P500). Combining examples 1 and 2, if a US company earns some of its profits in Europe and a recession hits in the EU, two things could happen simultaneously. A) The company's sales decline as European consumers scale back their spending, and B) the euro depreciates against the dollar as European investors sell euros and invest in safer securities denominated in other currencies (USD or not). The company suffers a loss in profits both from decreased sales and the depreciation of the EUR. There are many more factors that could lead to correlation between the euro and the S&P500, or more generally, the European and American economies. The balance of trade, investor and consumer confidence, exposure of banks in one region to sovereign debt in another, the spread of asset/mortgage-backed securities from US financial firms to European banks, companies, municipalities, etc. all play a role. One example of this last point comes from this article, which includes an interesting line: Among the victims of America’s subprime crisis are eight municipalities in Norway, which lost a total of $125 million through subprime mortgage-related investments. Long story short, these municipalities had mortgage-backed securities in their investment portfolios that were derived from, far down the line, subprime mortgages on US homes. I don't know the specific cities, but it really demonstrates how interconnected the world's economies are when an American family's payment on their subprime mortgage in, say, Chicago, can end up backing a derivative investment in the investment portfolio of, say, Hammerfest, Norway.\"" }, { "docid": "270992", "title": "", "text": "The main difference between an ETF and a Mutual Fund is Management. An ETF will track a specific index with NO manager input. A Mutual Fund has a manager that is trying to choose securities for its fund based on the mandate of the fund. Liquidity ETFs trade like a stock, so you can buy at 10am and sell at 11 if you wish. Mutual Funds (most) are valued at the end of each business day, so no intraday trading. Also ETFs are similar to stocks in that you need a buyer/seller for the ETF that you want/have. Whereas a mutual fund's units are sold back to itself. I do not know of many if any liquity issues with an ETF, but you could be stuck holding it if you can not find a buyer (usually the market maker). Mutual Funds can be closed to trading, however it is rare. Tax treatment Both come down to the underlying holdings in the fund or ETF. However, more often in Mutual Funds you could be stuck paying someone else's taxes, not true with an ETF. For example, you buy an Equity Mutual Fund 5 years ago, you sell the fund yourself today for little to no gain. I buy the fund a month ago and the fund manager sells a bunch of the stocks they bought for it 10 years ago for a hefty gain. I have a tax liability, you do not even though it is possible that neither of us have any gains in our pocket. It can even go one step further and 6 months from now I could be down money on paper and still have a tax liability. Expenses A Mutual Fund has an MER or Management Expense Ratio, you pay it no matter what. If the fund has a positive return of 12.5% in any given year and it has an MER of 2.5%, then you are up 10%. However if the fund loses 7.5% with the same MER, you are down 10%. An ETF has a much smaller management fee (typically 0.10-0.95%) but you will have trading costs associated with any trades. Risks involved in these as well as any investment are many and likely too long to go into here. However in general, if you have a Canadian Stock ETF it will have similar risks to a Canadian Equity Mutual Fund. I hope this helps." }, { "docid": "406711", "title": "", "text": "No, SPDR ETFs are not a good fit for a novice investor with a low level of financial literacy. In fact, there is no investment that is safe for an absolute beginner, not even a savings account. (An absolute beginner could easily overdraw his savings account, leading to fees and collections.) I would say that an investment becomes a good fit for an investor as soon as said investor understands how the investment works. A savings account at a bank or credit union is fairly easy to understand and is therefore a suitable place to hold money after a few hours to a day of research. (Even after 0 hours of research, however, a savings account is still better than a sock drawer.) Money market accounts (through a bank), certificates of deposit (through a bank), and money market mutual funds (through a mutual fund provider) are probably the next easiest thing to understand. This could take a few hours to a few weeks of research depending on the learner. Equities, corporate bonds, and government bonds are another step up in complexity, and could take weeks or months of schooling to understand well enough to try. Equity or bond mutual funds -- or the ETF versions of those, which is what you asked about -- are another level after that. Also important to understand along the way are the financial institutions and market infrastructure that exist to provide these products: banks, credit unions, public corporations, brokerages, stock exchanges, bond exchanges, mutual fund providers, ETF providers, etc." }, { "docid": "307465", "title": "", "text": "Although you can't invest in an index, you can invest in a fund that basically invests in what the index is made up of. Example: In dealing with an auto index, you could find a fund that buys car companies's stock. The Google Finance list of funds dealing with INDEXDJX:REIT Although not pertaining to your quetion exactly, you may want to consider buying into Vanguard REIT ETF I hope this answers your question." }, { "docid": "498645", "title": "", "text": "\"Bonds might not be simple, but in general there are only a few variables that need to be understood: bid, coupon (interest) rate, maturity, and yield. Bond tables clearly lay those out, and if you're talking about government bonds a lot of things (like convertibles) don't apply (although default is still a concern). This might be overly simplistic, but I view ETF's primarily as an easy way to bring somewhat esoteric instruments (like grain futures) into the easily available markets of Nasdaq and the NYSE. That they got \"\"enhanced\"\" with leveraged funds and the such is interesting, but perhaps not the original intent of the instrument. Complicating your situation a bit more is the fee that gets tacked onto the ETF. Even Vanguard government bond funds hang out north of 0.1%. That's not huge, but it's not particularly appealing either considering that (unlike rounding up live cattle futures), it's not that much work to buy US government bonds, so the expense might not seem worth it to someone who's comfortable purchasing the securities directly. I'd be interested to see someone else's view on this, but in general I'd say that if you know what you want and know how to buy it, the government bond ETF becomes a lot less relevant as the liquidity offered (including the actual \"\"ease of transacting\"\") seem to to be the biggest factors in favor. From Investopedia's description: The bond ETF is an exciting new addition to the bond market, offering an excellent alternative to self-directed investors who, looking for ease of trading and increased price transparency, want to practice indexing or active bond trading. However, bond ETFs are suitable for particular strategies. If, for instance, you are looking to create a specific income stream, bond ETFs may not be for you. Be sure to compare your alternatives before investing.\"" }, { "docid": "321637", "title": "", "text": "\"If you need less than $125k for the downpayment, I recommend you convert your mutual fund shares to their ETF counterparts tax-free: Can I convert conventional Vanguard mutual fund shares to Vanguard ETFs? Shareholders of Vanguard stock index funds that offer Vanguard ETFs may convert their conventional shares to Vanguard ETFs of the same fund. This conversion is generally tax-free, although some brokerage firms may be unable to convert fractional shares, which could result in a modest taxable gain. (Four of our bond ETFs—Total Bond Market, Short-Term Bond, Intermediate-Term Bond, and Long-Term Bond—do not allow the conversion of bond index fund shares to bond ETF shares of the same fund; the other eight Vanguard bond ETFs allow conversions.) There is no fee for Vanguard Brokerage clients to convert conventional shares to Vanguard ETFs of the same fund. Other brokerage providers may charge a fee for this service. For more information, contact your brokerage firm, or call 866-499-8473. Once you convert from conventional shares to Vanguard ETFs, you cannot convert back to conventional shares. Also, conventional shares held through a 401(k) account cannot be converted to Vanguard ETFs. https://personal.vanguard.com/us/content/Funds/FundsVIPERWhatAreVIPERSharesJSP.jsp Withdraw the money you need as a margin loan, buy the house, get a second mortgage of $125k, take the proceeds from the second mortgage and pay back the margin loan. Even if you have short term credit funds, it'd still be wiser to lever up the house completely as long as you're not overpaying or in a bubble area, considering your ample personal investments and the combined rate of return of the house and the funds exceeding the mortgage interest rate. Also, mortgage interest is tax deductible while margin interest isn't, pushing the net return even higher. $125k Generally, I recommend this figure to you because the biggest S&P collapse since the recession took off about 50% from the top. If you borrow $125k on margin, and the total value of the funds drop 50%, you shouldn't suffer margin calls. I assumed that you were more or less invested in the S&P on average (as most modern \"\"asset allocations\"\" basically recommend a back-door S&P as a mix of credit assets, managed futures, and small caps average the S&P). Second mortgage Yes, you will have two loans that you're paying interest on. You've traded having less invested in securities & a capital gains tax bill for more liabilities, interest payments, interest deductions, more invested in securities, a higher combined rate of return. If you have $500k set aside in securities and want $500k in real estate, this is more than safe for you as you will most likely have a combined rate of return of ~5% on $500k with interest on $500k at ~3.5%. If you're in small cap value, you'll probably be grossing ~15% on $500k. You definitely need to secure your labor income with supplementary insurance. Start a new question if you need a model for that. Secure real estate with securities A local bank would be more likely to do this than a major one, but if you secure the house with the investment account with special provisions like giving them copies of your monthly statements, etc, you might even get a lower rate on your mortgage considering how over-secured the loan would be. You might even be able to wrap it up without a down payment in one loan if it's still legal. Mortgage regulations have changed a lot since the housing crash.\"" }, { "docid": "44349", "title": "", "text": "\"There's a huge difference between \"\"can an anverage person make a profit on the stock market\"\" and \"\"can an average person get rich off the stock market\"\". It is certainly possible for an average person to profit, but of course you are unlikely to profit as much as the big Wall Street guys. An S&P 500 index fund, for instance, would be a pretty good way to profit. People with high-powered tools may make a lot of money picking individual stocks, and may even make some choices that help them when the market is down, but it's difficult to see how they could consistently make money over the long term without the S&P 500 also going up. The same applies, to varying extents, to various other index funds, ETFs, and mutual funds. I agree with littleadv that there is no single \"\"right\"\" thing for everyone to do. My personal take is that index funds are a good bet, and I've seen a lot of people take that view on personal finance blogs, etc. (for whatever that's worth). One advantage of index funds that track major indexes (like the S&P 500) is that because they are and are perceived as macro-indicators of the overall economic situation, at least you're in the same boat as many other people. On one level, that means that if you lose money a lot of other investors are also losing money, and when large numbers of people start losing money, that makes governments take action, etc., to turn things around. On another level, the S&P 500 is a lot of big companies; if it goes down, some of those big companies are losing value, and they will use their big-company resources to gain value, and if they succeed, the index goes up again and you benefit. In other words, index funds (and large mutual funds, ETFs, etc.) make investing less about what day-trading wonks focus on, which is trying to make a \"\"hot choice\"\" for a large gain. They make it more about hitching your wagon to an extremely large star that is powered by all the resources of extremely large companies, so that when those companies increase their value, you gain. The bigger the pool of people whose fortunes rise and fall with your own, the more you become part of an investment portfolio that is (I can't resist saying it) \"\"too big to fail\"\". That isn't to say that the S&P 500 can't lose value from time to time, but rather that if it does go down big and hard and stay there, you probably have bigger problems than losing money in the stock market (e.g., the US economy is collapsing and you should begin stockpiling bullets and canned food).\"" } ]

[ { "docid": "342258", "title": "", "text": "\"I'd start with a Google search for \"\"best backtesting tools.\"\" Does your online brokerage offer anything? You already understand that the data is the important part. The good stuff isn't free. But yeah, if you have some money to spend you can get more than enough data to completely overwhelm you. :)\"" } ]

[ { "docid": "99568", "title": "", "text": "\"The majority (about 80%) of mutual funds are underperforming their underlying indexes. This is why ETFs have seen massive capital inflows compared to equity funds, which have seen significant withdrawals in the last years. I would definitively recommend going with an ETF. In addition to pure index based ETFs that (almost) track broad market indexes like the S&P 500 there are quite a few more \"\"quant\"\" oriented ETFs that even outperformed the S&P. I am long the S&P trough iShares ETFs and have dividend paying ETFs and some quant ETFS on top (Invesco Powershares) in my portfolio.\"" }, { "docid": "408524", "title": "", "text": "Index Funds & ETFs, if they are tracking the same index, will be the same in an ideal world. The difference would be because of the following factors: Expense ratio: i.e. the expense the funds charge. This varies and hence it would lead to a difference in performance. Tracking error: this means that there is a small percentage of error between the actual index composition and the fund composition. This is due to various reasons. Effectively this would result in the difference between values. Demand / Supply: with ETFs, the fund is traded on stock exchanges like a stock. If the general feeling is that the index is rising, it could lead to an increase in the price of the ETF. Index funds on the other hand would remain the same for the day and are less liquid. This results in a price increase / decrease depending on the market. The above explains the reason for the difference. Regarding which one to buy, one would need to consider other factors like: a) How easy is it to buy ETFs? Do you already hold Demat A/C & access to brokers to help you conduct the transaction or do you need to open an additional account at some cost. b) Normally funds do not need any account, but are you OK with less liquidity as it would take more time to redeem funds." }, { "docid": "450848", "title": "", "text": "\"I'd also look into index funds (eg Vanguard) as they have low management fees. you can buy these as ETFs as well - so you can buy in at a very low starting amount. An index fund can also be a talking point for your kids about what an industry index is and how it relates to the companies that fall into it. Also about how mutual funds try to \"\"beat the market\"\" - and often fail.\"" }, { "docid": "102620", "title": "", "text": "You are diversified within a particular type of security. Notably the stock market. A truly diversified portfolio not only has multiple types of holdings within a single type of security (what your broad market fund does) but between different types. You have partially succeeded in doing this with the international fund - that way your risk is spread between domestic and international stocks. But there are other holdings. Cash, bonds, commodities, real estate, etc. There are broad index funds/ETFs for those as well, which may reduce your risk when the stock market as a whole tanks - which it does on occasion." }, { "docid": "461217", "title": "", "text": "\"Being long the S&P Index ETF you can expect to make money. The index itself will never \"\"crash\"\" because the individual stocks in it are simply removed when they begin performing badly. This is not to say that the S&P Index won't lose 80% of its value in an instant (or over a few trading sessions if circuit breakers are considered), but even in the 2008 correction, the S&P still traded far above book value. With this in mind, you have to realize, that despite common sentiment, the indexes are hardly representative of \"\"the market\"\". They are just a derivative, and as you might be aware, derivatives can enable financial tricks far removed from reality. Regarding index funds, if a small group of people decide that 401k's are performing badly, then they will simply rebalance the components of the indexes with companies that are doing well. The headline will be \"\"S&P makes ANOTHER record high today\"\" So although panic selling can disrupt the order book, especially during periods of illiquidity, with the current structure \"\"the stock market\"\" being based off of three composite indexes, can never crash, because there will always exist a company that is not exposed to broad market fluctuations and will be performing better by fundamentals and share price. Similarly, you collect dividends from the index ETFs. You can also sell covered calls on your holdings. The CBOE has a chart through the 2008 crisis showing your theoretical profit and loss if you sold calls 2 standard deviations out of the money, at every monthly interval. If you are going to be holding an index ETF for a long time, then you shouldn't be concerned about its share price at all, since the returns would be pretty abysmal either way, but it should suffice for hedging inflation.\"" }, { "docid": "93836", "title": "", "text": "\"Because ETFs, unlike most other pooled investments, can be easily shorted, it is possible for institutional investors to take an arbitrage position that is long the underlying securities and short the ETF. The result is that in a well functioning market (where ETF prices are what they should be) these institutional investors would earn a risk-free profit equal to the fee amount. How much is this amount, though? ETFs exist in a very competitive market. Not only do they compete with each other, but with index and mutual funds and with the possibility of constructing one's own portfolio of the underlying. ETF investors are very cost-conscious. As a result, ETF fees just barely cover their costs. Typically, ETF providers do not even do their own trading. They issue new shares only in exchange for a bundle of the underlying securities, so they have almost no costs. In order for an institutional investor to make money with the arbitrage you describe, they would need to be able to carry it out for less than the fees earned by the ETF. Unlike the ETF provider, these investors face borrowing and other shorting costs and limitations. As a result it is not profitable for them to attempt this. Note that even if they had no costs, their maximum upside would be a few basis points per year. Lots of low-risk investments do better than that. I'd also like to address your question about what would happen if there was an ETF with exorbitant fees. Two things about your suggested outcome are incorrect. If short sellers bid the price down significantly, then the shares would be cheap relative to their stream of future dividends and investors would again buy them. In a well-functioning market, you can't bid the price of something that clearly is backed by valuable underlying assets down to near zero, as you suggest in your question. Notice that there are limitations to short selling. The more shares are short-sold, the more difficult it is to locate share to borrow for this purpose. At first brokers start charging additional fees. As borrowable shares become harder to find, they require that you obtain a \"\"locate,\"\" which takes time and costs money. Finally they will not allow you to short at all. Unlimited short selling is not possible. If there was an ETF that charged exorbitant fees, it would fail, but not because of short sellers. There is an even easier arbitrage strategy: Investors would buy the shares of the ETF (which would be cheaper than the value of the underlying because of the fees) and trade them back to the ETF provider in exchange for shares of the underlying. This would drain down the underlying asset pool until it was empty. In fact, it is this mechanism (the ability to trade ETF shares for shares of the underlying and vice versa) that keeps ETF prices fair (within a small tolerance) relative to the underlying indices.\"" }, { "docid": "325818", "title": "", "text": "There are a number of ways this can result. In a broad ETF, such as SPY, the S&P 500 spider, the S&P index will have 500 stocks no matter what, so a buyout would simply result in a re-shuffling of the index makeup. No buyout will happen so quickly that there's no time to choose the next stock to join the index. In your case, if the fund manager (per the terms of the prospectus) wishes to simply reallocate the index to remove the taken-over stock that's probably how he handle it. Unless of course, the prospectus dictates otherwise. In which case, a cash dividend is a possible alternative." }, { "docid": "173967", "title": "", "text": "The S&P500 is an index, not an investment by itself. The index lists a large number of stocks, and the value of the index is the price of all the stocks added together. If you want to make an investment that tracks the S&P500, you could buy some shares of each stock in the index, in the same proportions as the index. This, however, is impractical for just about everyone. Index mutual funds provide an easy way to make this investment. SPY is an ETF (exchange-traded mutual fund) that does the same thing. An index CFD (contract for difference) is not the same as an index mutual fund. There are a number of differences between investing in a security fund and investing in a CFD, and CFDs are not available everywhere." }, { "docid": "159471", "title": "", "text": "Why don't you look at the actual funds and etfs in question rather than seeking a general conclusion about all pairs of funds and etfs? For example, Vanguard's total stock market index fund (VTSAX) and ETF (VTI). Comparing the two on yahoo finance I find no difference over the last 5 years visually. For a different pair of funds you may find something very slightly different. In many cases the index fund and ETF will not have the same benchmark and fees so comparisons get a little more cloudy. I recall a while ago there was an article that was pointing out that at the time emerging market ETF's had higher fees than corresponding index funds. For this reason I think you should examine your question on a case-by-case basis. Index fund and ETF returns are all publicly available so you don't have to guess." }, { "docid": "9116", "title": "", "text": "ACWI refers to a fund that tracks the MSCI All Country World Index, which is A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the world. The MSCI ACWI is maintained by Morgan Stanley Capital International, and is comprised of stocks from both developed and emerging markets. The ex-US in the name implies exactly what it sounds; this fund probably invests in stock markets (or stock market indexes) of the countries in the index, except the US. Brd Mkt refers to a Broad Market index, which, in the US, means that the fund attempts to track the performance of a wide swath of the US stock market (wider than just the S&P 500, for example). The Dow Jones U.S. Total Stock Market Index, the Wilshire 5000 index, the Russell 2000 index, the MSCI US Broad Market Index, and the CRSP US Total Market Index are all examples of such an index. This could also refer to a fund similar to the one above in that it tracks a broad swath of the several stock markets across the world. I spoke with BNY Mellon about the rest, and they told me this: EB - Employee Benefit (a bank collective fund for ERISA qualified assets) DL - Daily Liquid (provides for daily trading of fund shares) SL - Securities Lending (fund engages in the BNY Mellon securities lending program) Non-SL - Non-Securities Lending (fund does not engage in the BNY Mellon securities lending program) I'll add more detail. EB (Employee Benefit) refers to plans that fall under the Employee Retirement Income Security Act, which are a set a laws that govern employee pensions and retirement plans. This is simply BNY Mellon's designation for funds that are offered through 401(k)'s and other retirement vehicles. As I said before, DL refers to Daily Liquidity, which means that you can buy into and sell out of the fund on a daily basis. There may be fees for this in your plan, however. SL (Securities Lending) often refers to institutional funds that loan out their long positions to investment banks or brokers so that the clients of those banks/brokerages can sell the shares short. This SeekingAlpha article has a good explanation of how this procedure works in practice for ETF's, and the procedure is identical for mutual funds: An exchange-traded fund lends out shares of its holdings to another party and charges a rental fee. Running a securities-lending program is another way for an ETF provider to wring more return out of a fund's holdings. Revenue from these programs is used to offset a fund's expenses, which allows the provider to charge a lower expense ratio and/or tighten the performance gap between an ETF and its benchmark." }, { "docid": "440417", "title": "", "text": "\"Don't put money in things that you don't understand. ETFs won't kill you, ignorance will. The leveraged ultra long/short ETFs hold swaps that are essentially bets on the daily performance of the market. There is no guarantee that they will perform as designed at all, and they frequently do not. IIRC, in most cases, you shouldn't even be holding these things overnight. There aren't any hidden fees, but derivative risk can wipe out portions of the portfolio, and since the main \"\"asset\"\" in an ultra long/short ETF are swaps, you're also subject to counterparty risk -- if the investment bank the fund made its bet with cannot meet it's obligation, you're may lost alot of money. You need to read the prospectus carefully. The propectus re: strategy. The Fund seeks daily investment results, before fees and expenses, that correspond to twice the inverse (-2x) of the daily performance of the Index. The Fund does not seek to achieve its stated investment objective over a period of time greater than a single day. The prospectus re: risk. Because of daily rebalancing and the compounding of each day’s return over time, the return of the Fund for periods longer than a single day will be the result of each day’s returns compounded over the period, which will very likely differ from twice the inverse (-2x) of the return of the Index over the same period. A Fund will lose money if the Index performance is flat over time, and it is possible that the Fund will lose money over time even if the Index’s performance decreases, as a result of daily rebalancing, the Index’s volatility and the effects of compounding. See “Principal Risks” If you want to hedge your investments over a longer period of time, you should look at more traditional strategies, like options. If you don't have the money to make an option strategy work, you probably can't afford to speculate with leveraged ETFs either.\"" }, { "docid": "44349", "title": "", "text": "\"There's a huge difference between \"\"can an anverage person make a profit on the stock market\"\" and \"\"can an average person get rich off the stock market\"\". It is certainly possible for an average person to profit, but of course you are unlikely to profit as much as the big Wall Street guys. An S&P 500 index fund, for instance, would be a pretty good way to profit. People with high-powered tools may make a lot of money picking individual stocks, and may even make some choices that help them when the market is down, but it's difficult to see how they could consistently make money over the long term without the S&P 500 also going up. The same applies, to varying extents, to various other index funds, ETFs, and mutual funds. I agree with littleadv that there is no single \"\"right\"\" thing for everyone to do. My personal take is that index funds are a good bet, and I've seen a lot of people take that view on personal finance blogs, etc. (for whatever that's worth). One advantage of index funds that track major indexes (like the S&P 500) is that because they are and are perceived as macro-indicators of the overall economic situation, at least you're in the same boat as many other people. On one level, that means that if you lose money a lot of other investors are also losing money, and when large numbers of people start losing money, that makes governments take action, etc., to turn things around. On another level, the S&P 500 is a lot of big companies; if it goes down, some of those big companies are losing value, and they will use their big-company resources to gain value, and if they succeed, the index goes up again and you benefit. In other words, index funds (and large mutual funds, ETFs, etc.) make investing less about what day-trading wonks focus on, which is trying to make a \"\"hot choice\"\" for a large gain. They make it more about hitching your wagon to an extremely large star that is powered by all the resources of extremely large companies, so that when those companies increase their value, you gain. The bigger the pool of people whose fortunes rise and fall with your own, the more you become part of an investment portfolio that is (I can't resist saying it) \"\"too big to fail\"\". That isn't to say that the S&P 500 can't lose value from time to time, but rather that if it does go down big and hard and stay there, you probably have bigger problems than losing money in the stock market (e.g., the US economy is collapsing and you should begin stockpiling bullets and canned food).\"" }, { "docid": "426591", "title": "", "text": "\"Former financial analyst here, happy to help you. First off, you are right to not be entirely trusting of advisors and attorneys. They are usually trustworthy, but not always. And when you are new to this, the untrustworthy ones have a habit of reaching you first - you're their target market. I'll give you a little breakdown of how to plan, and a starting investment. First, figure out your future expenses. A LOT of that money may go to medical bills or associated care - don't forget the costs of modifications and customizations to items so you can have a better quality of life. Cars can be retrofit to assist you with a wheelchair, you can build a chair lift into a staircase, things like that which will be important for mobility - all depending on the lingering medical conditions. Mobility and independence will be critically important for you. Your past expenses are the best predictor of future expenses, so filter out the one-time legal and medical costs and use those to predict. Second, for investing there is a simple route to get into the stock market, and hopefully you will hear it a lot: Exchange Traded Funds (ETFs). You'll hear \"\"The S&P 500 increased by 80 points today...\"\" on the news; the S&P is a combination of 500 different stocks and is used to gauge the market overall. You can buy an exchange traded fund as a stock, and it's an investment in all those components. There's an ETF for almost anything, but the most popular ones are for those big indexes. I would suggest putting a few hundred thousand into an S&P 500 indexed ETF (do it at maybe $10,000 per month, so you spread the money out and ensure you don't buy at a market peak), and then let it sit there for many years. You can buy stocks through online brokerages like Scottrade or ETrade, and they make it fairly easy - they even have local offices that you can visit for help. Stocks are the easiest way to invest. Once you've done this, you can also open a IRA (a type of retirement account with special tax benefits) and contribute several thousand dollars to it per year. I'll be happy to give more advice if/when you need it, but there are a number of good books for beginning investors that can explain it better than I. I would suggest that you avoid real estate, especially if you expect to move overseas, as it is significantly more complicated and has maintenance costs and taxes.\"" }, { "docid": "161445", "title": "", "text": "The S&P 500 is a stock market index, which is a list of 500 stocks from the largest companies in America. You could open a brokerage account with a broker and buy shares in each of these companies, but the easiest, least expensive way to invest in all these stocks is to invest in an S&P 500 index mutual fund. Inside an index mutual fund, your money will be pooled together with everyone else in the fund to purchase all the stocks in the index. These types of funds are very low expense compared to managed mutual funds. Most mutual fund companies have an S&P 500 index fund; two examples are Vanguard and Fidelity. The minimum investment in most of these mutual funds is low enough that you will be able to open an account with your $4000. Something you need to keep in mind, however: investing in any stock mutual fund is not non-risk. It's not even low-risk, really. It is very possible to lose money by investing in the stock market. An S&P 500 index fund is diversified in the sense that you have money in lots of different stocks, but it is also not diversified, in a sense, because it is all in large cap American stocks. Before investing in the stock market, you should have a goal for the money you are investing. If you are investing for something several years away, an index fund can be a good place to invest, but if you will need this money within the next few years, the stock market might be too risky for you." }, { "docid": "183898", "title": "", "text": "It is true that this is possible, however, it's very remote in the case of the large and reputable fund companies such as Vanguard. FDIC insurance protects against precisely this for bank accounts, but mutual funds and ETFs do not have an equivalent to FDIC insurance. One thing that does help you in the case of a mutual fund or ETF is that you indirectly (through the fund) own actual assets. In a cash account at a bank, you have a promise from the bank to pay, and then the bank can go off and use your money to make loans. You don't in any sense own the bank's loans. With a fund, the fund company cannot (legally) take your money out of the fund, except to pay the expense ratio. They have to use your money to buy stocks, bonds, or whatever the fund invests in. Those assets are then owned by the fund. Legally, a mutual fund is a special kind of company defined in the Investment Company Act of 1940, and is a separate company from the investment advisor (such as Vanguard): http://www.sec.gov/answers/mfinvco.htm Funds have their own boards, and in principle a fund board can even fire the company advising the fund, though this is not likely since boards aren't usually independent. (a quick google found this article for more, maybe someone can find a better one: http://www.marketwatch.com/story/mutual-fund-independent-board-rule-all-but-dead) If Vanguard goes under, the funds could continue to exist and get a new adviser, or could be liquidated with investors receiving whatever the assets are worth. Of course, all this legal stuff doesn't help you with outright fraud. If a fund's adviser says it bought the S&P 500, but really some guy bought himself a yacht, Madoff-style, then you have a problem. But a huge well-known ETF has auditors, tons of different employees, lots of brokerage and exchange traffic, etc. so to me at least it's tough to imagine a risk here. With a small fund company with just a few people - and there are lots of these! - then there's more risk, and you'd want to carefully look at what independent agent holds their assets, who their auditors are, and so forth. With regular mutual funds (not ETFs) there are more issues with diversifying across fund companies: With ETFs, there probably isn't much downside to diversifying since you could buy them all from one brokerage account. Maybe it even happens naturally if you pick the best ETFs you can find. Personally, I would just pick the best ETFs and not worry about advisor diversity. Update: maybe also deserving a mention are exchange-traded notes (ETNs). An ETN's legal structure is more like the bank account, minus the FDIC insurance of course. It's an IOU from the company that runs the ETN, where they promise to pay back the value of some index. There's no investment company as with a fund, and therefore you don't own a share of any actual assets. If the ETN's sponsor went bankrupt, you would indeed have a problem, much more so than if an ETF's sponsor went bankrupt." }, { "docid": "217242", "title": "", "text": "You could look into an index fund or ETF that invests primarily in Real Estate Investment Trusts (REIT's). An REIT is any corporation, trust or association that acts as an investment agent specializing in real estate and real estate mortgages Many investment firms offer an index fund or ETF like this. For example, Vanguard and Fidelity have funds that invest primarily in real estate markets. You could also invest in a home construction ETF, like iShares' ITB, which invests in companies related to home construction. This ETF includes more companies than just REITs, so for example, Home Depot is included." }, { "docid": "41176", "title": "", "text": "\"What does ETFs have to do with this or Amazon? Actually, investing in ETFs means you are killing actively managed Mutual Funds (managed by people, fund managers) to get an average return (and loss) of the market that a computer manage instead of a person. And the ETF will surely have Amazon stocks because they are part of the index. I only invest in actively managed mutual funds. Yes, most actively managed mutual funds can't do better than the index, but if you work a bit harder, you can find the many that do much better than the \"\"average\"\" that an index give you.\"" }, { "docid": "364735", "title": "", "text": "I think that assuming that you're not looking to trade the fund, an index Mutual Fund is a better overall value than an ETF. The cost difference is negligible, and the ability to dollar-cost average future contributions with no transaction costs. You also have to be careful with ETFs; the spreads are wide on a low-volume fund and some ETFs are going more exotic things that can burn a novice investor. Track two similar funds (say Vanguard Total Stock Market: VTSMX and Vanguard Total Stock Market ETF: VTI), you'll see that they track similarly. If you are a more sophisticated investor, ETFs give you the ability to use options to hedge against declines in value without having to incur capital gains from the sale of the fund. (ie. 20 years from now, can use puts to make up for short-term losses instead of selling shares to avoid losses) For most retail investors, I think you really need to justify using ETFs versus mutual funds. If anything, the limitations of mutual funds (no intra-day trading, no options, etc) discourage speculative behavior that is ultimately not in your best interest. EDIT: Since this answer was written, many brokers have begun offering a suite of ETFs with no transaction fees. That may push the cost equation over to support Index ETFs over Index Mutual Funds, particularly if it's a big ETF with narrow spreads.." }, { "docid": "321637", "title": "", "text": "\"If you need less than $125k for the downpayment, I recommend you convert your mutual fund shares to their ETF counterparts tax-free: Can I convert conventional Vanguard mutual fund shares to Vanguard ETFs? Shareholders of Vanguard stock index funds that offer Vanguard ETFs may convert their conventional shares to Vanguard ETFs of the same fund. This conversion is generally tax-free, although some brokerage firms may be unable to convert fractional shares, which could result in a modest taxable gain. (Four of our bond ETFs—Total Bond Market, Short-Term Bond, Intermediate-Term Bond, and Long-Term Bond—do not allow the conversion of bond index fund shares to bond ETF shares of the same fund; the other eight Vanguard bond ETFs allow conversions.) There is no fee for Vanguard Brokerage clients to convert conventional shares to Vanguard ETFs of the same fund. Other brokerage providers may charge a fee for this service. For more information, contact your brokerage firm, or call 866-499-8473. Once you convert from conventional shares to Vanguard ETFs, you cannot convert back to conventional shares. Also, conventional shares held through a 401(k) account cannot be converted to Vanguard ETFs. https://personal.vanguard.com/us/content/Funds/FundsVIPERWhatAreVIPERSharesJSP.jsp Withdraw the money you need as a margin loan, buy the house, get a second mortgage of $125k, take the proceeds from the second mortgage and pay back the margin loan. Even if you have short term credit funds, it'd still be wiser to lever up the house completely as long as you're not overpaying or in a bubble area, considering your ample personal investments and the combined rate of return of the house and the funds exceeding the mortgage interest rate. Also, mortgage interest is tax deductible while margin interest isn't, pushing the net return even higher. $125k Generally, I recommend this figure to you because the biggest S&P collapse since the recession took off about 50% from the top. If you borrow $125k on margin, and the total value of the funds drop 50%, you shouldn't suffer margin calls. I assumed that you were more or less invested in the S&P on average (as most modern \"\"asset allocations\"\" basically recommend a back-door S&P as a mix of credit assets, managed futures, and small caps average the S&P). Second mortgage Yes, you will have two loans that you're paying interest on. You've traded having less invested in securities & a capital gains tax bill for more liabilities, interest payments, interest deductions, more invested in securities, a higher combined rate of return. If you have $500k set aside in securities and want $500k in real estate, this is more than safe for you as you will most likely have a combined rate of return of ~5% on $500k with interest on $500k at ~3.5%. If you're in small cap value, you'll probably be grossing ~15% on $500k. You definitely need to secure your labor income with supplementary insurance. Start a new question if you need a model for that. Secure real estate with securities A local bank would be more likely to do this than a major one, but if you secure the house with the investment account with special provisions like giving them copies of your monthly statements, etc, you might even get a lower rate on your mortgage considering how over-secured the loan would be. You might even be able to wrap it up without a down payment in one loan if it's still legal. Mortgage regulations have changed a lot since the housing crash.\"" } ]

[ { "docid": "129319", "title": "", "text": "yAnother potential tool for you would be a Monte Carlo Simulator. here's one http://financial-dictionary.thefreedictionary.com/Business+Fundamentals I know that past performance is no guarantee..... but I think it's in many cases not exactly a flawed tool, and especially with respect to money managers a good way to find good ones. If a manager has shown an ability over time to consistently beat the market, yes he might be due for a bad day, but you'd generally expect that they should be able to continue that trend. I'd apply the same logic to pundits. If their track record sucks, and they constantly seem to whipsaw you with their advice, why listen to them other than" } ]

[ { "docid": "117049", "title": "", "text": "\"It's easy for me to look at an IRA, no deposits or withdrawal in a year, and compare the return to some index. Once you start adding transactions, not so easy. Here's a method that answers your goal as closely as I can offer: SPY goes back to 1993. It's the most quoted EFT that replicates the S&P 500, and you specifically asked to compare how the investment would have gone if you were in such a fund. This is an important distinction, as I don't have to adjust for its .09% expense, as you would have been subject to it in this fund. Simply go to Yahoo, and start with the historical prices. Easy to do this on a spreadsheet. I'll assume you can find all your purchases inc dates & dollars invested. Look these up and treat those dollars as purchases of SPY. Once the list is done, go back and look up the dividends, issues quarterly, and on the dividend date, add the shares it would purchase based on that day's price. Of course, any withdrawals get accounted for the same way, take out the number of SPY shares it would have bought. Remember to include the commission on SPY, whatever your broker charges. If I've missed something, I'm sure we'll see someone point that out, I'd be happy to edit that in, to make this wiki-worthy. Edit - due to the nature of comments and the inability to edit, I'm adding this here. Perhaps I'm reading the question too pedantically, perhaps not. I'm reading it as \"\"if instead of doing whatever I did, I invested in an S&P index fund, how would I have performed?\"\" To measure one's return against a benchmark, the mechanics of the benchmarks calculation are not needed. In a comment I offer an example - if there were an ETF based on some type of black-box investing for which the investments were not disclosed at all, only day's end pricing, my answer above still applies exactly. The validity of such comparisons is a different question, but the fact that the formulation of the EFT doesn't come into play remains. In my comment below which I removed I hypothesized an ETF name, not intending it to come off as sarcastic. For the record, if one wishes to start JoesETF, I'm ok with it.\"" }, { "docid": "93836", "title": "", "text": "\"Because ETFs, unlike most other pooled investments, can be easily shorted, it is possible for institutional investors to take an arbitrage position that is long the underlying securities and short the ETF. The result is that in a well functioning market (where ETF prices are what they should be) these institutional investors would earn a risk-free profit equal to the fee amount. How much is this amount, though? ETFs exist in a very competitive market. Not only do they compete with each other, but with index and mutual funds and with the possibility of constructing one's own portfolio of the underlying. ETF investors are very cost-conscious. As a result, ETF fees just barely cover their costs. Typically, ETF providers do not even do their own trading. They issue new shares only in exchange for a bundle of the underlying securities, so they have almost no costs. In order for an institutional investor to make money with the arbitrage you describe, they would need to be able to carry it out for less than the fees earned by the ETF. Unlike the ETF provider, these investors face borrowing and other shorting costs and limitations. As a result it is not profitable for them to attempt this. Note that even if they had no costs, their maximum upside would be a few basis points per year. Lots of low-risk investments do better than that. I'd also like to address your question about what would happen if there was an ETF with exorbitant fees. Two things about your suggested outcome are incorrect. If short sellers bid the price down significantly, then the shares would be cheap relative to their stream of future dividends and investors would again buy them. In a well-functioning market, you can't bid the price of something that clearly is backed by valuable underlying assets down to near zero, as you suggest in your question. Notice that there are limitations to short selling. The more shares are short-sold, the more difficult it is to locate share to borrow for this purpose. At first brokers start charging additional fees. As borrowable shares become harder to find, they require that you obtain a \"\"locate,\"\" which takes time and costs money. Finally they will not allow you to short at all. Unlimited short selling is not possible. If there was an ETF that charged exorbitant fees, it would fail, but not because of short sellers. There is an even easier arbitrage strategy: Investors would buy the shares of the ETF (which would be cheaper than the value of the underlying because of the fees) and trade them back to the ETF provider in exchange for shares of the underlying. This would drain down the underlying asset pool until it was empty. In fact, it is this mechanism (the ability to trade ETF shares for shares of the underlying and vice versa) that keeps ETF prices fair (within a small tolerance) relative to the underlying indices.\"" }, { "docid": "220486", "title": "", "text": "\"You cannot actually buy an index in the true sense of the word. An index is created and maintained by a company like Standard and Poor's who licenses the use of the index to firms like Vanguard. The S&P 500 is an example of an index. The S&P 500 \"\"index includes 500 leading companies\"\", many finical companies sell products which track to this index. The two most popular products which track to indexes are Mutual Funds (as called Index Funds and Index Mutual Funds) and Exchange Traded Funds (as called ETFs). Each Index Mutual Fund or ETF has an index which it tracks against, meaning they hold securities which make up a sample of the index (some indexes like bond indexes are very hard to hold everything that makes them up). Looking at the Vanguard S&P 500 Index Mutual Fund (ticker VFINX) we see that it tracks against the S&P 500 index. Looking at its holdings we see the 500-ish stocks that it holds along with a small amount of bonds and cash to handle cash flow for people buying and sell shares. If we look at the Vanguard S&P 500 ETF (ticker VOO) we see that it also tracks against the S&P 500 index. Looking at its holdings we see they are very similar to the similar Index Mutual Fund. Other companies like T. Rowe Price have similar offering. Look at the T. Rowe Price Equity Index 500 Fund (ticker PREIX) its holdings in stocks are the same as the similar Vanguard fund and like the Vanguard fund it also holds a small amount of bonds and cash to handle cash flow. The only real difference between different products which track against the same index is in the expense ratio (fees for managing the fund) and in the small differences in the execution of the funds. For the most part execution of the funds do not really matter to most people (it has a very small effect), what matters is the expense (the fees paid to own the fund). If we just compare the expense ratio of the Vanguard and T. Rowe Price funds we see (as of 27 Feb 2016) Vanguard has an expense ratio of 0.17% for it Index Mutual Fund and 0.05% for its ETF, while T. Rowe Price has an expense ratio of 0.27%. These are just the fees for the funds themselves, there are also account maintenance fees (which normally go down as the amount of money you have invested at a firm go up) and in the case of ETFs execution cost (cost to trade the shares along with the difference between the bid and ask on the shares). If you are just starting out I would say going with the Index Mutual Fund would easier and most likely would cost less over-all if you are buying a small amount of shares every month. When choosing a company look at the expense ratio on the funds and the account maintenance fees (along with the account minimals). Vanguard is well known for having low fees and they in fact were the first to offer Index Mutual Funds. For more info on the S&P 500 index see also this Investopedia entry on the S&P 500 index. Do not worry if this is all a bit confusing it is to most people (myself included) at first.\"" }, { "docid": "454610", "title": "", "text": "\"I wonder if ETF's are further removed from the actual underlying holdings or assets giving value to the fund, as compared to regular mutual funds. Not exactly removed. But slightly different. Whenever a Fund want to launch an ETF, it would buy the underlying shares; create units. Lets say it purchased 10 of A, 20 of B and 25 of C. And created 100 units for price x. As part of listing, the ETF company will keep the purchased shares of A,B,C with a custodian. Only then it is allowed to sell the 100 units into the market. Once created, units are bought or sold like regular stock. In case the demand is huge, more units are created and the underlying shares kept with custodian. So, for instance, would VTI and Total Stock Market Index Admiral Shares be equally anchored to the underlying shares of the companies within the index? Yes they are. Are they both connected? Yes to an extent. The way Vanguard is managing this is given a Index [Investment Objective]; it is further splitting the common set of assets into different class. Read more at Share Class. The Portfolio & Management gives out the assets per share class. So Vanguard Total Stock Market Index is a common pool that has VTI ETF, Admiral and Investor Share and possibly Institutional share. Is VTI more of a \"\"derivative\"\"? No it is not a derivative. It is a Mutual Fund.\"" }, { "docid": "87238", "title": "", "text": "what reason would I have in buying an ETF? Apart from the efforts, the real reason is the ticket size. One can't buy shares in fraction. To truly reflect the index in equal weight, the amount to invest will be in multiples of millions [depending on the Index and the stock composition] This related question should help you understand why it is difficult even for large fund house to exactly mimic the index. Why do passive ETFs require so much trading (and incur costs)?" }, { "docid": "566579", "title": "", "text": "The official source for the Dow Jones P/E is Dow Jones. Unfortunately, the P/E is behind a pay-wall and not included in the free registration. The easiest (but only approximate) solution is to track against an equivalent ETF. Here's a list of popular indexes with an equivalent ETF. Source" }, { "docid": "384983", "title": "", "text": "\"You mentioned three concepts: (1) trading (2) diversification (3) buy and hold. Trading with any frequency is for people who want to manage their investments as a hobby or profession. You do not seem to be in that category. Diversification is a critical element of any investment strategy. No matter what you do, you should be diversified. All the way would be best (this means owning at least some of every asset out there). The usual way to do this is to own a mutual or index fund. Or several. These funds own hundreds or thousands of stocks, so that buying the fund instantly diversifies you. Buy and hold is the only reasonable approach to a portfolio for someone who is not interested in spending a lot of time managing it. There's no reason to think a buy-and-hold portfolio will underperform a typical traded portfolio, nor that the gains will come later. It's the assets in the portfolio that determine how aggressive/risky it is, not the frequency with which it is traded. This isn't really a site for specific recommendations, but I'll provide a quick idea: Buy a couple of index funds that cover the whole universe of investments. Index funds have low expenses and are the cheapest/easiest way to diversify. Buy a \"\"total stock market\"\" fund and a \"\"total bond fund\"\" in a ratio that you like. If you want, also buy an \"\"international fund.\"\" If you want specific tickers and ratios, another forum would be better(or just ask your broker or 401(k) provider). The bogleheads forum is one that I respect where people are very happy to give and debate specific recommendations. At the end of the day, responsibly managing your investment portfolio is not rocket science and shouldn't occupy a lot of time or worry. Just choose a few funds with low expenses that cover all the assets you are really interested in, put your money in them in a reasonable-ish ratio (no one knows that the best ratio is) and then forget about it.\"" }, { "docid": "412830", "title": "", "text": "The recommended way to track TSP funds in online portfolio tools is to track the underlying index and know that the results are pretty close. Not a perfect solution: :( Source including suggested ETFs: http://finance.yahoo.com/news/breaking-down-tsp-investment-funds-194600393.html Related, but not exactly what you are looking for, Personal Capital will track your TSP holdings: http://themilitarywallet.com/manage-thrift-savings-plan/" }, { "docid": "173967", "title": "", "text": "The S&P500 is an index, not an investment by itself. The index lists a large number of stocks, and the value of the index is the price of all the stocks added together. If you want to make an investment that tracks the S&P500, you could buy some shares of each stock in the index, in the same proportions as the index. This, however, is impractical for just about everyone. Index mutual funds provide an easy way to make this investment. SPY is an ETF (exchange-traded mutual fund) that does the same thing. An index CFD (contract for difference) is not the same as an index mutual fund. There are a number of differences between investing in a security fund and investing in a CFD, and CFDs are not available everywhere." }, { "docid": "21314", "title": "", "text": "\"This sound like a very bad idea. If you invest exclusively in silver, your investment is not diversified in any way. This is what I would call risky. Have a look at index funds and ETFs and build a diversified portfolio. It does not take much time, and you don't need to let it do by someone else. They are risky too, but I see \"\"silver only\"\" as much riskier. You reduce the risk by holding on to the funds for a long time.\"" }, { "docid": "285560", "title": "", "text": "\"If I invest in index funds or other long term stocks that pay dividend which I reinvest, they don't need to be worth more per share for me to make a profit, right? That is, if I sell part of the stocks, it's GOOD if they're worth more than I bought them at, but the real money comes from the QUANTITY of stocks that you get by reinvesting your dividends, right? I would say it is more the other way around. It is nice to get dividends and reinvest them, but overall the main gain comes from the stocks going up in value. The idea with index funds, however, is that you don't rely on any particular stock going up in value; instead you just rely on the aggregate of all the funds in the index going up. By buying lots of stocks bundled in an index fund, you avoid being too reliant on any one company's performance. Can I invest \"\"small amounts\"\" (part of paycheck) into index funds on a monthly basis, like €500, without taking major \"\"transaction fees\"\"? (Likely to be index fund specific... general answers or specific answers using popular stocks welcomed). Yes, you can. At least in the US, whether you can do this automatically from your paycheck depends on whether you employer has that set up. I don't know that work in the Netherlands. However, at the least, you can almost certainly set up an auto-invest program that takes $X out of your bank account every month and buys shares of some index fund(s). Is this plan market-crash proof? My parents keep saying that \"\"Look at 2008 and think about what such a thing would do to your plan\"\", and I just see that it will be a setback, but ultimately irrelevant, unless it happens when I need the money. And even then I'm wondering whether I'll really need ALL of my money in one go. Doesn't the index fund go back up eventually? Does a crash even matter if you plan on holding stocks for 10 or more years? Crashes always matter, because as you say, there's always the possibility that the crash will occur at a time you need the money. In general, it is historically true that the market recovers after crashes, so yes, if you have the financial and psychological fortitude to not pull your money out during the crash, and to ride it out, your net worth will probably go back up after a rough interlude. No one can predict the future, so it's possible for some unprecedented crisis to cause an unprecedented crash. However, the interconnectedness of stock markets and financial systems around the world is now so great that, were such a no-return crash to occur, it would probably be accompanied by the total collapse of the whole economic system. In other words, if the stock market dies suddenly once and for all, the entire way of life of \"\"developed countries\"\" will probably die with it. As long as you live in such a society, you can't really avoid \"\"gambling\"\" that it will continue to exist, so gambling on there not being a cataclysmic market crash isn't much more of a gamble. Does what I'm planning have similarities with some financial concept or product (to allow me to research better by looking at the risks of that concept/product)? Maybe like a mortgage investment plan without the bank eating your money in between? I'm not sure what you mean by \"\"what you're planning\"\". The main financial products relevant to what you're describing are index funds (which you already mentioned) and index ETFs (which are basically similar with regard to the questions you're asking here). As far as concepts, the philosophy of buying low-fee index funds, holding them for a long time, and not selling during crashes, is essentially that espoused by Jack Bogle (not quite the inventor of the index fund, but more or less its spiritual father) and the community of \"\"Bogleheads\"\" that has formed around his ideas. There is a Bogleheads wiki with lots of information about the details of this approach to investing. If this strategy appeals to you, you may find it useful to read through some of the pages on that site.\"" }, { "docid": "44349", "title": "", "text": "\"There's a huge difference between \"\"can an anverage person make a profit on the stock market\"\" and \"\"can an average person get rich off the stock market\"\". It is certainly possible for an average person to profit, but of course you are unlikely to profit as much as the big Wall Street guys. An S&P 500 index fund, for instance, would be a pretty good way to profit. People with high-powered tools may make a lot of money picking individual stocks, and may even make some choices that help them when the market is down, but it's difficult to see how they could consistently make money over the long term without the S&P 500 also going up. The same applies, to varying extents, to various other index funds, ETFs, and mutual funds. I agree with littleadv that there is no single \"\"right\"\" thing for everyone to do. My personal take is that index funds are a good bet, and I've seen a lot of people take that view on personal finance blogs, etc. (for whatever that's worth). One advantage of index funds that track major indexes (like the S&P 500) is that because they are and are perceived as macro-indicators of the overall economic situation, at least you're in the same boat as many other people. On one level, that means that if you lose money a lot of other investors are also losing money, and when large numbers of people start losing money, that makes governments take action, etc., to turn things around. On another level, the S&P 500 is a lot of big companies; if it goes down, some of those big companies are losing value, and they will use their big-company resources to gain value, and if they succeed, the index goes up again and you benefit. In other words, index funds (and large mutual funds, ETFs, etc.) make investing less about what day-trading wonks focus on, which is trying to make a \"\"hot choice\"\" for a large gain. They make it more about hitching your wagon to an extremely large star that is powered by all the resources of extremely large companies, so that when those companies increase their value, you gain. The bigger the pool of people whose fortunes rise and fall with your own, the more you become part of an investment portfolio that is (I can't resist saying it) \"\"too big to fail\"\". That isn't to say that the S&P 500 can't lose value from time to time, but rather that if it does go down big and hard and stay there, you probably have bigger problems than losing money in the stock market (e.g., the US economy is collapsing and you should begin stockpiling bullets and canned food).\"" }, { "docid": "450848", "title": "", "text": "\"I'd also look into index funds (eg Vanguard) as they have low management fees. you can buy these as ETFs as well - so you can buy in at a very low starting amount. An index fund can also be a talking point for your kids about what an industry index is and how it relates to the companies that fall into it. Also about how mutual funds try to \"\"beat the market\"\" - and often fail.\"" }, { "docid": "17823", "title": "", "text": "\"I'd suggest you start by looking at the mutual fund and/or ETF options available via your bank, and see if they have any low-cost funds that invest in high-risk sectors. You can increase your risk (and potential returns) by allocating your assets to riskier sectors rather than by picking individual stocks, and you'll be less likely to make an avoidable mistake. It is possible to do as you suggest and pick individual stocks, but by doing so you may be taking on more risk than you suspect, even unnecessary risk. For instance, if you decide to buy stock in Company A, you know you're taking a risk by investing in just one company. However, without a lot of work and financial expertise, you may not be able to assess how much risk you're taking by investing in Company A specifically, as opposed to Company B. Even if you know that investing in individual stocks is risky, it can be very hard to know how risky those particular individual stocks are, compared to other alternatives. This is doubly true if the investment involves actions more exotic than simply buying and holding an asset like a stock. For instance, you could definitely get plenty of risk by investing in commercial real estate development or complicated options contracts; but a certain amount of work and expertise is required to even understand how to do that, and there is a greater likelihood that you will slip up and make a costly mistake that negates any extra gain, even if the investment itself might have been sound for someone with experience in that area. In other words, you want your risk to really be the risk of the investment, not the \"\"personal\"\" risk that you'll make a mistake in a complicated scheme and lose money because you didn't know what you were doing. (If you do have some expertise in more exotic investments, then maybe you could go this route, but I think most people -- including me -- don't.) On the other hand, you can find mutual funds or ETFs that invest in large economic sectors that are high-risk, but because the investment is diversified within that sector, you need only compare the risk of the sectors. For instance, emerging markets are usually considered one of the highest-risk sectors. But if you restrict your choice to low-cost emerging-market index funds, they are unlikely to differ drastically in risk (at any rate, far less than individual companies). This eliminates the problem mentioned above: when you choose to invest in Emerging Markets Index Fund A, you don't need to worry as much about whether Emerging Markets Index Fund B might have been less risky; most of the risk is in the choice to invest in the emerging markets sector in the first place, and differences between comparable funds in that sector are small by comparison. You could do the same with other targeted sectors that can produce high returns; for instance, there are mutual funds and ETFs that invest specifically in technology stocks. So you could begin by exploring the mutual funds and ETFs available via your existing investment bank, or poke around on Morningstar. Fees will still matter no matter what sector you're in, so pay attention to those. But you can probably find a way to take an aggressive risk position without getting bogged down in the details of individual companies. Also, this will be less work than trying something more exotic, so you're less likely to make a costly mistake due to not understanding the complexities of what you're investing in.\"" }, { "docid": "9116", "title": "", "text": "ACWI refers to a fund that tracks the MSCI All Country World Index, which is A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the world. The MSCI ACWI is maintained by Morgan Stanley Capital International, and is comprised of stocks from both developed and emerging markets. The ex-US in the name implies exactly what it sounds; this fund probably invests in stock markets (or stock market indexes) of the countries in the index, except the US. Brd Mkt refers to a Broad Market index, which, in the US, means that the fund attempts to track the performance of a wide swath of the US stock market (wider than just the S&P 500, for example). The Dow Jones U.S. Total Stock Market Index, the Wilshire 5000 index, the Russell 2000 index, the MSCI US Broad Market Index, and the CRSP US Total Market Index are all examples of such an index. This could also refer to a fund similar to the one above in that it tracks a broad swath of the several stock markets across the world. I spoke with BNY Mellon about the rest, and they told me this: EB - Employee Benefit (a bank collective fund for ERISA qualified assets) DL - Daily Liquid (provides for daily trading of fund shares) SL - Securities Lending (fund engages in the BNY Mellon securities lending program) Non-SL - Non-Securities Lending (fund does not engage in the BNY Mellon securities lending program) I'll add more detail. EB (Employee Benefit) refers to plans that fall under the Employee Retirement Income Security Act, which are a set a laws that govern employee pensions and retirement plans. This is simply BNY Mellon's designation for funds that are offered through 401(k)'s and other retirement vehicles. As I said before, DL refers to Daily Liquidity, which means that you can buy into and sell out of the fund on a daily basis. There may be fees for this in your plan, however. SL (Securities Lending) often refers to institutional funds that loan out their long positions to investment banks or brokers so that the clients of those banks/brokerages can sell the shares short. This SeekingAlpha article has a good explanation of how this procedure works in practice for ETF's, and the procedure is identical for mutual funds: An exchange-traded fund lends out shares of its holdings to another party and charges a rental fee. Running a securities-lending program is another way for an ETF provider to wring more return out of a fund's holdings. Revenue from these programs is used to offset a fund's expenses, which allows the provider to charge a lower expense ratio and/or tighten the performance gap between an ETF and its benchmark." }, { "docid": "153660", "title": "", "text": "\"For a non-ETF mutual fund, you can only buy shares of the mutual fund from the mutual fund itself (at a price that the mutual fund will reveal only at the end of the day) and can only shares back to the mutual fund (again at a price that the mutual fund will reveal only at the end of the day). There is no open market in the sense that you cannot put in a bid to buy, say, 100 shares of VFINX at $217 per share through a brokerage, and if there is a seller willing to sell 100 shares of VFINX to you at $217, then the sale is consummated and you are now the proud owner of 100 shares of VFINX. The only buyer or seller of VFINX is the mutual find itself, and you tell it that you \"\"want to buy 100 shares of VFINX and please take the money out of my checking account\"\". If this order is entered before the markets close at 4 pm, the mutual fund determines its share price as of the end of the day, opens a new account for you and puts 100 shares of VFINX in it (or adds 100 shares of VFINX to your already existing pile of shares) and takes the purchase price out of your checking account via an ACH transfer. Similarly for redeeming/selling shares of VFINX that you own (and these are held in an account at the mutual fund itself, not by your brokerage): you tell the mutual fund to that you \"\"wish to redeem 100 shares and please send the proceeds to my bank account\"\" and the mutual fund does this at the end of the day, and the money appears in your bank account via ACH transfer two or three days later. Generally, these transactions do not need to be for round lots of multiples of 100 shares for efficiency; most mutual fund will gladly sell you fractional shares down to a thousandth of a share. In contrast, shares of an exchange-traded fund (ETF) are just like stock shares in that they can be bought and sold on the open market and your broker will charge you fees for buying and selling them. Selling fractional shares on the open market is generally not possible, and trading in round lots is less expensive. Also, trades occur at all times of the stock exchange day, not just at the end of the day as with non-ETF funds, and the price can fluctuate during the day too. Many non-ETF mutual funds have an ETF equivalent: VOO is the symbol for Vanguard's S&P 500 Index ETF while VFINX is the non-ETF version of the same index fund. Read more about the differences between ETFs and mutual funds, for example, here.\"" }, { "docid": "498645", "title": "", "text": "\"Bonds might not be simple, but in general there are only a few variables that need to be understood: bid, coupon (interest) rate, maturity, and yield. Bond tables clearly lay those out, and if you're talking about government bonds a lot of things (like convertibles) don't apply (although default is still a concern). This might be overly simplistic, but I view ETF's primarily as an easy way to bring somewhat esoteric instruments (like grain futures) into the easily available markets of Nasdaq and the NYSE. That they got \"\"enhanced\"\" with leveraged funds and the such is interesting, but perhaps not the original intent of the instrument. Complicating your situation a bit more is the fee that gets tacked onto the ETF. Even Vanguard government bond funds hang out north of 0.1%. That's not huge, but it's not particularly appealing either considering that (unlike rounding up live cattle futures), it's not that much work to buy US government bonds, so the expense might not seem worth it to someone who's comfortable purchasing the securities directly. I'd be interested to see someone else's view on this, but in general I'd say that if you know what you want and know how to buy it, the government bond ETF becomes a lot less relevant as the liquidity offered (including the actual \"\"ease of transacting\"\") seem to to be the biggest factors in favor. From Investopedia's description: The bond ETF is an exciting new addition to the bond market, offering an excellent alternative to self-directed investors who, looking for ease of trading and increased price transparency, want to practice indexing or active bond trading. However, bond ETFs are suitable for particular strategies. If, for instance, you are looking to create a specific income stream, bond ETFs may not be for you. Be sure to compare your alternatives before investing.\"" }, { "docid": "312406", "title": "", "text": "This is the chart going back to the first full year of this fund. To answer your question - yes, a low cost ETF or Mutual fund is fine. Why not go right to an S&P index? VOO has a .05% expense. Why attracted you to a choice that lagged the S&P by $18,000 over this 21 year period? (And yes, past performance, yada, yada, but that warning is appropriate for the opposite example. When you show a fund that beat the S&P short term, say 5 years, its run may be over. But this fund lagged the S&P by a significant margin over 2 decades, what makes you think this will change?" }, { "docid": "205280", "title": "", "text": "\"According to what little information is available currently, this fund is most akin to an actively managed exchange traded fund rather than an investment trust. An investment trust is an actively managed, closed-end fund that is tradeable on the stock market. \"\"Closed-end\"\" means that there are a fixed number of shares available for trading, so if you wish to buy or sell shares in a closed-end fund you need to find someone willing to sell or buy shares. \"\"Actively managed\"\" means that the assets are selected by the fund managers in the belief that they will perform well. This is in contrast to a \"\"passively managed\"\" fund which simply tracks an underlying index. The closed-end nature of investment trusts means that the share price is not well correlated to the value of the underlying assets. Indeed, almost all UK investment trusts trade at a significant discount to their net asset value. This reflects their historic poor performance and relatively weak liquidity. Of course there are some exceptions to this. Examples of open-end funds are unit trust (US = mutual funds) and ETFs (exchange traded funds). They are \"\"open-end\"\" funds in the sense that the number of shares/units available will change according to demand. Most importantly, the price of a share/unit will be strongly correlated to the net asset value of the underlying portfolio. In general, for an open-end fund, if the net asset value of the fund is X and there are Y shares/units outstanding, then the price of a share/unit will be X/Y. Historic data shows that passively managed funds (index trackers) \"\"always\"\" outperform actively managed funds in the long term. One of the big issues with actively managed funds is they have relatively high management fees. The Peoples Trust will be charging about 1% with a promise that this should come down over time. Compare this to a fee of 0.05% on a large, major market index tracking ETF. Further, the 1% headline fee being touted by Peoples Trust is a somewhat misleading, since they are paying their employees bonuses with shares in the fund. This will cause dilution of the net asset value per share and can be read as addition management fees by proxy. Since competent fund managers will demand high incomes, bonus shares could easily double the management fees, depending on the size of the fund. In summary, history has shown that the promises of active fund managers rarely (if ever) come to fruition. Personally, I would not consider this to be an attractive investment and would look more towards a passively managed major market index ETF with low management fees.\"" } ]

[ { "docid": "570664", "title": "", "text": "check pastsat-backtesting , backtesting tool, where one can can test on well known technical indicators without coding skills" } ]

[ { "docid": "49168", "title": "", "text": "The creation mechanism for ETF's ensures that the value of the underlying stocks do not diverge significantly from the Fund's value. Authorized participants have a strong incentive to arbitrage any pricing differences and create/redeem blocks of stock/etf until the prices are back inline. Contrary to what was stated in a previous answer, this mechanism lowers the cost of management of ETF's when compared to mutual funds that must access the market on a regular basis when any investors enter/exit the fund. The ETF only needs to create/redeem in a wholesale basis, this allows them to operate with management fees that are much lower than those of a mutual fund. Expenses Due to the passive nature of indexed strategies, the internal expenses of most ETFs are considerably lower than those of many mutual funds. Of the more than 900 available ETFs listed on Morningstar in 2010, those with the lowest expense ratios charged about .10%, while those with the highest expenses ran about 1.25%. By comparison, the lowest fund fees range from .01% to more than 10% per year for other funds. (For more on mutual fund feeds, read Stop Paying High Fees.)" }, { "docid": "128048", "title": "", "text": "\"When you invest in an S&P500 index fund that is priced in USD, the only major risk you bear is the risk associated with the equity that comprises the index, since both the equities and the index fund are priced in USD. The fund in your question, however, is priced in EUR. For a fund like this to match the performance of the S&P500, which is priced in USD, as closely as possible, it needs to hedge against fluctuations in the EUR/USD exchange rate. If the fund simply converted EUR to USD then invested in an S&P500 index fund priced in USD, the EUR-priced fund may fail to match the USD-priced fund because of exchange rate fluctuations. Here is a simple example demonstrating why hedging is necessary. I assumed the current value of the USD-priced S&P500 index fund is 1,600 USD/share. The exchange rate is 1.3 USD/EUR. If you purchase one share of this index using EUR, you would pay 1230.77 EUR/share: If the S&P500 increases 10% to 1760 USD/share and the exchange rate remains unchanged, the value of the your investment in the EUR fund also increases by 10% (both sides of the equation are multiplied by 1.1): However, the currency risk comes into play when the EUR/USD exchange rate changes. Take the 10% increase in the price of the USD index occurring in tandem with an appreciation of the EUR to 1.4 USD/EUR: Although the USD-priced index gained 10%, the appreciation of the EUR means that the EUR value of your investment is almost unchanged from the first equation. For investments priced in EUR that invest in securities priced in USD, the presence of this additional currency risk mandates the use of a hedge if the indexes are going to track. The fund you linked to uses swap contracts, which I discuss in detail below, to hedge against fluctuations in the EUR/USD exchange rate. Since these derivatives aren't free, the cost of the hedge is included in the expenses of the fund and may result in differences between the S&P500 Index and the S&P 500 Euro Hedged Index. Also, it's important to realize that any time you invest in securities that are priced in a different currency than your own, you take on currency risk whether or not the investments aim to track indexes. This holds true even for securities that trade on an exchange in your local currency, like ADR's or GDR's. I wrote an answer that goes through a simple example in a similar fashion to the one above in that context, so you can read that for more information on currency risk in that context. There are several ways to investors, be they institutional or individual, can hedge against currency risk. iShares offers an ETF that tracks the S&P500 Euro Hedged Index and uses a over-the-counter currency swap contract called a month forward FX contract to hedge against the associated currency risk. In these contracts, two parties agree to swap some amount of one currency for another amount of another currency, at some time in the future. This allows both parties to effectively lock in an exchange rate for a given time period (a month in the case of the iShares ETF) and therefore protect themselves against exchange rate fluctuations in that period. There are other forms of currency swaps, equity swaps, etc. that could be used to hedge against currency risk. In general, two parties agree to swap one quantity, like a EUR cash flow, payments of a fixed interest rate, etc. for another quantity, like a USD cash flow, payments based on a floating interest rate, etc. In many cases these are over-the-counter transactions, there isn't necessarily a standardized definition. For example, if the European manager of a fund that tracks the S&P500 Euro Hedged Index is holding euros and wants to lock in an effective exchange rate of 1.4 USD/EUR (above the current exchange rate), he may find another party that is holding USD and wants to lock in the respective exchange rate of 0.71 EUR/USD. The other party could be an American fund manager that manages a USD-price fund that tracks the FTSE. By swapping USD and EUR, both parties can, at a price, lock in their desired exchange rates. I want to clear up something else in your question too. It's not correct that the \"\"S&P 500 is completely unrelated to the Euro.\"\" Far from it. There are many cases in which the EUR/USD exchange rate and the level of the S&P500 index could be related. For example: Troublesome economic news in Europe could cause the euro to depreciate against the dollar as European investors flee to safety, e.g. invest in Treasury bills. However, this economic news could also cause US investors to feel that the global economy won't recover as soon as hoped, which could affect the S&P500. If the euro appreciated against the dollar, for whatever reason, this could increase profits for US businesses that earn part of their profits in Europe. If a US company earns 1 million EUR and the exchange rate is 1.3 USD/EUR, the company earns 1.3 million USD. If the euro appreciates against the dollar to 1.4 USD/EUR in the next quarter and the company still earns 1 million EUR, they now earn 1.4 million USD. Even without additional sales, the US company earned a higher USD profit, which is reflected on their financial statements and could increase their share price (thus affecting the S&P500). Combining examples 1 and 2, if a US company earns some of its profits in Europe and a recession hits in the EU, two things could happen simultaneously. A) The company's sales decline as European consumers scale back their spending, and B) the euro depreciates against the dollar as European investors sell euros and invest in safer securities denominated in other currencies (USD or not). The company suffers a loss in profits both from decreased sales and the depreciation of the EUR. There are many more factors that could lead to correlation between the euro and the S&P500, or more generally, the European and American economies. The balance of trade, investor and consumer confidence, exposure of banks in one region to sovereign debt in another, the spread of asset/mortgage-backed securities from US financial firms to European banks, companies, municipalities, etc. all play a role. One example of this last point comes from this article, which includes an interesting line: Among the victims of America’s subprime crisis are eight municipalities in Norway, which lost a total of $125 million through subprime mortgage-related investments. Long story short, these municipalities had mortgage-backed securities in their investment portfolios that were derived from, far down the line, subprime mortgages on US homes. I don't know the specific cities, but it really demonstrates how interconnected the world's economies are when an American family's payment on their subprime mortgage in, say, Chicago, can end up backing a derivative investment in the investment portfolio of, say, Hammerfest, Norway.\"" }, { "docid": "41176", "title": "", "text": "\"What does ETFs have to do with this or Amazon? Actually, investing in ETFs means you are killing actively managed Mutual Funds (managed by people, fund managers) to get an average return (and loss) of the market that a computer manage instead of a person. And the ETF will surely have Amazon stocks because they are part of the index. I only invest in actively managed mutual funds. Yes, most actively managed mutual funds can't do better than the index, but if you work a bit harder, you can find the many that do much better than the \"\"average\"\" that an index give you.\"" }, { "docid": "377186", "title": "", "text": "If you want to invest in the stock market, whether over a shorter period of 1 to 2 years or over a longer period of 10 or 20 years or longer you need to take some precautions and have a written investment plan with a risk management strategy incorporated in your plan. Others have said that 1 to 2 years is too short to invest in the stock market as the stock market can have a correction and fall by 50%. But it doesn't matter if you invest for 1 year or if you invest for 50 years, the stock market can still fall by 50% just before you plan to withdraw your funds. What you need to figure out is a way to get out before the market falls by 40% to 50%. A simple way to do this is to use technical indicators to warn you when a market trend is starting to change and that it is time to get out of the market. Two simple indicators you can use on a market index are the Rate of Change (ROC) indicator and the 100 week Moving Average (MA). Below is a 10 year weekly chart of the S&P500 with these two indicators charted. They show good times to get into the market and good times to get out. If you are using the 100 week MA you would buy in when the price crosses above the MA line and sell when the price crosses below the MA line. If you are using the ROC indicator you would buy in when the ROC indicator crosses above the zero line and sell when the ROC indicator crosses below the zero line. So your investment plan could be to buy an Index ETF representing the S&P500 when the ROC moves above zero and sell when it crosses below zero. You can also place a trailing stop loss of 10% to protect you in case of a sudden fall over a couple of days. You can manage your investments in as little as 10 minutes per week by checking the chart once per week and adjusting your stop loss order. If you want to progressively add to your investment each month you could check the charts and only add any new funds if both the ROC is above zero and sloping upwards. Another option for adding new funds could be if the price is above the MA and moving further away from the MA. All these rules should be incorporated into your investment plan so that you are not basing your decisions based on emotions. There are many other Technical Analysis Indicators you could also learn about to make better educated decisions about your stock market investments. However, what I have provided here is enough for anyone to test over different indexes and time frames and do their own paper trading on to gain some confidence before placing any real money on the table." }, { "docid": "566579", "title": "", "text": "The official source for the Dow Jones P/E is Dow Jones. Unfortunately, the P/E is behind a pay-wall and not included in the free registration. The easiest (but only approximate) solution is to track against an equivalent ETF. Here's a list of popular indexes with an equivalent ETF. Source" }, { "docid": "153660", "title": "", "text": "\"For a non-ETF mutual fund, you can only buy shares of the mutual fund from the mutual fund itself (at a price that the mutual fund will reveal only at the end of the day) and can only shares back to the mutual fund (again at a price that the mutual fund will reveal only at the end of the day). There is no open market in the sense that you cannot put in a bid to buy, say, 100 shares of VFINX at $217 per share through a brokerage, and if there is a seller willing to sell 100 shares of VFINX to you at $217, then the sale is consummated and you are now the proud owner of 100 shares of VFINX. The only buyer or seller of VFINX is the mutual find itself, and you tell it that you \"\"want to buy 100 shares of VFINX and please take the money out of my checking account\"\". If this order is entered before the markets close at 4 pm, the mutual fund determines its share price as of the end of the day, opens a new account for you and puts 100 shares of VFINX in it (or adds 100 shares of VFINX to your already existing pile of shares) and takes the purchase price out of your checking account via an ACH transfer. Similarly for redeeming/selling shares of VFINX that you own (and these are held in an account at the mutual fund itself, not by your brokerage): you tell the mutual fund to that you \"\"wish to redeem 100 shares and please send the proceeds to my bank account\"\" and the mutual fund does this at the end of the day, and the money appears in your bank account via ACH transfer two or three days later. Generally, these transactions do not need to be for round lots of multiples of 100 shares for efficiency; most mutual fund will gladly sell you fractional shares down to a thousandth of a share. In contrast, shares of an exchange-traded fund (ETF) are just like stock shares in that they can be bought and sold on the open market and your broker will charge you fees for buying and selling them. Selling fractional shares on the open market is generally not possible, and trading in round lots is less expensive. Also, trades occur at all times of the stock exchange day, not just at the end of the day as with non-ETF funds, and the price can fluctuate during the day too. Many non-ETF mutual funds have an ETF equivalent: VOO is the symbol for Vanguard's S&P 500 Index ETF while VFINX is the non-ETF version of the same index fund. Read more about the differences between ETFs and mutual funds, for example, here.\"" }, { "docid": "571913", "title": "", "text": "I am a firm believer in TD's e-series funds. No other bank in Canada has index funds with such low management fees. Index funds offer the flexibility to re-balance your portfolio every month without the need to pay commission fees. Currently I allocate 10% of my paycheck to be diversified between Canadian, US, and International e-series index funds. In terms of just being for beginners, this opinion is most likely based on the fact that an e-series portfolio is very easy to manage. But this doesn't mean that it is only for beginners. Sometimes the easiest solution is the best one! :)" }, { "docid": "183898", "title": "", "text": "It is true that this is possible, however, it's very remote in the case of the large and reputable fund companies such as Vanguard. FDIC insurance protects against precisely this for bank accounts, but mutual funds and ETFs do not have an equivalent to FDIC insurance. One thing that does help you in the case of a mutual fund or ETF is that you indirectly (through the fund) own actual assets. In a cash account at a bank, you have a promise from the bank to pay, and then the bank can go off and use your money to make loans. You don't in any sense own the bank's loans. With a fund, the fund company cannot (legally) take your money out of the fund, except to pay the expense ratio. They have to use your money to buy stocks, bonds, or whatever the fund invests in. Those assets are then owned by the fund. Legally, a mutual fund is a special kind of company defined in the Investment Company Act of 1940, and is a separate company from the investment advisor (such as Vanguard): http://www.sec.gov/answers/mfinvco.htm Funds have their own boards, and in principle a fund board can even fire the company advising the fund, though this is not likely since boards aren't usually independent. (a quick google found this article for more, maybe someone can find a better one: http://www.marketwatch.com/story/mutual-fund-independent-board-rule-all-but-dead) If Vanguard goes under, the funds could continue to exist and get a new adviser, or could be liquidated with investors receiving whatever the assets are worth. Of course, all this legal stuff doesn't help you with outright fraud. If a fund's adviser says it bought the S&P 500, but really some guy bought himself a yacht, Madoff-style, then you have a problem. But a huge well-known ETF has auditors, tons of different employees, lots of brokerage and exchange traffic, etc. so to me at least it's tough to imagine a risk here. With a small fund company with just a few people - and there are lots of these! - then there's more risk, and you'd want to carefully look at what independent agent holds their assets, who their auditors are, and so forth. With regular mutual funds (not ETFs) there are more issues with diversifying across fund companies: With ETFs, there probably isn't much downside to diversifying since you could buy them all from one brokerage account. Maybe it even happens naturally if you pick the best ETFs you can find. Personally, I would just pick the best ETFs and not worry about advisor diversity. Update: maybe also deserving a mention are exchange-traded notes (ETNs). An ETN's legal structure is more like the bank account, minus the FDIC insurance of course. It's an IOU from the company that runs the ETN, where they promise to pay back the value of some index. There's no investment company as with a fund, and therefore you don't own a share of any actual assets. If the ETN's sponsor went bankrupt, you would indeed have a problem, much more so than if an ETF's sponsor went bankrupt." }, { "docid": "307465", "title": "", "text": "Although you can't invest in an index, you can invest in a fund that basically invests in what the index is made up of. Example: In dealing with an auto index, you could find a fund that buys car companies's stock. The Google Finance list of funds dealing with INDEXDJX:REIT Although not pertaining to your quetion exactly, you may want to consider buying into Vanguard REIT ETF I hope this answers your question." }, { "docid": "154229", "title": "", "text": "\"In this environment, I don't think that it is advisable to buy a broad emerging market fund. Why? \"\"Emerging market\"\" is too broad... Look at the top 10 holdings of the fund... You're exposed to Russia & Brazil (oil driven), Chinese and Latin American banks and Asian electronics manufacturing. Those are sectors that don't correlate, in economies that are unstable -- a recipie for trouble unless you think that the global economy is heading way up. I would recommend focusing on the sectors that you are interested in (ie oil, electronics, etc) via a low cost vehicle like an index ETF or invest using a actively managed emerging markets fund with a strategy that you understand. Don't invest a dime unless you understand what you are getting into. An index fund is just sorting companies by market cap. But... What does market cap mean when you are buying a Chinese bank?\"" }, { "docid": "75372", "title": "", "text": "Bond MF/ETF comes in many flavour, one way to look at them is corporate, govt. (gilt/sovreign), money market (short term, overnight lending etc.), govt. backed bonds. The ETF/MFs that invest money in these are also different types. One way to evaluate an ETF/MF is to see where they invest your money. Corporate debts are by the highest coupon paying bonds, however, the chance of default is also greater, if you wish to invest in these, it is preferable to look at the ETF/MF's debt portfolio financial ratings (Moodies etc.). Govt. bonds are more stable and unless the govt. defaults (which happens more often than we would like to think), here also look for higher rating bonds portfolio that the fund/scheme carries. The govt. backed bonds are somewhat similar to sovreign bonds, however, these are issuesd by institutions which are backed by govt. (e.g. national railways, municipal bodies etc.), any fund/scheme that invests in these bonds could also be considered and similarly measured. The last are the short term money market related, which provides the least return but are very liquid. It is very difficult to answer how you should invest large sum on ETF/MFs that are bond oriented. However, from any investment perspective, it is better to spread your money. If I take your hypthetical case of 1M$, I would divide it into 100K$ pieces and invest in 10 different ETF/MF schemes of different flavour: Hope this helps." }, { "docid": "498645", "title": "", "text": "\"Bonds might not be simple, but in general there are only a few variables that need to be understood: bid, coupon (interest) rate, maturity, and yield. Bond tables clearly lay those out, and if you're talking about government bonds a lot of things (like convertibles) don't apply (although default is still a concern). This might be overly simplistic, but I view ETF's primarily as an easy way to bring somewhat esoteric instruments (like grain futures) into the easily available markets of Nasdaq and the NYSE. That they got \"\"enhanced\"\" with leveraged funds and the such is interesting, but perhaps not the original intent of the instrument. Complicating your situation a bit more is the fee that gets tacked onto the ETF. Even Vanguard government bond funds hang out north of 0.1%. That's not huge, but it's not particularly appealing either considering that (unlike rounding up live cattle futures), it's not that much work to buy US government bonds, so the expense might not seem worth it to someone who's comfortable purchasing the securities directly. I'd be interested to see someone else's view on this, but in general I'd say that if you know what you want and know how to buy it, the government bond ETF becomes a lot less relevant as the liquidity offered (including the actual \"\"ease of transacting\"\") seem to to be the biggest factors in favor. From Investopedia's description: The bond ETF is an exciting new addition to the bond market, offering an excellent alternative to self-directed investors who, looking for ease of trading and increased price transparency, want to practice indexing or active bond trading. However, bond ETFs are suitable for particular strategies. If, for instance, you are looking to create a specific income stream, bond ETFs may not be for you. Be sure to compare your alternatives before investing.\"" }, { "docid": "114092", "title": "", "text": "I would also be getting out of the stock market if I noticed prices starting to fall and a crash possibly on the way. There are some good and quite simple techniques I would use to time the markets over the medium to long term. I have described some of them in the answer to this question of mine: What are some simple techniques used for Timing the Stock Market over the long term? You could use similar techniques in your investing. And in regards to back-testing DCA to Timing The Markets, I have done that too in my answer to the following question: Investing in low cost index fund — does the timing matter? Timing the Markets wins hand down. In regards to back-testing and the concerns Kent Anderson has brought up, when I back-test a trading strategy, if that strategy is successful, I then forward test it over a year or two to confirm the results. As with back-testing you can sometimes curve fit your criteria too much. By forward testing you are confirming that the strategy is robust over different market conditions. One strategy you can take when the market does start to fall is short selling, as mentioned by some already. I am now short selling using CFDs over the short to medium term as one of my more aggressive strategies. I have a longer term strategy where I do not short, but tighten my stop losses when the market starts to tank. Sometimes my positions will keep going up even though the market as a whole is heading down, and I can make an extra 5% to 10% on these positions before I get taken out. The rare position even continues going up during the whole downturn and when the market starts to recover. So I let the market decide when I get out and when I stay in, I leave my emotions out of it. The best thing you can do is have a written trading plan with all your criteria for getting into the market, your criteria for getting out of the market and your position sizing and risk management incorporated in the plan." }, { "docid": "454610", "title": "", "text": "\"I wonder if ETF's are further removed from the actual underlying holdings or assets giving value to the fund, as compared to regular mutual funds. Not exactly removed. But slightly different. Whenever a Fund want to launch an ETF, it would buy the underlying shares; create units. Lets say it purchased 10 of A, 20 of B and 25 of C. And created 100 units for price x. As part of listing, the ETF company will keep the purchased shares of A,B,C with a custodian. Only then it is allowed to sell the 100 units into the market. Once created, units are bought or sold like regular stock. In case the demand is huge, more units are created and the underlying shares kept with custodian. So, for instance, would VTI and Total Stock Market Index Admiral Shares be equally anchored to the underlying shares of the companies within the index? Yes they are. Are they both connected? Yes to an extent. The way Vanguard is managing this is given a Index [Investment Objective]; it is further splitting the common set of assets into different class. Read more at Share Class. The Portfolio & Management gives out the assets per share class. So Vanguard Total Stock Market Index is a common pool that has VTI ETF, Admiral and Investor Share and possibly Institutional share. Is VTI more of a \"\"derivative\"\"? No it is not a derivative. It is a Mutual Fund.\"" }, { "docid": "295993", "title": "", "text": "ETFs are legally required to publicly disclose their positions at every point in time. The reason for this is that for an ETF to issue shares of ETF they do NOT take cash in exchange but underlying securities - this is called a creation unit. So people need to know which shares to deliver to the fund to get a share of ETF in exchange. This is never done by retail clients, however, but by nominated market makers. Retail persons will normally trade shares only in the secondary market (ie. on a stock exchange), which does not require new shares of the ETF to be issued. However, they do not normally make it easy to find this information in a digestible way, and each ETF does it their own way. So typically services that offer this information are payable (as somebody has to scrape the information from a variety of sources or incentivise ETF providers to send it to them). If you have access to a Bloomberg terminal, this information is available from there. Otherwise there are paid for services that offer it. Searching on Google for ETF constituent data, I found two companies that offer it: See if you can find what you need there. Good luck. (etfdb even has a stock exposure tool freely available that allows you to see which ETFs have large exposure to a stock of your choosing, see here: http://etfdb.com/tool/etf-stock-exposure-tool/). Since this data is in a table format you could easily download it automatically using table parsing tools for your chosen programming language. PS: Don't bother with underlying index constituents, they are NOT required to be made public and index providers will normally charge handsomely for this so normally only institutional investors will have this information." }, { "docid": "358997", "title": "", "text": "What is your time horizon? Over long horizons, you absolutely want to minimise the expense ratio – a seemingly puny 2% fee p.a. can cost you a third of your savings over 35 years. Over short horizons, the cost of trading in and trading out might matter more. A mutual fund might be front-loaded, i.e. charge a fixed initial percentage when you first purchase it. ETFs, traded daily on an exchange just like a stock, don't have that. What you'll pay there is the broker commission, and the bid-ask spread (and possibly any premium/discount the ETF has vis-a-vis the underlying asset value). Another thing to keep in mind is tracking error: how closely does the fond mirror the underlying index it attempts to track? More often than not it works against you. However, not sure there is a systematic difference between ETFs and funds there. Size and age of a fund can matter, indeed - I've had new and smallish ETFs that didn't take off close down, so I had to sell and re-allocate the money. Two more minor aspects: Synthetic ETFs and lending to short sellers. 1) Some ETFs are synthetic, that is, they don't buy all the underlying shares replicating the index, actually owning the shares. Instead, they put the money in the bank and enter a swap with a counter-party, typically an investment bank, that promises to pay them the equivalent return of holding that share portfolio. In this case, you have (implicit) credit exposure to that counter-party - if the index performs well, and they don't pay up, well, tough luck. The ETF was relying on that swap, never really held the shares comprising the index, and won't necessarily cough up the difference. 2) In a similar vein, some (non-synthetic) ETFs hold the shares, but then lend them out to short sellers, earning extra money. This will increase the profit of the ETF provider, and potentially decrease your expense ratio (if they pass some of the profit on, or charge lower fees). So, that's a good thing. In case of an operational screw up, or if the short seller can't fulfil their obligations to return the shares, there is a risk of a loss. These two considerations are not really a factor in normal times (except in improving ETF expense ratios), but during the 2009 meltdown they were floated as things to consider. Mutual funds and ETFs re-invest or pay out dividends. For a given mutual fund, you might be able to choose, while ETFs typically are of one type or the other. Not sure how tax treatment differs there, though, sorry (not something I have to deal with in my jurisdiction). As a rule of thumb though, as alex vieux says, for a popular index, ETFs will be cheaper over the long term. Very low cost mutual funds, such as Vanguard, might be competitive though." }, { "docid": "285560", "title": "", "text": "\"If I invest in index funds or other long term stocks that pay dividend which I reinvest, they don't need to be worth more per share for me to make a profit, right? That is, if I sell part of the stocks, it's GOOD if they're worth more than I bought them at, but the real money comes from the QUANTITY of stocks that you get by reinvesting your dividends, right? I would say it is more the other way around. It is nice to get dividends and reinvest them, but overall the main gain comes from the stocks going up in value. The idea with index funds, however, is that you don't rely on any particular stock going up in value; instead you just rely on the aggregate of all the funds in the index going up. By buying lots of stocks bundled in an index fund, you avoid being too reliant on any one company's performance. Can I invest \"\"small amounts\"\" (part of paycheck) into index funds on a monthly basis, like €500, without taking major \"\"transaction fees\"\"? (Likely to be index fund specific... general answers or specific answers using popular stocks welcomed). Yes, you can. At least in the US, whether you can do this automatically from your paycheck depends on whether you employer has that set up. I don't know that work in the Netherlands. However, at the least, you can almost certainly set up an auto-invest program that takes $X out of your bank account every month and buys shares of some index fund(s). Is this plan market-crash proof? My parents keep saying that \"\"Look at 2008 and think about what such a thing would do to your plan\"\", and I just see that it will be a setback, but ultimately irrelevant, unless it happens when I need the money. And even then I'm wondering whether I'll really need ALL of my money in one go. Doesn't the index fund go back up eventually? Does a crash even matter if you plan on holding stocks for 10 or more years? Crashes always matter, because as you say, there's always the possibility that the crash will occur at a time you need the money. In general, it is historically true that the market recovers after crashes, so yes, if you have the financial and psychological fortitude to not pull your money out during the crash, and to ride it out, your net worth will probably go back up after a rough interlude. No one can predict the future, so it's possible for some unprecedented crisis to cause an unprecedented crash. However, the interconnectedness of stock markets and financial systems around the world is now so great that, were such a no-return crash to occur, it would probably be accompanied by the total collapse of the whole economic system. In other words, if the stock market dies suddenly once and for all, the entire way of life of \"\"developed countries\"\" will probably die with it. As long as you live in such a society, you can't really avoid \"\"gambling\"\" that it will continue to exist, so gambling on there not being a cataclysmic market crash isn't much more of a gamble. Does what I'm planning have similarities with some financial concept or product (to allow me to research better by looking at the risks of that concept/product)? Maybe like a mortgage investment plan without the bank eating your money in between? I'm not sure what you mean by \"\"what you're planning\"\". The main financial products relevant to what you're describing are index funds (which you already mentioned) and index ETFs (which are basically similar with regard to the questions you're asking here). As far as concepts, the philosophy of buying low-fee index funds, holding them for a long time, and not selling during crashes, is essentially that espoused by Jack Bogle (not quite the inventor of the index fund, but more or less its spiritual father) and the community of \"\"Bogleheads\"\" that has formed around his ideas. There is a Bogleheads wiki with lots of information about the details of this approach to investing. If this strategy appeals to you, you may find it useful to read through some of the pages on that site.\"" }, { "docid": "198572", "title": "", "text": "\"I have a similar situation -- five different accounts between me and my wife. Just as you and @Alex B describe, I maintain my asset allocation across the combination of all accounts. I also maintain a spreadsheet to track the targets, deviations from the targets, amounts required to get back in balance, and overall performance. I (mostly) don't use mutual funds. I have selected, for each category, 1 or 2 ETFs. Choosing index ETFs with low expense ratios and a brokerage with cheap or free trades keeps expenses low. (My broker offers free ETF trades if you buy off their list as long as you aren't short-term trading; this is great for rebalancing for free 2 or 3 times a year.) Using ETFs also solves the minimum balance problem -- but watch out for commissions. If you pay $10 to buy $500 worth of an ETF, that's an immediate 2% loss; trade a couple of times a year and that ETF has to gain 5% just to break even. One issue that comes up is managing cash and avoiding transaction fees. Say your IRA has all the growth stock funds and your Roth has the bonds. Stocks do well and bonds do poorly, so you sell off some stocks, which creates a bunch of cash in your IRA. Now you want to buy some bonds but you don't have enough cash in your Roth, so you buy the bonds in your IRA. Not a problem at first but if you don't manage it you can end up with small amounts of various funds spread across all of your accounts. If you're not careful you can end up paying two commissions (in two different accounts) to sell off / purchase enough of a category to get back to your targets. Another problem I had is that only one account (401k) is receiving deposits on a regular basis, and that's all going into an S&P 500 index fund. This makes it so that my allocation is off by a fair amount every quarter or so -- too much in large cap equities, not enough of everything else. My solution to this going forward is to \"\"over-rebalance\"\" a couple of times a year: sell enough SPY from my other accounts so that I'm under-allocated in large caps by the amount I expect to add to my 401k over the next 3 months. (So that in six months at my next rebalancing I'm only 3 months over-allocated to large caps -- plus or minus whatever gains/losses there are.)\"" }, { "docid": "205280", "title": "", "text": "\"According to what little information is available currently, this fund is most akin to an actively managed exchange traded fund rather than an investment trust. An investment trust is an actively managed, closed-end fund that is tradeable on the stock market. \"\"Closed-end\"\" means that there are a fixed number of shares available for trading, so if you wish to buy or sell shares in a closed-end fund you need to find someone willing to sell or buy shares. \"\"Actively managed\"\" means that the assets are selected by the fund managers in the belief that they will perform well. This is in contrast to a \"\"passively managed\"\" fund which simply tracks an underlying index. The closed-end nature of investment trusts means that the share price is not well correlated to the value of the underlying assets. Indeed, almost all UK investment trusts trade at a significant discount to their net asset value. This reflects their historic poor performance and relatively weak liquidity. Of course there are some exceptions to this. Examples of open-end funds are unit trust (US = mutual funds) and ETFs (exchange traded funds). They are \"\"open-end\"\" funds in the sense that the number of shares/units available will change according to demand. Most importantly, the price of a share/unit will be strongly correlated to the net asset value of the underlying portfolio. In general, for an open-end fund, if the net asset value of the fund is X and there are Y shares/units outstanding, then the price of a share/unit will be X/Y. Historic data shows that passively managed funds (index trackers) \"\"always\"\" outperform actively managed funds in the long term. One of the big issues with actively managed funds is they have relatively high management fees. The Peoples Trust will be charging about 1% with a promise that this should come down over time. Compare this to a fee of 0.05% on a large, major market index tracking ETF. Further, the 1% headline fee being touted by Peoples Trust is a somewhat misleading, since they are paying their employees bonuses with shares in the fund. This will cause dilution of the net asset value per share and can be read as addition management fees by proxy. Since competent fund managers will demand high incomes, bonus shares could easily double the management fees, depending on the size of the fund. In summary, history has shown that the promises of active fund managers rarely (if ever) come to fruition. Personally, I would not consider this to be an attractive investment and would look more towards a passively managed major market index ETF with low management fees.\"" } ]

[ { "docid": "442110", "title": "", "text": "75k is short of the 'highly compensated' category. Most US citizens in that pay range would consider paying someone to do their taxes as an unnecessary expense. Tax shelters usually don't come into play for this level of income. However, there are certain things which provide deductions. Some things that make it better to pay someone: Use the free online tax forms to sandbox your returns. If all you're concerned about is ensuring you pay your taxes correctly, this is the most cost efficient route. If you want to minimize your tax burden, consult with a CPA. Be sure to get one who is familiar with resident aliens from your country and the relevant tax treaties. The estimate you're looking at may be the withholding, of which you may be eligible for a refund for some part of that withholding. Tax treaties likely make sure that you get credit on each side for the money paid in the other. For example, as a US citizen, if I go to Europe and work and pay taxes there, I can deduct the taxes paid in Europe from my tax burden in the US. If I've already paid more to the EU than I would have paid on the same amount earned in the US, then my tax burden in the US is zero. By the same token, if I have not paid up to my US burden, then I owe the balance to the US. But this is way better than paying taxes to your home country and to the host country where you earned the money." } ]

[ { "docid": "417981", "title": "", "text": "\"While the question is very localized, I'll answer about the general principle. My main question is with how far away it is (over 1000 miles), how do I quantify the travel expenses? Generally, \"\"necessary and ordinary\"\" expenses are deductible. This is true for business and also true for rentals. But what is necessary and what is ordinary? Is it ordinary that a landlord will manage the property 1000 miles away by himself on a daily basis? Is it ordinary for people to drive 1000 miles every week? I'd say \"\"no\"\" to both. I'd say it would be cheaper for you to hire a local property manager, thus the travel expense would not be necessary. I would say it would be cheaper to fly (although I don't know if its true to the specific situation of the OP, but as I said - its too localized to deal with) rather than drive from Texas to Colorado. If the OP thinks that driving a thousand miles is indeed ordinary and necessary he'll have to justify it to the IRS examiner, as I'm sure it will be examined. 2 trips to the property a year will be a nearly 100% write-off (2000 miles, hotels, etc). From what I understood (and that is what I've been told by my CPA), IRS generally allows 1 (one) trip per year per property. If there's an exceptional situation - be prepared to justify it. Also, keep all the receipts (like gas, hotel, etc.... If you claim mileage but in reality you took a flight - you'll get hit hard by the IRS when audited). Also while I'm up there am I allowed to mix business with pleasure? You cannot deduct personal (\"\"pleasure\"\") expenses, at all. If the trip is mainly business, but you go out at the evening instead of staying at the hotel - that's fine. But if the trip is \"\"business\"\" trip where you spend a couple of hours at your property and then go around having fun for two days - the whole trip may be disallowed. If there's a reasonable portion dedicated to your business/rental, and the rest is pleasure - you'll have to split some of the costs and only deduct the portion attributed to the business activities. You'll have to analyze your specific situation, and see where it falls. Don't stretch the limits too much, it will cost you more on the long run after all the audits and penalties. Can I also write off all travel involved in the purchase of the property? Although, again, the \"\"necessary and ordinary\"\" justification of such a trip is arguable, lets assume it is necessary and ordinary and generally justified. It is reasonable to expect you to go and see the property with your own eyes before the closing (IMHO, of course, I'm not an authority). Such an expense can be either business or investment expense. If its a business expense - its deductible on schedule C. If its an investment expense (if you do buy the property), its added to the cost of the property (capitalized). I'm not a tax adviser or a tax professional, and this is not a tax advice. This answer was not written or intended to be used, and cannot be used, for the purpose of avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code. You should seek a professional consultation with a CPA/Attorney(tax) licensed in your State(s) or a Federally licensed Enrolled Agent (EA).\"" }, { "docid": "158738", "title": "", "text": "Expenses are where the catch is found. Not all expenditures are considered expenses for tax purposes. Good CPAs make a comfortable living untangling this sort of thing. Advice for both of your family members' businesses...consult with a CPA before making big purchases. They may need to adjust the way they buy, or the timing of it, or simply to set aside capital to pay the taxes for the profit used to purchase those items. CPA can help find the best path. That 10k in unallocated income can be used to redecorate your office, but there's still 3k in taxes due on it. Bottom Line: Can't label business income as profit until the taxes have been paid." }, { "docid": "531370", "title": "", "text": "\"These types of diagrams appear all throughout Kiyosaki's Rich Dad, Poor Dad book. The arrows in the diagrams represent cash flow. For example, the first two diagrams of this type in the book are: The idea being presented here is that an asset generates income, and a liability generates expenses. According to the book, rich people spend their money buying assets, while middle class people buy liabilities. The diagram you posted above does not appear in the edition of the book I have (Warner Books Edition, printed in 2000). However, the following similar diagram appears in the chapter titled \"\"The History of Taxes and the Power of Corporations\"\": The idea behind this diagram is to demonstrate what the author considers the tax advantages of a personal corporation: using a corporation to pay for certain expenses with pre-tax dollars. Here is a quote from this chapter: Employees earn and get taxed and they try to live on what is left. A corporation earns, spends everything it can, and is taxed on anything that is left. It's one of the biggest legal tax loopholes that the rich use. They're easy to set up and are not expensive if you own investments that are producing good cash flow. For example; by owning your own corporation - vacations are board meetings in Hawaii. Car payments, insurance, repairs are company expenses. Health club membership is a company expense. Most restaurant meals are partial expenses. And on and on - but do it legally with pre-tax dollars. This piece of advice, like so much of the book, may contain a small amount of truth, but is oversimplified and potentially dangerous if taken a face value. There are many examples, as JoeTaxpayer mentioned, of people who tried to deduct too many expenses and failed to make a business case for them that would satisfy the IRS.\"" }, { "docid": "339465", "title": "", "text": "Taxes should never be hated. It should be an honor to contribute toward the common good of the nation. It used to be this way until they were made into a political weapon. Our nation used to raise taxes when we held debt and lower taxes when debt was low. Instead, this bullshit idea that taxes are bad was crammed down peoples throats, and now we're sitting at a significant debt that really started to take off with Reagan." }, { "docid": "349348", "title": "", "text": "\"I'm assuming that when you say \"\"convert to S-Corp tax treatment\"\" you're not talking about actually changing your LLC to a Corporation. There are two distinct pieces of the puzzle here. First, there's your organizational form. Your state, which is where the business is legally formed and recognized, creates the LLC or Corporation. \"\"S-Corp\"\" doesn't come into play here: your company is either an LLC or a Corporation. (There are a handful of other organizational types your state might have, e.g. PLLC, Limited Partnership, etc.; none of these are immediately relevant to this discussion). Second, there's the tax treatment you receive by the IRS. If your company was created by the state as an LLC, note that the IRS doesn't recognize LLCs as a distinct organizational type: you elect to be taxed as an individual (for single member LLCs), a partnership (for multiple member LLCs), or as a corporation. The former two elections are \"\"pass through\"\" -- there's no additional level of taxation on corporate profits, everything just passes through to the owners. The latter election introduces a tax on corporate profits. When you elect pass-through treatment, a single-member LLC files on Schedule C; a multiple-member LLC will prepare a form K-1 which you will include on your 1040. If your company was created by the state as a Corporation (not an LLC), you could still elect pass-through taxation if your company qualifies under the rules in Subchapter S (i.e. \"\"an S-Corp\"\"). States do not recognize \"\"S-Corp\"\" as part of the organizational process -- that's just a tax distinction used by the IRS (and possibly your state's tax authorities). In your case, if you are a single-member LLC (and assuming there are no other reasons to organize as a corporation), talking about \"\"S-Corp tax treatment\"\" doesn't make any sense. You'll just file your schedule C; in my experience it's fairly simple. (Note that this is based on my experience of single- and multiple-member LLCs in just two states. Your state may have different rules that affect state-level taxation; and the rules may change from year to year. I've found that hiring a good CPA to prepare the forms saves a good bit of stress and time that can be better applied to the business.)\"" }, { "docid": "225321", "title": "", "text": "\"Loved this... &gt;A Philadelphia-area human-resources executive told Mr. Cappelli that he applied anonymously for a job in his own company as an experiment. He didn't make it through the screening process. --- And crap like THIS... &gt;Neal Grunstra, president of Mindbank Consulting Group, a temporary-staffing company, calls this \"\"looking for a unicorn.\"\" Mr. Cappelli's favorite email came from a company that drew 25,000 applicants for a standard engineering position only to have the HR department say not one was qualified. One job seeker said \"\"he had been told he was perfect for a given position—except for the fact that his previous job title didn't match that of the vacancy,\"\" a title unique to the prospective employer. Is the reason why -- even 2 decades ago -- I refused to let \"\"HR\"\" do any filtering or \"\"pre-qualifying\"\" of resumes for me when I hired. (Because they have no idea of the *degree* of importance attached to any specific hiring \"\"requirement\"\"; and that many of said requirements are not requirements at all, but rather \"\"it would be great if the candidate had XXX, but YYY will do just as well, depending...\"\") Also, this is why the BEST way to get hired (or to hire) is to do an \"\"end run around\"\" the HR department and get resumes into the hands of the hiring manager via networking -- preferably avoiding HR and the whole \"\"classified/listed job\"\" altogether -- HR can handle the paperwork around hiring AFTER qualified candidates have been interviewed.\"" }, { "docid": "446190", "title": "", "text": "\"I assume you are filing US taxes because you are a US citizen, resident alien, or other \"\"US person\"\". If you have a total of $10,000 or more in assets in non-US accounts, you are required to file FinCEN Form 114, Report of Foreign Bank and Financial Accounts, also known as FBAR, to report those accounts. See Comparison of Form 8938 and FBAR Requirements. Note this refers to the total balance in the account (combined with any other accounts you may have); the amount you transferred this year is not relevant. Also note that the FBAR is filed separately from your income tax return (it does not go to the IRS), though if you have over $50,000 in offshore assets you may also have to file IRS Form 8938. Simply reporting those accounts does not necessarily mean you will owe extra taxes. Most US taxes are based on income, not assets. According to the page linked, the maximum penalty for a \"\"willful\"\" failure to report such accounts is a fine of $100,000 or 50% of the assets in question, whichever is greater, in addition to possible criminal sanctions. There may be other US filing requirements that I don't know about, so you may want to consult a tax professional. I do not know anything about your filing requirements under Indian law.\"" }, { "docid": "488574", "title": "", "text": "Good professional tax advice is expensive. If your situation is simple, then paying someone doesn't give you more than you could get from a simple software package. In this case, doing your own taxes will save you money this year, and also help you next year, as your situation grows steadily more complex. If you don't do your own taxes when you're single with a part time job, you'll never do it when you have a family, a full time job, a side business, and many deductions. Learning how to do your taxes over time, as your 'tax life' becomes complex, is a valuable skill. If your situation is complex, you will need pay a lot to get it done correctly. Sometimes, that cost is worthwhile. At bare minimum, I would say 'attempt to do your taxes yourself, first'. This will force you to organize your files, making the administrative cost of doing your return lower (ie: you aren't paying your tax firm to sort your receipts, because you've already ordered them nicely with your own subtotals, everything perfectly stapled together). If your situation is complex, and you find a place to get it done cheaply (think H&R Block), you will not be getting value for service. I am not saying a low-end tax firm will necessarily get things wrong, but if you don't have a qualified professional (read: university educated and designated) doing your return, the complexities can be ignored. Low-end tax firms typically hire seasonal staff, train them for 1-2 weeks, and mostly just show them how to enter tax slips into the same software you could buy yourself. If you underpay for professional services, you will pay the price, metaphorically speaking. For your specific situation, I strongly recommend you have a professional service look at your returns, because you are a non-resident, meaning you likely need to file in your home country as well. Follow what they do with your return, and next year, see how much of it you can do yourself. Before you hire someone, get a fee quote, and shop around until you find someone you are comfortable with. $1k spent now could save you many headaches in the future." }, { "docid": "460401", "title": "", "text": "\"You could debate the \"\"why\"\"s of tax policy endlessly. There are lots of things in tax law that I think are bad ideas, and probably a few here and there that I think are good ideas. I am well aware that there are things that I think are good ideas that others think are bad ideas and vice versa. To your specific point: I suppose you could say that having a place to live is a necessity. But most people do not live in the absolute minimum necessary to give them a place to sleep and protection from the weather. You could survive with a one-room apartment with a bed on one side and a toilet and some minimal cooking facilities on the other. Most people have considerably more than that. At some point that's luxury and not necessity. And if you want to push it, you COULD live in a cardboard box under a bridge, you don't NEED a house or apartment to survive. Personally I think it's absurd that as a home-owner I get a deduction for my mortgage interest, while if someone were to rent an identical house with a monthly rental equal to exactly the same amount that I am paying on my mortgage, he would receive no deduction. The stated goal of that one was to encourage home ownership. But people who own homes are generally richer than those who rent, so the net result is that the poor are paying higher taxes to help subsidize the homes of the rich. And then the rich congratulate themselves on how they are giving these tax breaks to help make housing more affordable for poor people. To reiterate @keshlam, tax laws only makes sense when understood politically. Yes, some people have fine ideas about what is fair and just. Others simply want tax breaks that benefit their business or people with tough financial situations that just happen by chance to resemble their own. Many of the people with noble ideas have little concept of what the implications of the policies they push are. Many of the ideas that some people view as worthy and noble, others view as frivolous, counter-productive, or even evil. Then you mash all these competing groups and interest together and see what comes out.\"" }, { "docid": "376800", "title": "", "text": "The top long-term capital gains tax rate will rise to 20% effective 1 Jan, 2011, unless Congress decides to do something about it before then. (Will they? Who knows!! There's been talk about it, but, well, it's Congress. They don't even know what they're going to do.) Anyway. The rules about when you can sell stock are mostly concerned with when you can realize a capital loss: if you sell a stock at a loss and then re-buy it for tax purposes within 30 days, it's a wash sale and not eligible for a deduction. However, I don't believe this applies to any stocks once you realize a gain - once you've realized the gain and paid your tax for it, it's all yours, locked in at whatever rate. Your replacement stock will be subject to short-term capital gains for the next year afterwards, and you might need to be careful with identifying the holding period on different lots of your stock, but I don't believe there will be any particular trouble. Please do not rely entirely on my advice and consult also with your tax preparer or lawyer. :) And the IRS documentation: Special Addendum for Nov/Dec 2012! Spoiler alert! Congress did indeed act: they extended the rates, but only temporarily, so now we're looking at tax hikes starting in 2013 instead, only the new top rate++ will be something like 23.8% on account of an extra 3.8% medicare tax on passive earnings (brought to you via Obamacare legislation). But the year and the rates' specifics aside, same thing still applies. And the Republican house and Democratic senate/President are still duking it out. Have fun. ++ 3.8% surtax applies to the lesser of (a) net investment income (b) income over $200,000 ($250k if married). 20% tax rate applies to people in the 15% income tax bracket for ordinary income or higher. Additional tax discounts for property held over 5 years may be available. Consult tax law and your favorite tax professional and prepare to be confused." }, { "docid": "427469", "title": "", "text": "If significant amounts are involved, that would be a good time to consult a tax professional (EA/CPA licensed in your state). Generally, sale of a business is an ordinary income and you can only deduct tangible expenses, as Joe said. That would be laptops, bills, expenses per receipt, of course they must all be directly attributable to the business. You will need to be able to show that the laptops has only been used in business, recapture depreciation, etc. Same with all the rest of the expenses. If you're incorporated (i.e.: you hold this software under an S-Corp), then you're selling stocks, not business, and the tax treatment may be different, but I'm guessing this is not the case for you." }, { "docid": "319836", "title": "", "text": "Three points for you to keep in mind. 1. In the very first year, you should have 182 days outside India. So that in the year when you start your consultancy, you will not have any liability to pay tax on earning abroad. 2. Although you may be starting a consultancy abroad, if you do any services in India, there will be withholding tax depending on the country in which you have started the consultancy business. 3. Whatever money you repatriate is not taxable in India. However, if you you repatriate the money as gift to anyone who is not a relative, will be taxed in his/her hand." }, { "docid": "35810", "title": "", "text": "Making a game is hard enough, focus on that. If/when you start getting close to having something to sell, then if you're serious and want the company to grow into a full time venture, briefly consult with a lawyer and possibly accountant to set this up. It will save you a lot of time researching what you have to do and a lot of headache from potentially doing things wrong. If you want to try to do it on your own, I'd recommend getting a book on starting a business because there is more to know than a single post can cover. You'll probably have to file for a DBA (doing business as) at your city hall in order to be allowed to refer to yourself as the name of your company (otherwise you have to use your personal name). Initiating that will likely initiate annual business taxes in your town in addition to the cheap filing fee. You also want to consider how you will handle trademark (of your business and game) and copyright (of your game). If this is going to grow, you'll have to have contracts written for either employees or for freelancers who might produce assets for you. You may also need to consider writing an EULA for your game, privacy policies, etc. Additionally, you'll likely have to file with your state to collect and send sales tax. You'll also want to meticulously track costs and revenue related to your business. Formally starting a business will likely open you up to property, sales and income tax. For example, where I am, was even taxed on the equipment the business uses (e.g. computers). This is why it makes sense to wait until you're closer to having a product before you try to formally start a business and to consult with professionals on the best way. The type of business you should form will depend on the scope you plan for the company and the amount of time/money you're willing to put in. A sole proprietorship (what you are by default) means there is no difference legally/financially between you as an individual and you as a company. This may be suitable if this is just a hobby, but not if you intend it to grow because that means any lawsuit directed at your company and its money is also directed at you and your money. The differences between an LLC and corporation are more nuanced and involve differences in legal and tax treatment, however, they both shield you from the previously mentioned problem. If you want this to be more than a hobby you should form either an LLC or a corporation. Do some research on the differences and how they might apply to you and in your state." }, { "docid": "390435", "title": "", "text": "If you itemize your deductions then the interest that you pay on your primary residence is tax deductible. Also realestate tax is also deductible. Both go on Schedule A. The car payment is not tax deductible. You will want to be careful about claiming business deduction for home or car. The IRS has very strict rules and if you have any personal use you can disqualify the deduction. For the car you often need to use the mileage reimbursement rates. If you use the car exclusively for work, then a lease may make more sense as you can expense the lease payment whereas with the car you need to follow the depreciation schedule. If you are looking to claim business expense of car or home, it would be a very good idea to get professional tax advice to ensure that you do not run afoul of the IRS." }, { "docid": "451180", "title": "", "text": "From India Tax point of view: Some one else may give the US tax treatment. Refer to this similar question what taxes I need to pay in India Capital Gains. My accountant never asked or reported the bought property in taxes- should he reported in taxes?Did he do wrong not reporting should I report the property in my next year taxes? If you mean in IT Returns, yes it should be declared. Can i bring the money back if needed? By Back if you mean repatriate to US, The capital portion would be Ease if the loan property was purchased or loan repaid from NRE. Else there is limit on the amount and paperwork. Consult a CA. If I rent the property instead of selling, do I have to report the income and what income? should I be filling taxes on the rental income in India or just in USA or both You are taxable for the rent and have to report it as income and pay taxes in India." }, { "docid": "352136", "title": "", "text": "First of all, consult an accountant who is familiar with tax laws and online businesses. While most accountants know tax laws, fewer know how to handle online income like you describe although the number is growing. Right now, since you're a minor, this complicates things a bit. That's why you'll need a tax accountant to come up with the best business structure to use. You'll need to keep your own records to estimate your quarterly taxes. At the amount you're making, you'll want to do this since you'll pay a substantial penalty at the end of the year if you don't. You can use a small business accounting software package for this or just track everything using Excel or the like. As long as taxes are paid, you won't go to jail. But you need to pay them along with any penalties by April 15, 2013. If you don't do this, then the IRS will want to have a 'discussion' with you." }, { "docid": "226568", "title": "", "text": "\"It is unusual to need a consultant to open a bank account for you, and I would also be concerned that perhaps the consultant could take the money and do nothing, or continue to demand various sums of money for \"\"expenses\"\" like permits, licenses, identity check, etc. until you give up. Some of the more accepted ways to open a bank account are: A: Call up an established bank and follow their instructions to open a personal account . Make sure you are calling on a real bank, one that has been around a while. Hints: has permanent locations, in the local phone book, and has shares traded on a national stock exchange. Call the bank directly, don't use a number given to you by a 3rd party consultant, as it may be a trick... Discuss on the phone and find out if you can open an account by mail or if you need to visit in person. B: Create a company or branch office in the foreign country, assuming this is for business or investing. and open an account by appointing someone (like a lawyer or accountant or similar professional) in the foreign country to represent the company to open an account in person. If you are a US citizen, you will want to ask your CPA/accountant/tax lawyer about the TD F 90-22.1 Foreign Account Bank Report form, and the FATCA Foreign Account Tax Compliance Act. There can be very large fines for not making the required reports. The requirements to open a bank account have become more strict in many countries, so don't be surprised if they will not open an account for a foreigner with no local address, if that is your situation.\"" }, { "docid": "341960", "title": "", "text": "To start with, I should mention that many tax preparation companies will give you any number of free consultations on tax issues — they will only charge you if you use their services to file a tax form, such as an amended return. I know that H&R Block has international tax specialists who are familiar with the issues facing F-1 students, so they might be the right people to talk about your specific situation. According to TurboTax support, you should prepare a completely new 1040NR, then submit that with a 1040X. GWU’s tax department says you can submit late 8843, so you should probably do that if you need to claim non-resident status for tax purposes." }, { "docid": "319555", "title": "", "text": "Option A - you sell the house and then use the money to pay off a portion of your second mortgage. The return on that investment is 5.5% a year, or $1925 net. Option B - you rent it out, that will bring you $5220 (435 x 12), more than 2.5 times option A. That's not counting any money going towards the principal of the loan. Given that you'll be using a property management company, you can be fairly certain that there won't be any unexpected expenses (credit check, security deposit should take care of that) Option C - you invest the money somewhere else. You'll have to get 15% return in order to beat option B. I don't think that's sustainable. You should talk to a CPA about the tax implications, but I'm fairly certain that you'll do better tax wise to rent it out, since you can use depreciation to lower your tax bill. Finally, where do you think real estate prices will be in 4 years? If you think they'll increase that's another reason to hold onto the property and rent it. Finally finally, if you plan to rent it out long term (over 4 years), it will be a good idea to refinance and lock the current interest rate." } ]

[ { "docid": "556976", "title": "", "text": "There are few things going on here: My advice would be: with 75k income and a regular pay check there isn't a whole let you can do to adjust your tax burden. It's unlikely that any adviser will save enough money to warrant professional advice and the associated cost. Use off the shelf software for tax return and tax planning." } ]

[ { "docid": "477017", "title": "", "text": "\"Let me make sure I understand the point of what Adam Smith is going on about. In discussion of relative poverty, he relates the idea that an individual can be considered in poverty if they do not meet the customary amount of goods considered by their society to be the minimum to be polite in public. You have thus transferred his meaning of what poor means to be what is considered \"\"basic living\"\". You have then taken this concept and tied the cost of \"\"basic living\"\", which you still haven't actually narrowed down, towards the tax rate on income for a citizen of a community. This is all in the context that you're concerned with the community level of price for \"\"basic living\"\" and whether its too high. However, you also haven't said what too high is nor why you're concerned with the literal price which is why I've said you can only control the price of a good through central authority. I never made the assertion you wanted to invoke a centrally planned economy, I simply stated that the only way to control prices across a community is through central authority. You've stated that we collect taxes on local, state, and federal levels. This is true, however it does not mean that they control the price. They simply modify the price set by the market, and only serve to increase the price from the base set by market participants. When I want to buy beer, I don't just pay for the cost of the beer. I pay the cost of the beer + the city tax + county tax + state tax + state sales tax on the beer, which raises the price. Also, these taxes are not income taxes which is what was being discussed. I still don't know what your point is because you cannot seem to define phrases you've used that I have stated I do not know. If you cannot define what you're talking about, how it relates to the actual discussion, and why its relevant then please stop as its simply a derailment.\"" }, { "docid": "151946", "title": "", "text": "\"Legally speaking, when you convert that bit-coin onto something else, the Israeli Tax Authority will look into the value of that something else, compare it to the original value of the previous something else you used to buy bit-coins (USD, in your example), and charge you capital gain taxes for the difference. According to the Israeli law you're supposed to pay taxes when selling (converting the bit-coin to something else), and since you're not using any formal bank or stock broker which will automatically deduct the taxes, you have to pay the taxes yourself. By not doing so you're committing a tax fraud. The real question you're asking is whether they'll come after you. Well, that depends on the amounts. They might. Pay attention: there's no statute of limitation for tax fraud in Israel. They may come after you in 50 years from now. Another thing to keep in mind: if you used bit-coins to buy something (services or products of any kind), you probably didn't pay the VAT (מע\"\"מ) - which is another case of tax fraud on your behalf. PS: I'm not a lawyer or accountant, so get a professional advice, but I have been dealing with the Tax Authority in Israel, so I've got a pretty good idea of what the rules are.\"" }, { "docid": "244233", "title": "", "text": "The only ridiculous thing in the article is the statement that taxes to try to keep down inequality won't do any good because companies will hire less. What bullshit. Taxes on the wealthy doesn't need to come from the companies alone, it should also come from closing ridiculous loopholes that only favour the rich, and a more progressive income tax system that includes all earnings, be them through wages or through capital gains. I really don't understand why $100,000 in wages should be treated differently tax-wise than $100,000 in capital gains..." }, { "docid": "319555", "title": "", "text": "Option A - you sell the house and then use the money to pay off a portion of your second mortgage. The return on that investment is 5.5% a year, or $1925 net. Option B - you rent it out, that will bring you $5220 (435 x 12), more than 2.5 times option A. That's not counting any money going towards the principal of the loan. Given that you'll be using a property management company, you can be fairly certain that there won't be any unexpected expenses (credit check, security deposit should take care of that) Option C - you invest the money somewhere else. You'll have to get 15% return in order to beat option B. I don't think that's sustainable. You should talk to a CPA about the tax implications, but I'm fairly certain that you'll do better tax wise to rent it out, since you can use depreciation to lower your tax bill. Finally, where do you think real estate prices will be in 4 years? If you think they'll increase that's another reason to hold onto the property and rent it. Finally finally, if you plan to rent it out long term (over 4 years), it will be a good idea to refinance and lock the current interest rate." }, { "docid": "129606", "title": "", "text": "You should probably get a professional tax advice, as it is very specific to the Philipines tax laws and the US-Philippine tax treaty. What I know, however, is that if it was the other way around - you paying a foreigner coming to the US to consult you - you would be withholding 30% of their pay for the IRS which they would be claiming for refund on their own later. So if the US does it to others - I'm not surprised to hear that others do it to the US. Get a professional advice on what and how you should be doing. In any case, foreign taxes paid can be used to offset your US taxes using form 1116 up to some extent." }, { "docid": "277812", "title": "", "text": "There are many different types of 1099 forms. Since you are comparing it to a W-2, I'm assuming you are talking about a 1099-MISC form. Independent contractor income If you are a worker earning a salary or wage, your employer reports your annual earnings at year-end on Form W-2. However, if you are an independent contractor or self-employed you will receive a Form 1099-MISC from each client that pays you at least $600 during the tax year. For example, if you are a freelance writer, consultant or artist, you hire yourself out to individuals or companies on a contract basis. The income you receive from each job you take should be reported to you on Form 1099-MISC. When you prepare your tax return, the IRS requires you to report all of this income and pay income tax on it. So even if you receive a 1099-MISC form, you are required to pay taxes on it." }, { "docid": "11654", "title": "", "text": "\"You will need to file a US income tax return, and declare all income world-wide. Whether this results in any tax owed depends on your particular circumstances, and the effect of any tax treaties between the US and India. There are additional requirements for the filing of information on the amounts in foreign accounts held by \"\"US tax persons\"\". Depending on the nature of these accounts, the complexity of the forms, and the penalties for non-compliance can be quite high... Short version: Consult a professional well-qualified in US/India tax matters...\"" }, { "docid": "360629", "title": "", "text": "\"Do I need to pay taxes in India in this scenario? For India tax purposes, you would still qualify as \"\"Resident Indian\"\". As a resident Indian you have to pay taxes on Global income. It is not relevant whether you transfer the money back to India to keep in US. The income is generated and taxable. Depending on your contract, presumably you are working as a free lance; certain expenses are allowed to be deducted from your income, for example if you purchase equipment to help carry out the work, stay / entertainment costs, etc. Consult a professional CA who should be able to guide you on what is eligible and what is not. The balance along with your other income will be taxed as per tax brackets. There is exemption for certain category of workers, mostly in entertainment industry where such income is not taxable. This does not apply to your case.\"" }, { "docid": "61518", "title": "", "text": "\"Your assertion that you will not be selling anything is at odds with the idea that you will be doing tax loss harvesting. Tax loss harvesting always involves some selling (you sell stocks that have fallen in price and lock in the capital losses, which gives you a break on your taxes). If you absolutely prohibit your advisor from selling, then you will not be able to do tax loss harvesting (in that case, why are you using an advisor at all?). Tax loss harvesting has nothing to do with your horizon nor the active/passive difference, really. As a practical matter, a good tax loss harvesting plan involves mechanically selling losers and immediately putting the money in another stock with more-or-less similar risk so your portfolio doesn't change much. In this way you get a stable portfolio that performs just like a static portfolio but gives you a tax benefit each year. The IRS officially prohibits this practice via the \"\"wash sale rule\"\" that says you can't buy a substantially identical asset within a short period of time. However, though two stocks have similar risk, they are not generally substantially similar in a legal sense, so the IRS can't really beat you in court and they don't try. Basically you can't just buy the same stock again. The roboadvisor is advertising that they will perform this service, keeping your portfolio pretty much static in terms of risk, in such a way that your tax benefit is maximized and you don't run afoul of the IRS.\"" }, { "docid": "35810", "title": "", "text": "Making a game is hard enough, focus on that. If/when you start getting close to having something to sell, then if you're serious and want the company to grow into a full time venture, briefly consult with a lawyer and possibly accountant to set this up. It will save you a lot of time researching what you have to do and a lot of headache from potentially doing things wrong. If you want to try to do it on your own, I'd recommend getting a book on starting a business because there is more to know than a single post can cover. You'll probably have to file for a DBA (doing business as) at your city hall in order to be allowed to refer to yourself as the name of your company (otherwise you have to use your personal name). Initiating that will likely initiate annual business taxes in your town in addition to the cheap filing fee. You also want to consider how you will handle trademark (of your business and game) and copyright (of your game). If this is going to grow, you'll have to have contracts written for either employees or for freelancers who might produce assets for you. You may also need to consider writing an EULA for your game, privacy policies, etc. Additionally, you'll likely have to file with your state to collect and send sales tax. You'll also want to meticulously track costs and revenue related to your business. Formally starting a business will likely open you up to property, sales and income tax. For example, where I am, was even taxed on the equipment the business uses (e.g. computers). This is why it makes sense to wait until you're closer to having a product before you try to formally start a business and to consult with professionals on the best way. The type of business you should form will depend on the scope you plan for the company and the amount of time/money you're willing to put in. A sole proprietorship (what you are by default) means there is no difference legally/financially between you as an individual and you as a company. This may be suitable if this is just a hobby, but not if you intend it to grow because that means any lawsuit directed at your company and its money is also directed at you and your money. The differences between an LLC and corporation are more nuanced and involve differences in legal and tax treatment, however, they both shield you from the previously mentioned problem. If you want this to be more than a hobby you should form either an LLC or a corporation. Do some research on the differences and how they might apply to you and in your state." }, { "docid": "546372", "title": "", "text": "You better consult with a tax adviser (EA or CPA) on this, my answer doesn't constitute such an advice. Basically, you're selling stuff on Kickstarter. No matter how they call it (projects, pledges, rewards - all are just words), you're selling stuff. People give you money (=pledges) and in return you're giving them tangible or intangible goods (=rewards). All the rest is just PR. So you will pay taxes on all the money you get, and you will be able to deduct some of the expenses (depends on whether its a business or a hobby, the deduction may be full or limited). It doesn't matter if you use LLC or your own account from the financial/taxation point of you, but it matters legally. LLC limits your personal liability, but do get a legal advice on this issue, and whether it is at all relevant for you. If you raise funds in 2012 you pay taxes on the money in 2012. If you go into production in 2013 - you can deduct expenses in 2013. If you're classified as a hobby, you'll end up paying full taxes in 2012 and deducting nothing in 2013. Talk to a tax adviser." }, { "docid": "173088", "title": "", "text": "\"What is a stock? A share of stock represents ownership of a portion of a corporation. In olden times, you would get a physical stock certificate (looking something like this) with your name and the number of shares on it. That certificate was the document demonstrating your ownership. Today, physical stock certificates are quite uncommon (to the point that a number of companies don't issue them anymore). While a one-share certificate can be a neat memento, certificates are a pain for investors, as they have to be stored safely and you'd have to go through a whole annoying process to redeem them when you wanted to sell your investment. Now, you'll usually hold stock through a brokerage account, and your holdings will just be records in a database somewhere. You'll pick a broker (more on that in the next question), instruct them to buy something, and they'll keep track of it in your account. Where do I get a stock? You'll generally choose a broker and open an account. You can read reviews to compare different brokerages in your country, as they'll have different fees and pricing. You can also make sure the brokerage firm you choose is in good standing with the financial regulators in your country, though one from a major national bank won't be unsafe. You will be required to provide personal information, as you are opening a financial account. The information should be similar to that required to open a bank account. You'll also need to get your money in and out of the account, so you'll likely set up a bank transfer. It may be possible to request a paper stock certificate, but don't be surprised if you're told this is unavailable. If you do get a paper certificate, you'll have to deal with considerably more hassle and delay if you want to sell later. Brokers charge a commission, which is a fee per trade. Let's say the commission is $10/trade. If you buy 5 shares of Google at $739/share, you'd pay $739 * 5 + $10 = $3705 and wind up with $3695 worth of stock in your account. You'd pay the same commission when you sell the stock. Can anyone buy/own/use a stock? Pretty much. A brokerage is going to require that you be a legal adult to maintain an account with them. There are generally ways in which a parent can open an account on behalf of an underage child though. There can be different types of restrictions when it comes to investing in companies that are not publicly held, but that's not something you need to worry about. Stocks available on the public stock market are available to, well, the public. How are stocks taxed? Taxes differ from country to country, but as a general rule, you do have to provide the tax authorities with sufficient information to determine what you owe. This means figuring out how much you purchased the stock for and comparing that with how much you sold it for to determine your gain or loss. In the US (and I suspect in many other countries), your brokerage will produce an annual report with at least some of this information and send it to the tax authorities and you. You or someone you hire to do your taxes will use that report to compute the amount of tax owed. Your brokerage will generally keep track of your \"\"cost basis\"\" (how much you bought it for) for you, though it's a good idea to keep records. If you refuse to tell the government your cost basis, they can always assume it's $0, and then you'll pay more tax than you owe. Finding the cost basis for old investments can be difficult many years later if the records are lost. If you can determine when the stock was purchased, even approximately, it's possible to look back at historical price data to determine the cost. If your stock pays a dividend (a certain amount of money per-share that a company may pay out of its profits to its investors), you'll generally need to pay tax on that income. In the US, the tax rate on dividends may be the same or less than the tax rate on normal wage income depending on how long you've held the investment and other rules.\"" }, { "docid": "501801", "title": "", "text": "\"Ed: Saw your comment, thank you. The short answer (a rough simplification), seems to be that you pay PA income tax for income made in PA. You pay IL income tax for income made in IL, not income made across both states. And you make sure the IL amount paid is correct via a credit calculated on Schedule CR. It looks to me (bear with me, I am no expert on tax law in IL, PA, or in general, so consult a professional for \"\"good\"\" advice :), like you basically do this on Schedule CR: It looks like there may be some more pertinent info on Publication 111, so that may potentially change the math a bit too. This check is 2014 income, during which you are a resident of IL. It's income from a PA employer. You must file a tax return in PA regardless, since you \"\"earned income in PA\"\". Did your former employer withhold PA income taxes on this particular paycheck? I'm not seeing where it says you should not include tax withheld; could you please point that out? Perhaps they mean you should only include tax actually considered \"\"due\"\" on the PA tax return. From IL's Schedule CR instructions: What is the purpose of Schedule CR? Schedule CR, Credit for Tax Paid to Other States, allows you to take a credit for income taxes you paid to other states on income you received while a resident of Illinois. You are allowed this credit only if you filed a required tax return with the other state. You must use information from the tax return you filed with the other state to complete Schedule CR. ... What taxes qualify for the credit? Taxes that qualify for the credit are income taxes you paid to another state of the United States,\"" }, { "docid": "283459", "title": "", "text": "\"Please declare everything you earn in India as well as the total amount of assets (it's called FBAR). The penalties for not declaring is jail time no matter how small the amount (and lots of ordinary people every 2-3 years are regularly sent to jail for not declaring such income). It's taken very seriously by the IRS - and any Indian bank who has an office in the US or does business here, can be asked by IRS to provide any bank account details for you. You will get deductions for taxes already paid to a foreign country due to double taxation, so there won't be any additional taxes because income taxes in US are on par or even lower than that in India. Using tricks (like transferring ownership to your brother) may not be worth it. Note: you pay taxes only when you realize gains anyway - both in India or here, so why do you want to take such hassles. If you transfer to your brother, it will be taxed only until you hold them. Make sure you have exact dates of gains between the date you came to US and the date you \"\"gifted\"\" to your brother. As long as you clearly document that the stocks transferred to your brother was a gift and you have no more claims on them, it should be ok, but best to consult a CPA in the US. If you have claims on them, example agreement that you will repurchase them, then you will still continue to pay taxes. If you sell your real estate investments in India, you have to pay tax on the gains in the US (and you need proof of the original buying cost and your sale). If you have paid taxes on the real estate gains in India, then you can get deduction due to double tax avoidance treaty. No issues in bringing over the capital from India to US.\"" }, { "docid": "352136", "title": "", "text": "First of all, consult an accountant who is familiar with tax laws and online businesses. While most accountants know tax laws, fewer know how to handle online income like you describe although the number is growing. Right now, since you're a minor, this complicates things a bit. That's why you'll need a tax accountant to come up with the best business structure to use. You'll need to keep your own records to estimate your quarterly taxes. At the amount you're making, you'll want to do this since you'll pay a substantial penalty at the end of the year if you don't. You can use a small business accounting software package for this or just track everything using Excel or the like. As long as taxes are paid, you won't go to jail. But you need to pay them along with any penalties by April 15, 2013. If you don't do this, then the IRS will want to have a 'discussion' with you." }, { "docid": "244561", "title": "", "text": "\"You're certainly referring to \"\"Ex Post Facto\"\" laws, and while the US is constitutionally prohibited from passing criminal laws that are retroactive, the US Supreme Court has upheld many tax laws that apply tax code changes retroactively. You might ask a similar question on Law.SE for a more thorough treatment of the legalities of congress passing those laws, but I will stick to the personal finance portion of the question. What this means is that you can't expect that the current tax laws will be in force in the future, and your investment/retirement plans should be as flexible as possible. You may wish to have some money in both Roth and traditional 401(k) accounts. You might not want to have millions of dollars in Roth accounts, because if congress does act to limit the tax benefits of those accounts, it will probably be targeting the larger balances. If you are valuing tax deductions, you should put slightly more weight on deductions that you can take today than deductions that would apply in the future. If you do find yourself in trouble because of a retroactive change, be sure to consult a tax lawyer that specializes in dealing with the IRS to possibly negotiate a settlement for a lower amount than the full tax bill that results from the changes.\"" }, { "docid": "318111", "title": "", "text": "This is how a consulting engagement in India works. If you are registered for Service Tax and have a service tax number, no tax is deducted at source and you have to pay 12.36% to service tax department during filing (once a quarter). If you do not have Service tax number i.e. not registered for service tax, the company is liable to deduct 10% at source and give the same to Income Tax Dept. and give you a Form-16 at the end of the financial year. If you fall in 10% tax bracket, no further tax liability, if you are in 30%, 20% more needs to be paid to Income Tax Dept.(calculate for 20% tax bracket). The tax slabs given above are fine. If you fail to pay the remainder tax (if applicable) Income Tax Dept. will send you a demand notice, politely asking you to pay at the end of the FY. I would suggest you talk to a CA, as there are implications of advance tax (on your consulting income) to be paid once a quarter." }, { "docid": "403663", "title": "", "text": "\"Social security number should only be needed for things that involve tax withholding or tax payment. Your bank or investment broker, and your employer, need it so they can report your earnings. You need it when filing tax forms. Other than those, nobody should really be asking you for it. The gym had absolutely no good reason to ask and won't have done anything with the number. I think we can ignore that one. The store cards are a bigger problem. Depending on exactly what was done with the data, you may have been messing up the credit record of whoever legitimately had that number... and if so you might be liable on fraud charges if they or the store figure out what happened and come after you. But that's unrelated to the fact that you have a legitimate SSN now. Basically, you really don't want to open this can of worms. And I hope you're posting from a disposable user ID and not using your real name... (As I noted in a comment, the other choice would be to contact the authorities (I'm not actually sure which bureau/department would be best), say \"\"I was young, foolish, and confused by America's process... do I need to do anything to correct this?\"\", and see what happens... but it might be wise to get a lawyer's advice on whether that's a good idea, a bad idea, or simply unnecessary.)\"" }, { "docid": "381884", "title": "", "text": "IANAL, I am married to someone in your situation. As a US citizen age 26 who has not had any contact with the IRS, you should most definitely be worried... As a US citizen, you are (and always have been) required to file a US tax return and pay any tax on all income, no matter where earned, and no matter where you reside. There are often (but not always) agreements between governments to reduce double taxation. The US rule as to whether a particular type of income is taxable will prevail. As a US citizen with financial accounts (chequing, saving, investment, etc.) above a minimum balance, abroad, you are required to report information, including the amounts in the account, to the US government annually (Look up FBAR). Failure to file these forms carries harsh penalties. A recent law (FATCA) requires foreign financial institutions to report information on their US citizen clients to the US, irrespective of any local banking privacy laws. It's possible that your application triggered these reporting requirements. You will not be allowed to renounce your US citizenship until you have paid all past US taxes and penalties. Good new: you are eligible in ten years or so to run for President. Don't believe any of this, or that nothing has been missed; you must consult with a local tax expert specializing in US/UK tax laws." } ]

[ { "docid": "160301", "title": "", "text": "It's going to depend entirely on your tax situation, its complexity, and your willingness/interest in dealing with tax filings. Personally I find that not only do I not enjoy dealing with figuring out my taxes, but I don't know even a fraction of the possible deductions available and all the clever ways to leverage them. Plus the tax code is changing constantly and staying on top of that is not something I'm ever going to attempt. I am of the philosophy that it is my duty to pay only the absolute minimum tax legally required, and to utilize every possible exemption, deduction, credit, etc. that is available to me. Plus my business activities are a bit on the non-traditional side so it requires some unorthodox thinking at times. For me, a trained professional is the only way to go. What it costs me, I way more than make up in savings on my tax bill. I also go out of my way to never get a refund because if I get one, it just means I gave the government a free loan. The last time I computed my own taxes (used TurboTax if memory serves) was I think in the late 90s." } ]

[ { "docid": "501801", "title": "", "text": "\"Ed: Saw your comment, thank you. The short answer (a rough simplification), seems to be that you pay PA income tax for income made in PA. You pay IL income tax for income made in IL, not income made across both states. And you make sure the IL amount paid is correct via a credit calculated on Schedule CR. It looks to me (bear with me, I am no expert on tax law in IL, PA, or in general, so consult a professional for \"\"good\"\" advice :), like you basically do this on Schedule CR: It looks like there may be some more pertinent info on Publication 111, so that may potentially change the math a bit too. This check is 2014 income, during which you are a resident of IL. It's income from a PA employer. You must file a tax return in PA regardless, since you \"\"earned income in PA\"\". Did your former employer withhold PA income taxes on this particular paycheck? I'm not seeing where it says you should not include tax withheld; could you please point that out? Perhaps they mean you should only include tax actually considered \"\"due\"\" on the PA tax return. From IL's Schedule CR instructions: What is the purpose of Schedule CR? Schedule CR, Credit for Tax Paid to Other States, allows you to take a credit for income taxes you paid to other states on income you received while a resident of Illinois. You are allowed this credit only if you filed a required tax return with the other state. You must use information from the tax return you filed with the other state to complete Schedule CR. ... What taxes qualify for the credit? Taxes that qualify for the credit are income taxes you paid to another state of the United States,\"" }, { "docid": "355897", "title": "", "text": "\"First, point: The CRA wants you to start a business with a \"\"Reasonable expectation of profit\"\". They typically expect to see a profit within 5 years, so you may be inviting unwanted questions from future auditors by using a breakeven strategy. Second point: If the goal is to pay as little tax as possible, you may want to consider having the corporation pay you as little as possible. Corporate income taxes are much lower than personal income taxes, according to these two CRA links: How it works is that your company pays you little as an outright salary and offers you perks like a leased company car, expense account for lunch and entertainment, a mobile phone, computer, etc. The company owns all of this stuff and lets you use it as part of the job. The company pays for all this stuff with corporate pre-tax dollars as opposed to you paying for it with personal after-tax dollars. There are specifics on meals & entertainment which modify this slightly (you can claim 50%) but you get the idea. The actual rate difference will depend on your province of residence and your corporate income level. There is also a requirement for \"\"Reasonable Expenses\"\", such that the expenses have to be in line with what you are doing. If you need to travel to a conference each year, that would be a reasonable expense. Adding your family and making it a vacation for everyone would not. You can claim such expenses as a sole proprietor or a corporation. The sole-proprietorship option puts any after-expense profits into your pocket as taxable income, where the corporate structure allows the corporation to hold funds and limit the amount paid out to you. I've seen this strategy successfully done first-hand, but have not done it myself. I am not a lawyer or accountant, consult these professionals about this tax strategy before taking any action.\"" }, { "docid": "319836", "title": "", "text": "Three points for you to keep in mind. 1. In the very first year, you should have 182 days outside India. So that in the year when you start your consultancy, you will not have any liability to pay tax on earning abroad. 2. Although you may be starting a consultancy abroad, if you do any services in India, there will be withholding tax depending on the country in which you have started the consultancy business. 3. Whatever money you repatriate is not taxable in India. However, if you you repatriate the money as gift to anyone who is not a relative, will be taxed in his/her hand." }, { "docid": "453027", "title": "", "text": "&gt;Here's the real scoop - I would hire more people and buy more inventory and put more into capital investment if I paid less taxes, You would do so if there was money to be made doing so. It's as simple as that. Corporate Taxes are on net income. If hiring one more person contributed further to your bottom line you'd do so. That is the only thing that drives you. If the incremental cost of the hire is lower than the increased revenue. Period. Corporate taxes are on net income. Meaning you're still going to get more money, you're just going to get a little less of that incremental income growth than you thought. You'll still hire." }, { "docid": "390435", "title": "", "text": "If you itemize your deductions then the interest that you pay on your primary residence is tax deductible. Also realestate tax is also deductible. Both go on Schedule A. The car payment is not tax deductible. You will want to be careful about claiming business deduction for home or car. The IRS has very strict rules and if you have any personal use you can disqualify the deduction. For the car you often need to use the mileage reimbursement rates. If you use the car exclusively for work, then a lease may make more sense as you can expense the lease payment whereas with the car you need to follow the depreciation schedule. If you are looking to claim business expense of car or home, it would be a very good idea to get professional tax advice to ensure that you do not run afoul of the IRS." }, { "docid": "85229", "title": "", "text": "Insurance - get estimate from an insurance agent who works with policies for commercial real estate. See comments below regarding incorporation. Taxes - if this was basic income for a simple LLC, estimating 25-40% and adjusting over time might work. Rental property is a whole different prospect. Financial experts who specialize in rental properties would be a good source of advice, and worth the cost. See below regarding incorporating. Real estate appreciation - not something you can count on for developed property. Appreciation used to be almost guaranteed to at least keep up with inflation. Now property values are not even guaranteed to go up. Never have been but the general rule was improved real estate in good repair appreciated in price. Even if property values increase over time, rental properties depreciate. In fact, for rental properties, you can claim a certain rate of depreciation over time as an expense on taxes. This depreciation could mean selling for less than you paid for the property after a number of years, and owing capital gains taxes, since you would owe the difference between the depreciated value and the sale price. Related to taxes are local codes. Some areas require you to have a property management license to handle buildings with more than a certain number of units. If you are going to own rental properties, you should protect your private financial life by incorporating. Form a company. The company will own the property and hire any maintenance people or property managers or security staff or any similar employment activities. The company takes out the insurance and pays taxes. The company can pay you a salary. So, bottom line, you can have the company pay all the expenses and take all the risks. Then, assuming there's any money left after expenses, the company can pay you a manager's salary. That way if the worst happens and a tenant breaks their hip in the shower and sues you for ONE MILLION DOLLARS and wins, the company folds and you walk away. You might even consider two companies. One to own the property and lease it to a property management company. The property management company can then go bankrupt in case of some sort of liability issue, in which case you still keep the property, form a new management company, repaint and rename the property and move on. TL;DR: Get insurance advice from insurance agent before you buy. Same for taxes from an accountant. Get trained as a property manager if your local codes require it (might be a good idea anyway). Incorporate and have the company take all the risks." }, { "docid": "318111", "title": "", "text": "This is how a consulting engagement in India works. If you are registered for Service Tax and have a service tax number, no tax is deducted at source and you have to pay 12.36% to service tax department during filing (once a quarter). If you do not have Service tax number i.e. not registered for service tax, the company is liable to deduct 10% at source and give the same to Income Tax Dept. and give you a Form-16 at the end of the financial year. If you fall in 10% tax bracket, no further tax liability, if you are in 30%, 20% more needs to be paid to Income Tax Dept.(calculate for 20% tax bracket). The tax slabs given above are fine. If you fail to pay the remainder tax (if applicable) Income Tax Dept. will send you a demand notice, politely asking you to pay at the end of the FY. I would suggest you talk to a CA, as there are implications of advance tax (on your consulting income) to be paid once a quarter." }, { "docid": "61518", "title": "", "text": "\"Your assertion that you will not be selling anything is at odds with the idea that you will be doing tax loss harvesting. Tax loss harvesting always involves some selling (you sell stocks that have fallen in price and lock in the capital losses, which gives you a break on your taxes). If you absolutely prohibit your advisor from selling, then you will not be able to do tax loss harvesting (in that case, why are you using an advisor at all?). Tax loss harvesting has nothing to do with your horizon nor the active/passive difference, really. As a practical matter, a good tax loss harvesting plan involves mechanically selling losers and immediately putting the money in another stock with more-or-less similar risk so your portfolio doesn't change much. In this way you get a stable portfolio that performs just like a static portfolio but gives you a tax benefit each year. The IRS officially prohibits this practice via the \"\"wash sale rule\"\" that says you can't buy a substantially identical asset within a short period of time. However, though two stocks have similar risk, they are not generally substantially similar in a legal sense, so the IRS can't really beat you in court and they don't try. Basically you can't just buy the same stock again. The roboadvisor is advertising that they will perform this service, keeping your portfolio pretty much static in terms of risk, in such a way that your tax benefit is maximized and you don't run afoul of the IRS.\"" }, { "docid": "352136", "title": "", "text": "First of all, consult an accountant who is familiar with tax laws and online businesses. While most accountants know tax laws, fewer know how to handle online income like you describe although the number is growing. Right now, since you're a minor, this complicates things a bit. That's why you'll need a tax accountant to come up with the best business structure to use. You'll need to keep your own records to estimate your quarterly taxes. At the amount you're making, you'll want to do this since you'll pay a substantial penalty at the end of the year if you don't. You can use a small business accounting software package for this or just track everything using Excel or the like. As long as taxes are paid, you won't go to jail. But you need to pay them along with any penalties by April 15, 2013. If you don't do this, then the IRS will want to have a 'discussion' with you." }, { "docid": "182989", "title": "", "text": "Since you say 1099, I'll assume it's in the US. :) Think of your consulting operation as a small business. Businesses are only taxed on their profits, not their revenues. So you should only be paying tax on the $700 in the example you gave. Note, though, that you need to be sure the IRS thinks you're a small business. Having a separate bank account for the business, filing for a business license with your local city/state, etc are all things that help make the case that you're running a business. Of course, the costs of doing all those things are business expenses, and thus things you can deduct from that $1000 in revenue at tax time." }, { "docid": "129606", "title": "", "text": "You should probably get a professional tax advice, as it is very specific to the Philipines tax laws and the US-Philippine tax treaty. What I know, however, is that if it was the other way around - you paying a foreigner coming to the US to consult you - you would be withholding 30% of their pay for the IRS which they would be claiming for refund on their own later. So if the US does it to others - I'm not surprised to hear that others do it to the US. Get a professional advice on what and how you should be doing. In any case, foreign taxes paid can be used to offset your US taxes using form 1116 up to some extent." }, { "docid": "451180", "title": "", "text": "From India Tax point of view: Some one else may give the US tax treatment. Refer to this similar question what taxes I need to pay in India Capital Gains. My accountant never asked or reported the bought property in taxes- should he reported in taxes?Did he do wrong not reporting should I report the property in my next year taxes? If you mean in IT Returns, yes it should be declared. Can i bring the money back if needed? By Back if you mean repatriate to US, The capital portion would be Ease if the loan property was purchased or loan repaid from NRE. Else there is limit on the amount and paperwork. Consult a CA. If I rent the property instead of selling, do I have to report the income and what income? should I be filling taxes on the rental income in India or just in USA or both You are taxable for the rent and have to report it as income and pay taxes in India." }, { "docid": "546277", "title": "", "text": "Note: This is not professional tax advice. If you think you need professional tax advice, find a licensed professional in your local area. What are the expected earnings/year? US$100? US$1,000? US$100,000? I would say if this is for US$1,000 or less that registering an EIN, and consulting a CPA to file a Partnership Tax return is not going to be a profitable exercise.... all the earnings, perhaps more, will go to paying someone to do (or help do) the tax filings. The simplest taxes are for a business that you completely own. Corporations and Partnerships involve additional forms and get more and more and complex, and even more so when it involves foreign participation. Partnerships are often not formal partnerships but can be more easily thought of as independent businesses that each participants owns, that are simply doing some business with each other. Schedule C is the IRS form you fill out for any businesses that you own. On schedule C you would list the income from advertising. Also on schedule C there is a place for all of the business expenses, such as ads that you buy, a server that you rent, supplies, employees, and independent contractors. Amounts paid to an independent contractor certainly need not be based on hours, but could be a fixed fee, or based on profit earned. Finally, if you pay anyone in the USA over a certain amount, you have to tell the IRS about that with a Form 1099 at the beginning of the next year, so they can fill out their taxes. BUT.... according to an article in International Tax Blog you might not have to file Form 1099 with the IRS for foreign contractors if they are not US persons (not a US citizen or a resident visa holder)." }, { "docid": "129355", "title": "", "text": "\"The tax system in general, and income tax in particular, is used for several purposes at once. One of those purposes is to raise money to run the government. It isn't the only purpose of income tax, and income tax isn't the only source of money to run the government. Try a thought experiment: let's say it costs $10,000 per person per year to run the government. (It might actually cost far more or far less, that's not the point.) A super simple tax system would just ask each person for $10,000. But such a system isn't fair. Some people don't even earn $10,000 so they are literally not able to pay that. Some people, who earn a lot, can easily afford to pay more. So a still-pretty simple approach asks each person to pay a particular percentage of their income, and the hope is that this will add up to enough to run the government. This still doesn't feel fair to everyone - 10% of your income is hard to find when you're spending it all on rent and food, and easy to find when you have way more than you \"\"need\"\". So many countries have what's called a \"\"progressive\"\" system of income tax where you pay no tax on the first X of your income, then a small percentage on the next Y, a larger percentage on the next Z and so on. But you asked about business profit. Some places don't tax business profits at all - they just collect income taxes on people once the money reaches them as salary or dividends. Other places do. Just as a person who doesn't earn any income can't send the government money, a business that spent more on expenses than it brought in as revenue can't send the government money either. So the tax is on profit. That seems fairer to most people anyway. Things then get even more complicated for both business and personal income taxes because the government uses the system to encourage certain behaviours and to help people facing hard times. If you want to encourage people to get training and move into higher paying jobs, you might make tuition tax deductible. Most countries give a tax deduction for each small child you have. This isn't because people with children use less of the services government provides, is it? Instead it's an acknowledgement that people with children generally have less money to spend. Or an encouragement to have children, or something. Tax motivations are complicated. If you charged all businesses a flat tax regardless of whether they were making or losing money, people might be hesitant to start companies that lose money at first. There might be less entrepreneurship in that country. If instead you only tax profits, it feels fairer and more people are likely to join in. So that's what most governments do. Is the imaginary business owner who is not turning a profit somehow getting a free ride? They are still paying tax. If they took any salary for themselves, there was personal income tax on that. Everything the company bought, it paid sales tax on. There may have been excise taxes and such in other things they bought. The economic activity of the business has been driving the wheel of the local economy and spinning off some taxes at various levels that whole time. Whether the business itself is chipping in some corporate income tax too may not end up being particularly relevant. Example: a sole proprietor has revenue of $100,000 and spends $10,000 on supplies and such. If the salary to the owner is $89,000 the company has a $1000 profit which it pays tax on. If the salary to the owner is $91,000 the company has a $1000 loss and doesn't pay tax (and may be able to use the loss to reduce taxes in a future year.) So what? The owner is paying personal income tax on roughly $90,000. The government is getting the support it needs. Yes, some owners do all the \"\"encouraged\"\" things so that some income is not taxed either in the business or the personal sphere. That is presumably what the government wanted when it set those things up as deductions. Making charitable contributions, hiring new employees, building new facilities ... essentially the government is paying the business to do those things because they're good for the country. The overall government budget (funded by personal and corporate income tax along with sales tax, excises taxes etc) is supposed to achieve certain goals which include roads and schools but also job creation and the like. This is one of the ways they do that.\"" }, { "docid": "82284", "title": "", "text": "\"See Publication 505, specifically the section on \"\"Annualized Income Installment Method\"\", which says: If you do not receive your income evenly throughout the year (for example, your income from a repair shop you operate is much larger in the summer than it is during the rest of the year), your required estimated tax payment for one or more periods may be less than the amount figured using the regular installment method. The publication includes a worksheet and explanation of how to calculate the estimated tax due for each period when you have unequal income. If you had no freelance income during a period, you shouldn't owe any estimated tax for that period. However, the process for calculating the estimated tax using this method is a good bit more complex and confusing than using the \"\"short\"\" method (in which you just estimate how much tax you will owe for the year and divide it into four equal pieces). Therefore, in future years you might want to still use the equal-payments method if you can swing it. (It's too late for this year since you missed the April deadline for the first payment.) If you can estimate the total amount of freelance income you'll receive (even though you might not be able to estimate when you'll receive it), you can probably still use the simpler method. If you really have no idea how much money you'll make over the year, you could either use the more complex computation, or you could use a very high estimate to ensure you pay enough tax, and you'll get a refund if you pay too much.\"" }, { "docid": "415345", "title": "", "text": "Whether to employ a payroll service to handle the taxes (and possibly the payroll itself) is a matter that depends on how savvy you are with respect to your own taxes and with using computers in general. If you are comfortable using programs such as Excel, or Quicken, or TurboTax, or TaxAct etc, then taking care of payroll taxes on a nanny's wages all by yourself is not too hard. If you take a shoebox full of receipts and paystubs to your accountant each April to prepare your personal income tax returns and sign whatever the accountant puts in front of you as your tax return, then you do need to hire a payroll service. It will also cost you a bundle since there are no economies of scale to help you; there is only one employee to be paid." }, { "docid": "341960", "title": "", "text": "To start with, I should mention that many tax preparation companies will give you any number of free consultations on tax issues — they will only charge you if you use their services to file a tax form, such as an amended return. I know that H&R Block has international tax specialists who are familiar with the issues facing F-1 students, so they might be the right people to talk about your specific situation. According to TurboTax support, you should prepare a completely new 1040NR, then submit that with a 1040X. GWU’s tax department says you can submit late 8843, so you should probably do that if you need to claim non-resident status for tax purposes." }, { "docid": "225321", "title": "", "text": "\"Loved this... &gt;A Philadelphia-area human-resources executive told Mr. Cappelli that he applied anonymously for a job in his own company as an experiment. He didn't make it through the screening process. --- And crap like THIS... &gt;Neal Grunstra, president of Mindbank Consulting Group, a temporary-staffing company, calls this \"\"looking for a unicorn.\"\" Mr. Cappelli's favorite email came from a company that drew 25,000 applicants for a standard engineering position only to have the HR department say not one was qualified. One job seeker said \"\"he had been told he was perfect for a given position—except for the fact that his previous job title didn't match that of the vacancy,\"\" a title unique to the prospective employer. Is the reason why -- even 2 decades ago -- I refused to let \"\"HR\"\" do any filtering or \"\"pre-qualifying\"\" of resumes for me when I hired. (Because they have no idea of the *degree* of importance attached to any specific hiring \"\"requirement\"\"; and that many of said requirements are not requirements at all, but rather \"\"it would be great if the candidate had XXX, but YYY will do just as well, depending...\"\") Also, this is why the BEST way to get hired (or to hire) is to do an \"\"end run around\"\" the HR department and get resumes into the hands of the hiring manager via networking -- preferably avoiding HR and the whole \"\"classified/listed job\"\" altogether -- HR can handle the paperwork around hiring AFTER qualified candidates have been interviewed.\"" }, { "docid": "403663", "title": "", "text": "\"Social security number should only be needed for things that involve tax withholding or tax payment. Your bank or investment broker, and your employer, need it so they can report your earnings. You need it when filing tax forms. Other than those, nobody should really be asking you for it. The gym had absolutely no good reason to ask and won't have done anything with the number. I think we can ignore that one. The store cards are a bigger problem. Depending on exactly what was done with the data, you may have been messing up the credit record of whoever legitimately had that number... and if so you might be liable on fraud charges if they or the store figure out what happened and come after you. But that's unrelated to the fact that you have a legitimate SSN now. Basically, you really don't want to open this can of worms. And I hope you're posting from a disposable user ID and not using your real name... (As I noted in a comment, the other choice would be to contact the authorities (I'm not actually sure which bureau/department would be best), say \"\"I was young, foolish, and confused by America's process... do I need to do anything to correct this?\"\", and see what happens... but it might be wise to get a lawyer's advice on whether that's a good idea, a bad idea, or simply unnecessary.)\"" } ]

[ { "docid": "488574", "title": "", "text": "Good professional tax advice is expensive. If your situation is simple, then paying someone doesn't give you more than you could get from a simple software package. In this case, doing your own taxes will save you money this year, and also help you next year, as your situation grows steadily more complex. If you don't do your own taxes when you're single with a part time job, you'll never do it when you have a family, a full time job, a side business, and many deductions. Learning how to do your taxes over time, as your 'tax life' becomes complex, is a valuable skill. If your situation is complex, you will need pay a lot to get it done correctly. Sometimes, that cost is worthwhile. At bare minimum, I would say 'attempt to do your taxes yourself, first'. This will force you to organize your files, making the administrative cost of doing your return lower (ie: you aren't paying your tax firm to sort your receipts, because you've already ordered them nicely with your own subtotals, everything perfectly stapled together). If your situation is complex, and you find a place to get it done cheaply (think H&R Block), you will not be getting value for service. I am not saying a low-end tax firm will necessarily get things wrong, but if you don't have a qualified professional (read: university educated and designated) doing your return, the complexities can be ignored. Low-end tax firms typically hire seasonal staff, train them for 1-2 weeks, and mostly just show them how to enter tax slips into the same software you could buy yourself. If you underpay for professional services, you will pay the price, metaphorically speaking. For your specific situation, I strongly recommend you have a professional service look at your returns, because you are a non-resident, meaning you likely need to file in your home country as well. Follow what they do with your return, and next year, see how much of it you can do yourself. Before you hire someone, get a fee quote, and shop around until you find someone you are comfortable with. $1k spent now could save you many headaches in the future." } ]

[ { "docid": "85229", "title": "", "text": "Insurance - get estimate from an insurance agent who works with policies for commercial real estate. See comments below regarding incorporation. Taxes - if this was basic income for a simple LLC, estimating 25-40% and adjusting over time might work. Rental property is a whole different prospect. Financial experts who specialize in rental properties would be a good source of advice, and worth the cost. See below regarding incorporating. Real estate appreciation - not something you can count on for developed property. Appreciation used to be almost guaranteed to at least keep up with inflation. Now property values are not even guaranteed to go up. Never have been but the general rule was improved real estate in good repair appreciated in price. Even if property values increase over time, rental properties depreciate. In fact, for rental properties, you can claim a certain rate of depreciation over time as an expense on taxes. This depreciation could mean selling for less than you paid for the property after a number of years, and owing capital gains taxes, since you would owe the difference between the depreciated value and the sale price. Related to taxes are local codes. Some areas require you to have a property management license to handle buildings with more than a certain number of units. If you are going to own rental properties, you should protect your private financial life by incorporating. Form a company. The company will own the property and hire any maintenance people or property managers or security staff or any similar employment activities. The company takes out the insurance and pays taxes. The company can pay you a salary. So, bottom line, you can have the company pay all the expenses and take all the risks. Then, assuming there's any money left after expenses, the company can pay you a manager's salary. That way if the worst happens and a tenant breaks their hip in the shower and sues you for ONE MILLION DOLLARS and wins, the company folds and you walk away. You might even consider two companies. One to own the property and lease it to a property management company. The property management company can then go bankrupt in case of some sort of liability issue, in which case you still keep the property, form a new management company, repaint and rename the property and move on. TL;DR: Get insurance advice from insurance agent before you buy. Same for taxes from an accountant. Get trained as a property manager if your local codes require it (might be a good idea anyway). Incorporate and have the company take all the risks." }, { "docid": "427469", "title": "", "text": "If significant amounts are involved, that would be a good time to consult a tax professional (EA/CPA licensed in your state). Generally, sale of a business is an ordinary income and you can only deduct tangible expenses, as Joe said. That would be laptops, bills, expenses per receipt, of course they must all be directly attributable to the business. You will need to be able to show that the laptops has only been used in business, recapture depreciation, etc. Same with all the rest of the expenses. If you're incorporated (i.e.: you hold this software under an S-Corp), then you're selling stocks, not business, and the tax treatment may be different, but I'm guessing this is not the case for you." }, { "docid": "540527", "title": "", "text": "TL:DR: You should read something like The Little Book of Common Sense Investing, and read some of the popular questions on this site. The main message that you will get from that research is that there is an inescapable connection between risk and reward, or to put it another way, volatility and reward. Things like government bonds and money market accounts have quite low risk, but also low reward. They offer a nearly guaranteed 1-3%. Stocks, high-risk bonds, or business ventures (like your soda and vending machine scheme) may return 20% a year some years, but you could also lose money, maybe all you've invested (e.g., what if a vandal breaks one of your machines or the government adds a $5 tax for each can of soda?). Research has shown that the best way for the normal person to use their money to make money is to buy index funds (these are funds that buy a bunch of different stocks), and to hold them for a long time (over 10-15 years). By buying a broad range of stocks, you avoid some of the risks of investing (e.g., if one company's stock tanks, you don't lose very much), while keeping most of the benefits. By keeping them for a long time, the good years more than even out the bad years, and you are almost guaranteed to make ~6-7%/year. Buying individual stocks is a really, really bad idea. If you aren't willing to invest the time to become an expert investor, then you will almost certainly do worse than index funds over the long run. Another option is to use your capital to start a side business (like your vending machine idea). As mentioned before, this still has risks. One of those risks is that it will take more work than you expect (who will find places for your vending machines? Who will fill them? Who will hire those who fill them? etc.). The great thing about an index fund is that it doesn't take work or research. However, if there are things that you want to do, that take capital, this can be a good way to make more income." }, { "docid": "319836", "title": "", "text": "Three points for you to keep in mind. 1. In the very first year, you should have 182 days outside India. So that in the year when you start your consultancy, you will not have any liability to pay tax on earning abroad. 2. Although you may be starting a consultancy abroad, if you do any services in India, there will be withholding tax depending on the country in which you have started the consultancy business. 3. Whatever money you repatriate is not taxable in India. However, if you you repatriate the money as gift to anyone who is not a relative, will be taxed in his/her hand." }, { "docid": "25172", "title": "", "text": "The transaction will be taxable in India. You will have to pay Capital Gains tax. I am assuming that you purchased the house while you were Indian Resident for tax purposes. As such its needs more paper work to get the money back to US. Consult a CA in India who will help with the paperwork. You haven't mentioned your tax status in US, one you update it, someone will post a US tax aspects of the transaction." }, { "docid": "403663", "title": "", "text": "\"Social security number should only be needed for things that involve tax withholding or tax payment. Your bank or investment broker, and your employer, need it so they can report your earnings. You need it when filing tax forms. Other than those, nobody should really be asking you for it. The gym had absolutely no good reason to ask and won't have done anything with the number. I think we can ignore that one. The store cards are a bigger problem. Depending on exactly what was done with the data, you may have been messing up the credit record of whoever legitimately had that number... and if so you might be liable on fraud charges if they or the store figure out what happened and come after you. But that's unrelated to the fact that you have a legitimate SSN now. Basically, you really don't want to open this can of worms. And I hope you're posting from a disposable user ID and not using your real name... (As I noted in a comment, the other choice would be to contact the authorities (I'm not actually sure which bureau/department would be best), say \"\"I was young, foolish, and confused by America's process... do I need to do anything to correct this?\"\", and see what happens... but it might be wise to get a lawyer's advice on whether that's a good idea, a bad idea, or simply unnecessary.)\"" }, { "docid": "62966", "title": "", "text": "when investing in index funds Index fund as the name suggests invests in the same proportion of the stocks that make up the index. You can choose a Index Fund that tracks NYSE or S&P etc. You cannot select individual companies. Generally these are passively managed, i.e. just follow the index composition via automated algorithms resulting in lower Fund Manager costs. is it possible to establish an offshore company Yes it is possible and most large organization or High Net-worth individuals do this. Its expensive and complicated for ordinary individuals. One needs and army of International Tax Consultants / International Lawyers / etc but do I have to pay taxes from the capital gains at the end of the year? Yes Canada taxes on world wide income and you would have to pay taxes on gains in Canada. Note depending on your tax residency status in US, you may have to pay tax in US as well." }, { "docid": "599336", "title": "", "text": "Generally for tax questions you should talk to a tax adviser. Don't consider anything I write here as a tax advice, and the answer was not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer. Does IRS like one payment method over other or they simply don't care as long as she can show the receipts? They don't care as long as she withholds the taxes (30%, unless specific arrangements are made for otherwise). She should withhold 30% of the payment and send it to the IRS. The recipient should claim refund, if the actual tax liability is lower. It's only consulting work at the moment, so most of the communication is done over phone. Should they start engaging in written communication to keep records of the work done? Yes, if she wants it to be a business expense. Is it okay to pay in one go to save money-transferring fees? Can she pay in advance? Again, she can do whatever she wants, but if she wants to account for it on her tax returns she should do it the same way she would pay any other vendor in her business. She cannot use different accounting methods for different vendors. Basically, she has not outsourced work in previous years, and she wants to avoid any red flags. Then she should start by calling on her tax adviser, and not an anonymous Internet forum." }, { "docid": "390435", "title": "", "text": "If you itemize your deductions then the interest that you pay on your primary residence is tax deductible. Also realestate tax is also deductible. Both go on Schedule A. The car payment is not tax deductible. You will want to be careful about claiming business deduction for home or car. The IRS has very strict rules and if you have any personal use you can disqualify the deduction. For the car you often need to use the mileage reimbursement rates. If you use the car exclusively for work, then a lease may make more sense as you can expense the lease payment whereas with the car you need to follow the depreciation schedule. If you are looking to claim business expense of car or home, it would be a very good idea to get professional tax advice to ensure that you do not run afoul of the IRS." }, { "docid": "74251", "title": "", "text": "As Phil notes, converting to Roth means paying tax on the entire amount of the 401k (or, the entire amount moved, anyway). Most of the time that's a bad idea. Roth is a good idea when you're young and paying lower taxes (and often have lots of deductions), and when your money will have lots of time to appreciate tax-free. I imagine there could be edge cases, though, where this could be a good idea. If he's got a lot of savings which he's planning to live off of for a few years (not the income, but the savings itself), then he would have $0 income for those years. In that case, it's logical to convert some of the 401k to a Roth IRA, to take advantage of lower tax rates (probably up to or through the 15% tax rate, depending on if his total dollars are enough that he'll be paying an actual tax rate (not marginal) higher than 15% or not). Now, odds are it's better to take that savings and invest it along with the 401k and then live off of those earnings, rather than just spending the savings, but I imagine there are some with circumstances where this would make sense - particularly if, for example, he downsized in houses and has a few hundred K from that, tax-free." }, { "docid": "460401", "title": "", "text": "\"You could debate the \"\"why\"\"s of tax policy endlessly. There are lots of things in tax law that I think are bad ideas, and probably a few here and there that I think are good ideas. I am well aware that there are things that I think are good ideas that others think are bad ideas and vice versa. To your specific point: I suppose you could say that having a place to live is a necessity. But most people do not live in the absolute minimum necessary to give them a place to sleep and protection from the weather. You could survive with a one-room apartment with a bed on one side and a toilet and some minimal cooking facilities on the other. Most people have considerably more than that. At some point that's luxury and not necessity. And if you want to push it, you COULD live in a cardboard box under a bridge, you don't NEED a house or apartment to survive. Personally I think it's absurd that as a home-owner I get a deduction for my mortgage interest, while if someone were to rent an identical house with a monthly rental equal to exactly the same amount that I am paying on my mortgage, he would receive no deduction. The stated goal of that one was to encourage home ownership. But people who own homes are generally richer than those who rent, so the net result is that the poor are paying higher taxes to help subsidize the homes of the rich. And then the rich congratulate themselves on how they are giving these tax breaks to help make housing more affordable for poor people. To reiterate @keshlam, tax laws only makes sense when understood politically. Yes, some people have fine ideas about what is fair and just. Others simply want tax breaks that benefit their business or people with tough financial situations that just happen by chance to resemble their own. Many of the people with noble ideas have little concept of what the implications of the policies they push are. Many of the ideas that some people view as worthy and noble, others view as frivolous, counter-productive, or even evil. Then you mash all these competing groups and interest together and see what comes out.\"" }, { "docid": "546372", "title": "", "text": "You better consult with a tax adviser (EA or CPA) on this, my answer doesn't constitute such an advice. Basically, you're selling stuff on Kickstarter. No matter how they call it (projects, pledges, rewards - all are just words), you're selling stuff. People give you money (=pledges) and in return you're giving them tangible or intangible goods (=rewards). All the rest is just PR. So you will pay taxes on all the money you get, and you will be able to deduct some of the expenses (depends on whether its a business or a hobby, the deduction may be full or limited). It doesn't matter if you use LLC or your own account from the financial/taxation point of you, but it matters legally. LLC limits your personal liability, but do get a legal advice on this issue, and whether it is at all relevant for you. If you raise funds in 2012 you pay taxes on the money in 2012. If you go into production in 2013 - you can deduct expenses in 2013. If you're classified as a hobby, you'll end up paying full taxes in 2012 and deducting nothing in 2013. Talk to a tax adviser." }, { "docid": "501801", "title": "", "text": "\"Ed: Saw your comment, thank you. The short answer (a rough simplification), seems to be that you pay PA income tax for income made in PA. You pay IL income tax for income made in IL, not income made across both states. And you make sure the IL amount paid is correct via a credit calculated on Schedule CR. It looks to me (bear with me, I am no expert on tax law in IL, PA, or in general, so consult a professional for \"\"good\"\" advice :), like you basically do this on Schedule CR: It looks like there may be some more pertinent info on Publication 111, so that may potentially change the math a bit too. This check is 2014 income, during which you are a resident of IL. It's income from a PA employer. You must file a tax return in PA regardless, since you \"\"earned income in PA\"\". Did your former employer withhold PA income taxes on this particular paycheck? I'm not seeing where it says you should not include tax withheld; could you please point that out? Perhaps they mean you should only include tax actually considered \"\"due\"\" on the PA tax return. From IL's Schedule CR instructions: What is the purpose of Schedule CR? Schedule CR, Credit for Tax Paid to Other States, allows you to take a credit for income taxes you paid to other states on income you received while a resident of Illinois. You are allowed this credit only if you filed a required tax return with the other state. You must use information from the tax return you filed with the other state to complete Schedule CR. ... What taxes qualify for the credit? Taxes that qualify for the credit are income taxes you paid to another state of the United States,\"" }, { "docid": "349348", "title": "", "text": "\"I'm assuming that when you say \"\"convert to S-Corp tax treatment\"\" you're not talking about actually changing your LLC to a Corporation. There are two distinct pieces of the puzzle here. First, there's your organizational form. Your state, which is where the business is legally formed and recognized, creates the LLC or Corporation. \"\"S-Corp\"\" doesn't come into play here: your company is either an LLC or a Corporation. (There are a handful of other organizational types your state might have, e.g. PLLC, Limited Partnership, etc.; none of these are immediately relevant to this discussion). Second, there's the tax treatment you receive by the IRS. If your company was created by the state as an LLC, note that the IRS doesn't recognize LLCs as a distinct organizational type: you elect to be taxed as an individual (for single member LLCs), a partnership (for multiple member LLCs), or as a corporation. The former two elections are \"\"pass through\"\" -- there's no additional level of taxation on corporate profits, everything just passes through to the owners. The latter election introduces a tax on corporate profits. When you elect pass-through treatment, a single-member LLC files on Schedule C; a multiple-member LLC will prepare a form K-1 which you will include on your 1040. If your company was created by the state as a Corporation (not an LLC), you could still elect pass-through taxation if your company qualifies under the rules in Subchapter S (i.e. \"\"an S-Corp\"\"). States do not recognize \"\"S-Corp\"\" as part of the organizational process -- that's just a tax distinction used by the IRS (and possibly your state's tax authorities). In your case, if you are a single-member LLC (and assuming there are no other reasons to organize as a corporation), talking about \"\"S-Corp tax treatment\"\" doesn't make any sense. You'll just file your schedule C; in my experience it's fairly simple. (Note that this is based on my experience of single- and multiple-member LLCs in just two states. Your state may have different rules that affect state-level taxation; and the rules may change from year to year. I've found that hiring a good CPA to prepare the forms saves a good bit of stress and time that can be better applied to the business.)\"" }, { "docid": "290385", "title": "", "text": "\"Answers: 1. Is this a good idea? Is it really risky? What are the pros and cons? Yes, it is a bad idea. I think, with all the talk about employer matches and tax rates at retirement vs. now, that you miss the forest for the trees. It's the taxes on those retirement investments over the course of 40 years that really matter. Example: Imagine $833 per month ($10k per year) invested in XYZ fund, for 40 years (when you retire). The fund happens to make 10% per year over that time, and you're taxed at 28%. How much would you have at retirement? 2. Is it a bad idea to hold both long term savings and retirement in the same investment vehicle, especially one pegged to the US stock market? Yes. Keep your retirement separate, and untouchable. It's supposed to be there for when you're old and unable to work. Co-mingling it with other funds will induce you to spend it (\"\"I really need it for that house! I can always pay more into it later!\"\"). It also can create a false sense of security (\"\"look at how much I've got! I got that new car covered...\"\"). So, send 10% into whatever retirement account you've got, and forget about it. Save for other goals separately. 3. Is buying SPY a \"\"set it and forget it\"\" sort of deal, or would I need to rebalance, selling some of SPY and reinvesting in a safer vehicle like bonds over time? For a retirement account, yes, you would. That's the advantage of target date retirement funds like the one in your 401k. They handle that, and you don't have to worry about it. Think about it: do you know how to \"\"age\"\" your account, and what to age it into, and by how much every year? No offense, but your next question is what an ETF is! 4. I don't know ANYTHING about ETFs. Things to consider/know/read? Start here: http://www.investopedia.com/terms/e/etf.asp 5. My company plan is \"\"retirement goal\"\" focused, which, according to Fidelity, means that the asset allocation becomes more conservative over time and switches to an \"\"income fund\"\" after the retirement target date (2050). Would I need to rebalance over time if holding SPY? Answered in #3. 6. I'm pretty sure that contributing pretax to 401k is a good idea because I won't be in the 28% tax bracket when I retire. How are the benefits of investing in SPY outweigh paying taxes up front, or do they not? Partially answered in #1. Note that it's that 4 decades of tax-free growth that's the big dog for winning your retirement. Company matches (if you get one) are just a bonus, and the fact that contributions are tax free is a cherry on top. 7. Please comment on anything else you think I am missing I think what you're missing is that winning at personal finance is easy, and winning at personal finance is hard\"" }, { "docid": "339465", "title": "", "text": "Taxes should never be hated. It should be an honor to contribute toward the common good of the nation. It used to be this way until they were made into a political weapon. Our nation used to raise taxes when we held debt and lower taxes when debt was low. Instead, this bullshit idea that taxes are bad was crammed down peoples throats, and now we're sitting at a significant debt that really started to take off with Reagan." }, { "docid": "61518", "title": "", "text": "\"Your assertion that you will not be selling anything is at odds with the idea that you will be doing tax loss harvesting. Tax loss harvesting always involves some selling (you sell stocks that have fallen in price and lock in the capital losses, which gives you a break on your taxes). If you absolutely prohibit your advisor from selling, then you will not be able to do tax loss harvesting (in that case, why are you using an advisor at all?). Tax loss harvesting has nothing to do with your horizon nor the active/passive difference, really. As a practical matter, a good tax loss harvesting plan involves mechanically selling losers and immediately putting the money in another stock with more-or-less similar risk so your portfolio doesn't change much. In this way you get a stable portfolio that performs just like a static portfolio but gives you a tax benefit each year. The IRS officially prohibits this practice via the \"\"wash sale rule\"\" that says you can't buy a substantially identical asset within a short period of time. However, though two stocks have similar risk, they are not generally substantially similar in a legal sense, so the IRS can't really beat you in court and they don't try. Basically you can't just buy the same stock again. The roboadvisor is advertising that they will perform this service, keeping your portfolio pretty much static in terms of risk, in such a way that your tax benefit is maximized and you don't run afoul of the IRS.\"" }, { "docid": "114559", "title": "", "text": "\"My wife and I use to file \"\"married file separately\"\". I consulted a tax accountant and it does not matter who's name the accounts are under. The interest from the accounts can be counted as income on either person's tax return regardless of whose name is on the account. You can even split the interest income between the returns if that is advantageous. This is true for any income earned between the two of you. It use to be a big hassle to file this way even using the software programs. The programs would not attempt to allocate the income between the tax returns in order to minimize my tax liability. I had to do this manually. Most of the loopholes have been closed and the last couple of years I've filed \"\"married filed jointly\"\". I'm not sure how your wife's citizenship status affects any of this.\"" }, { "docid": "384541", "title": "", "text": "\"An employee costs the company in four ways: Salary, taxes, benefits, and capital. Salary: The obvious one, what they pay you. Taxes: There are several taxes that an employer has to pay for the privilege of hiring someone, including social security taxes (which goes to your retirement), unemployment insurance tax (your unemployment benefits if they lay you off), and workers compensation tax (pays if you are injured on the job). (There may be other taxes that I'm not thinking of, but in any case those are the main ones.) Benefits: In the U.S. employers often pay for medical insurance, sometimes for dental, life, and disability. There's usually some sort of retirement plan. They expect to give you some number of vacation days, holidays, and sick days where they pay you even though you're not working. Companies sometimes offer other benefits, like discounts on buying company products, membership in health clubs, etc. Capital: Often the company has to provide you with some sort of equipment, like a computer; furniture, like a chair and desk; etc. As far as the company is concerned, all of the above are part of the cost of having you as an employee. If they would pay a domestic employee $60,000 in salary and $20,000 in taxes, then assuming the same benefits and capital investment, if a foreign employee would cost them $0 in taxes they should logically be willing to pay $80,000. Any big company will have accountants who figure out the total cost of a new employee in excruciating detail, and they will likely be totally rational about this. A smaller company might think, \"\"well, taxes don't really count ...\"\" This is irrational but people are not always rational. I don't know what benefits they are offering you, if any, and what equipment they will provide you with, if any. I also don't know what taxes, if any, a U.S. company has to pay when hiring a remote employee in a foreign country. If anybody on here knows the answer to that, please chime in. Balanced against that, the company likely sees disadvantages to hiring a foreign remote employee, too. Communication will be more difficult, which may result in inefficiency. My previous employer used some contractors in India and while there were certainly advantages, the language and time zone issues caused difficulties. There are almost certainly some international bureaucratic inconveniences they will have to deal with. Etc. So while you should certainly calculate what it would cost them to have a domestic employee doing the same job, that's not necessarily the end of the story. And ultimately it all comes down to negotiations. Even if the company knows that by the time they add in taxes and benefits and whatever, a domestic employee will cost them $100,000 a year, if they are absolutely convinced that they should be able to hire an Austrian for $60,000 a year, that might be the best offer you will get. You can point out the cost savings, and maybe they will concede the point and maybe not.\"" } ]

[ { "docid": "498834", "title": "", "text": "\"I've been highly compensated for a while now, and I have never used a tax professional. My past complications include the year that my company was bought by a VC firm and my stock options and stock held were bought out to the tune of 5x my salary. And now I have two kids in college, with scholarships, and paying the remainder out of 529 accounts. Usually, I don't even use tax software. My typical method is to use the online software -- like turbotax online -- and let it figure out where I am. Then I use the \"\"Free File Fillable forms\"\" online to actually complete the process. Search for \"\"Free File Fillable Forms\"\" -- it's not the same as using turbotax or TaxAct for free. My suggestion to you: download the PDF form of 1040EZ and 1040A from the IRS. Print the EZ, and fill it out. This will give you a better feel for what exactly is going on. With your income, I don't think you can file the EZ, but it's a good way to get your feet wet. The way income taxes work here in the US: According to the IRS, the Personal Exemption this year is worth $4,050, and the Standard Deduction $6,300, assuming you're single. Lets assume that your salary will be in fact 75,000, and you don't pay for any benefits, but you do make a 401k contribution of 15% of your salary. Then your W-2 at the end of the year should tell you to put 63,750 in a particular box on your 1040 form. (63,750 is 85% of 75,000). Lets then assume 63,750 is your AGI after other additions and subtractions. 63,750 - 4,050 - 6,300 == 53,400. The federal Tax system is graduated, meaning there are different ranges (brackets) with different percentages. The term tax people use for taxable income of 53,400 is \"\"marginal tax rate\"\"...so the last dollar they tax at 25%. Other dollars less. According to the IRS, if you're single, then on 53,400, you pay \"\"$6,897.50 plus 25% of the amount over $50,400\"\" Or 6897.50 + 750, or 7647.50. Note this is only Federal Income Tax. You will also be paying Social Security and Medicare payroll Tax. And I'm guessing you'll also be paying colorado state income tax. Each state has its own forms and methods for figuring out the taxes and stuff. By the way, when you start, you'll fill out a \"\"W-4\"\" form to \"\"help\"\" you figure out how much to withhold from every paycheck. (I find the W-4 is not helpful at all). Your company will withhold from your paycheck some mysterious amount, and the process of filling out your 1040A or 1040EZ or whatever will be, likely, to get the over-withheld amount back.\"" } ]

[ { "docid": "75195", "title": "", "text": "I have a very similar situation doing side IT projects. I set up an LLC for the business, created a separate bank account, and track things separately. I then pay myself from the LLC bank account based on my hours for the consulting job. (I keep a percentage in the LLC account to pay for expenses.) I used to do my taxes myself, but when I created this arrangement, I started having an accountant do them. An LLC will not affect your tax status, but it will protect you from liability and make things more accountable come tax time." }, { "docid": "599336", "title": "", "text": "Generally for tax questions you should talk to a tax adviser. Don't consider anything I write here as a tax advice, and the answer was not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer. Does IRS like one payment method over other or they simply don't care as long as she can show the receipts? They don't care as long as she withholds the taxes (30%, unless specific arrangements are made for otherwise). She should withhold 30% of the payment and send it to the IRS. The recipient should claim refund, if the actual tax liability is lower. It's only consulting work at the moment, so most of the communication is done over phone. Should they start engaging in written communication to keep records of the work done? Yes, if she wants it to be a business expense. Is it okay to pay in one go to save money-transferring fees? Can she pay in advance? Again, she can do whatever she wants, but if she wants to account for it on her tax returns she should do it the same way she would pay any other vendor in her business. She cannot use different accounting methods for different vendors. Basically, she has not outsourced work in previous years, and she wants to avoid any red flags. Then she should start by calling on her tax adviser, and not an anonymous Internet forum." }, { "docid": "25172", "title": "", "text": "The transaction will be taxable in India. You will have to pay Capital Gains tax. I am assuming that you purchased the house while you were Indian Resident for tax purposes. As such its needs more paper work to get the money back to US. Consult a CA in India who will help with the paperwork. You haven't mentioned your tax status in US, one you update it, someone will post a US tax aspects of the transaction." }, { "docid": "540527", "title": "", "text": "TL:DR: You should read something like The Little Book of Common Sense Investing, and read some of the popular questions on this site. The main message that you will get from that research is that there is an inescapable connection between risk and reward, or to put it another way, volatility and reward. Things like government bonds and money market accounts have quite low risk, but also low reward. They offer a nearly guaranteed 1-3%. Stocks, high-risk bonds, or business ventures (like your soda and vending machine scheme) may return 20% a year some years, but you could also lose money, maybe all you've invested (e.g., what if a vandal breaks one of your machines or the government adds a $5 tax for each can of soda?). Research has shown that the best way for the normal person to use their money to make money is to buy index funds (these are funds that buy a bunch of different stocks), and to hold them for a long time (over 10-15 years). By buying a broad range of stocks, you avoid some of the risks of investing (e.g., if one company's stock tanks, you don't lose very much), while keeping most of the benefits. By keeping them for a long time, the good years more than even out the bad years, and you are almost guaranteed to make ~6-7%/year. Buying individual stocks is a really, really bad idea. If you aren't willing to invest the time to become an expert investor, then you will almost certainly do worse than index funds over the long run. Another option is to use your capital to start a side business (like your vending machine idea). As mentioned before, this still has risks. One of those risks is that it will take more work than you expect (who will find places for your vending machines? Who will fill them? Who will hire those who fill them? etc.). The great thing about an index fund is that it doesn't take work or research. However, if there are things that you want to do, that take capital, this can be a good way to make more income." }, { "docid": "158738", "title": "", "text": "Expenses are where the catch is found. Not all expenditures are considered expenses for tax purposes. Good CPAs make a comfortable living untangling this sort of thing. Advice for both of your family members' businesses...consult with a CPA before making big purchases. They may need to adjust the way they buy, or the timing of it, or simply to set aside capital to pay the taxes for the profit used to purchase those items. CPA can help find the best path. That 10k in unallocated income can be used to redecorate your office, but there's still 3k in taxes due on it. Bottom Line: Can't label business income as profit until the taxes have been paid." }, { "docid": "318111", "title": "", "text": "This is how a consulting engagement in India works. If you are registered for Service Tax and have a service tax number, no tax is deducted at source and you have to pay 12.36% to service tax department during filing (once a quarter). If you do not have Service tax number i.e. not registered for service tax, the company is liable to deduct 10% at source and give the same to Income Tax Dept. and give you a Form-16 at the end of the financial year. If you fall in 10% tax bracket, no further tax liability, if you are in 30%, 20% more needs to be paid to Income Tax Dept.(calculate for 20% tax bracket). The tax slabs given above are fine. If you fail to pay the remainder tax (if applicable) Income Tax Dept. will send you a demand notice, politely asking you to pay at the end of the FY. I would suggest you talk to a CA, as there are implications of advance tax (on your consulting income) to be paid once a quarter." }, { "docid": "67625", "title": "", "text": "It appears your company is offering roughly a 25% discount on its shares. I start there as a basis to give you a perspective on what the 30% matching offer means to you in terms of value. Since you are asking for things to consider not whether to do it, below are a few considerations (there may be others) in general you should think about your sources of income. if this company is your only source of income, it is more prudent to make your investment in their shares a smaller portion of your overall investment/savings strategy. what is the holding period for the shares you purchase. some companies institute a holding period or hold duration which restricts when you can sell the shares. Generally, the shorter the duration period the less risk there is for you. So if you can buy the shares and immediately sell the shares that represents the least amount of relative risk. what are the tax implications for shares offered at such a discount. this may be something you will need to consult a tax adviser to get a better understanding. your company should also be able to provide a reasonable interpretation of the tax consequences for the offering as well. is the stock you are buying liquid. liquid, in this case, is just a fancy term for asking how many shares trade in a public market daily. if it is a very liquid stock you can have some confidence that you may be able to sell out of your shares when you need. personally, i would review the company's financial statements and public statements to investors to get a better understanding of their competitive positioning, market size and prospects for profitability and growth. given you are a novice at this it may be good idea to solicit the opinion of your colleagues at work and others who have insight on the financial performance of the company. you should consider other investment options as well. since this seems to be your first foray into investing you should consider diversifying your savings into a few investments areas (such as big market indices which typically should be less volatile). last, there is always the chance that your company could fail. Companies like Enron, Lehman Brothers and many others that were much smaller than those two examples have failed in the past. only you can gauge your tolerance for risk. As a young investor, the best place to start is to use index funds which track a broader universe of stocks or bonds as the first step in building an investment portfolio. once you own a good set of index funds you can diversify with smaller investments." }, { "docid": "531370", "title": "", "text": "\"These types of diagrams appear all throughout Kiyosaki's Rich Dad, Poor Dad book. The arrows in the diagrams represent cash flow. For example, the first two diagrams of this type in the book are: The idea being presented here is that an asset generates income, and a liability generates expenses. According to the book, rich people spend their money buying assets, while middle class people buy liabilities. The diagram you posted above does not appear in the edition of the book I have (Warner Books Edition, printed in 2000). However, the following similar diagram appears in the chapter titled \"\"The History of Taxes and the Power of Corporations\"\": The idea behind this diagram is to demonstrate what the author considers the tax advantages of a personal corporation: using a corporation to pay for certain expenses with pre-tax dollars. Here is a quote from this chapter: Employees earn and get taxed and they try to live on what is left. A corporation earns, spends everything it can, and is taxed on anything that is left. It's one of the biggest legal tax loopholes that the rich use. They're easy to set up and are not expensive if you own investments that are producing good cash flow. For example; by owning your own corporation - vacations are board meetings in Hawaii. Car payments, insurance, repairs are company expenses. Health club membership is a company expense. Most restaurant meals are partial expenses. And on and on - but do it legally with pre-tax dollars. This piece of advice, like so much of the book, may contain a small amount of truth, but is oversimplified and potentially dangerous if taken a face value. There are many examples, as JoeTaxpayer mentioned, of people who tried to deduct too many expenses and failed to make a business case for them that would satisfy the IRS.\"" }, { "docid": "222049", "title": "", "text": "Your recruiter is likely trying to avoid having to pay the employer's side of employment taxes, and may even be trying to avoid having to file a 1099 for you by treating your relationship as a vendor/service provider that he is purchasing services from, which would make your pay just a business expense. It's definitely in his best interest for you to do it this way. Whether it's in your best interest is up to you. You should consult a licensed legal/tax professional to help you determine whether this is a good arrangement for you. (Most of the time, when someone starts playing tax avoidance games, they eventually get stung by it.) The next big question: If you already know this guy is a snake, why are you still working with him? If you don't trust him, why would you take legal/tax advice from him? He might land you a high-paying job. But he also might cause you years of headaches if his tax advice turns out to be flawed." }, { "docid": "355897", "title": "", "text": "\"First, point: The CRA wants you to start a business with a \"\"Reasonable expectation of profit\"\". They typically expect to see a profit within 5 years, so you may be inviting unwanted questions from future auditors by using a breakeven strategy. Second point: If the goal is to pay as little tax as possible, you may want to consider having the corporation pay you as little as possible. Corporate income taxes are much lower than personal income taxes, according to these two CRA links: How it works is that your company pays you little as an outright salary and offers you perks like a leased company car, expense account for lunch and entertainment, a mobile phone, computer, etc. The company owns all of this stuff and lets you use it as part of the job. The company pays for all this stuff with corporate pre-tax dollars as opposed to you paying for it with personal after-tax dollars. There are specifics on meals & entertainment which modify this slightly (you can claim 50%) but you get the idea. The actual rate difference will depend on your province of residence and your corporate income level. There is also a requirement for \"\"Reasonable Expenses\"\", such that the expenses have to be in line with what you are doing. If you need to travel to a conference each year, that would be a reasonable expense. Adding your family and making it a vacation for everyone would not. You can claim such expenses as a sole proprietor or a corporation. The sole-proprietorship option puts any after-expense profits into your pocket as taxable income, where the corporate structure allows the corporation to hold funds and limit the amount paid out to you. I've seen this strategy successfully done first-hand, but have not done it myself. I am not a lawyer or accountant, consult these professionals about this tax strategy before taking any action.\"" }, { "docid": "11654", "title": "", "text": "\"You will need to file a US income tax return, and declare all income world-wide. Whether this results in any tax owed depends on your particular circumstances, and the effect of any tax treaties between the US and India. There are additional requirements for the filing of information on the amounts in foreign accounts held by \"\"US tax persons\"\". Depending on the nature of these accounts, the complexity of the forms, and the penalties for non-compliance can be quite high... Short version: Consult a professional well-qualified in US/India tax matters...\"" }, { "docid": "127664", "title": "", "text": "\"Your employment status is not 100% clear from the question. Normally, consultants are sole-proprietors or LLC's and are paid with 1099's. They take care of their own taxes, often with schedule C, and they sometimes can but generally do not use \"\"employer\"\" company 401(k). If this is your situation, you can contact any provider you want and set up your own solo 401(k), which will have great investment options and no fees. I do this, through Fidelity. If you are paid with a W2, you are not a consultant. You are an employee and must use your employer's 401(k). Figure out what you are. If you are a consultant, open a solo 401(k) at the provider of your choice. Make sure beforehand that they allow incoming rollovers. Roll all of your previous 401(k)s and IRA's into it. When you have moved your 401(k) to a better provider, you won't be paying any extra fees, but you will not recoup any fees your original provider charged. I'm not sure why you mention a Roth IRA. If you try to roll your 401(k) into a Roth instead of a traditional IRA or 401(k), be aware that you will be taxed on everything you roll. ---- Edit: a little info about IRA's in response to your comment ---- Tax advantaged retirement accounts come in two flavors: one is managed by your company and the money is taken out of your paycheck. This is usually a 401(k) or 403(b). You can contribute up to $18K per year and your company can also contribute to it. The other flavor is an IRA. You can contribute $5,500 per year to this for you and $5,500 for your spouse. These are outside of your company and you make the deposits yourself. You choose your own provider, so competition has driven prices way down. You can have both a 401(k) and an IRA and contribute the max to both (though at high incomes you lose the ability to deduct IRA contributions). These accounts are tax advantaged because you only pay taxes once. With a regular brokerage account, you pay income tax in the year in which you earn money, then you pay tax every year on dividends and any capital gains that have been realized by selling. There are two types of tax-advantaged accounts: Traditional IRA or Traditional 401(k). You do not pay income tax on this money in the year you earn it, nor do you pay capital gains tax. Instead you pay tax only in the year in which you take the money out (in retirement). Roth IRA or Roth 401(k). You do pay income tax on money on this money in the year in which you earn it. But then you don't pay tax on any gains or withdrawals ever again. When you leave your job (and sometimes at other times) you can move your money out of a 401(k) into your IRA, where you can do a better job managing it. You can also move money from your IRA into a 401(k) if your 401(k) provider will allow you to. Whether traditional or Roth is better depends on your tax rate now and your tax rate at retirement. However, if you choose to move money from a traditional account into a Roth account, you must pay tax on it in that year as if it was income because traditional and Roth accounts are taxed at different times. For that reason, if you are just trying to move money out of your 401(k) to save on fees, the logical place to put it is in a traditional IRA. Moving money from a traditional to a Roth may make sense, for example, if your tax rate is temporarily low this year, but that would be a separate decision from the one you are looking at. You can always roll your traditional IRA into a Roth later if that does become the case. Otherwise, there's no reason to think your traditional 401(k) should be rolled into a Roth IRA according to what you have described.\"" }, { "docid": "557603", "title": "", "text": "\"Employers withhold at rates specified in Circular E issued by the IR. You can request that additional money be withheld (not an issue here) or you can have reduced withholding by claiming additional allowances on a W-4 (i.e., more than just for you and spouse and dependents) if you believe that this will result in withholding that will more closely match the tax due. (Note added in edit):Page 2 of the W-4 form has worksheets that can be used to figure out how many additional allowances to request. Also, I wonder if your withholding will be 37% or final tax bill be 26% of your adjusted gross income. The tax brackets are the tax on marginal income. If you are in the 28% tax bracket, you owe 28 cents in tax for each additional dollar of income, not 28 cents in tax for every dollar of income. Your overall tax might well be less than 20% of your income. As a specific example, in 2011 a married taxpayer filing jointly would be in the (highest) 35% tax bracket if the taxable income was $379,150 or more (marginal tax rate of 35% is applicable to every dollar more than $379,150) but the tax on $379,150 itself works out to be $102,574 or 27.05% of the taxable income. So if you do expect to be earning around $350K or more in salary between now and December 31 to hit that 26% that you expect you will owe, you might want to consider paying a tax accountant for advice on how to fill out your W-4 form for your new employer rather than relying on an Internet forum such as this for free advice. Note added in edit: Your comment \"\"... it is a cocktail of ... federal taxes, state taxes, local taxes, health care ...\"\" on the earlier version of my answer does raise the question of whether you want your employer to withhold 26% instead of 37% and have the money go to meet all these obligations or just 26% towards your Federal income tax liability only. The Federal W-4 form affects only how much money is withheld from your paycheck and sent to the US Treasury. Some of the money that each of your employers withholds (Social Security and Medicare taxes) is not affected by what you put down on the W-4 form. Now, if you hold two jobs and the total income shown on your W-2s is larger than the SS limit, you will have had too much Social Security taxes withheld, and the excess will be a credit towards your Federal income tax liability. You have self-employment income too on which you owe Social Security and Medicare taxes and you are making estimated tax payments. The excess Social Security tax payment can count towards this too (as well as income tax on your Schedule C income). Thus, if your new employer is withholding too much, you might be able to skip making the fourth quarterly payment of estimated tax or make a reduced payment (there is no requirement that the four installments must be equal). In short, there are lots of ramifications that you need to take into account before deciding that 26% is the right number. Instead of filling out a W-4 all by yourself right away, I strongly recommend reading up a lot on income taxes, or play with a tax preparation program (last year's version will do a pretty good job of at least getting you in the right ballpark), or consult with a tax accountant.\"" }, { "docid": "237262", "title": "", "text": "With something this complicated you are going to want to consult professionals. Either a professional with international experience, who will tell you the best tax arrangement overall but might come expensive, or one professional in each country who will optimize for that country. You will have to pay US taxes, and depending on your residency probably some in Spain. Double tax agreements should kick in to prevent you paying tax on the same money twice. You do not have to pay separate 'European' taxes. If you do substantial business in another country you might have to pay there, but one of your professionals should sort it out." }, { "docid": "173088", "title": "", "text": "\"What is a stock? A share of stock represents ownership of a portion of a corporation. In olden times, you would get a physical stock certificate (looking something like this) with your name and the number of shares on it. That certificate was the document demonstrating your ownership. Today, physical stock certificates are quite uncommon (to the point that a number of companies don't issue them anymore). While a one-share certificate can be a neat memento, certificates are a pain for investors, as they have to be stored safely and you'd have to go through a whole annoying process to redeem them when you wanted to sell your investment. Now, you'll usually hold stock through a brokerage account, and your holdings will just be records in a database somewhere. You'll pick a broker (more on that in the next question), instruct them to buy something, and they'll keep track of it in your account. Where do I get a stock? You'll generally choose a broker and open an account. You can read reviews to compare different brokerages in your country, as they'll have different fees and pricing. You can also make sure the brokerage firm you choose is in good standing with the financial regulators in your country, though one from a major national bank won't be unsafe. You will be required to provide personal information, as you are opening a financial account. The information should be similar to that required to open a bank account. You'll also need to get your money in and out of the account, so you'll likely set up a bank transfer. It may be possible to request a paper stock certificate, but don't be surprised if you're told this is unavailable. If you do get a paper certificate, you'll have to deal with considerably more hassle and delay if you want to sell later. Brokers charge a commission, which is a fee per trade. Let's say the commission is $10/trade. If you buy 5 shares of Google at $739/share, you'd pay $739 * 5 + $10 = $3705 and wind up with $3695 worth of stock in your account. You'd pay the same commission when you sell the stock. Can anyone buy/own/use a stock? Pretty much. A brokerage is going to require that you be a legal adult to maintain an account with them. There are generally ways in which a parent can open an account on behalf of an underage child though. There can be different types of restrictions when it comes to investing in companies that are not publicly held, but that's not something you need to worry about. Stocks available on the public stock market are available to, well, the public. How are stocks taxed? Taxes differ from country to country, but as a general rule, you do have to provide the tax authorities with sufficient information to determine what you owe. This means figuring out how much you purchased the stock for and comparing that with how much you sold it for to determine your gain or loss. In the US (and I suspect in many other countries), your brokerage will produce an annual report with at least some of this information and send it to the tax authorities and you. You or someone you hire to do your taxes will use that report to compute the amount of tax owed. Your brokerage will generally keep track of your \"\"cost basis\"\" (how much you bought it for) for you, though it's a good idea to keep records. If you refuse to tell the government your cost basis, they can always assume it's $0, and then you'll pay more tax than you owe. Finding the cost basis for old investments can be difficult many years later if the records are lost. If you can determine when the stock was purchased, even approximately, it's possible to look back at historical price data to determine the cost. If your stock pays a dividend (a certain amount of money per-share that a company may pay out of its profits to its investors), you'll generally need to pay tax on that income. In the US, the tax rate on dividends may be the same or less than the tax rate on normal wage income depending on how long you've held the investment and other rules.\"" }, { "docid": "177169", "title": "", "text": "No; it's a bond, not a wrapper like an ISA. You can buy more bonds, assuming you do this before they run out. And it's a retail bond, so you can't sell it; you have to leave the money tied up for the term. Remember, once you take cash out of an ISA you can't put it back - though you could of course put it back using this year's (£15k) allowance. And as the bond has 20% tax deducted at source, it's maybe not a good idea to take money out and lose its tax free nature. You can get 2.4% tax free from Coventry Building Society." }, { "docid": "417981", "title": "", "text": "\"While the question is very localized, I'll answer about the general principle. My main question is with how far away it is (over 1000 miles), how do I quantify the travel expenses? Generally, \"\"necessary and ordinary\"\" expenses are deductible. This is true for business and also true for rentals. But what is necessary and what is ordinary? Is it ordinary that a landlord will manage the property 1000 miles away by himself on a daily basis? Is it ordinary for people to drive 1000 miles every week? I'd say \"\"no\"\" to both. I'd say it would be cheaper for you to hire a local property manager, thus the travel expense would not be necessary. I would say it would be cheaper to fly (although I don't know if its true to the specific situation of the OP, but as I said - its too localized to deal with) rather than drive from Texas to Colorado. If the OP thinks that driving a thousand miles is indeed ordinary and necessary he'll have to justify it to the IRS examiner, as I'm sure it will be examined. 2 trips to the property a year will be a nearly 100% write-off (2000 miles, hotels, etc). From what I understood (and that is what I've been told by my CPA), IRS generally allows 1 (one) trip per year per property. If there's an exceptional situation - be prepared to justify it. Also, keep all the receipts (like gas, hotel, etc.... If you claim mileage but in reality you took a flight - you'll get hit hard by the IRS when audited). Also while I'm up there am I allowed to mix business with pleasure? You cannot deduct personal (\"\"pleasure\"\") expenses, at all. If the trip is mainly business, but you go out at the evening instead of staying at the hotel - that's fine. But if the trip is \"\"business\"\" trip where you spend a couple of hours at your property and then go around having fun for two days - the whole trip may be disallowed. If there's a reasonable portion dedicated to your business/rental, and the rest is pleasure - you'll have to split some of the costs and only deduct the portion attributed to the business activities. You'll have to analyze your specific situation, and see where it falls. Don't stretch the limits too much, it will cost you more on the long run after all the audits and penalties. Can I also write off all travel involved in the purchase of the property? Although, again, the \"\"necessary and ordinary\"\" justification of such a trip is arguable, lets assume it is necessary and ordinary and generally justified. It is reasonable to expect you to go and see the property with your own eyes before the closing (IMHO, of course, I'm not an authority). Such an expense can be either business or investment expense. If its a business expense - its deductible on schedule C. If its an investment expense (if you do buy the property), its added to the cost of the property (capitalized). I'm not a tax adviser or a tax professional, and this is not a tax advice. This answer was not written or intended to be used, and cannot be used, for the purpose of avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code. You should seek a professional consultation with a CPA/Attorney(tax) licensed in your State(s) or a Federally licensed Enrolled Agent (EA).\"" }, { "docid": "415345", "title": "", "text": "Whether to employ a payroll service to handle the taxes (and possibly the payroll itself) is a matter that depends on how savvy you are with respect to your own taxes and with using computers in general. If you are comfortable using programs such as Excel, or Quicken, or TurboTax, or TaxAct etc, then taking care of payroll taxes on a nanny's wages all by yourself is not too hard. If you take a shoebox full of receipts and paystubs to your accountant each April to prepare your personal income tax returns and sign whatever the accountant puts in front of you as your tax return, then you do need to hire a payroll service. It will also cost you a bundle since there are no economies of scale to help you; there is only one employee to be paid." }, { "docid": "352136", "title": "", "text": "First of all, consult an accountant who is familiar with tax laws and online businesses. While most accountants know tax laws, fewer know how to handle online income like you describe although the number is growing. Right now, since you're a minor, this complicates things a bit. That's why you'll need a tax accountant to come up with the best business structure to use. You'll need to keep your own records to estimate your quarterly taxes. At the amount you're making, you'll want to do this since you'll pay a substantial penalty at the end of the year if you don't. You can use a small business accounting software package for this or just track everything using Excel or the like. As long as taxes are paid, you won't go to jail. But you need to pay them along with any penalties by April 15, 2013. If you don't do this, then the IRS will want to have a 'discussion' with you." } ]

[ { "docid": "395483", "title": "", "text": "\"Whether you do decide to go with a tax advisor or not, be sure to do some research on your own. When we moved to the US about 5 years ago, I did find the taxes here pretty complicated and confusing. I went ahead and read up all different tax documents and did some calculations of my own before hiring a CPA (at that point, I just wanted a second opinion to make sure I got the calculations right). However, when the office of the CPA was finished with my taxes, I found they had made a mistake! When I went back to their office to point it out, the lady just shrugged, corrected her numbers on the form and said \"\"You seem to know a lot about this stuff already. Why are you here?\"\" I swore to never use them again - not this particular CPA at least. Now, I am not saying all CPAs are the same - some of them are pretty darn good at their job and know what they are doing. All I am saying is it helps to be prepared and know some basic stuff. Just don't go in all blind. After all, they are also humans prone to mistakes and your taxes are your liability in the end. My suggestion is to start with a good tool that supports tax filing for non-residents. Most of them provide a step-by-step QA based tool. As you go through the steps, Google each question you don't understand. It may take more time than hiring a tax advisor directly but in the end it will all be worth it.\"" } ]

[ { "docid": "352136", "title": "", "text": "First of all, consult an accountant who is familiar with tax laws and online businesses. While most accountants know tax laws, fewer know how to handle online income like you describe although the number is growing. Right now, since you're a minor, this complicates things a bit. That's why you'll need a tax accountant to come up with the best business structure to use. You'll need to keep your own records to estimate your quarterly taxes. At the amount you're making, you'll want to do this since you'll pay a substantial penalty at the end of the year if you don't. You can use a small business accounting software package for this or just track everything using Excel or the like. As long as taxes are paid, you won't go to jail. But you need to pay them along with any penalties by April 15, 2013. If you don't do this, then the IRS will want to have a 'discussion' with you." }, { "docid": "277812", "title": "", "text": "There are many different types of 1099 forms. Since you are comparing it to a W-2, I'm assuming you are talking about a 1099-MISC form. Independent contractor income If you are a worker earning a salary or wage, your employer reports your annual earnings at year-end on Form W-2. However, if you are an independent contractor or self-employed you will receive a Form 1099-MISC from each client that pays you at least $600 during the tax year. For example, if you are a freelance writer, consultant or artist, you hire yourself out to individuals or companies on a contract basis. The income you receive from each job you take should be reported to you on Form 1099-MISC. When you prepare your tax return, the IRS requires you to report all of this income and pay income tax on it. So even if you receive a 1099-MISC form, you are required to pay taxes on it." }, { "docid": "25172", "title": "", "text": "The transaction will be taxable in India. You will have to pay Capital Gains tax. I am assuming that you purchased the house while you were Indian Resident for tax purposes. As such its needs more paper work to get the money back to US. Consult a CA in India who will help with the paperwork. You haven't mentioned your tax status in US, one you update it, someone will post a US tax aspects of the transaction." }, { "docid": "226568", "title": "", "text": "\"It is unusual to need a consultant to open a bank account for you, and I would also be concerned that perhaps the consultant could take the money and do nothing, or continue to demand various sums of money for \"\"expenses\"\" like permits, licenses, identity check, etc. until you give up. Some of the more accepted ways to open a bank account are: A: Call up an established bank and follow their instructions to open a personal account . Make sure you are calling on a real bank, one that has been around a while. Hints: has permanent locations, in the local phone book, and has shares traded on a national stock exchange. Call the bank directly, don't use a number given to you by a 3rd party consultant, as it may be a trick... Discuss on the phone and find out if you can open an account by mail or if you need to visit in person. B: Create a company or branch office in the foreign country, assuming this is for business or investing. and open an account by appointing someone (like a lawyer or accountant or similar professional) in the foreign country to represent the company to open an account in person. If you are a US citizen, you will want to ask your CPA/accountant/tax lawyer about the TD F 90-22.1 Foreign Account Bank Report form, and the FATCA Foreign Account Tax Compliance Act. There can be very large fines for not making the required reports. The requirements to open a bank account have become more strict in many countries, so don't be surprised if they will not open an account for a foreigner with no local address, if that is your situation.\"" }, { "docid": "62966", "title": "", "text": "when investing in index funds Index fund as the name suggests invests in the same proportion of the stocks that make up the index. You can choose a Index Fund that tracks NYSE or S&P etc. You cannot select individual companies. Generally these are passively managed, i.e. just follow the index composition via automated algorithms resulting in lower Fund Manager costs. is it possible to establish an offshore company Yes it is possible and most large organization or High Net-worth individuals do this. Its expensive and complicated for ordinary individuals. One needs and army of International Tax Consultants / International Lawyers / etc but do I have to pay taxes from the capital gains at the end of the year? Yes Canada taxes on world wide income and you would have to pay taxes on gains in Canada. Note depending on your tax residency status in US, you may have to pay tax in US as well." }, { "docid": "318111", "title": "", "text": "This is how a consulting engagement in India works. If you are registered for Service Tax and have a service tax number, no tax is deducted at source and you have to pay 12.36% to service tax department during filing (once a quarter). If you do not have Service tax number i.e. not registered for service tax, the company is liable to deduct 10% at source and give the same to Income Tax Dept. and give you a Form-16 at the end of the financial year. If you fall in 10% tax bracket, no further tax liability, if you are in 30%, 20% more needs to be paid to Income Tax Dept.(calculate for 20% tax bracket). The tax slabs given above are fine. If you fail to pay the remainder tax (if applicable) Income Tax Dept. will send you a demand notice, politely asking you to pay at the end of the FY. I would suggest you talk to a CA, as there are implications of advance tax (on your consulting income) to be paid once a quarter." }, { "docid": "582571", "title": "", "text": "\"You're confusing so many things at once here...... First thing first: we cannot suggest you what to do business-wise since we have no idea about your business. How on Earth can anyone know if you should sell the software to someone or try to distribute to customers yourself? How would we know if you should hire employees or not? If you say you don't need employees - why would you consider hiring them? If you say you want to sell several copies and have your own customers - why would you ask if you should sell your code to someone else? Doesn't make sense. Now to some more specific issues: I heard sole proprietary companies doesn't earn more than 250k and it's better to switch to corporation or LLC etc. because of benefits. I heard it was snowing today in Honolulu. So you heard things. It doesn't make them true, or relevant to you. There's no earning limit above which you should incorporate. You can be sole proprietor and make millions, and you can incorporate for a $10K/year revenue business. Sole proprietorship, incorporation (can be C-Corp or S-Corp), or LLC - these are four different types of legal entity to conduct business. Each has its own set of benefits and drawbacks, and you must understand which one suits you in your particular situation. For that you should talk to a lawyer who could help you understand what liability protection you might need, and to a tax adviser (EA/CPA licensed in your state) who can help you understand the tax-related costs and benefits of each choice. On the other hand I heard that if I create LLC company, in case of failure, they can get EVERYTHING from me, what's this all about? No. This is not true. Who are \"\"they\"\", how do you define \"\"failure\"\", and why would they get anything from you at all? Even without knowing all that, your understanding is wrong, because the \"\"LL\"\" in LLC stands for LIMITED liability. The whole point of forming LLC or Corporation is to limit your own personal liability. But mere incorporation or forming LLC doesn't necessarily mean your liability is limited. Your State law defines what you must do for that limited liability protection, and that includes proper ways to run your business. Again - talk to your lawyer and your tax adviser about what it means to you. I'm totally unfamiliar with everything related to taxes/companies/LLC/corporation etc Familiarize yourself. No-one is going to do it for you. Start reading, ask specific questions on specific issues, and get a proper legal and tax advice from licensed professionals.\"" }, { "docid": "82284", "title": "", "text": "\"See Publication 505, specifically the section on \"\"Annualized Income Installment Method\"\", which says: If you do not receive your income evenly throughout the year (for example, your income from a repair shop you operate is much larger in the summer than it is during the rest of the year), your required estimated tax payment for one or more periods may be less than the amount figured using the regular installment method. The publication includes a worksheet and explanation of how to calculate the estimated tax due for each period when you have unequal income. If you had no freelance income during a period, you shouldn't owe any estimated tax for that period. However, the process for calculating the estimated tax using this method is a good bit more complex and confusing than using the \"\"short\"\" method (in which you just estimate how much tax you will owe for the year and divide it into four equal pieces). Therefore, in future years you might want to still use the equal-payments method if you can swing it. (It's too late for this year since you missed the April deadline for the first payment.) If you can estimate the total amount of freelance income you'll receive (even though you might not be able to estimate when you'll receive it), you can probably still use the simpler method. If you really have no idea how much money you'll make over the year, you could either use the more complex computation, or you could use a very high estimate to ensure you pay enough tax, and you'll get a refund if you pay too much.\"" }, { "docid": "11654", "title": "", "text": "\"You will need to file a US income tax return, and declare all income world-wide. Whether this results in any tax owed depends on your particular circumstances, and the effect of any tax treaties between the US and India. There are additional requirements for the filing of information on the amounts in foreign accounts held by \"\"US tax persons\"\". Depending on the nature of these accounts, the complexity of the forms, and the penalties for non-compliance can be quite high... Short version: Consult a professional well-qualified in US/India tax matters...\"" }, { "docid": "453027", "title": "", "text": "&gt;Here's the real scoop - I would hire more people and buy more inventory and put more into capital investment if I paid less taxes, You would do so if there was money to be made doing so. It's as simple as that. Corporate Taxes are on net income. If hiring one more person contributed further to your bottom line you'd do so. That is the only thing that drives you. If the incremental cost of the hire is lower than the increased revenue. Period. Corporate taxes are on net income. Meaning you're still going to get more money, you're just going to get a little less of that incremental income growth than you thought. You'll still hire." }, { "docid": "546372", "title": "", "text": "You better consult with a tax adviser (EA or CPA) on this, my answer doesn't constitute such an advice. Basically, you're selling stuff on Kickstarter. No matter how they call it (projects, pledges, rewards - all are just words), you're selling stuff. People give you money (=pledges) and in return you're giving them tangible or intangible goods (=rewards). All the rest is just PR. So you will pay taxes on all the money you get, and you will be able to deduct some of the expenses (depends on whether its a business or a hobby, the deduction may be full or limited). It doesn't matter if you use LLC or your own account from the financial/taxation point of you, but it matters legally. LLC limits your personal liability, but do get a legal advice on this issue, and whether it is at all relevant for you. If you raise funds in 2012 you pay taxes on the money in 2012. If you go into production in 2013 - you can deduct expenses in 2013. If you're classified as a hobby, you'll end up paying full taxes in 2012 and deducting nothing in 2013. Talk to a tax adviser." }, { "docid": "114559", "title": "", "text": "\"My wife and I use to file \"\"married file separately\"\". I consulted a tax accountant and it does not matter who's name the accounts are under. The interest from the accounts can be counted as income on either person's tax return regardless of whose name is on the account. You can even split the interest income between the returns if that is advantageous. This is true for any income earned between the two of you. It use to be a big hassle to file this way even using the software programs. The programs would not attempt to allocate the income between the tax returns in order to minimize my tax liability. I had to do this manually. Most of the loopholes have been closed and the last couple of years I've filed \"\"married filed jointly\"\". I'm not sure how your wife's citizenship status affects any of this.\"" }, { "docid": "314342", "title": "", "text": "\"Many individual states, counties, and cities have their own income taxes, payroll taxes, sales taxes, property taxes, etc., you will need to consult your state and local government websites for information about additional taxes that apply based on your locale. Wages, Salaries, Tips, Cash bonuses and other taxable employee pay, Strike benefits, Long-term disability, Earnings from self employment Earned income is subject to payroll taxes such as: Earned income is also subject to income taxes which are progressively higher depending on the amount earned minus tax credits, exemptions, and/or deductions depending on how you file. There are 7 tax rates that get progressively larger as your income rises but only applies to the income in each bracket. 10% for the first 18,650 (2017) through 39.6% for any income above 470,700. The full list of rates is in the above linked article about payroll taxes. Earned income is required for contributions to an IRA. You cannot contribute more to an IRA than you have earned in a given year. Interest, Ordinary Dividends, Short-term Capital Gains, Retirement income (pensions, distributions from tax deferred accounts, social security), Unemployment benefits, Worker's Compensation, Alimony/Child support, Income earned while in prison, Non-taxable military pay, most rental income, and S-Corp passthrough income Ordinary income is taxed the same as earned income with the exception that social security taxes do not apply. This is the \"\"pure taxable income\"\" referred to in the other linked question. Dividends paid by US Corporations and qualified foreign corporations to stock-holders (that are held for a certain period of time before the dividend is paid) are taxed at the Long-term Capital Gains rate explained below. Ordinary dividends like the interest earned in your bank account are included with ordinary income. Stocks, Bonds, Real estate, Carried interest -- Held for more than a year Income from assets that increase in value while being held for over a year. Long term capital gains justified by the idea that they encourage people to hold stock and make long term investments rather than buying and then quickly reselling for a short-term profit. The lower tax rates also reflect the fact that many of these assets are already taxed as they are appreciating in value. Real-estate is usually taxed through local property taxes. Equity in US corporations realized by rising stock prices and dividends that are returned to stock holders reflect earnings from a corporation that are already taxed at the 35% Corporate tax rate. Taxing Capital gains as ordinary income would be a second tax on those same profits. Another problem with Long-term capital gains tax is that a big portion of the gains for assets held for multiple decades are not real gains. Inflation increases the price of assets held for longer periods, but you are still taxed on the full gain even if it would be a loss when inflation is calculated. Capital gains are also taxed differently depending on your income level. If you are in the 10% or 15% brackets then Long-term capital gains are assessed at 0%. If you are in the 25%, 28%, 33%, or 35% brackets, they are assessed at 15%. Only those in the 39.6% bracket pay 20%. Capital assets sold at a profit held for less than a year Income from buying and selling any assets such as real-estate, stock, bonds, etc., that you hold for less than a year before selling. After adding up all gains and losses during the year, the net gain is taxed as ordinary income. Collectibles held for more than a year are not considered capital assets and are still taxed at ordinary income rates.\"" }, { "docid": "244561", "title": "", "text": "\"You're certainly referring to \"\"Ex Post Facto\"\" laws, and while the US is constitutionally prohibited from passing criminal laws that are retroactive, the US Supreme Court has upheld many tax laws that apply tax code changes retroactively. You might ask a similar question on Law.SE for a more thorough treatment of the legalities of congress passing those laws, but I will stick to the personal finance portion of the question. What this means is that you can't expect that the current tax laws will be in force in the future, and your investment/retirement plans should be as flexible as possible. You may wish to have some money in both Roth and traditional 401(k) accounts. You might not want to have millions of dollars in Roth accounts, because if congress does act to limit the tax benefits of those accounts, it will probably be targeting the larger balances. If you are valuing tax deductions, you should put slightly more weight on deductions that you can take today than deductions that would apply in the future. If you do find yourself in trouble because of a retroactive change, be sure to consult a tax lawyer that specializes in dealing with the IRS to possibly negotiate a settlement for a lower amount than the full tax bill that results from the changes.\"" }, { "docid": "501801", "title": "", "text": "\"Ed: Saw your comment, thank you. The short answer (a rough simplification), seems to be that you pay PA income tax for income made in PA. You pay IL income tax for income made in IL, not income made across both states. And you make sure the IL amount paid is correct via a credit calculated on Schedule CR. It looks to me (bear with me, I am no expert on tax law in IL, PA, or in general, so consult a professional for \"\"good\"\" advice :), like you basically do this on Schedule CR: It looks like there may be some more pertinent info on Publication 111, so that may potentially change the math a bit too. This check is 2014 income, during which you are a resident of IL. It's income from a PA employer. You must file a tax return in PA regardless, since you \"\"earned income in PA\"\". Did your former employer withhold PA income taxes on this particular paycheck? I'm not seeing where it says you should not include tax withheld; could you please point that out? Perhaps they mean you should only include tax actually considered \"\"due\"\" on the PA tax return. From IL's Schedule CR instructions: What is the purpose of Schedule CR? Schedule CR, Credit for Tax Paid to Other States, allows you to take a credit for income taxes you paid to other states on income you received while a resident of Illinois. You are allowed this credit only if you filed a required tax return with the other state. You must use information from the tax return you filed with the other state to complete Schedule CR. ... What taxes qualify for the credit? Taxes that qualify for the credit are income taxes you paid to another state of the United States,\"" }, { "docid": "61518", "title": "", "text": "\"Your assertion that you will not be selling anything is at odds with the idea that you will be doing tax loss harvesting. Tax loss harvesting always involves some selling (you sell stocks that have fallen in price and lock in the capital losses, which gives you a break on your taxes). If you absolutely prohibit your advisor from selling, then you will not be able to do tax loss harvesting (in that case, why are you using an advisor at all?). Tax loss harvesting has nothing to do with your horizon nor the active/passive difference, really. As a practical matter, a good tax loss harvesting plan involves mechanically selling losers and immediately putting the money in another stock with more-or-less similar risk so your portfolio doesn't change much. In this way you get a stable portfolio that performs just like a static portfolio but gives you a tax benefit each year. The IRS officially prohibits this practice via the \"\"wash sale rule\"\" that says you can't buy a substantially identical asset within a short period of time. However, though two stocks have similar risk, they are not generally substantially similar in a legal sense, so the IRS can't really beat you in court and they don't try. Basically you can't just buy the same stock again. The roboadvisor is advertising that they will perform this service, keeping your portfolio pretty much static in terms of risk, in such a way that your tax benefit is maximized and you don't run afoul of the IRS.\"" }, { "docid": "259420", "title": "", "text": "Unfortunately, nothing is ever that simple. Do you have any income in the country where you currently live? The US has tax treaties with many countries, and though you may not have tax on the income generated by 401(k) withdrawals in the US, that income may be taxable in your home country. Your best bet at this point is to hire an accountant that is familiar with US tax treaty issues and pay for some advice." }, { "docid": "359814", "title": "", "text": "Starting and running a business in the US is actually a lot less complicated than most people think. You mention incorporation, but a corporation (or even an S-Corp) isn't generally the best entity to start a business with . Most likely you are going to want to form an LLC instead this will provide you with liability protection while minimizing your paperwork and taxes. The cost for maintaining an LLC is relatively cheap $50-$1000 a year depending on your state and you can file the paperwork to form it yourself or pay an attorney to do it for you. Generally I would avoid the snake oil salesman that pitch specific out of state LLCs (Nevada, Delaware etc..) unless you have a specific reason or intend on doing business in the state. With the LLC or a Corporation you need to make sure you maintain separate finances. If you use the LLC funds to pay personal expenses you run the risk of loosing the liability protection afforded by the LLC (piercing the corporate veil). With a single member LLC you can file as a pass through entity and your LLC income would pass through to your federal return and taxes aren't any more complicated than putting your business income on your personal return like you do now. If you have employees things get more complex and it is really easiest to use a payroll service to process state and federal tax with holding. Once your business picks up you will want to file quarterly tax payments in order to avoid an under payment penalty. Generally, most taxpayers will avoid the under payment penalty if they owe less than $1,000 in tax after subtracting their withholdings and credits, or if they paid at least 90% of the tax for the current year, or 100% of the tax shown on the return for the prior year, whichever is smaller. Even if you get hit by the penalty it is only 10% of the amount of tax you didn't pay in time. If you are selling a service such writing one off projects you should be able to avoid having to collect and remit sales tax, but this is going to be very state specific. If you are selling software you will have to deal with sales tax assuming your state has a sales tax. One more thing to look at is some cities require a business license in order to operate a business within city limits so it would also be a good idea to check with your city to find out if you need a business license." }, { "docid": "319836", "title": "", "text": "Three points for you to keep in mind. 1. In the very first year, you should have 182 days outside India. So that in the year when you start your consultancy, you will not have any liability to pay tax on earning abroad. 2. Although you may be starting a consultancy abroad, if you do any services in India, there will be withholding tax depending on the country in which you have started the consultancy business. 3. Whatever money you repatriate is not taxable in India. However, if you you repatriate the money as gift to anyone who is not a relative, will be taxed in his/her hand." } ]

[ { "docid": "277583", "title": "", "text": "Good tax people are expensive. If you are comfortable with numbers and computers, you can do it better yourself." } ]

[ { "docid": "589123", "title": "", "text": "\"As you said, in the US LLC is (usually, unless you elect otherwise) not a separate tax entity. As such, the question \"\"Does a US LLC owned by a non-resident alien have to pay US taxes\"\" has no meaning. A US LLC, regardless of who owns it, doesn't pay US income taxes. States are different. Some States do tax LLCs (for example, California), so if you intend to operate in such a State - you need to verify that the extra tax the LLC would pay on top of your personal tax is worth it for you. As I mentioned in the comment, you need to check your decision making very carefully. LLC you create in the US may or may not be recognized as a separate legal/tax entity in your home country. So while you neither gain nor lose anything in the US (since the LLC is transparent tax wise), you may get hit by extra taxes at home if they see the LLC as a non-transparent corporate entity. Also, keep in mind that the liability protection by the LLC usually doesn't cover your own misdeeds. So if you sell products of your own work, the LLC may end up being completely worthless and will only add complexity to your business. I suggest you check all these with a reputable attorney. Not one whose business is to set up LLCs, these are going to tell you anything you want to hear as long as you hire them to do their thing. Talk to one who will not benefit from your decision either way and can provide an unbiased advice.\"" }, { "docid": "319836", "title": "", "text": "Three points for you to keep in mind. 1. In the very first year, you should have 182 days outside India. So that in the year when you start your consultancy, you will not have any liability to pay tax on earning abroad. 2. Although you may be starting a consultancy abroad, if you do any services in India, there will be withholding tax depending on the country in which you have started the consultancy business. 3. Whatever money you repatriate is not taxable in India. However, if you you repatriate the money as gift to anyone who is not a relative, will be taxed in his/her hand." }, { "docid": "11654", "title": "", "text": "\"You will need to file a US income tax return, and declare all income world-wide. Whether this results in any tax owed depends on your particular circumstances, and the effect of any tax treaties between the US and India. There are additional requirements for the filing of information on the amounts in foreign accounts held by \"\"US tax persons\"\". Depending on the nature of these accounts, the complexity of the forms, and the penalties for non-compliance can be quite high... Short version: Consult a professional well-qualified in US/India tax matters...\"" }, { "docid": "177169", "title": "", "text": "No; it's a bond, not a wrapper like an ISA. You can buy more bonds, assuming you do this before they run out. And it's a retail bond, so you can't sell it; you have to leave the money tied up for the term. Remember, once you take cash out of an ISA you can't put it back - though you could of course put it back using this year's (£15k) allowance. And as the bond has 20% tax deducted at source, it's maybe not a good idea to take money out and lose its tax free nature. You can get 2.4% tax free from Coventry Building Society." }, { "docid": "314342", "title": "", "text": "\"Many individual states, counties, and cities have their own income taxes, payroll taxes, sales taxes, property taxes, etc., you will need to consult your state and local government websites for information about additional taxes that apply based on your locale. Wages, Salaries, Tips, Cash bonuses and other taxable employee pay, Strike benefits, Long-term disability, Earnings from self employment Earned income is subject to payroll taxes such as: Earned income is also subject to income taxes which are progressively higher depending on the amount earned minus tax credits, exemptions, and/or deductions depending on how you file. There are 7 tax rates that get progressively larger as your income rises but only applies to the income in each bracket. 10% for the first 18,650 (2017) through 39.6% for any income above 470,700. The full list of rates is in the above linked article about payroll taxes. Earned income is required for contributions to an IRA. You cannot contribute more to an IRA than you have earned in a given year. Interest, Ordinary Dividends, Short-term Capital Gains, Retirement income (pensions, distributions from tax deferred accounts, social security), Unemployment benefits, Worker's Compensation, Alimony/Child support, Income earned while in prison, Non-taxable military pay, most rental income, and S-Corp passthrough income Ordinary income is taxed the same as earned income with the exception that social security taxes do not apply. This is the \"\"pure taxable income\"\" referred to in the other linked question. Dividends paid by US Corporations and qualified foreign corporations to stock-holders (that are held for a certain period of time before the dividend is paid) are taxed at the Long-term Capital Gains rate explained below. Ordinary dividends like the interest earned in your bank account are included with ordinary income. Stocks, Bonds, Real estate, Carried interest -- Held for more than a year Income from assets that increase in value while being held for over a year. Long term capital gains justified by the idea that they encourage people to hold stock and make long term investments rather than buying and then quickly reselling for a short-term profit. The lower tax rates also reflect the fact that many of these assets are already taxed as they are appreciating in value. Real-estate is usually taxed through local property taxes. Equity in US corporations realized by rising stock prices and dividends that are returned to stock holders reflect earnings from a corporation that are already taxed at the 35% Corporate tax rate. Taxing Capital gains as ordinary income would be a second tax on those same profits. Another problem with Long-term capital gains tax is that a big portion of the gains for assets held for multiple decades are not real gains. Inflation increases the price of assets held for longer periods, but you are still taxed on the full gain even if it would be a loss when inflation is calculated. Capital gains are also taxed differently depending on your income level. If you are in the 10% or 15% brackets then Long-term capital gains are assessed at 0%. If you are in the 25%, 28%, 33%, or 35% brackets, they are assessed at 15%. Only those in the 39.6% bracket pay 20%. Capital assets sold at a profit held for less than a year Income from buying and selling any assets such as real-estate, stock, bonds, etc., that you hold for less than a year before selling. After adding up all gains and losses during the year, the net gain is taxed as ordinary income. Collectibles held for more than a year are not considered capital assets and are still taxed at ordinary income rates.\"" }, { "docid": "384541", "title": "", "text": "\"An employee costs the company in four ways: Salary, taxes, benefits, and capital. Salary: The obvious one, what they pay you. Taxes: There are several taxes that an employer has to pay for the privilege of hiring someone, including social security taxes (which goes to your retirement), unemployment insurance tax (your unemployment benefits if they lay you off), and workers compensation tax (pays if you are injured on the job). (There may be other taxes that I'm not thinking of, but in any case those are the main ones.) Benefits: In the U.S. employers often pay for medical insurance, sometimes for dental, life, and disability. There's usually some sort of retirement plan. They expect to give you some number of vacation days, holidays, and sick days where they pay you even though you're not working. Companies sometimes offer other benefits, like discounts on buying company products, membership in health clubs, etc. Capital: Often the company has to provide you with some sort of equipment, like a computer; furniture, like a chair and desk; etc. As far as the company is concerned, all of the above are part of the cost of having you as an employee. If they would pay a domestic employee $60,000 in salary and $20,000 in taxes, then assuming the same benefits and capital investment, if a foreign employee would cost them $0 in taxes they should logically be willing to pay $80,000. Any big company will have accountants who figure out the total cost of a new employee in excruciating detail, and they will likely be totally rational about this. A smaller company might think, \"\"well, taxes don't really count ...\"\" This is irrational but people are not always rational. I don't know what benefits they are offering you, if any, and what equipment they will provide you with, if any. I also don't know what taxes, if any, a U.S. company has to pay when hiring a remote employee in a foreign country. If anybody on here knows the answer to that, please chime in. Balanced against that, the company likely sees disadvantages to hiring a foreign remote employee, too. Communication will be more difficult, which may result in inefficiency. My previous employer used some contractors in India and while there were certainly advantages, the language and time zone issues caused difficulties. There are almost certainly some international bureaucratic inconveniences they will have to deal with. Etc. So while you should certainly calculate what it would cost them to have a domestic employee doing the same job, that's not necessarily the end of the story. And ultimately it all comes down to negotiations. Even if the company knows that by the time they add in taxes and benefits and whatever, a domestic employee will cost them $100,000 a year, if they are absolutely convinced that they should be able to hire an Austrian for $60,000 a year, that might be the best offer you will get. You can point out the cost savings, and maybe they will concede the point and maybe not.\"" }, { "docid": "501801", "title": "", "text": "\"Ed: Saw your comment, thank you. The short answer (a rough simplification), seems to be that you pay PA income tax for income made in PA. You pay IL income tax for income made in IL, not income made across both states. And you make sure the IL amount paid is correct via a credit calculated on Schedule CR. It looks to me (bear with me, I am no expert on tax law in IL, PA, or in general, so consult a professional for \"\"good\"\" advice :), like you basically do this on Schedule CR: It looks like there may be some more pertinent info on Publication 111, so that may potentially change the math a bit too. This check is 2014 income, during which you are a resident of IL. It's income from a PA employer. You must file a tax return in PA regardless, since you \"\"earned income in PA\"\". Did your former employer withhold PA income taxes on this particular paycheck? I'm not seeing where it says you should not include tax withheld; could you please point that out? Perhaps they mean you should only include tax actually considered \"\"due\"\" on the PA tax return. From IL's Schedule CR instructions: What is the purpose of Schedule CR? Schedule CR, Credit for Tax Paid to Other States, allows you to take a credit for income taxes you paid to other states on income you received while a resident of Illinois. You are allowed this credit only if you filed a required tax return with the other state. You must use information from the tax return you filed with the other state to complete Schedule CR. ... What taxes qualify for the credit? Taxes that qualify for the credit are income taxes you paid to another state of the United States,\"" }, { "docid": "390435", "title": "", "text": "If you itemize your deductions then the interest that you pay on your primary residence is tax deductible. Also realestate tax is also deductible. Both go on Schedule A. The car payment is not tax deductible. You will want to be careful about claiming business deduction for home or car. The IRS has very strict rules and if you have any personal use you can disqualify the deduction. For the car you often need to use the mileage reimbursement rates. If you use the car exclusively for work, then a lease may make more sense as you can expense the lease payment whereas with the car you need to follow the depreciation schedule. If you are looking to claim business expense of car or home, it would be a very good idea to get professional tax advice to ensure that you do not run afoul of the IRS." }, { "docid": "477017", "title": "", "text": "\"Let me make sure I understand the point of what Adam Smith is going on about. In discussion of relative poverty, he relates the idea that an individual can be considered in poverty if they do not meet the customary amount of goods considered by their society to be the minimum to be polite in public. You have thus transferred his meaning of what poor means to be what is considered \"\"basic living\"\". You have then taken this concept and tied the cost of \"\"basic living\"\", which you still haven't actually narrowed down, towards the tax rate on income for a citizen of a community. This is all in the context that you're concerned with the community level of price for \"\"basic living\"\" and whether its too high. However, you also haven't said what too high is nor why you're concerned with the literal price which is why I've said you can only control the price of a good through central authority. I never made the assertion you wanted to invoke a centrally planned economy, I simply stated that the only way to control prices across a community is through central authority. You've stated that we collect taxes on local, state, and federal levels. This is true, however it does not mean that they control the price. They simply modify the price set by the market, and only serve to increase the price from the base set by market participants. When I want to buy beer, I don't just pay for the cost of the beer. I pay the cost of the beer + the city tax + county tax + state tax + state sales tax on the beer, which raises the price. Also, these taxes are not income taxes which is what was being discussed. I still don't know what your point is because you cannot seem to define phrases you've used that I have stated I do not know. If you cannot define what you're talking about, how it relates to the actual discussion, and why its relevant then please stop as its simply a derailment.\"" }, { "docid": "540527", "title": "", "text": "TL:DR: You should read something like The Little Book of Common Sense Investing, and read some of the popular questions on this site. The main message that you will get from that research is that there is an inescapable connection between risk and reward, or to put it another way, volatility and reward. Things like government bonds and money market accounts have quite low risk, but also low reward. They offer a nearly guaranteed 1-3%. Stocks, high-risk bonds, or business ventures (like your soda and vending machine scheme) may return 20% a year some years, but you could also lose money, maybe all you've invested (e.g., what if a vandal breaks one of your machines or the government adds a $5 tax for each can of soda?). Research has shown that the best way for the normal person to use their money to make money is to buy index funds (these are funds that buy a bunch of different stocks), and to hold them for a long time (over 10-15 years). By buying a broad range of stocks, you avoid some of the risks of investing (e.g., if one company's stock tanks, you don't lose very much), while keeping most of the benefits. By keeping them for a long time, the good years more than even out the bad years, and you are almost guaranteed to make ~6-7%/year. Buying individual stocks is a really, really bad idea. If you aren't willing to invest the time to become an expert investor, then you will almost certainly do worse than index funds over the long run. Another option is to use your capital to start a side business (like your vending machine idea). As mentioned before, this still has risks. One of those risks is that it will take more work than you expect (who will find places for your vending machines? Who will fill them? Who will hire those who fill them? etc.). The great thing about an index fund is that it doesn't take work or research. However, if there are things that you want to do, that take capital, this can be a good way to make more income." }, { "docid": "151946", "title": "", "text": "\"Legally speaking, when you convert that bit-coin onto something else, the Israeli Tax Authority will look into the value of that something else, compare it to the original value of the previous something else you used to buy bit-coins (USD, in your example), and charge you capital gain taxes for the difference. According to the Israeli law you're supposed to pay taxes when selling (converting the bit-coin to something else), and since you're not using any formal bank or stock broker which will automatically deduct the taxes, you have to pay the taxes yourself. By not doing so you're committing a tax fraud. The real question you're asking is whether they'll come after you. Well, that depends on the amounts. They might. Pay attention: there's no statute of limitation for tax fraud in Israel. They may come after you in 50 years from now. Another thing to keep in mind: if you used bit-coins to buy something (services or products of any kind), you probably didn't pay the VAT (מע\"\"מ) - which is another case of tax fraud on your behalf. PS: I'm not a lawyer or accountant, so get a professional advice, but I have been dealing with the Tax Authority in Israel, so I've got a pretty good idea of what the rules are.\"" }, { "docid": "531370", "title": "", "text": "\"These types of diagrams appear all throughout Kiyosaki's Rich Dad, Poor Dad book. The arrows in the diagrams represent cash flow. For example, the first two diagrams of this type in the book are: The idea being presented here is that an asset generates income, and a liability generates expenses. According to the book, rich people spend their money buying assets, while middle class people buy liabilities. The diagram you posted above does not appear in the edition of the book I have (Warner Books Edition, printed in 2000). However, the following similar diagram appears in the chapter titled \"\"The History of Taxes and the Power of Corporations\"\": The idea behind this diagram is to demonstrate what the author considers the tax advantages of a personal corporation: using a corporation to pay for certain expenses with pre-tax dollars. Here is a quote from this chapter: Employees earn and get taxed and they try to live on what is left. A corporation earns, spends everything it can, and is taxed on anything that is left. It's one of the biggest legal tax loopholes that the rich use. They're easy to set up and are not expensive if you own investments that are producing good cash flow. For example; by owning your own corporation - vacations are board meetings in Hawaii. Car payments, insurance, repairs are company expenses. Health club membership is a company expense. Most restaurant meals are partial expenses. And on and on - but do it legally with pre-tax dollars. This piece of advice, like so much of the book, may contain a small amount of truth, but is oversimplified and potentially dangerous if taken a face value. There are many examples, as JoeTaxpayer mentioned, of people who tried to deduct too many expenses and failed to make a business case for them that would satisfy the IRS.\"" }, { "docid": "244233", "title": "", "text": "The only ridiculous thing in the article is the statement that taxes to try to keep down inequality won't do any good because companies will hire less. What bullshit. Taxes on the wealthy doesn't need to come from the companies alone, it should also come from closing ridiculous loopholes that only favour the rich, and a more progressive income tax system that includes all earnings, be them through wages or through capital gains. I really don't understand why $100,000 in wages should be treated differently tax-wise than $100,000 in capital gains..." }, { "docid": "129606", "title": "", "text": "You should probably get a professional tax advice, as it is very specific to the Philipines tax laws and the US-Philippine tax treaty. What I know, however, is that if it was the other way around - you paying a foreigner coming to the US to consult you - you would be withholding 30% of their pay for the IRS which they would be claiming for refund on their own later. So if the US does it to others - I'm not surprised to hear that others do it to the US. Get a professional advice on what and how you should be doing. In any case, foreign taxes paid can be used to offset your US taxes using form 1116 up to some extent." }, { "docid": "546372", "title": "", "text": "You better consult with a tax adviser (EA or CPA) on this, my answer doesn't constitute such an advice. Basically, you're selling stuff on Kickstarter. No matter how they call it (projects, pledges, rewards - all are just words), you're selling stuff. People give you money (=pledges) and in return you're giving them tangible or intangible goods (=rewards). All the rest is just PR. So you will pay taxes on all the money you get, and you will be able to deduct some of the expenses (depends on whether its a business or a hobby, the deduction may be full or limited). It doesn't matter if you use LLC or your own account from the financial/taxation point of you, but it matters legally. LLC limits your personal liability, but do get a legal advice on this issue, and whether it is at all relevant for you. If you raise funds in 2012 you pay taxes on the money in 2012. If you go into production in 2013 - you can deduct expenses in 2013. If you're classified as a hobby, you'll end up paying full taxes in 2012 and deducting nothing in 2013. Talk to a tax adviser." }, { "docid": "557603", "title": "", "text": "\"Employers withhold at rates specified in Circular E issued by the IR. You can request that additional money be withheld (not an issue here) or you can have reduced withholding by claiming additional allowances on a W-4 (i.e., more than just for you and spouse and dependents) if you believe that this will result in withholding that will more closely match the tax due. (Note added in edit):Page 2 of the W-4 form has worksheets that can be used to figure out how many additional allowances to request. Also, I wonder if your withholding will be 37% or final tax bill be 26% of your adjusted gross income. The tax brackets are the tax on marginal income. If you are in the 28% tax bracket, you owe 28 cents in tax for each additional dollar of income, not 28 cents in tax for every dollar of income. Your overall tax might well be less than 20% of your income. As a specific example, in 2011 a married taxpayer filing jointly would be in the (highest) 35% tax bracket if the taxable income was $379,150 or more (marginal tax rate of 35% is applicable to every dollar more than $379,150) but the tax on $379,150 itself works out to be $102,574 or 27.05% of the taxable income. So if you do expect to be earning around $350K or more in salary between now and December 31 to hit that 26% that you expect you will owe, you might want to consider paying a tax accountant for advice on how to fill out your W-4 form for your new employer rather than relying on an Internet forum such as this for free advice. Note added in edit: Your comment \"\"... it is a cocktail of ... federal taxes, state taxes, local taxes, health care ...\"\" on the earlier version of my answer does raise the question of whether you want your employer to withhold 26% instead of 37% and have the money go to meet all these obligations or just 26% towards your Federal income tax liability only. The Federal W-4 form affects only how much money is withheld from your paycheck and sent to the US Treasury. Some of the money that each of your employers withholds (Social Security and Medicare taxes) is not affected by what you put down on the W-4 form. Now, if you hold two jobs and the total income shown on your W-2s is larger than the SS limit, you will have had too much Social Security taxes withheld, and the excess will be a credit towards your Federal income tax liability. You have self-employment income too on which you owe Social Security and Medicare taxes and you are making estimated tax payments. The excess Social Security tax payment can count towards this too (as well as income tax on your Schedule C income). Thus, if your new employer is withholding too much, you might be able to skip making the fourth quarterly payment of estimated tax or make a reduced payment (there is no requirement that the four installments must be equal). In short, there are lots of ramifications that you need to take into account before deciding that 26% is the right number. Instead of filling out a W-4 all by yourself right away, I strongly recommend reading up a lot on income taxes, or play with a tax preparation program (last year's version will do a pretty good job of at least getting you in the right ballpark), or consult with a tax accountant.\"" }, { "docid": "226568", "title": "", "text": "\"It is unusual to need a consultant to open a bank account for you, and I would also be concerned that perhaps the consultant could take the money and do nothing, or continue to demand various sums of money for \"\"expenses\"\" like permits, licenses, identity check, etc. until you give up. Some of the more accepted ways to open a bank account are: A: Call up an established bank and follow their instructions to open a personal account . Make sure you are calling on a real bank, one that has been around a while. Hints: has permanent locations, in the local phone book, and has shares traded on a national stock exchange. Call the bank directly, don't use a number given to you by a 3rd party consultant, as it may be a trick... Discuss on the phone and find out if you can open an account by mail or if you need to visit in person. B: Create a company or branch office in the foreign country, assuming this is for business or investing. and open an account by appointing someone (like a lawyer or accountant or similar professional) in the foreign country to represent the company to open an account in person. If you are a US citizen, you will want to ask your CPA/accountant/tax lawyer about the TD F 90-22.1 Foreign Account Bank Report form, and the FATCA Foreign Account Tax Compliance Act. There can be very large fines for not making the required reports. The requirements to open a bank account have become more strict in many countries, so don't be surprised if they will not open an account for a foreigner with no local address, if that is your situation.\"" }, { "docid": "506108", "title": "", "text": "\"LLC is, as far as I know, just a US thing, so I'm assuming that you are in the USA. Update for clarification: other countries do have similar concepts, but I'm not aware of any country that uses the term LLC, nor any other country that uses the single-member LLC that is disregarded for income tax purposes that I'm referring to here (and that I assume the recruiter also was talking about). Further, LLCs vary by state. I only have experience with California, so some things may not apply the same way elsewhere. Also, if you are located in one state but the client is elsewhere, things can get more complex. First, let's get one thing out of the way: do you want to be a contractor, or an employee? Both have advantage, and especially in the higher-income areas, contractor can be more beneficial for you. Make sure that if you are a contractor, your rate must be considerably higher than as employee, to make up for the benefits you give up, as well as the FICA taxes and your expense of maintaining an LLC (in California, it costs at least $800/year, plus legal advice, accounting, and various other fees etc.). On the other hand, oftentimes, the benefits as an employee aren't actually worth all that much when you are in high income brackets. Do pay attention to health insurance - that may be a valuable benefit, or it may have such high deductibles that you would be better off getting your own or paying the penalty for going uninsured. Instead of a 401(k), you can set up an IRA (update or various other options), and you can also replace all the other benefits. If you decide that being an employee is the way to go, stop here. If you decide that being a contractor is a better deal for you, then it is indeed a good idea to set up an LLC. You actually have three fundamental options: work as an individual (the legal term is \"\"sole proprietorship\"\"), form a single-member LLC disregarded for income tax purposes, or various other forms of incorporation. Of these, I would argue that the single-member LLC combines the best of both worlds: taxation is almost the same as for sole proprietorship, the paperwork is minimal (a lot less than any other form of incorporation), but it provides many of the main benefits of incorporating. There are several advantages. First, as others have already pointed out, the IRS and Department of Labor scrutinize contractor relationships carefully, because of companies that abused this status on a massive scale (Uber and now-defunct Homejoy, for instance, but also FedEx and other old-economy companies). One of the 20 criteria they use is whether you are incorporated or not. Basically, it adds to your legal credibility as a contractor. Another benefit is legal protection. If your client (or somebody else) sues \"\"you\"\", they can usually only sue the legal entity they are doing business with. Which is the LLC. Your personal assets are safe from judgments. That's why Donald Trump is still a billionaire despite his famous four bankruptcies (which I believe were corporate, not personal, bankrupcies). Update for clarification Some people argue that you are still liable for your personal actions. You should consult with a lawyer about the details, but most business liabilities don't arise from such acts. Another commenter suggested an E&O policy - a very good idea, but not a substitute for an LLC. An LLC does require some minimal paperwork - you need to set up a separate bank account, and you will need a professional accounting system (not an Excel spreadsheet). But if you are a single member LLC, the paperwork is really not a huge deal - you don't need to file a separate federal tax return. Your income will be treated as if it was personal income (the technical term is that the LLC is disregarded for IRS tax purposes). California still does require a separate tax return, but that's only two pages or so, and unless you make a large amount, the tax is always $800. That small amount of paperwork is probably why your recruiter recommended the LLC, rather than other forms of incorporation. So if you want to be a contractor, then it sounds like your recruiter gave you good advice. If you want to be an employee, don't do it. A couple more points, not directly related to the question, but hopefully generally helpful: If you are a contractor (whether as sole proprietor or through an LLC), in most cities you need a business license. Not only that, but you may even need a separate business license in every city you do business (for instance, in the city where your client is located, even if you don't live there). Business licenses can range from \"\"not needed\"\" to a few dollars to a few hundred dollars. In some cities, the business license fee may also depend on your income. And finally, one interesting drawback of a disregarded LLC vs. sole proprietorship as a contractor has to do with the W-9 form and your Social Security Number. Generally, when you work for somebody and receive more than $600/year, they need to ask you for your Social Security Number, using form W-9. That is always a bit of a concern because of identity theft. The IRS also recognizes a second number, the EIN (Employer Identification Number). This is basically like an SSN for corporations. You can also apply for one if you are a sole proprietor. This is a HUGE benefit because you can use the EIN in place of your SSN on the W-9. Instant identity theft protection. HOWEVER, if you have a disregarded LLC, the IRS says that you MUST use your SSN; you cannot use your EIN! Update: The source for that information is the W-9 instructions; it specifically only excludes LLCs.\"" }, { "docid": "276408", "title": "", "text": "Please consult a tax advisor. You may be voilating the FEMA [Foreign Exchange Management Act] and can land into trouble. Further what you are doing can land up into various other acts as illegal including AML. Further if there is income generated by Indian citizen in India, he is still liable to pay tax, irrespective of whether you get the funds back into India. Edit: AML is Anti Money Laundering. Your transaction is sure to raise AML triggers as it looks like converting Black Money to White in round about way. Once the triggers are raised, RBI division will investigate further to verify what you are doing. If you are able to prove that this is a valid transaction, you would be OK on AML front. How will Income Tax Know? - If they don't know does not mean you are not liable for tax. - Any suspicious transactions would get investigated and sooner or later Income Tax would know about it and can cause a serious problem. - It is irrelevant where you have kept the money, if you have earned something, its taxable. For it not to be taxable you need to conduct this business differently. Please consult a tax adviser who will advice you on the tax-ability of this type of transaction." } ]

[ { "docid": "495467", "title": "", "text": "The IRS' primary reference Pub 519 Tax Guide for Aliens -- current year online (current and previous years downloadable in PDF from the Forms&Pubs section of the website) says NO: Students and business apprentices from India. A special rule applies .... You can claim the standard deduction .... Use Worksheet 5-1 to figure your standard deduction. If you are married and your spouse files a return and itemizes deductions, you cannot take the standard deduction. Note the last sentence, which is clearly an exception to the 'India rule', which is already an exception to the general rule that nonresident filers never get the standard deduction. Of course this is the IRS' interpretation of the law (which is defined to include ratified treaties); if you think they are wrong, you could claim the deduction anyway and when they assess the additional tax (and demand payment) take it to US Tax Court -- but I suspect the legal fees will cost you more than the marginal tax on $6300, even under Tax Court's simplified procedures for small cases." } ]

[ { "docid": "449096", "title": "", "text": "The word bespoke means made to order. Bespoke insurance means non-cookie cutter. That mean the thing your are trying to protect, or the risk to that item is not normally covered; so you need a non-standard type of policy. Your neighborhood insurance company doesn't handle a bespoke policy. There are companies that do. Reinsurance is insurance on insurance. Company X has a risk they want to insure, so they go to insurance company A. After a while insurance company A realizes that they have sold a few of these policies and they have a risk if they guessed wrong. So they take out a policy with insurance company B to protect themselves if more than some percentage of their policies go bad. That policy takes bespoke reinsurance." }, { "docid": "446190", "title": "", "text": "\"I assume you are filing US taxes because you are a US citizen, resident alien, or other \"\"US person\"\". If you have a total of $10,000 or more in assets in non-US accounts, you are required to file FinCEN Form 114, Report of Foreign Bank and Financial Accounts, also known as FBAR, to report those accounts. See Comparison of Form 8938 and FBAR Requirements. Note this refers to the total balance in the account (combined with any other accounts you may have); the amount you transferred this year is not relevant. Also note that the FBAR is filed separately from your income tax return (it does not go to the IRS), though if you have over $50,000 in offshore assets you may also have to file IRS Form 8938. Simply reporting those accounts does not necessarily mean you will owe extra taxes. Most US taxes are based on income, not assets. According to the page linked, the maximum penalty for a \"\"willful\"\" failure to report such accounts is a fine of $100,000 or 50% of the assets in question, whichever is greater, in addition to possible criminal sanctions. There may be other US filing requirements that I don't know about, so you may want to consult a tax professional. I do not know anything about your filing requirements under Indian law.\"" }, { "docid": "397449", "title": "", "text": "You can keep your Mutual Funds. You have to communicate your new status to fund house. The SIP can continue. Please note you have to convert the savings account to NRO account. Most banks would keep the account number same, else you have to revise SIP debit to new NRO account. From a tax point of view, it would be similar to resident status. Right now short term gains are taxed. There are quite a few other things you may need to do. Although dated, this is a good article. PS: Once you become resident alien in US for tax purposes, you are liable for taxes on global income." }, { "docid": "369773", "title": "", "text": "Resident Alien is liable for the same taxes as a citizen. Citizenship has nothing to do with taxes." }, { "docid": "46386", "title": "", "text": "Do I need to declare it to IRS? The account? No. You do need to file a form W8-BEN with the bank though and make sure you maintain the correct information on it (it has your address there, so if you move - update it). Your account may be frozen until the form is provided, especially if it has activity on it. The 2-nd and 3-rd scenario would come as a result of some freelancing activity done while I am out of the US (definitely would qualify for Non-Resident Alien status). This you do have to report to the IRS. I'm guessing the payer is in the US, and would not know that you're a foreigner. In this case you're liable for taxes (if the payer knows you're a foreigner - they must withhold the taxes on your behalf). The payer will report payments to the IRS, so you have to submit your own tax return for a match. If there's activity on your account that might be suspicious, it will be reported to money laundering unit in the US Treasury Department, that may come after you through the treaties the US might have with your home country (tax treaty, extradition treaty, etc)." }, { "docid": "307404", "title": "", "text": "I am a non-resident alien transferring a limited amount ( in dollars post tax) to India every couple of months. Assuming you are transferring this into an NRE account in India or atleast NRO account in India. As a NRI, by regulations one should not hold normal Savings account. This has to be converted into NRO. I put that money as a fixed deposit in a bank (which gives 6-7 percent annual return) Assuming you have FCNR deposits. Also assuming that you are declaring the taxes in your US Tax returns and paying tax accordingly. There is no tax in India on FCNR. If this was in ordinary FD or in NRO account, you are declaring and paying taxes in India as well as in US. What is the max limit on transferring money back from India to USA? If you have transferred this into NRE account, there is no limit. Other account there is a limit. Read more at Liberalized Remittance Scheme and here. What are the legitimate ways to transfer the money? From India point of view, this has to be Bank to Bank transfers. You can't carry cash [Indian Rupees] outside of India beyond Rs 25000 [or 15000?]. You can't hold excess of USD 250 without valid purpose. Western Union is not authorized to transfer funds out of India. Will there be any tax levied? No assuming you are already paying taxes on the Interest in US and depending on the type of account in India." }, { "docid": "544992", "title": "", "text": "As a gift, the responsibility lays with the giver to file a 709 with their taxes for gifting to a single entity (barring certain exclusions) an amount over $14,000 within the (2017) tax year. https://www.irs.gov/pub/irs-pdf/i709.pdf If this person is a foreign entity from outside the country, you might need to provide in your tax filing a form 3520 https://www.irs.gov/businesses/gifts-from-foreign-person The reporting limits are: more than $100,000 from a foreign estate or non-resident alien, or more than $15,102 from a foreign company. If you don't know who/where the money came from i.e. cash, it would be considered found money and fall under income (not a gift)." }, { "docid": "265861", "title": "", "text": "This answer applies only to corporation tax, not income tax. Different things, income tax is much higher. 12.5% is the low rate for corporation tax. The standard rate is 25%. Or if you're Apple 0%. Like many countries Ireland will only consider you eligible for the low rate of corporation tax if you (your Irish company) can demonstrably prove yourself resident in Ireland. This is more than just address, and you must be able to evidence that your staff work there, your directors are both European Economic Area citizens and have their board meetings in Ireland, and most importantly that they run the company from Ireland, etc. If you're a one man corporation, unless you want to live in Ireland, it's not going to work. Referring to the Irish government's website: The term 'residence' was not, until recently, defined in law. The general rule was that companies, whose 'central management and control' was exercised in the State, were treated as resident here. This rule or test emerged as a result of judicial decisions set down in case law. Factors to be taken into account in establishing where the company's central management and control lie include, for example, where the important questions of company policy are determined, where the majority of directors reside, where the negotiation of major contracts is undertaken and where the company's head office is located. Long story short: An Irish incorporated company is not treated as Irish resident for tax purposes if it is a 'relevant company' ... A Relevant Company is a company that ... is ultimately controlled by persons resident in the EU or in a country with which Ireland has concluded a double taxation treaty" }, { "docid": "555732", "title": "", "text": "\"My number one piece of advice is to see a tax professional who can guide you through the process, especially if you're new to the process. Second, keep detailed records. That being said, I found two articles, [1] and [2] that give some relevant details that you might find helpful. The articles state that: Many artists end up with a combination of income types: income from regular wages and income from self-employment. Income from wages involves a regular paycheck with all appropriate taxes, social security, and Medicare withheld. Income from self-employment may be in the form of cash, check, or goods, with no withholding of any kind. They provide a breakdown for expenses and deductions based on the type of income you receive. If you get a regular paycheck: If you've got a gig lasting more than a few weeks, chances are you will get paid regular wages with all taxes withheld. At the end of the year, your employer will issue you a form W-2. If this regular paycheck is for entertainment-related work (and not just for waiting tables to keep the rent paid), you will deduct related expenses on a Schedule A, under \"\"Unreimbursed Employee business expenses,\"\" or on Form 2106, which will give you a total to carry to the schedule A. The type of expenses that go here are: If you are considered an independent contractor (I presume this includes the value of goods, based on the first quoted paragraph above): Independent contractors get paid by cash or check with no withholding of any kind. This means that you are responsible for all of the Social Security and Medicare normally paid or withheld by your employer; this is called Self-Employment Tax. In order to take your deductions, you will need to complete a Schedule C, which breaks down expenses into even more detail. In addition to the items listed above, you will probably have items in the following categories: Ideally, you should receive a 1099 MISC from whatever employer(s) paid you as an independent contractor. Keep in mind that some states have a non-resident entertainers' tax, which is A state tax levied against performers whose legal residence is outside of the state where the performance is given. The tax requires that a certain percentage of any gross earnings from the performance be withheld for the state. Seriously, keep all of your receipts, pay stubs, W2's, 1099 forms, contracts written on the backs of napkins, etc. and go see a tax professional.\"" }, { "docid": "158136", "title": "", "text": "\"The current tax regime? Not sure if you are being serious or facetious, but: [US Citizens and Resident Aliens Abroad - Filing Requirements](https://www.irs.gov/individuals/international-taxpayers/us-citizens-and-resident-aliens-abroad-filing-requirements) &gt;If you are a U.S. citizen or resident alien living or traveling outside the United States, **you generally are required to file income tax returns, estate tax returns, and gift tax returns and pay estimated tax in the same way as those residing in the United States.** In contrast, corporations don't pay taxes on profits earned abroad until repatriation [here](http://money.cnn.com/2014/08/14/news/economy/corporate-taxes-inversion/index.html), [here](https://www.nytimes.com/2017/03/09/business/economy/corporate-tax-report.html), [here](https://www.bloomberg.com/graphics/2016-apple-profits/). So guess what they NEVER do? This is why literally every large US multi-national corporate \"\"person\"\" pays next to nothing in taxes. It is quite obvious that this is a violation of the spirit if not the letter of tax law. That simple fix would wipe out massive amounts of government debt and force multi-national corporations and their shareholders to become engaged stake holders in the efficiency of government. But if, unlike W-2 paid human counterparts, you can dodge all taxation, \"\"Who cares if the government is using funds efficiently?\"\" That is incentive to actually game the system to force the government into wasteful spending because the subsequent fallout of increased taxation and/or failure of the state can be dodged without consequence.\"" }, { "docid": "477172", "title": "", "text": "The answer to this question requires looking at the mathematics of the Qualified Dividends and Capital Gains Worksheet (QDCGW). Start with Taxable Income which is the number that appears on Line 43 of Form 1040. This is after the Adjusted Gross Income has been reduced by the Standard Deduction or Itemized Deductions as the case may be, as well as the exemptions claimed. Then, subtract off the Qualified Dividends and the Net Long-Term Capital Gains (reduced by Net Short-Term Capital Losses, if any) to get the non-cap-gains part of the Taxable Income. Assigning somewhat different meanings to the numbers in the OPs' question, let's say that the Taxable Income is $74K of which $10K is Long-Term Capital Gains leaving $64K as the the non-cap-gains taxable income on Line 7 of the QDCGW. Since $64K is smaller than $72.5K (not $73.8K as stated by the OP) and this is a MFJ return, $72.5K - $64K = $8.5K of the long-term capital gains are taxed at 0%. The balance $1.5K is taxed at 15% giving $225 as the tax due on that part. The 64K of non-cap-gains taxable income has a tax of $8711 if I am reading the Tax Tables correctly, and so the total tax due is $8711+225 = $8936. This is as it should be; the non-gains income of $64K was assessed the tax due on it, $8.5K of the cap gains were taxed at 0%, and $1.5K at 15%. There are more complications to be worked out on the QDCGW for high earners who attract the 20% capital gains rate but those are not relevant here." }, { "docid": "556383", "title": "", "text": "First, the single worst reason to do anything is because most people are doing it. The second worst thing is to take tax advice from a non-tax pro. (Ironic, I understand, but read on) Run through your 2015 tax return. Do you itemize already? If not, there's a reason, the standard deduction for a couple is $12,600 in 2016, so a renter isn't likely to have enough deductions to itemize, even with a high state tax. For 2016, project your total interest from the mortgage, and the year's property tax, then add your state income tax, and last, any charitable donations. This total comprises the bulk of what people take on their Schedule A. Now, since your current withholding assumes the standard $12,600, subtract this number, and you're left with the amount your taxable income will be reduced for the fact that you have the house. Last, divide this number by $4000. The result is how many more withholding allowances you can claim. One personal exemption (a withholding allowance) is exactly $4050 this year. For what its worth, median home price for early 2016 was $190K. After 20% down, a $152K mortgage would cost about $6000 in interest the first year, and maybe $3000 in property tax. The average couple, making $60,000 or so won't have a state bill much over $3000, so shy of some nice donations, it's easy to have a house, yet still not itemize. Of course, if you have higher income and a more expensive home, the numbers will be different. The best you can do is to get tax software or use an online service and estimate the 2016 return based on your numbers. If you wish to post numbers via an edit to your question, I'm happy to update my answer a bit to your situation. Note - the form you'll use to adjust withholdings, the W4, offers a worksheet to perform the calculation. It asks in line 1 for your total itemized deductions, then subtract the standard deduction, then divide by $4050. Pretty much what I suggested above." }, { "docid": "197576", "title": "", "text": "First of all depending on the type of IRA you may not have to pay taxes on withdrawals in the US at all. If you are withdrawing your principle from a Roth IRA then you don't owe taxes. Only when you withdraw the gains do you pay taxes on it. You have two options for withdrawals: Lump Sum Withdrawal: If you take a lump sum withdrawal you will owe taxes to the US (30% for non-resident aliens of the US), and according to DTAA; Article 23, you will file your taxes with India declaring your IRA or 401(k) withdrawal proceeds and claim credit on the taxes you paid to the US. Monthly Pension Withdrawal: You can also receive monthly pension payments and you will only be taxed in the country in which you are a resident of. This is according to DTAA, Article 20. You would then have to submit necessary documentation to your payer in the US so that they do not withhold any taxes in the US. Just as a side note it might be just better to keep the money where it is and let it grow or roll it over to a Roth IRA if you are currently in a lower tax bracket for maximum savings of your principle. Here is a link with more detailed information of what I provided you: http://articles.economictimes.indiatimes.com/2012-01-25/news/30663129_1_taxable-income-nri-401k-plan" }, { "docid": "230566", "title": "", "text": "If you aren't a US National (citizen or Green Card holder or some other exception I know not of), you're an alien, no matter where else you may or may not be a citizen. If you don't meet the residency tests, you're nonresident. Simple as that." }, { "docid": "591940", "title": "", "text": "\"I'm thinking about visiting the UK and I'm wondering which things are affected by the VAT and which are not. Most consumer goods are subject to VAT at the standard rate. Most food sold in shops is zero-rated, with the exception of a handful of luxury foods. Food in cafes/restaurants and some takeaway food is subject to VAT at the standard rate. Most paper books are zero rated (IIRC books that come with CDs are an exception). Some services are exempt, insurance is a notable one, so are some transactions with charities. Some small buisnesses and sole traders may not be VAT registered in which case there is no VAT for you to pay (but they can't reclaim VAT on the goods and services they buy). (there is a distinction between zero-rated and exempt but it's not relavent to you as a customer). Some goods have special rules, notably second hand goods. Prices are normally given inclusive of VAT. The exception to this is suppliers who mostly deal in business to business transactions. Also as a non-UK resident is there a way to get a rebate/reimbursement on this tax? There is something called the \"\"retail export scheme\"\" which can get you a refund but there are a number of catches.\"" }, { "docid": "475115", "title": "", "text": "Per the IRS instructions on filing as Head of Household as a Citizen Living Abroad, if you choose to file only your own taxes, and you qualify for Head of Household without them, the IRS does not consider you married: If you are a U.S. citizen married to a nonresident alien you may qualify to use the head of household tax rates. You are considered unmarried for head of household purposes if your spouse was a nonresident alien at any time during the year and you do not choose to treat your nonresident spouse as a resident alien. However, your spouse is not a qualifying person for head of household purposes. You must have another qualifying person and meet the other tests to be eligible to file as a head of household. As such, you could file as Married Filing Separately (if you have no children) or Head of Household (if you have one or more children, a parent, etc. for whom you paid more than half of their upkeep - see the document for more information). You also may choose to file as Married Filing Jointly, if it benefits you to do so (it may, if she earns much less than you). See the IRS document Nonresident Spouse Treated As Resident for more information. If you choose to treat her as a resident, then you must declare her worldwide income. In some circumstances this will be beneficial for you, if you earn substantially more than her and it lowers your tax rate overall to do so. Married Filing Separately severely limits your ability to take some deductions and credits, so it's well worth seeing which is better." }, { "docid": "31870", "title": "", "text": "He alienated whole countries and races of people. He also alienated more than half of America and he's wondering why no one wants to buy his tacky condos or stay in his sub standard hotels? Moron. His base can't afford to buy those condos or stay at his hotels not till he gets rid those damn immigrants stealing coal jobs." }, { "docid": "256395", "title": "", "text": "With a question like this you should talk to a tax professional who knows about international tax and knows about both the UK and the country you will be working in. They will give you up to date advice on what can be an extremely complex question. However to get you started I'll tell you what I was told when I did this nearly twenty years ago. It's all about whether you are resident in the UK for tax purposes or not. If you are, you will pay UK tax. If not, you wont (assuming you are being paid outside the UK - check with your professional exactly what is involved). In those days you could be counted as 'non resident' if you spent a complete period of twelve months outside the UK. You can make occasional visits to the UK without invalidating that. Again, check exactly how much you are allowed to return while still being not resident. Usually you will have to pay tax in the country where you are resident, but check the rules there. With some skilful timing you may be able to be considered non-resident in bouth countries, at least for some of the time. Again, your tax professional will know. The bank account question - again get a professional. I don't think it's a problem, but you may have to establish that you are being paid in the foreign country. In general you are going to need an account in the country where you work, so if its a problem get paid there and transfer any money you need in the UK." }, { "docid": "343913", "title": "", "text": "It could be a a way to preserve the value of your money, but depends upon various factors. If a country defaults, and it leads to hyper-inflation, by definition that means that money loses its purchasing power. In even simpler terms, it cannot buy as much tomorrow as I could today. Therefore people can be incented to either hoard physical goods, or other non-perishable items. Real-estate may well be such an item. If you are resident in the country, you have to live somewhere. It is possible that a landlord might try to raise rent beyond what your job is willing to pay. Of course, in a house, you might have a similar situation with utilities like electricity... Assuming some kind of re-stabilization of the economy and currency, even with several more zeros on the end, it is conceivable that the house would subsequently sell for an appropriately inflation adjusted amount, as other in-demand physical goods may. Lots of variables. Good Luck." } ]

[ { "docid": "366685", "title": "", "text": "Whole life insurance accumulates a cash value on a pre-tax basis. With a paid-up policy, you make payments until a particular age (usually 65 or 70), at which point you are insured for the rest of your life or a very old age like 120. You can also access this pool of money via loans while you are still alive, but you reduce your benefit until you repay the loans. This may be advantageous if you have a high net worth. Also, if you own a business or farm, a permanent policy may be desirable if the transfer of your property to heirs is likely to generate alot of transactional costs like taxes. Nowadays there are probably better ways to do that too. Whole life/universal life is a waste of money 95%+ of the time. An example, my wife and I were recently offered open-enrollment (no medical exam) insurance policies our employers in New York. We're in our early 30's. I bought a term policy paying about $400k which costs $19/mo. My wife was offered a permanent policy that pays $100k which costs $83/mo, and would have a cash value of $35k at age 65. If you invested the $60/mo difference between those policies and earned 5%/year with 30% taxes on the gains, you'd have over $40k with 4x more coverage." } ]

[ { "docid": "204176", "title": "", "text": "A Certified Financial Planner has passed a licensing exam and will advise you and help you reach your financial goals. A good CFP can help you a lot, especially if you are unsure how to set up your insurance, investment, savings, and financial plans on your own. You do not need a CFP to get a life insurance policy. If you do get a CFP, he or she should help you above and beyond life insurance -- i.e. retirement planning, investment advice, education planning, etc. It's advantageous to you to pay a fixed price for services instead of a percentage or commission. Negotiate fees up front. For life insurance, in most cases a term policy will fit your needs. Whole life, universal life, etc., combine investments and life insurance into a single product and are big commission makers for the salesman. They make it sound like the best thing ever, so be aware. One of my rules of thumb is that, generally speaking, the larger the commission is for the salesperson, the worse the product is for the consumer. Welcome to life insurance pitches. Term life is far less expensive and provides a death benefit and nothing else. If you just had a baby and need to protect your family, for example, term life is often a good solution, easy to buy, and inexpensive. As you stated, any of the major providers will do just fine." }, { "docid": "178746", "title": "", "text": "Generally speaking: 401k good. Whole life bad. You'll come out ahead if you buy term life (which will cost like 10% of what whole life costs) and invest the other 90% that you would have paid in premium. The only merit that whole life has is if you're estate planning and and want to leave your kids a ton of money, tax free. If you're thinking about saving money for yourself, whole life is not a good choice." }, { "docid": "489278", "title": "", "text": "The deposit insurance isn't provided by the bank; it's provided by the Singapore Deposit Insurance Corporation (SDIC). In the event that the bank fails or is declared insolvent, the SDIC will pay deposit holders their total balance in all accounts with that bank, up to S$50,000. If you hold S$60,000 in all of your insured accounts, you'll only receive S$50,000 if the bank fails. The SDIC provides an example page with sample calculations, and this is exactly what they show. If you deposit an amount greater than $S50,000, it's only insured up to S$50,000. So does it mean one should open multiple accounts under different banks to spread the money around and maintain only S$50,000 in one deposit account? This is one option. The calculations page I linked to above gives this reminder: Deposits are not insured separately in each branch office of a DI Scheme member i.e. all your eligible accounts maintained with different branches of a DI Scheme member are aggregated and insured up to S$50,000. This seems like common sense, but it's important to remember that if you open an account with two branch offices of Bank A, your deposits are aggregated and insured up to S$50,000. The SDIC insurance is per institution (called a Deposit Insurance Member), not per branch. If you hold S$45,000 in each branch office, for a total of S$90,000, you're still only insured up to S$50,000 for that bank. If you want to spread out your accounts between multiple banks, make sure they're different banks, not just different branches. Another option, if it applies to you, is to open a joint account with your spouse. In the FAQ page, the SDIC gives this example under point 14: if you and your husband have a joint account with S$70,000, and you have a separate account of S$20,000, your total deposits of S$55,000 will be covered to the maximum of S$50,000. The deposit of $S70,000 is split evenly between the spouses, so in the eyes of the SDIC, each are holding S$35,000. Then, the husband's additional S$20,000 is added to S$35,000 for a total of S$50,000. This is then insured up to S$50,000 as usual. I'm sure there are other options specific to Singapore that I'm not aware of; if you're well above the limit, i.e. holding millions of dollars, I'm sure a professional accountant in Singapore could guide you further." }, { "docid": "16767", "title": "", "text": "&gt;Better for you and for me, yes, but not for the disadvantaged without benefactors. That's the situation I was in. That wasn't exactly my point. I'm all for helping people, and social security does help people, and I am very happy it helped you - I'm not disputing that. What I'm saying is that what you got from social security is not as good as what you would have got from a $500,000 - $1,000,000 term life insurance policy. For people in there 20s, in good health, that kind of policy should be $20-$40/month, which could easily be bought with the money we otherwise spend on social security. (Now... whether parents would actually be responsible enough to buy term life insurance and put money towards retirement if we didn't have social security is a WHOOOOOOOOOLE nother discussion.) That's all I'm saying - I'd rather buy term life and invest for my own retirement because me and my family will come out ahead of where social security will put us. I'm really not a financial wizard, and I have to believe that this type of plan would work well for everyone else, too." }, { "docid": "564675", "title": "", "text": "\"From the details you have given it looks like you have \"\"Unit Linked\"\" insurance policy. In such policies a part of the premium goes towards the \"\"Insurance\"\", the balance is invested into \"\"Mutual Funds / stock Market\"\". It is generally not advisable to have \"\"Unit Linked\"\" policy compared to pure \"\"Term\"\" policy. Generally the amount of fees charged for \"\"Unit Linked\"\" policy is high and hence the returns to the end user are low. i.e. if you buy a \"\"Term\"\" insurance for the same sum insured and invest on your own the balance in any \"\"Mutual Fund\"\" you will end up making more that what you are getting now. Typically these policies have 3 years lock-in period. As you have purchased this in 2008, you can cancel the policy without any penalties. This will save you future premium and you can buy a term insurance and invest the difference yourself. Note the unit linked policy is useful for people who do not invest on their own and this is a good way to be forced into saving than nothing else.\"" }, { "docid": "528077", "title": "", "text": "Absolutely! Just because a spouse doesn't have a taxable income, doesn't mean they aren't providing real, tangible benefit to the family economy with an important job. As tragic as it is to consider losing your spouse, are you truly in a position to replace everything they do you for you? Knowing what they do for you and appreciating the effort your spouse gives is important, but don't sell short the dollar amount of what they provide. Your life insurance policy should be to keep you whole. Without your spouse, you will need childcare. You might need domestic services to the home. What about a nanny or similar service? Would $50K cover that until your child is an adult? There are a number of added expenses in the short and long term that would occur if a spouse died. How much for a funeral? Obviously you know the amount and term depends on the age of your kid. But I think you should really try to account for the number of daily hours you spouse puts in, and try to attach a cost to those hours. Then buy insurance for them just as you would for a wage earning. For example, buy a policy that is 10x the annual cost for services it would take to compensate for your spouse. Your tolerance for risk and cost can adjust it up and down from there." }, { "docid": "318971", "title": "", "text": "\"In general, \"\"billed amounts\"\" don't mean a whole lot, since if the provider has a contract with the insurance company (usually called \"\"in-network\"\"), the insurance company picks what the rates are that the treatment \"\"should\"\" cost, and how that cost gets allocated between what the insurance company pays and what the patient pays. Due to that contract, the insurance company and provider should agree on how much the patient owes, and one shouldn't pay a provider more than what the insurance company says you should. On the other hand, some insurance plans have a level of \"\"out of network\"\" coverage. In that case, the insurance company has its same sense of what the treatment \"\"should\"\" cost, but is really only concerned with paying its share. The EOB then should show how much they pay, but will generally show the full \"\"billed amount\"\" minus their payment as the amount the patient owes. That is, since there's no contract between the provider and the insurance company, the insurance company has no way to stop the provider from \"\"balance billing\"\" you for whatever they want beyond the amount that the insurance is paying, since any payment amount is purely a transaction between you and the provider. In general (as with anything involving large amounts of money), it's best to get all you can in writing. The provider should be able to provide you with a statement showing zero remaining due, and including both any payment you've made to them and any payments made by the insurance company. It may take a while for the payment from the insurance company to be processed, and until it does there may be something on the statement showing \"\"estimated amount to be paid by insurance\"\", which isn't as comforting as one showing \"\"actual amount paid by insurance\"\" and \"\"zero due\"\".\"" }, { "docid": "464166", "title": "", "text": "\"You are kind of thinking of this correctly, but you will and should pay for insurance at some point. What I mean by that is that, although the insurance company is making a profit, that removing the risk for certain incidents from your life, you are still receiving a lot of value. Things that inflict large losses in your life tend to be good insurance buys. Health, liability, long term care, long term disability and property insurance typically fall into this category. In your case, assuming you are young and healthy, it would be a poor choice to drop the major medical health insurance. There is a small chance you will get very sick in the next 10 years or so and require the use of this insurance. A much smaller chance than what is represented by the premium. But if you do get very sick, and don't have insurance, it will probably wipe you out financially. The devastation could last the rest of your life. You are paying to mitigate that possibility. And as you said, it's pretty low cost. While you seem to be really good at numbers it is hard to quantify the risk avoidance. But it must be considered in your analysis. Also along those lines is car insurance. While you may not be willing to pay for \"\"full coverage\"\" it's a great idea to max out your personal liability if you have sufficient assets.\"" }, { "docid": "261087", "title": "", "text": "\"Cash/CD's for a house downpayment = Good. Resist the urge to invest this money unless you're not planning on the house for at least 5 years. Roth IRA - Good. Amounts contributed are able to be withdrawn without tax penalties, though you would really need to be in a crisis for this to be a good idea. It's your long-term, retirement money. The earlier you start, the better. Use your 401K at work, if it's offered. Contribute to the Roth as much as you can, as well. Whole life (\"\"Cash value\"\") life insurance: Be careful... Cash-value life insurance (Whole, Universal, Variable Universal) must be watched more closely as you age. Once they reach that \"\"magical\"\" point of being self-sustaining, you cannot relax. The annual cost of insurance is taken from the cash value, which your premium payments replenish. If you stop making premium payments, eventually the cost of insurance (which goes up every year) will erode your cash value down to nothing, at which point more premium must be paid to keep the policy in force. This often happens in your old age, when you can least afford the surprise, and costs are highest. Some advisors get messed up in their priorities when they start depending on the 8-10% commissions they are paid on insurance policies. Since premiums for cash-value policies are far higher than for term policies, you might get some insight into your advisor if they ignore your attempts to consider a term policy. Because of the insurance costs' effects on your cash value, these types of policies are some of the most inefficient and expensive ways to invest. You are better off not investing via a life insurance policy. You don't need life insurance unless someone depends on your financial contribution to their life (spouse and children, for example). Some people just like the peace of mind it brings, and some people want a lump sum to leave as a gift to their loved ones (which is an expensive way to leave a gift). You can have these \"\"feel-good\"\" benefits with a term policy for much less money, if you must have them. Unless you expect to become uninsurable at some point in the future, you should consider using term insurance to meet your life insurance needs until it is no longer needed.\"" }, { "docid": "217596", "title": "", "text": "This is going to be a philosophical answer, but here it goes. What is the purpose of an insurance? In my perspective, insurance is a way to protect yourself from risks in life you can not afford to take. Following this principle, most of the people do not have enough money to fix a Ferrari, or pay the medical expenses of a third party--so insurance against liabilities makes financial sense, but many can afford buying an equivalent car as they are insuring. If you have enough money to buy an equivalent car, you are paying for a risk you can take yourself. Then, instead of paying the comprehensive fee which is used to pay the different accidents, the company's administrative fees and the shareholder profits; I would save your money in a separate account and use it as a self-insurance. That is at least what I do. I even put other insurances and extended warranties, which respective risks I have decided to absorve; that way I diversify my fund." }, { "docid": "415915", "title": "", "text": "\"SIPC is a corporation - a legal entity separate from its owners. In the case of SIPC, it is funded through the fees paid by its members. All the US brokers are required to be members and to contribute to SIPC funds. Can it go bankrupt? Of course. Any legal entity can go bankrupt. A person can go bankrupt. A country can go bankrupt. And so can anything in between. However, looking at the history of things, there are certain assumptions that can be made. These are mere guesses, as there's no law about any of these things (to the best of my knowledge), but seeing how things were - we can try and guess that they will also be like this in the future. I would guess, that in case of a problem for the SIPC to meet its obligation, any of the following would happen (or combinations): Too big to fail - large insurance companies had been bailed out before by the governments since it was considered that their failure would be more destructive to the economy than the bailout. AIG as an example in the US. SIPC is in essence is an insurance company. So is Lloyd's of London. Breach of trust of the individual investors that can lead to a significant market crash. That's what happened in the US to Fannie Mae and Freddie Mac. They're now \"\"officially\"\" backed by the US government. If SIPC is incapable of meeting its obligation, I would definitely expect the US government to step in, even though there's no such obligation. Raising funds through charging other members. If the actuary calculations were incorrect, the insurance companies adjust them and raise premiums. That is what should happen in this case as well. While may not necessarily solve a cashflow issue, in the long term it will allow SIPC to balance, so that bridge loans (from the US government/Feds/public bonds) could be used in between. Not meeting obligations, i.e.: bankruptcy. That is an option, and insurance companies have gone bankrupt before. Not unheard of, but from the past experience - again, I'd expect the US government to step in. In general, I don't see any significant difference between SIPC in the US and a \"\"generic\"\" insurance coverage elsewhere. Except that in the US SIPC is mandatory, well regulated, and the coverage is uniform across brokerages, which is a benefit to the consumer.\"" }, { "docid": "488638", "title": "", "text": "\"Really this is no different from any kind of large lump sum and having a mortgage. There are probably many questions and answers on this subject. It really doesn't matter that the proceeds were the result of a sale, an inheritance would not change the answer. I think it is important to note that the proceeds will not eliminate the house 2 mortgage. A high level choice of investment one makes is between equity (such as stock) and debt investments (such as bonds and mortgages). You are in a unique case of being able to invest in your own mortgage with no investment fee. This may tip the scales in favor of paying down the mortgage. It is difficult to answer in your specific case as we don't know the rest of your finances. Do you have a sizable 401K that is heavily invested in stocks? Do you have the need for a college fund? Do you have an emergency fund? Do you have a desire to own several homes generating income property? If it was me I'd do the following in order, skipping steps I may have already completed: I've heard that the bank may agree to a \"\"one time adjustment\"\" to lower the payments on Mortgage #2 because of paying a very large payment. Is this something that really happens? I really kind of hate this attitude. Your goal is to get rid of the mortgage in a timely manner. Doing such makes paying for kids college a snap, reduces the income one might need in retirement, basically eliminates the need for life insurance, and gives one a whole lot of money to have fun with.\"" }, { "docid": "366976", "title": "", "text": "There's a cool calculator at Money Chimp that lets you plug in a start and end year and see what the compound annual growth rate of the S&P 500. The default date range of 1871 through 2010 gives a rate of 8.92% for example. Something you need to take into account when comparing returns to a whole life policy is what happens to the cash value in your policy when you die. Many of these policies are written so that your beneficiaries only get the face value of the policy, and the insurance company keeps the cash value." }, { "docid": "111174", "title": "", "text": "\"Is your mother still paying the premiums, or are you? If you're paying the premiums, then just contact the company and say you are no longer willing to pay and want to cancel the policy. If she's paying the premiums, why do you care? If the issue is the non-smoking declaration, and you are a smoker or want to take up smoking ... I don't know what country you live in, but I'd be surprised if there's a law anywhere that gives your mother the legal authority to forbid you from smoking when you are over 18. If you are paying the premiums, then contact the insurance company and tell them that you are no longer a non-smoker. The premiums may go up. If she is paying the premiums, tell her that you are now a smoker and that she should contact the insurance company about changing this clause in the policy if she wants to be sure it remains valid. If she declines to do this, that's between her and the insurance company. As you're not a party to the contract, it really has nothing to do with you. If, as you say, your mother is not fully capable of managing her affairs, you could contact the insurance company for her. I don't see how you could get the policy \"\"invalidated\"\". Unless there is some evidence that the life insurance company made false claims, or somehow tricked your mother into buying the policy, or that the policy violates local law, there is nothing \"\"invalid\"\" about it. Just because you've decided you don't want the policy doesn't make it invalid. Likewise I don't see how you could get the premiums refunded. The whole point of life insurance is that you pay a monthly premium, and if and when you die, they pay the beneficiary the face value of the policy. Life insurance is often described as a kind of gambling game: The insurance company is betting that you will live long enough to pay more in premiums than they pay out in benefits. You are betting that you will get more in benefits than you pay in premiums. If you die young, you win! If you could wait and see if you die within some time period, and if not demand your premiums back, well, that would be like saying that you want to bet on a spin of the roulette wheel, and if you win you take your winnings, and if you lose you want to get your original bet back. What casino would agree to that? You should be able to cancel the policy at any time. I suppose there might be some specific commitment in the contract, like you pledge not to cancel within X years. If you never signed it, I don't see how you could be obligated to pay for it, regardless of what commitments your mother made. I don't know where you live or your country's laws, but I doubt your mother can sign a contract legally committing you to pay for something for the rest of your life. You say it's a \"\"whole life\"\" policy, which means it should have some cash value if you cancel it, i.e. you get SOME money back. Not everything you and/or your mother paid in, but something.\"" }, { "docid": "155640", "title": "", "text": "\"John's answer is similar to what I was thinking. You should invest in insurance \"\"because there's an insurance salesman who needs to pay to send his kid to college.\"\" I will never be a fan of any type of permanent insurance, and I think it wrong to sell a single person with no dependents such a policy. I've used the expression \"\"Variable Annuities are sold, not bought.\"\" I feel the same about these insurance policies. The best advice I can offer in a short reply is this: If you need life insurance, buy term. Save as much as you can, 10% minimum, more if you are able. A young person should be saving for retirement and to position them self to buy their first house, if that's what they wish. What good is a full up Whole Life policy when you need to raise $40K to put down on a house? Sorry to sound like I'm lecturing, this is one of my hot points.\"" }, { "docid": "157702", "title": "", "text": "From everything I have read I still cannot be convinced of Whole Life Insurance Good! You have a brain! but it seems to be the first thing any financial advisor is trained to sell. The commissions on whole life are sick. The selling agent gets upward of 90% of your first year's premium. I imagine that the regional and district managers split the remaining 10%, but that is speculation. This is why there is typically a 15 year surrender charge on whole life. The LI company is not getting any of the money! You may want to reevaluate any financial adviser that promotes whole life. If it was me, I would fire them the moment the words came out of their mouth." }, { "docid": "392895", "title": "", "text": "First, you need to understand how modern insurance companies operate. On the front end, they write contracts with customers, collecting up front premiums, and promising to pay out to cover future losses. Efficient premiums cover exactly what's paid out; if you charge too much customers leave for competition, and if you charge too little the company goes under, or at least loses money. Large armies of people are employed to accurately guess future risks, hopefully to the point of certainty you have in human mortality. So over time, they will pay back those premiums. And there's a constant stream of new premiums coming in to replace money going out. So there's this effective pool of money they can use to buffer against large losses with; it's called float. And when the pool of money remains relatively constant, they can invest it longer term than the people who comprise the underlying risk. Large insurance companies like Berkshire Hathaway function in this manner; it's where Warren Buffet finds capital to invest while hiding from Wall St in Nebraska. The way these companies profit is by making sure the equation works: Profits = Premiums - Payouts + Return on float Payouts could be just payments for insured risk. But they could also be for the whole life insurance you're running across from time to time. These contracts offer the insured the chance to invest their money with the people who invest the float. And as long as the return on float is greater than the return they're offering, it's still profitable for the company. Since this guarantees suboptimal returns for you, it's usually a good idea to buy term insurance (much cheaper) and invest the difference yourself." }, { "docid": "351509", "title": "", "text": "\"anything whole life has a value (sometimes known as \"\"cash value\"\"), which is the value you get if you surrender the policy to the insurance company (ie. cancel the policy). I'm not sure i'd sell another person/company a life insurance policy on myself though. Kinda creates a bad incentive problem.\"" }, { "docid": "112374", "title": "", "text": "\"You're circling around the answer... The only real difference between a loddar and a privately-issued promissory note is that the loddar is issued by a recognized third party with better credit/credibility (the whole merchant/priest/farmer cartel-thing). Private entities absolutely can and do issue their own promises to pay, and accept them, and in turn rely on those promises to make other promises. It's what you do when you charge something to a credit-card on the basis of your employer's promise to pay. You charge new tires, the tire store promises to pay its employees based on your CC company's promise to pay the tire-store, which is based on your promise to pay the credit-card company, which is based on your employer's promise to pay you, which is based on your employer's contracts with its customers, and so on... In fact, often as not, the whole chain *never actually gets reconciled with printed cash.* The central bank never has to print or even know about these transactions. It's just checks and electronic transfers: promises all the way down, maybe with occasional cash withdrawals for popcorn at the movies or to tip the stripper or something... That doesn't mean it's not \"\"real money\"\", it absolutely is: those promises are buying groceries and tires and making mortgage-payments and paying dentist bills and getting people to dig up stuff out of mines that will be fashioned into iPads, and all kinds of stuff. Where this hurts most people in the brain is that they kind of accept dollar bills as axiomatically and intrinsically valuable. So trying to explain in reverse how they are the same as promissory notes or credit-certificates is like trying to convince them that a plane ticket is the same as an airplane (which is obviously not true). That's why I started with this imaginary world without money. If you let go of any preconceptions, and stop trying to think through the analogies and don't read it trying to predictively look for the outcome conclusions, if you just read it and follow the story through, it is obvious that the *only* intrinsic difference (in that imaginary world) between apple-certificates, loddars, and privately-issued IOUs is the *credibility of the issuer*. Trying to understand this stuff via analogy will make your head spin: Taking it all the way back to the thread-topic and the question at the top of the page, what makes it so difficult is the tendency and mental impulse to analogize money as a \"\"thing\"\" that \"\"is\"\" somewhere, and therefore has to \"\"go\"\" somewhere. But that's an intrinsically and substantially imperfect analogy, which is what makes it hard to explain to a five-year-old. And you can't make the reality fit that analogy and stay sane. Even if you refuse to accept all this maddening abstraction and insist on only doing transactions with physical cash, or gold pieces, *the value of those markers is still 100% contingent on everyone accepting that everyone else will continue to believe that everyone else will continue to accept that currency...* Money is essentially a promise that other people will keep. Instead of giving you food, your employer gives you a \"\"universal gift certificate\"\" that you can redeem anywhere, and everyone else will accept it, because they can in turn redeem it anywhere else. The only difference between using a bank-draft or printed dollar bill, versus writing a promise to make good yourself, is the credibility of the issuer. That's a really difficult premise for most people to accept, because it's invisible and abstract, and seems to conflict with tangible interactions you've been doing all your life. So we have this sort of tendency to try and force the reality to fit preconceived conceptual analogies, like someone who keeps rejecting explanations of how airplanes can fly because \"\"that still doesn't explain how metal can be lighter than air\"\"... it's demanding that the reality must fit a hypothesis that doesn't apply. Hope that helps.\"" } ]

[ { "docid": "211839", "title": "", "text": "\"Whole life is life insurance that lasts your whole life. Seriously. Since the insurance company must make a profit, and since they know they will always pay out on a whole life policy, whole life tends to be very expensive, and has lower \"\"death\"\" benefits than a term policy. Some of these policies are \"\"paid-up\"\" policies, meaning that they are structured so that you don't have to pay premiums forever. But what it amounts to is that the insurance company invests your premiums, and then pays you a smaller \"\"dividend,\"\" much like banks do with savings accounts. Unless you are especially risk-averse, it is almost always a better decision to get an inexpensive term policy, and invest the money you save yourself, rather than letting the insurance company invest it for you and reap most of the benefits. If you are doing things properly, you won't need life insurance your whole life, as retirement investments will eventually replace your working income.\"" } ]

[ { "docid": "415915", "title": "", "text": "\"SIPC is a corporation - a legal entity separate from its owners. In the case of SIPC, it is funded through the fees paid by its members. All the US brokers are required to be members and to contribute to SIPC funds. Can it go bankrupt? Of course. Any legal entity can go bankrupt. A person can go bankrupt. A country can go bankrupt. And so can anything in between. However, looking at the history of things, there are certain assumptions that can be made. These are mere guesses, as there's no law about any of these things (to the best of my knowledge), but seeing how things were - we can try and guess that they will also be like this in the future. I would guess, that in case of a problem for the SIPC to meet its obligation, any of the following would happen (or combinations): Too big to fail - large insurance companies had been bailed out before by the governments since it was considered that their failure would be more destructive to the economy than the bailout. AIG as an example in the US. SIPC is in essence is an insurance company. So is Lloyd's of London. Breach of trust of the individual investors that can lead to a significant market crash. That's what happened in the US to Fannie Mae and Freddie Mac. They're now \"\"officially\"\" backed by the US government. If SIPC is incapable of meeting its obligation, I would definitely expect the US government to step in, even though there's no such obligation. Raising funds through charging other members. If the actuary calculations were incorrect, the insurance companies adjust them and raise premiums. That is what should happen in this case as well. While may not necessarily solve a cashflow issue, in the long term it will allow SIPC to balance, so that bridge loans (from the US government/Feds/public bonds) could be used in between. Not meeting obligations, i.e.: bankruptcy. That is an option, and insurance companies have gone bankrupt before. Not unheard of, but from the past experience - again, I'd expect the US government to step in. In general, I don't see any significant difference between SIPC in the US and a \"\"generic\"\" insurance coverage elsewhere. Except that in the US SIPC is mandatory, well regulated, and the coverage is uniform across brokerages, which is a benefit to the consumer.\"" }, { "docid": "495874", "title": "", "text": "\"The two questions inherent in any decision to purchase an insurance plan is, \"\"how likely am I to need it?\"\", and \"\"what's the worst case scenario if I don't have it?\"\". The actuary that works for the insurance company is asking these same questions from the other end (with the second question thus being \"\"what would we be expected to have to pay out for a claim\"\"), using a lot of data about you and people like you to arrive at an answer. It really boils down to little more than a bet between you and the insurance company, and like any casino, the insurer has a house edge. The question is whether you think you'll beat that edge; if you're more likely than the insurer thinks you are to have to file a claim, then additional insurance is a good bet. So, the reasons you might decide against getting umbrella insurance include: Your everyday liability is low - Most people don't live in an environment where the \"\"normal\"\" insurance they carry won't pay for their occasional mistakes or acts of God. The scariest one for most is a car accident, but when you think of all the mistakes that have to be made by both sides in order for you to burn through the average policy's liability limits and still be ruined for life, you start feeling better. For instance, in Texas, minimum insurance coverage levels are 50/100/50; assuming neither party is hurt but the car is a total loss, your insurer will pay the fair market value of the car up to $50,000. That's a really nice car, to have a curbside value of 50 grand; remember that most cars take an initial hit of up to 25% of their sticker value and a first year depreciation of up to 50%. That 50 grand would cover an $80k Porsche 911 or top-end Lexus ES, and the owner of that car, in the U.S. at least, cannot sue to recover replacement value; his damages are only the fair market value of the car (plus medical, lost wages, etc, which are covered under your two personal injury liability buckets). If that's a problem, it's the other guy's job to buy his own supplemental insurance, such as gap insurance which covers the remaining payoff balance of a loan or lease above total loss value. Beyond that level, up into the supercars like the Bentleys, Ferraris, A-Ms, Rollses, Bugattis etc, the drivers of these cars know full well that they will never get the blue book value of the car from you or your insurer, and take steps to protect their investment. The guys who sell these cars also know this, and so they don't sell these cars outright; they require buyers to sign \"\"ownership contracts\"\", and one of the stipulations of such a contract is that the buyer must maintain a gold-plated insurance policy on the car. That's usually not the only stipulation; The total yearly cost to own a Bugatti Veyron, according to some estimates, is around $300,000, of which insurance is only 10%; the other 90% is obligatory routine maintenance including a $50,000 tire replacement every 10,000 miles, obligatory yearly detailing at $10k, fuel costs (that's a 16.4-liter engine under that hood; the car requires high-octane and only gets 3 mpg city, 8 highway), and secure parking and storage (the moguls in Lower Manhattan who own one of these could expect to pay almost as much just for the parking space as for the car, with a monthly service contract payment to boot). You don't have a lot to lose - You can't get blood from a turnip. Bankruptcy laws typically prevent creditors from taking things you need to live or do your job, including your home, your car, wardrobe, etc. For someone just starting out, that may be all you have. It could still be bad for you, but comparing that to, say, a small business owner with a net worth in the millions who's found liable for a slip and fall in his store, there's a lot more to be lost in the latter case, and in a hurry. For the same reason, litigious people and their legal representation look for deep pockets who can pay big sums quickly instead of $100 a month for the rest of their life, and so very few lawyers will target you as an individual unless you're the only one to blame (rare) or their client insists on making it personal. Most of your liability is already covered, one way or the other - When something happens to someone else in your home, your homeowner's policy includes a personal liability rider. The first two \"\"buckets\"\" of state-mandated auto liability insurance are for personal injury liability; the third is for property (car/house/signpost/mailbox). Health insurance covers your own emergency care, no matter who sent you to the ER, and life and AD&D insurance covers your own death or permanent disability no matter who caused it (depending on who's offering it; sometimes the AD&D rider is for your employer's benefit and only applies on the job). 99 times out of 100, people just want to be made whole when it's another Average Joe on the other side who caused them harm, and that's what \"\"normal\"\" insurance is designed to cover. It's fashionable to go after big business for big money when they do wrong (and big business knows this and spends a lot of money insuring against it), but when it's another little guy on the short end of the stick, rabidly pursuing them for everything they're worth is frowned on by society, and the lawyer virtually always walks away with the lion's share, so this strategy is self-defeating for those who choose it; no money and no friends. Now, if you are the deep pockets that people look for when they get out of the hospital, then a PLP or other supplemental liability insurance is definitely in order. You now think (as you should) that you're more likely to be sued for more than your normal insurance will cover, and even if the insurance company thinks the same as you and will only offer a rather expensive policy, it becomes a rather easy decision of \"\"lose a little every month\"\" or \"\"lose it all at once\"\".\"" }, { "docid": "241099", "title": "", "text": "If there are no dependents, there is no need for life insurance. You mention getting insurance when it is not needed, to protect you against some future risk. If you have a policy and a disease crops up that would normally make you un-insurable, you can keep your insurance for the rest of the term. The cost for this would be very high. You would have to have a term that would last decades to cover you until some future child is out of college. If you never have somebody that depends on you for income, there never is a need for life insurance." }, { "docid": "588153", "title": "", "text": "A derivative is a financial instrument of a special kind, the kind “whose price depends on, or is derived from, another asset”. This definition is from John Hull, Options, Futures and Other Derivatives – a book definitely worth to own if you are curious about this, you can easily find old copies for a few dollars. The first point is that a derivative is a financial instrument, like credits, or insurances, the second point is that its price depends closely from the price of something else, the mentioned asset. In most cases derivatives can be understood as financial insurances against some risk bound to the asset. In the sequel I give a small list of derivatives and highlight the assets and the risk they can be bound to. And first, let me point out that the definition is (marginally) wrong because some derivatives depend on things which are not assets, nor do they have a price, like temperature, sunlight, or even your own life in the case of mortgages. But before going in this list, let me go through the remaining points of your question. What is the basic idea and concept behind a derivative? As already noted, in most cases, a derivative can be understood as a financial insurance compensating from a risk of some sort. In a classical insurance contract, one party of the contract is an insurance company, but in the broader case of a derivative, that counterparty can be pretty anything: an insurance, a bank, a government, a large company, and most probably market makers. How is it really used, and how does this deviate from the first point? Briefly, how does is it affecting people, and how is it causing problems? An important point with derivatives is that it can be arbitrarily complicated to compute their prices. Actually what is hidden in the attempt of giving a definition for derivatives, is that they are products whose price Y is a measurable function of one or several random variables X_1, X_2, … X_n on which we can use the theory of arbitrage pricing to get hints on the actual price Y of the asset – this is what the depends on means in technical terms. In the most favorable case, we obtain an easy formula linking Y to the X_is which tells us what is the price of our financial instrument. But in practice, it can be very difficult, if at all possible, to determine a price for derivatives. This has two implications: Persons possessing sophisticated techniques to compute the price of derivatives have a strategic advantage on derivatives market, in comparison to less advanced actors on the market. Organisation owning assets they cannot price cannot compute their bilan anymore, so that they cannot know for sure their financial situation. They are somehow playing roulette. But wait, if derivatives are insurances they should help to mitigate some financial risk, which precisely means that they should help their owners to more accurately see their financial situation! How is this not a contradiction? Some persons with sophisticated techniques to compute the price of derivatives are actually selling complicated derivatives to less knowledgeable persons. For instance, many communes in France and Germany have contracted credits whose reimbursements have a fixed interest part, like in a classical credit, and a variable interest part whose rate is computed against a complicated formula involving the value of the Swiss frank at each quarter starting from the inception of the credit. (So, for a 25 years running credit of theis type, the price Y of the credit at its inception depends on 100 Xs, which are the uncertain prices for the Swiss frank each quarter of the 25 next years.) Some of these communes can be quite small, with 5.000 inhabitants, and needless to say, do not have the required expertise to analyse the risks bound to such instruments, which in that special case led the court call the credit a swindling and to cancel the credit. But what chain of events leads a 5.000 inhabitants city in France to own a credit whose reimbursements depends on the Swiss frank? After the credit crunch in 2007 and the fall of Lehman Brothers in 2008, it has begun to be very hard to organise funding, which basically means to conclude credits running long in time on large amounts of money. So, the municipality needs a 25 years credit of 10.000.000 EUROS and goes to its communal bank. The communal bank has hundreds or thousands of municipalities looking for credits and needs itself a financing. So the communal bank goes to one of the five largest financial institutions in the world, which insists on selling a huge credit whose reimbursements have a variable part depending on hundred of values the Swiss frank will have in the 25 next years. Since the the big bank has better computation techniques than the small bank it makes a big profit. Since the small bank has no idea, how to compute the correct price of the credit it bought, it cuts this in pieces and sell it in the same form to the various communes it works with. If we were to attribute this kind of intentions to the largest five banks, we could ask about the possibility that they designed the credit to take advantage of the primitive evaluation methods of the small bank. We could also ask if they organised a cartel to force communal banks to buy their bermudean snowballs. And we could also ask, if they are so influent that they eventually can manipulate the Swiss frank to secure an even higher profit. But I will not go into this. To the best of my understanding, the subprime crisis is a play along the same plot, with different actors, but I know this latter subject only by what I could read in French newspapers. So much for the “How is it causing problems?” part. What is some of the terminology in relation to derivatives (and there meanings of course)? Answering this question is basically the purpose of the 7 first chapters of the book by Hull, along with deriving some important mathematical principles. And I will not copy these seven chapters here! How would someone get started dealing in derivatives (I'm playing a realistic stock market simulation, so it doesn't matter if your answer to this costs me money)? If you ask the question, I understand that you are not a professional, so that your are actually trying to become the one that has money and zero knowledge in the play I outlined above. I would recommand not doing this. That said, if you have a good mathematical background and can program well, once you are confindent with the books of Hull and Joshi, you can have fun implementing various market models and implementing trading strategies. Once you are confident with this, you can also read the articles on quantitative finance on arXiv.org. And once you are done with this, you can decide for yourself if you want to play the same market as the guys writing these articles. (And yes, even for the simplest options, they have better models than you have and will systematically outperform you in the long run, even if some random successes will give you the feeling that you do well and could do better.) (indeed, I've made it a personal goal to somehow lose every last cent of my money) You know your weapons! :) Two parties agree today on a price for one to deliver a commodity to the other at some future instant. This is a classical future contract, it can be modified in every imaginable way, usually by embedding options. For instance one party could have the option to choose between different delivery points or delivery days. Two parties write today a contract allowing the one party to buy at some future time a commodity to the the second party. The price is written today, as part of the contract. (There is the corresponding option entitling the owner to sell something.) Unlike the future contract, only one party can be obliged to do something, the other jas a right but no obligation. If you buy and option, your are buying some sort of insurance against a change of price on some asset. This is the most familiar to anybody. Credits can come in many different flavours, especially the formula to compute interests, or also embed options. Common options are early settlement options or restructuration options. While this is not completely inutitive, the credit works like an insurance. This is most easily understood from the side of the organisation lending the money, that speculates that the ratio of creanciers going bankrupt will be low enough for her to make profit, just like a fire insurance company speculates that the ratio of fire accidents will be low enough for her to make a profit. This is like a mortgage on a financial institution. Two parties agree that one will recive an upfront today and give a compensation to the second one if some third party defaults. Here this is an explicit insurance against the unfortuante event, where a creancier goes bankrupt. One finds here more or less standard options on electricity. But electricity have delicious particularities as it can practically not be stored, and fallout is also (usually) avoided. As for classical options, these are insurances against price moves. A swap is like two complementary credits on the same amount of money, so that it ends up in the two parties not actually exchanging the credit nominal and only paying interest one to the other — which makes only sense if these interests are computed with different formulas. Typical example are fixed rate vs. EURIBOR on some given maturity, which we interpret as an insurance against fluctuations of the EURIBOR, or a fixed rate vs. the exchange ratio between two currencies, which we interpret as an insurance against the two currencies decorrelating. Swaps are the richest and the most generic category of financial derivatives. The off-the-counter market features very imaginative, very customised insurance products. The most basic form is the insurance against drought, but you can image different dangers, and once you have it you can put it in options, in a swap, etc. For instance, a restaurant with a terrasse could enter in a weather insurance, paying each year a fixed amount of money and becoming in return an amount of money based on the amount of rainy day in a year. Actually, this list is virtually without limits!" }, { "docid": "318971", "title": "", "text": "\"In general, \"\"billed amounts\"\" don't mean a whole lot, since if the provider has a contract with the insurance company (usually called \"\"in-network\"\"), the insurance company picks what the rates are that the treatment \"\"should\"\" cost, and how that cost gets allocated between what the insurance company pays and what the patient pays. Due to that contract, the insurance company and provider should agree on how much the patient owes, and one shouldn't pay a provider more than what the insurance company says you should. On the other hand, some insurance plans have a level of \"\"out of network\"\" coverage. In that case, the insurance company has its same sense of what the treatment \"\"should\"\" cost, but is really only concerned with paying its share. The EOB then should show how much they pay, but will generally show the full \"\"billed amount\"\" minus their payment as the amount the patient owes. That is, since there's no contract between the provider and the insurance company, the insurance company has no way to stop the provider from \"\"balance billing\"\" you for whatever they want beyond the amount that the insurance is paying, since any payment amount is purely a transaction between you and the provider. In general (as with anything involving large amounts of money), it's best to get all you can in writing. The provider should be able to provide you with a statement showing zero remaining due, and including both any payment you've made to them and any payments made by the insurance company. It may take a while for the payment from the insurance company to be processed, and until it does there may be something on the statement showing \"\"estimated amount to be paid by insurance\"\", which isn't as comforting as one showing \"\"actual amount paid by insurance\"\" and \"\"zero due\"\".\"" }, { "docid": "564420", "title": "", "text": "I haven't looked at that warranty in detail, but generally speaking this should help. What is GAP insurance? In the case of a total loss/write off gap insurance covers the outstanding finance after your regular insurance pay out. The two won't match up usually because of the depreciation right after you buy the car. For example, if you take out $20,000 finance and buy a car, then write it off after six months, your insurance company may only value it at $16,000 but it's unlikely you will have cleared $4,000 from your finance. Gap insurance will pay out the difference and settle the debt. Will Chrysler change the engine, if it comes to bhore? Yes, unless they identify misuse or deliberate damage. For instance, if you do 1000 miles and the engine explodes, it's a mechanical fault that the warranty would cover. If they open up the engine/look at diagnostics and find it's been thrashed to within an inch of it's life, they may claim it was your driving which has destroyed the engine and you would have to prove it was an underlying fault and would have blown either way. Will car dents be covered with this bumper to bumper insurance? Not likely, as I mentioned in the last point, if it's your fault it wouldn't be covered. I think you may be confusing the terms insurance and warranty at this point. Insurance would cover your dents but a warranty only covers the manufacturer's faults, even in the case of extended warranties. What does basic mean in terms of warranty? Sounds obvious, but whatever Chrysler want it to mean! There's no legal definition of 'basic' so you would need to check the documents thoroughly or ask them to explain exactly what is and isn't covered. If they're reluctant, it's probably because 'basic' covers very little..." }, { "docid": "430612", "title": "", "text": "(Disclosure - I am a real estate agent, involved with houses to buy/sell, but much activity in rentals) I got a call from a man and his wife looking for an apartment. He introduced itself, described what they were looking for, and then suggested I google his name. He said I'd find that a few weeks back, his house burned to the ground and he had no insurance. He didn't have enough savings to rebuild, and besides needing an apartment, had a building lot to sell. Insurance against theft may not be at the top of your list. Don't keep any cash, and keep your possessions to a minimum. But a house needs insurance for a bank to give you a mortgage. Once paid off, you have no legal obligation, but are playing a dangerous game. You are right, it's an odds game. If the cost of insurance is .5% the house value and the chance of it burning down is 1 in 300 (I made this up) you are simply betting it won't be yours that burns down. Given that for most people, a paid off house is their largest asset, more value that all other savings combined, it's a risk most would prefer not to take. Life insurance is a different matter. A person with no dependents has no need for insurance. For those who are married (or have a loved one), or for parents, insurance is intended to help survivors bridge the gap for that lost income. The 10-20 times income value for insurance is just a recommendation, whose need fades away as one approaches independence. I don't believe in insurance as an investment vehicle, so this answer is talking strictly term." }, { "docid": "151817", "title": "", "text": "\"Technically, this doesn't seem like a scam, but I don't think the system is beneficial. They use a lot of half-truths to convince you that their product is right for you. Some of the arguments presented and my thoughts. Don't buy term and invest the rest because you can't predict how much you'll earn from the \"\"rest\"\" Also Don't invest in a 401k because you can't predict how much you'll earn They are correct that you won't know exactly how much you'll have due to stock market, but that doesn't mean the stock market is a bad place to put your money. Investing in a 401k is risky because of the harsh 401k withdrawal rules Yes, 401ks have withdrawal rules (can't typically start before 59.5, must start by 70.5) but those rules don't hamper my investing style in any way. Most Term Life Insurance policies don't pay out They are correct again, but their conclusions are wrong. Yes, most people don't die while you have a term insurance policy which is why Term life insurance is relatively cheap. But they aren't arguing you don't need insurance, just that you need their insurance which is \"\"better\"\" You need the Guaranteed growth they offer The chart used to illustrate their guaranteed growth includes non-guaranteed dividends. They invest $10,000 per year for 36 years and end up with $1,000,000. That's a 5% return! I use 10% for my estimate of stock market performance, but let's say it's only 8%. The same $10,000 per year results in over $2 Million dollars. Using 10.5% (average return of the S&P 500 over it's lifetime) the result is a staggering $3.7 MILLION. So if I'm looking at $3.7M vs. $1M, It costs me $2.7 Million dollars to give me the same coverage as my term life policy. That's one expensive Term Life Insurance policy. My personal favorite: Blindly following the advice of Wall Street and financial “gurus” such as Dave Ramsey and Suze Orman got you where you are. Are you happy with the state of your finances? Do you still believe their fairytale, “Buy Term (insurance) and Invest the Difference”? Yes, I sure do believe that fairytale and I'm prospering quite well thank you. :) While I don't think this is a scam, it's outrageously expensive and not a good financial choice.\"" }, { "docid": "117627", "title": "", "text": "Whole life policies have its own useful purpose, but it is never meant to be a vehicle that allows you to maximize cash value accumulation. Yes, you can buy term and invest the difference. Assuming you set out to reduce your liabilities to zero/minimum when that term policy ends or you have no such desires to transfer your wealth to your next of kin income tax free. Indexed universal life and variable universal life is much better suited for cash value accumulation when looking at life insurance products." }, { "docid": "8057", "title": "", "text": "Actually, most insurance policies DON'T have a cash value if you don't make a claim. The reason that some life insurance policies do this is that they are really tax sheltered investments posing as insurance. With that in mind, the root of your question is really whether insurance premiums are wasted if you never make a claim. It really makes no difference if you are talking about EI, Auto, or Homeowner's insurance. My answer to that is no. What you are paying for when you buy insurance is financial risk avoidance. Look at it this way, you don't buy EI as an investment where you hope to get a return on your investment. You are buying the right to be protected against catastrophic financial difficulty associated with losing your job. Whether you claim it or not you did receive that protection. This is what drives me so crazy when I hear people talk about how an insurance company is ripping you off because you paid more in premiums than they paid out in benefits. Of course you did! If most people didn't pay in more than the company paid out there would be no financial interest for someone to form an insurance company." }, { "docid": "201012", "title": "", "text": "To add to JoeTaxpayer's answer, the cost of providing (term) life insurance for one year increases with the age of the insured. Thus, if you buy a 30-year term policy with level premiums (the premium is the same for 30 years) then, during the earlier years, you pay more than the cost to the insurance company for providing the benefit. In later years, you pay somewhat less than the cost of providing the insurance. The excess premiums that the insurance company charged in earlier years and the earnings from investing that money covers the difference between the premium paid in later years and the true cost of providing the coverage. If after 20 years you decide that you no longer need the protection (children have grown up and now have jobs etc) and you cancel the policy, you will have overpaid for the protection that you got. The insurance company will not give you backsies on the overpayment. As an alternative, you might want to consider a term life insurance policy in which the premiums increase each year (or increase every 5 years) and thus better approximate the actual cost to the insurance company. One advantage is that you pay less in early life and pay more in later years (when hopefully your income will have increased and you can afford to pay more). Thus, you can get a policy with a larger face value (150K for your wife and 400K for yourself is really quite small) with annual premium of $550 now and more in later years. Also if you decide to cancel the policy after 20 years, you will not have overpaid for the level of coverage provided. Finally, in addition to a policy with larger face value, I recommend that you include the mortgage (if any) on your house in the amount that you decide is enough for your family to live on and to send the kids to college, etc., or get a separate (term life insurance) policy to cover the mortgage on your home. Many mortgage contracts have clauses to the effect that the entire principal owed becomes immediately due if either of the borrowers dies. Yes, the widow or widower can get a replacement mortgage, or prove to the lender that the monthly payments will continue as before, (or pay off the mortgage from that $150K or $400K which will leave a heck of a lot less for the family to survive on) etc., but in the middle of dealing with all the hassles created by a death in the family, this is one headache that can be taken care of now. The advantage of including the mortgage amount in a single policy that will support the family when you are gone is that you get a bit of a break; the sum of the annual premiums on ten policies for $100K is more than the premiums for a single $1M policy. There is also the consideration that the principal owed on the mortgage declines over the years (very slowly at first, though) and so there will be more money available for living expenses in later years. Alternatively, consider a special term life insurance policy geared towards mortgage coverage. The face value of this policy reduces each year to match the amount still due on the mortgage. Note that you may already have such a policy in place because the lender has insisted on you getting such a policy as a condition for issuing the loan. In this case, keep in mind that not only is the lender the beneficiary of such a policy, but if you bought the policy through the lender, you are providing extra profit to the lender; you can get a similar policy at lower premiums on the open market than the policy that your lender has so thoughtfully provided you. I bought mine from a source that caters to employees of nonprofit organizations and public sector employees; your mileage may vary." }, { "docid": "402325", "title": "", "text": "\"&gt; So I asked this question in /r/DebateaCommunist and got some interesting answers, mostly about how banks exist to make money out of nowhere and to fool people. What do yall have to say? That isn't what they said. Nobody mentioned fooling people from what I can see from a cursory glance. And if they did, they're being facetious. Also, they didn't mean \"\"make money from thin air\"\" in the sense of it being a magical trick. They make money from a sort of market inefficiency: they broker between people who want to invest money and those who want to borrow it. The top two answers are about right: a bank borrows money from investors (who deposit money in checking and savings accounts), and lends it to borrowers in the form of loans or mortgages. The difference between the interest rates is their profit. You deposit $1000 with me at 2% for 20 years. I give you $1485.95 at the end of that term. Where did I get the extra five hundred books? Well I lent it out in mortgages over the same terms at 6% and received $3207.14 over the same period of time. Your $1000 made you $485.95, and made me $1721.19 which I keep for the purposes of providing you with ATMs, dealing with bad debts and staffing the place. Simple, eh? Of course, they also provide other services in addition to this, and the way in which they do it is regulated, but that's all a bank is at its core. A central bank is slightly different: they issue money (i.e. \"\"print\"\" it), and supply it at a headline interest rate to the commercial banks. And of course banks borrow amongst themselves. But then we get ourselves down the rabbit hole of \"\"grown up\"\" economics and LIBOR and the like... there are whole textbooks used to explain exactly how that mechanism works and what's going on there. But if you want to get rich, find a way to start a bank. Seriously. Doing it to the old school way is seriously profitable if you can be trusted.\"" }, { "docid": "564675", "title": "", "text": "\"From the details you have given it looks like you have \"\"Unit Linked\"\" insurance policy. In such policies a part of the premium goes towards the \"\"Insurance\"\", the balance is invested into \"\"Mutual Funds / stock Market\"\". It is generally not advisable to have \"\"Unit Linked\"\" policy compared to pure \"\"Term\"\" policy. Generally the amount of fees charged for \"\"Unit Linked\"\" policy is high and hence the returns to the end user are low. i.e. if you buy a \"\"Term\"\" insurance for the same sum insured and invest on your own the balance in any \"\"Mutual Fund\"\" you will end up making more that what you are getting now. Typically these policies have 3 years lock-in period. As you have purchased this in 2008, you can cancel the policy without any penalties. This will save you future premium and you can buy a term insurance and invest the difference yourself. Note the unit linked policy is useful for people who do not invest on their own and this is a good way to be forced into saving than nothing else.\"" }, { "docid": "16767", "title": "", "text": "&gt;Better for you and for me, yes, but not for the disadvantaged without benefactors. That's the situation I was in. That wasn't exactly my point. I'm all for helping people, and social security does help people, and I am very happy it helped you - I'm not disputing that. What I'm saying is that what you got from social security is not as good as what you would have got from a $500,000 - $1,000,000 term life insurance policy. For people in there 20s, in good health, that kind of policy should be $20-$40/month, which could easily be bought with the money we otherwise spend on social security. (Now... whether parents would actually be responsible enough to buy term life insurance and put money towards retirement if we didn't have social security is a WHOOOOOOOOOLE nother discussion.) That's all I'm saying - I'd rather buy term life and invest for my own retirement because me and my family will come out ahead of where social security will put us. I'm really not a financial wizard, and I have to believe that this type of plan would work well for everyone else, too." }, { "docid": "194429", "title": "", "text": "\"i dont know how they would buy *term* policies though, i suppose there is an actuarial value to the policy (ie. you might die during the policy term). A lot of these polices are \"\"10 year term\"\" or something like that, so the actuarial value might be significant. (a lot of people get these who cant get whole life or cant afford to get it, with the health problems they now have). Something tells me these transactions are not very advantageous to the insured (especially since i've seen them heavily advertised on channels my mom tends to watch)\"" }, { "docid": "355491", "title": "", "text": "Higher life insurance. Mortgage insurance is a very expensive decreasing term life insurance policy, that pays the Lender. You can likely increase your limits for less cost, AND, the payout doesn't depreciate every month, AND, your beneficiary can use the money any way they want - to buy food, or pay property taxes, or whatever." }, { "docid": "407726", "title": "", "text": "\"An annuity is a product. In simple terms, you hand over a lump sum of cash and receive an agreed annual income until you die. The underlying investment required to reach that income level is not your concern, it's the provider's worry. So there is a huge mount of security to the retiree in having an annuity. It is worth pointing out that with simple annuities where one gives a lump sum of money to (typically) an insurance company, the annuity payments cease upon the death of the annuitant. If any part of the lump sum is still left, that money belongs to the company, not to the heirs of the deceased. Fancier versions of annuities cover the spouse of the annuitant as well (joint and survivor annuity) or guarantee a certain number of payments (e.g. 10-year certain) regardless of when the annuitant dies (payments for the remaining certain term go to the residual beneficiary) etc. How much of an annuity payment the company offers for a fixed lump sum of £X depends on what type of annuity is chosen; usually simple annuities give the maximum bang for the buck. Also, different companies may offer slightly different rates. So, why should one choose to buy an annuity instead of keeping the lump sum in a bank or in fixed deposits (CDs in US parlance), or invested in the stock market or the bond market, etc., and making periodic withdrawals from these assets at a \"\"safe rate of withdrawal\"\"? Safe rates of withdrawal are often touted as 4% per annum in the US, though there are newer studies saying that a smaller rate should be used. Well, safe rates of withdrawal are designed to ensure that the retiree does not use up all the money and is left destitute just when medical bills and other costs are likely to be peaking. Indeed, if all the money were kept in a sock at home (no growth at all), a 4% per annum withdrawal rate will last the retiree for 25 years. With some growth of the lump sum in an investment, somewhat larger withdrawals might be taken in good years, but that 4% is needed even when the investments have declined in value because of economic conditions beyond one's control. So, there are good things and bad things that can happen if one chooses to not buy an annuity. On the other hand, with an annuity, the payments will continue till death and so the retiree feels safer, as Chris mentioned. There is also the serenity in not having to worry how the investments are doing; that's the company's business. A down side, of course, is that the payments are fixed and if inflation is raging, the retiree still gets the same amount. If extra cash is needed one year for unavoidable expenses, the annuity will not provide it, whereas the lump sum (whether kept in a sock or invested) can be drawn on for the extra expense. Another down side is that any money remaining is gone, with nothing left for the heirs. On the plus side, the annuity payments are usually larger than those that the retiree will get via the safe rate of withdrawal method from the lump sum. This is because the insurance company is applying the laws of large numbers: many annuitants will not survive past their life expectancy, and their leftover monies are pure profit to the insurance company, often more than enough (when invested properly by the company) to pay those old codgers who continue to live past their life expectancy. Personally, I wouldn't want to buy an annuity with all my money, but getting an annuity with part of the money is worthwhile. Important: The annuity discussed in this answer is what is sometimes called a single-premium or an immediate annuity. It is purchased at the time of retirement with a single (large) lump sum payment. This is not the kind of annuity that is described in JAGAnalyst's answer which requires payment of (much smaller) premiums over many years. Search this forum for variable annuity to learn about these types of annuities.\"" }, { "docid": "320073", "title": "", "text": "Fisher Capital Management: Leading 10 Monetary Suggestions Posted on 17/10/2011 by fcminvestment Even though resolutions boost financial condition a great idea to accomplish in any period for year is for numerous persons discover this less difficult from the starting of the New Year. Irrespective of any time one start, the fundamentals stay identical. Fisher Capital Management shares recommendations in order to be in advance monetarily. 1. Be Compensated How Much you are worth and Save Some Part of It This appears easy; however countless individuals have difficulty having this specific initial fundamental principle. Be positive and understand exactly what your task is worth within the industry, through executing the assessment of your expertise, productiveness, career responsibilities, involvement to the firm, and the current fee, equally within and beyond the organization, regarding what you perform. Becoming under compensated actually a thousand bucks a year may possess a substantial collective result more than the actual process of one’s employment existence. Irrespective of the amount or perhaps how small you are compensated, you will in no way obtain be advance in case one devote far more compared to a person gain. Frequently it is less difficult to invest much less compared to this will be to make much more, and the small efforts within the amount of places may outcome in large savings. This will not usually have that which includes producing large sacrifices. 2. Adhere to the Price Range How many people understand when the funds will be heading when one never budget? How does a person can easily established investing and saving targets when one never understands in which the cash is actually heading? People require the budget whether or not a person creates thousands or perhaps hundreds of thousands of bucks a year. 3. Settle Credit Card Accounts Credit card financial obligation is actually the number one hindrance to becoming ahead monetarily. These small items of plastic tend to be so convenient to utilize, it is therefore very easy to overlook that it is actual cash we are coping with whenever you whip these away to pay out for any transaction, big or even little. In spite of the great resolves in order to shell out balance away swiftly, the truth is that it usually will not, and wind up having to pay much more regarding issues compared to make paid off when you made use of money. 4. Chip in towards the Pension Program When the company has a 401(k) plan and a person do not contribute to this, you are running away through one of the finest discounts right there. Request the boss if they have the 401(k) plan (or even comparable program), and sign up right now. In the event that you happen to be contributing, attempt to increase the contribution. In case the company will not provide the pension program, think about the Individual retirement account. 5. Make Financial Savings Program You might have discovered this before: Pay for yourself first! If perhaps a person delay till you have satisfied most ones monetary commitments prior to finding what is remaining around for saving, probabilities tend to be you will in no way possess a wholesome financial savings accounts or perhaps opportunities. Deal with it in order to fix apart the minimal for 5% to 10% of the income to get savings prior to shelling out the expenses. More desirable however, get cash instantly taken off through the income and deposit straight into a distinct account. 6. Make Investments! Should you are contributing the pension program and the savings account as well as one may also handle to set a number of funds in to some other ventures, all the far better. 7. Improve Ones Career Rewards Work benefits such as the 401(k) program, flexible expenditure consideration, healthcare as well as dental care coverage, and so on. are usually valued at huge money. Try to make certain you will be making the most of your own and also getting benefit of these kinds which can easily help save cash through lowering taxation or perhaps out-of-pocket expenditures. 8. Evaluate Ones Coverage Protections Overly numerous individuals tend to be though in to spending a lot regarding life and impairment coverage, no matter if it is through incorporating all these protections to automobile mortgages, purchasing whole-life insurance if term-life creates a lot more feeling, or perhaps purchasing life insurance any time one possess absolutely no dependents. In the different side, it really is essential to an individual get sufficient insurance coverage to be able to safeguard the loved ones and also the earnings in the event of fatality or possibly impairment. 9. Revise Your Current Will 70% of American citizens do not possess a will. In case a person have dependents, irrespective of just how small or what amount a person own, an individual need a will. When the predicament is not very difficult a person may actually carry out the personal plan just like WillMaker through Nolo Press. Safeguard your own cherished family members. Create your will. 10. Maintain Suitable Data When a person do not maintain useful data, you are most likely in no way proclaiming all the allowable revenue taxes deductions as well as credits. Established a method today and utilize this each of the year. It is a lot simpler compared to rushing in order to discover all the things from taxes period, just to skip things which may have rescued a person capital." }, { "docid": "315255", "title": "", "text": "\"You are not interpreting the table correctly. The $20K \"\"base rate\"\" that you think should have been eliminated is in fact the total tax for the whole bracket. You only dipped partially into the bracket, and the $3K reduction accounts for that. Look at the table again: What it means is that if you earn $100K, you will pay $6897.50 + 25% of (100000-50400) = $12400. If you earn $140000, you'll pay $26835 + (140000-130150) * 0.28 = $2758. So why the difference between $26835 and $6897.50? That's exactly 25% of $79500, which is the difference between $130150 and $50400 - the whole value of the bracket.\"" } ]

[ { "docid": "511386", "title": "", "text": "For most people Term is the way to go. I consider life insurance a necessity not an investment. See this article on SmartMoney." } ]

[ { "docid": "2286", "title": "", "text": "If your uncle is looking to maintain life insurance coverage for specific shorter period of time he may want to look into hybrid life insurance. If you buy a hybrid universal life policy, the premium and death benefit can be guaranteed to last until any age. Since, most permanent policies focus on cash value accumulation it is hard for most people to find cheap whole life or affordable universal life. Consumers only looking for a longer duration have a more flexible choice with a new hybrid product that combines elements of both term life coverage and universal life. Hybrid universal policies are much cheaper then other permanent coverage such as whole life coverage because they do not emphasize cash value accumulation. However, the premiums and death benefits can still be guaranteed to a specific age (i.e. 85, 90, 95, 100). So, premiums can be scaled to coordinate with your desired budget and the face amount required for your family. Typical universal life and whole life insurance contracts only allow for lifetime coverage. However, hybrid universal life offers a much smaller premium because the coverage can be dialed into a specific age. If the policyholder does live beyond the originally selected age, the death benefit will simply begin getting smaller, while the original premium will continue to remain the same." }, { "docid": "320073", "title": "", "text": "Fisher Capital Management: Leading 10 Monetary Suggestions Posted on 17/10/2011 by fcminvestment Even though resolutions boost financial condition a great idea to accomplish in any period for year is for numerous persons discover this less difficult from the starting of the New Year. Irrespective of any time one start, the fundamentals stay identical. Fisher Capital Management shares recommendations in order to be in advance monetarily. 1. Be Compensated How Much you are worth and Save Some Part of It This appears easy; however countless individuals have difficulty having this specific initial fundamental principle. Be positive and understand exactly what your task is worth within the industry, through executing the assessment of your expertise, productiveness, career responsibilities, involvement to the firm, and the current fee, equally within and beyond the organization, regarding what you perform. Becoming under compensated actually a thousand bucks a year may possess a substantial collective result more than the actual process of one’s employment existence. Irrespective of the amount or perhaps how small you are compensated, you will in no way obtain be advance in case one devote far more compared to a person gain. Frequently it is less difficult to invest much less compared to this will be to make much more, and the small efforts within the amount of places may outcome in large savings. This will not usually have that which includes producing large sacrifices. 2. Adhere to the Price Range How many people understand when the funds will be heading when one never budget? How does a person can easily established investing and saving targets when one never understands in which the cash is actually heading? People require the budget whether or not a person creates thousands or perhaps hundreds of thousands of bucks a year. 3. Settle Credit Card Accounts Credit card financial obligation is actually the number one hindrance to becoming ahead monetarily. These small items of plastic tend to be so convenient to utilize, it is therefore very easy to overlook that it is actual cash we are coping with whenever you whip these away to pay out for any transaction, big or even little. In spite of the great resolves in order to shell out balance away swiftly, the truth is that it usually will not, and wind up having to pay much more regarding issues compared to make paid off when you made use of money. 4. Chip in towards the Pension Program When the company has a 401(k) plan and a person do not contribute to this, you are running away through one of the finest discounts right there. Request the boss if they have the 401(k) plan (or even comparable program), and sign up right now. In the event that you happen to be contributing, attempt to increase the contribution. In case the company will not provide the pension program, think about the Individual retirement account. 5. Make Financial Savings Program You might have discovered this before: Pay for yourself first! If perhaps a person delay till you have satisfied most ones monetary commitments prior to finding what is remaining around for saving, probabilities tend to be you will in no way possess a wholesome financial savings accounts or perhaps opportunities. Deal with it in order to fix apart the minimal for 5% to 10% of the income to get savings prior to shelling out the expenses. More desirable however, get cash instantly taken off through the income and deposit straight into a distinct account. 6. Make Investments! Should you are contributing the pension program and the savings account as well as one may also handle to set a number of funds in to some other ventures, all the far better. 7. Improve Ones Career Rewards Work benefits such as the 401(k) program, flexible expenditure consideration, healthcare as well as dental care coverage, and so on. are usually valued at huge money. Try to make certain you will be making the most of your own and also getting benefit of these kinds which can easily help save cash through lowering taxation or perhaps out-of-pocket expenditures. 8. Evaluate Ones Coverage Protections Overly numerous individuals tend to be though in to spending a lot regarding life and impairment coverage, no matter if it is through incorporating all these protections to automobile mortgages, purchasing whole-life insurance if term-life creates a lot more feeling, or perhaps purchasing life insurance any time one possess absolutely no dependents. In the different side, it really is essential to an individual get sufficient insurance coverage to be able to safeguard the loved ones and also the earnings in the event of fatality or possibly impairment. 9. Revise Your Current Will 70% of American citizens do not possess a will. In case a person have dependents, irrespective of just how small or what amount a person own, an individual need a will. When the predicament is not very difficult a person may actually carry out the personal plan just like WillMaker through Nolo Press. Safeguard your own cherished family members. Create your will. 10. Maintain Suitable Data When a person do not maintain useful data, you are most likely in no way proclaiming all the allowable revenue taxes deductions as well as credits. Established a method today and utilize this each of the year. It is a lot simpler compared to rushing in order to discover all the things from taxes period, just to skip things which may have rescued a person capital." }, { "docid": "155640", "title": "", "text": "\"John's answer is similar to what I was thinking. You should invest in insurance \"\"because there's an insurance salesman who needs to pay to send his kid to college.\"\" I will never be a fan of any type of permanent insurance, and I think it wrong to sell a single person with no dependents such a policy. I've used the expression \"\"Variable Annuities are sold, not bought.\"\" I feel the same about these insurance policies. The best advice I can offer in a short reply is this: If you need life insurance, buy term. Save as much as you can, 10% minimum, more if you are able. A young person should be saving for retirement and to position them self to buy their first house, if that's what they wish. What good is a full up Whole Life policy when you need to raise $40K to put down on a house? Sorry to sound like I'm lecturing, this is one of my hot points.\"" }, { "docid": "415915", "title": "", "text": "\"SIPC is a corporation - a legal entity separate from its owners. In the case of SIPC, it is funded through the fees paid by its members. All the US brokers are required to be members and to contribute to SIPC funds. Can it go bankrupt? Of course. Any legal entity can go bankrupt. A person can go bankrupt. A country can go bankrupt. And so can anything in between. However, looking at the history of things, there are certain assumptions that can be made. These are mere guesses, as there's no law about any of these things (to the best of my knowledge), but seeing how things were - we can try and guess that they will also be like this in the future. I would guess, that in case of a problem for the SIPC to meet its obligation, any of the following would happen (or combinations): Too big to fail - large insurance companies had been bailed out before by the governments since it was considered that their failure would be more destructive to the economy than the bailout. AIG as an example in the US. SIPC is in essence is an insurance company. So is Lloyd's of London. Breach of trust of the individual investors that can lead to a significant market crash. That's what happened in the US to Fannie Mae and Freddie Mac. They're now \"\"officially\"\" backed by the US government. If SIPC is incapable of meeting its obligation, I would definitely expect the US government to step in, even though there's no such obligation. Raising funds through charging other members. If the actuary calculations were incorrect, the insurance companies adjust them and raise premiums. That is what should happen in this case as well. While may not necessarily solve a cashflow issue, in the long term it will allow SIPC to balance, so that bridge loans (from the US government/Feds/public bonds) could be used in between. Not meeting obligations, i.e.: bankruptcy. That is an option, and insurance companies have gone bankrupt before. Not unheard of, but from the past experience - again, I'd expect the US government to step in. In general, I don't see any significant difference between SIPC in the US and a \"\"generic\"\" insurance coverage elsewhere. Except that in the US SIPC is mandatory, well regulated, and the coverage is uniform across brokerages, which is a benefit to the consumer.\"" }, { "docid": "315255", "title": "", "text": "\"You are not interpreting the table correctly. The $20K \"\"base rate\"\" that you think should have been eliminated is in fact the total tax for the whole bracket. You only dipped partially into the bracket, and the $3K reduction accounts for that. Look at the table again: What it means is that if you earn $100K, you will pay $6897.50 + 25% of (100000-50400) = $12400. If you earn $140000, you'll pay $26835 + (140000-130150) * 0.28 = $2758. So why the difference between $26835 and $6897.50? That's exactly 25% of $79500, which is the difference between $130150 and $50400 - the whole value of the bracket.\"" }, { "docid": "219351", "title": "", "text": "DJClayworth's response is generally correct. You wouldn't have to pay taxes on insurance benefits, since those are in fact bringing you whole to what you've lost. However, in some cases you do need to consider taxes. Specifically, if the insurance payout is higher than your cost basis in the lost property. While you may think that this never happens (why would the insurance company pay more than what it cost you?), it in fact quite frequently does. Specific example would be a car used in your business. If you used your car as part of your business and deducted car depreciation on your tax return - your cost basis was reduced by the depreciation. Getting a full car cost payout form insurance would in fact constitute taxable income to you for the difference between your cost basis (adjusted for the depreciation) and the payout. Another example would be collectibles. Say you bought a car 20 years ago at $5000, you maintained it well during the years (assume you spend another $5000 on repairs), and it is now insured at FMV of $50000. But, alas, it got destroyed by a mountain lion who climbed over the fence and pushed it over a cliff. You got a $50000 payout from your insurance company (because you insured it for full FMV coverage, as a collectible should be insured), of which $40000 will be taxable to you. There may be more specific cases where insurance payouts are (partially) taxable. However, as a general rule, they're not, as long as they're at or below your cost basis level." }, { "docid": "147243", "title": "", "text": "\"While a lot of the answers focus on cost to replace and how much money you should have for tangible goods. There are a few more issues to consider. However before we get started, these issues are not related to ones net worth. They are related to other factors. Having money certainly helps, but someone worth only $10 may not need to insure their stuff under some circumstances. Insurance is a risk avoidance strategy. As such, it should be used to avoid risks that would otherwise cause issues for you. The normal example is a house. If you lost your house due to fire, would you be able to \"\"make it\"\" while you paid the mortgage off, and got a new mortgage to pay for a new house? This is a relatively simple view, but a good one. These days people tend to look at insurance as a savings account. I payed in X so I am entitled to Y. Heath insurance (a bit more on this later) is exacerbating the issue by selling it's self that way, but it simply isn't true. What your paying the premium for to avoid the risk of loss. Not so you can have a pool of money to draw from in time of need, but so that a time of need should never arise. Which brings us back to, should you get insurance? Tangible Assets Let's assume you have no legal or contractual obligation to have insurance. If you put the money you were spending aside would you have enough money to secure a new asset should your current one just vanish? This is the normal argument. But it has a second side. Do you need the asset at all, or can you just accept the loss. Lets pick on a red neck for a second. While certainly not millionaires, or \"\"well off\"\" by conventional means, the guy with 6 cars on bricks in his lawn does not need to insure 6 cars. If one were to vanish, it may make a hardship but hey, he's got 5 more. So with tangible goods it's more of a question of can you afford to replace the item, do you need to replace the item, and how big a risk is it to you to loose the item? What would you rather loose, the item, or the cost of the insurance? Non-tangible Assets I am going to try to keep this as un-rant like as I can manage, but be aware that I am biased. There are two big examples of non-tangible assets that are commonly insured. Life Insurance, and Health insurance. There are others, but it's very hard to get people to pay money to insure something that they don't actually have. Ideas can be insured, for example, but in order to insure an idea you have to spell it out, at that point why not just file for the patent etc. etc. Keep in mind that a lot of people and companies will insure against losses due to IP theft or other such intangible things. Largely these follow the same rules as tangible assets. This section is meant to focus on those insurances that do not. Life Insurance Life insurance is a bit odd. Were all going to die, so it seems like a \"\"good bet\"\" but what your insuring against with life insurance is an early death. For term life insurance it's a gamble. Will you die before your term runs out. For full life insurance (with no term) it's a different gamble. Will you die before you have paid in what they agreed to pay out. In many cases it's also a gamble that you will miss a payment or two and cancel the policy before you die. If the risk of your death worth the insurance. Usually while young the answer is yes. Do you leave your Family short one earner? Will they make it without the insurance? But as you get older, as life insurance becomes more of a sure thing it also becomes less needed. Your kids move out, there not dependent on you any more. You have retirement accounts setup so your partner need not worry should something happen. What risk exactly are your trying to avoid at this point. You will die. You have planned for that eventuality, it's not a risk anymore, it's a fact. Heath Insurance Is another beast all together. Historically you insured against some catastrophic event, that you couldn't really plan for. Say a heart attack. Surgery and treatment would run in the tens of thousands, so it would ruin you if you didn't have insurance to cover that. That was the risk that you were avoiding. A big, expensive event, causing financial ruin. However, over time it has shifted into something else. The general concept is still there, insure to avoid a risk. But the \"\"risk\"\" has been widened to include all manor of things that are not actually risks. For example a flu. You would go to your doctor, pay your co-pay, and your insurance would pay the rest of the visit. Then you would go to the drug store and get the drugs, pay your co-pay and the insurance pays the rest. But what risk, in this instance are you insuring against? That you can't cover the cost of a doctors visit? That you can't cover the cost of the medication? In this example, a common one, historically the \"\"mother of the house\"\" would go you have a flu, have some chicken noodle soup and go to bed. That would be the end of it. Cost of care is a day's lost wages (or maybe a weeks) and a few cans of soup. However today, because we choose to, the cost of care is much higher. We go to the doctor, pay our co-pays, the insurance has to pay it's part. The doctors office has to carry the cost of the staff it takes to see you, and the staff it takes to handle the claims with the insurance company. And now your flu, cost $1,500. But again that's not exactly true either. With heath insurance and \"\"normal\"\" medical care (like sprained ankles, and colds, etc.) the insurance only really covers the cost of having insurance. In that same flu example, if you went to the doctor as a \"\"self pay\"\" (no insurance) you would often time get a much lower, and reasonable rate. Frequently, under the cost of your standard co-pay. This seems like the doctors being \"\"bad\"\" but it's not. They don't have to file a claim, they don't have to keep track of it. They get immediate payment, not payment 6 months down the line that they need to share with other businesses. With \"\"critical\"\" or \"\"catastrophic\"\" care, heath insurance is still a good thing. If you have a big, unforeseen event, then heath insurance is great at helping you avoid that risk. With chronic (long term) care, your back in the same boat as the flu. Often times you can get better, and cheaper, care as a self pay patent, then as a insured patent. That is not always the case however. So you have to measure your own circumstance, and decide if insurance is right for you. But remember insurance is about risk avoidance, and not about paying less. You will ALWAYS pay more for insurance. It's designed that way. Even if the cost is hidden in many ways. (Taxes, spread out over visits, or prescriptions, etc.)\"" }, { "docid": "71926", "title": "", "text": "Like keshlam mentioned Insurance and Investment should not generally be mixed. Term Insurance is the best and cheapest insurance. This would work out better than Money Back Option you have. i.e. Take a Term Insurance for the same amount, invest the difference between the Premium of Term Insurance and Money Back option. Even if you invest this difference in Bank FD's the return is much more than what your Money Back policy gives. Pension Plans are not advisable. Although IRDA has in recent times streamlined quite a bit of it, there is still some amount that goes into commission, plus the returns from Annuity providers [the yearly payment you get after retirement] is less than what you get from FD's. i.e. currently the Annuity rates are in the range of 5-6% and one year FD's are in the range of 7-8%. The only reason one need to go with Pension plan or Money Bank plan would be if one is not financially disciplined or can't reconcile to the fact that Term Insurance in-spite of not giving any returns is much better." }, { "docid": "488638", "title": "", "text": "\"Really this is no different from any kind of large lump sum and having a mortgage. There are probably many questions and answers on this subject. It really doesn't matter that the proceeds were the result of a sale, an inheritance would not change the answer. I think it is important to note that the proceeds will not eliminate the house 2 mortgage. A high level choice of investment one makes is between equity (such as stock) and debt investments (such as bonds and mortgages). You are in a unique case of being able to invest in your own mortgage with no investment fee. This may tip the scales in favor of paying down the mortgage. It is difficult to answer in your specific case as we don't know the rest of your finances. Do you have a sizable 401K that is heavily invested in stocks? Do you have the need for a college fund? Do you have an emergency fund? Do you have a desire to own several homes generating income property? If it was me I'd do the following in order, skipping steps I may have already completed: I've heard that the bank may agree to a \"\"one time adjustment\"\" to lower the payments on Mortgage #2 because of paying a very large payment. Is this something that really happens? I really kind of hate this attitude. Your goal is to get rid of the mortgage in a timely manner. Doing such makes paying for kids college a snap, reduces the income one might need in retirement, basically eliminates the need for life insurance, and gives one a whole lot of money to have fun with.\"" }, { "docid": "355491", "title": "", "text": "Higher life insurance. Mortgage insurance is a very expensive decreasing term life insurance policy, that pays the Lender. You can likely increase your limits for less cost, AND, the payout doesn't depreciate every month, AND, your beneficiary can use the money any way they want - to buy food, or pay property taxes, or whatever." }, { "docid": "10531", "title": "", "text": "\"Buy term and invest the rest is something you will hear all the time, but actually cash value life insurance is a very misunderstood, useful financial product. Cash value life insurance makes sense if: If you you aren't maxing out your retirement accounts, just stick with term insurance, and save as much as you can for retirement. Otherwise, if you have at least 5 or 10k extra after you've funded retirement (for at least 7 years), one financial strategy is to buy a whole life policy from one of the big three mutual insurance firms. You buy a low face value policy, for example, say 50k face value; the goal is to build cash value in the policy. Overload the policy by buying additional paid up insurance in the first 7 years of the policy, using a paid-up addition rider of the policy. This policy will then grow its cash value at around 2% to 4% over the life of the policy....similar perhaps to the part of your portfolio that would would be in muni bonds; basically you are beating inflation by a small margin. Further, as you dump money into the policy, the death benefit grows. After 7 or 8 years, the cash value of the policy should equal the money you've put into it, and your death benefit will have grown substantially maybe somewhere around $250k in this example. You can access the cash value by taking a policy loan; you should only do this when it makes sense financially or in an emergency; but the important thing to realize is that your cash is there, if you need it. So now you have insurance, you have your cash reserves. Why should you do this? You save up your cash and have access to it, and you get the insurance for \"\"free\"\" while still getting a small return on your investment. You are diversifying your financial portfolio, pushing some of your money into conservative investments.\"" }, { "docid": "145614", "title": "", "text": "\"Life Insurance can be a difficult decision. We have to first assess the \"\"want\"\" for it vs. the \"\"need\"\" for it, and that differs from person to person. Any Life licensed agent should be happy to do this calculation for you at no cost and no obligation. Just be sure you are well educated in the subject to make sure they are looking after YOUR needs and not their wallets. For the majority of clients, when looking at \"\"needs\"\" we will be sure to look at income coverage (less what the household needs with one less body) as well as debt coverage, education costs etc. More importantly make sure you are buying the RIGHT insurance, as much as the right amount.\"" }, { "docid": "65407", "title": "", "text": "\"While the other answers try to quantify the value of health care the question you ask is about employee vs contractor. The delta between those regarding benefits goes way beyond health care. In fact because almost every full time employee must have health care offered by their employer the option of \"\"you can have X with healthcare, or Y with no healthcare\"\" is no longer an option. I have seen situations in the last few years where employees who had no need for healthcare coverage (retired military) were offered additional vacation days to compensate for their lower cost to the employer. For employee vs contractor what is different isn't just healthcare. It also includes holidays, vacation days, sick days, employer portion of social security, education benefits, and 401k. Insurance benefits include not just healthcare but also dental, vision, short term and long term disability, and life insurance. The rule of thumb to cover all these benefits that are lost when you are a contractor is an amount equal to your income. Of course some of these benefits depend on single vs married and kids or not. But unless the rate they are paying the contractors is approaching twice the rate they are paying employees the contractor will be hard pressed to cover the missing benefits.\"" }, { "docid": "326506", "title": "", "text": "We frequently get whole insurance vs term insurance questions; and most of the answers will support term insurance. We get questions regarding getting insurance before there is a need in case there is a problem getting it later. And for most people it doesn't make sense to over-insure early. You have asked from a slightly different position, you have a more solid reason to be concerned about your health. You don't have a need now, and can't estimate what your need will be, or when it will be. Those numbers you quote may seem high, but when you don't know how many kids you may have, or what you will need to protect against, they may turn out to be inadequate when you do need the insurance. You need to sit down with a fee only financial planner. They can lay out your options today, and as your situation changes. Then as the years go by, have that plan reexamined. The fee only planner will not tell you what company to buy insurance from, or what funds to invest in, but they will help you decide what types of protection and investment you need." }, { "docid": "257187", "title": "", "text": "\"Sometimes 403b's contain annuities or other insurance related instruments. I know that in many New York schools the local teacher unions administer the 403b plan, and sometimes choose proprietary investments like variable annuities or other insurance products. In New York the Attorney General sued and settled with the state teacher's union for their endorsement of a high cost ING 403b plan -- I believe the maintenance fees were in excess of 3%/year! In a tax deferred plan like a 401k, 403b or 457 plan, the low risk \"\"insurance fund\"\" is generally a GIC \"\"Guaranteed Investment Contract\"\". A GIC (aka \"\"Stable Value Fund\"\") is sort of cross between a CD and a Money Market fund. It's used by insurance companies to raise short term capital. GICs usually yield a premium versus a money market and are a safe investment. If your wife is in a 403b with annuities or other life-insurance tie ins other than GICs, make sure that you understand the fee structure and ask lots of questions.\"" }, { "docid": "441626", "title": "", "text": "\"Another thing that insurance companies try to do with these types of vehicles is to promote the \"\"cash value\"\" of the policy. The longer you participate in the policy, the more your cash value goes up (assuming the investments perform reasonably well). The selling point is that at any time you can take out part of that cash value without impacting your insurance policy. A lot of people see that benefit as being the same as either putting the money in the bank or investing it, when actually they could do better if they did either of those things themselves. One true advantage of the whole term policy is that if you should fall on hard times and are not able to work, the premium payments can be taken out of the cash value. That way even if you can't make the monthly payments, the insurance policy basically pays for itself. I actually experienced this myself many years ago after I lost my job and had some health issues. I was out of work a long time, but my life insurance never lapsed. That in itself made it worthwhile for me.\"" }, { "docid": "261087", "title": "", "text": "\"Cash/CD's for a house downpayment = Good. Resist the urge to invest this money unless you're not planning on the house for at least 5 years. Roth IRA - Good. Amounts contributed are able to be withdrawn without tax penalties, though you would really need to be in a crisis for this to be a good idea. It's your long-term, retirement money. The earlier you start, the better. Use your 401K at work, if it's offered. Contribute to the Roth as much as you can, as well. Whole life (\"\"Cash value\"\") life insurance: Be careful... Cash-value life insurance (Whole, Universal, Variable Universal) must be watched more closely as you age. Once they reach that \"\"magical\"\" point of being self-sustaining, you cannot relax. The annual cost of insurance is taken from the cash value, which your premium payments replenish. If you stop making premium payments, eventually the cost of insurance (which goes up every year) will erode your cash value down to nothing, at which point more premium must be paid to keep the policy in force. This often happens in your old age, when you can least afford the surprise, and costs are highest. Some advisors get messed up in their priorities when they start depending on the 8-10% commissions they are paid on insurance policies. Since premiums for cash-value policies are far higher than for term policies, you might get some insight into your advisor if they ignore your attempts to consider a term policy. Because of the insurance costs' effects on your cash value, these types of policies are some of the most inefficient and expensive ways to invest. You are better off not investing via a life insurance policy. You don't need life insurance unless someone depends on your financial contribution to their life (spouse and children, for example). Some people just like the peace of mind it brings, and some people want a lump sum to leave as a gift to their loved ones (which is an expensive way to leave a gift). You can have these \"\"feel-good\"\" benefits with a term policy for much less money, if you must have them. Unless you expect to become uninsurable at some point in the future, you should consider using term insurance to meet your life insurance needs until it is no longer needed.\"" }, { "docid": "339326", "title": "", "text": "\"There are a few questions that need qualification, and a bit on the understanding of what is being 'purchased'. There are two axioms that require re-iteraton, Death, and Taxes. Now, The First is eventually inevitable, as most people will eventually die. It depends what is happening now, that determines what will happen tomorrow, and the concept of certainty. The Second Is a pay as you go plan. If you are contemplating what will heppen tomorrow, you have to look at what types of \"\"Insurance\"\" are available, and why they were invented in the first place. The High seas can be a rough travelling ground, and Not every shipment of goods and passengers arrived on time, and one piece. This was the origin of \"\"insurance\"\", when speculators would gamble on the safe arrival of a ship laden with goods, at the destination, and for this they received a 'cut' on the value of the goods shipped. Thus the concept of 'Underwriting', and the VALUE associated with the cargo, and the method of transport. Based on an example gallion of good repair and a well seasoned Captain and crew, a lower rate of 'insurance' was deemed needed, prior to shipment, than some other 'rating agency - or underwriter'. Now, I bring this up, because, it depends on the Underwriter that you choose as to the payout, and the associated Guarantee of Funds, that you will receive if you happen to need to 'collect' on the 'Insurance Contract'. In the case of 'Death Benefit' insurance, You will never see the benefit, at the end, however, while the policy is in force (The Term), it IS an Asset, that would be considered in any 'Estate Planning' exercise. First, you have to consider, your Occupation, and the incidence of death due to occupational hazards. Generally this is considered in your employment negotiations, and is either reflected in the salary, or if it is a state sponsored Employer funded, it is determined by your occupational risk, and assessed to the employer, and forms part of the 'Cost-of-doing-business', in that this component or 'Occupational Insurance' is covered by that program. The problem, is 'disability' and what is deemed the same by the experience of the particular 'Underwriter', in your location. For Death Benefits, Where there is an Accident, for Motor Vehicle Accidents (and 50,000 People in the US die annually) these are covered by Motor Vehicle Policy contracts, and vary from State to State. Check the Registrar of State Insurance Co's for your state to see who are the market leaders and the claim /payout ratios, compared to insurance in force. Depending on the particular, 'Underwiriter' there may be significant differences, and different results in premium, depending on your employer. (Warren Buffet did not Invest in GEICO, because of his benevolence to those who purchase Insurance Policies with GEICO). The original Poster mentions some paramaters such as Age, Smoking, and other 'Risk factors'.... , but does not mention the 'Soft Factors' that are not mentioned. They are, 'Risk Factors' such, as Incidence of Murder, in the region you live, the Zip Code, you live at, and the endeavours that you enjoy when you are not in your occupation. From the Time you get up in the morning, till the time you fall asleep (And then some), you are 'AT Risk' , not from a event standpoint, but from a 'Fianancial risk' standpoint. This is the reason that all of the insurance contracts, stipulate exclusions, and limits on when they will pay out. This is what is meant by the 'Soft Risk Factors', and need to be ascertained. IF you are in an occupation that has a limited exposure to getting killed 'on the job', then you will be paying a lower premium, than someone who has a high risk occupation. IT used to be that 'SkySkraper Iron Workers', had a high incidence of injury and death , but over the last 50 years, this has changed. The US Bureau of Labor Statistics lists these 10 jobs as the highest for death (per 100,000 workers). The scales tilt the other way for these occupations: (In Canada, the Cheapest Rate for Occupational Insurance is Lawyer, and Politician) So, for the rest in Sales, management etc, the national average is 3 to 3.5 depending on the region, of deaths per 100,000 employed in that occupation. So, for a 30 year old bank worker, the premium is more like a 'forced savings plan', in the sense that you are paying towards something in the future. The 'Risk of Payout' in Less than 6 months is slim. For a Logging Worker or Fisher(Men&Women) , the risk is very high that they might not return from that voyage for fish and seafood. If you partake in 'Extreme Sports' or similar risk factors, then consider getting 'Whole Term- Life' , where the premium is spread out over your working lifetime, and once you hit retirement (55 or 65) then the occupational risk is less, and the plan will payout at the age of 65, if you make it that far, and you get a partial benefit. IF you have a 'Pension Plan', then that also needs to be factored in, and be part of a compreshensive thinking on where you want to be 5 years from today.\"" }, { "docid": "464166", "title": "", "text": "\"You are kind of thinking of this correctly, but you will and should pay for insurance at some point. What I mean by that is that, although the insurance company is making a profit, that removing the risk for certain incidents from your life, you are still receiving a lot of value. Things that inflict large losses in your life tend to be good insurance buys. Health, liability, long term care, long term disability and property insurance typically fall into this category. In your case, assuming you are young and healthy, it would be a poor choice to drop the major medical health insurance. There is a small chance you will get very sick in the next 10 years or so and require the use of this insurance. A much smaller chance than what is represented by the premium. But if you do get very sick, and don't have insurance, it will probably wipe you out financially. The devastation could last the rest of your life. You are paying to mitigate that possibility. And as you said, it's pretty low cost. While you seem to be really good at numbers it is hard to quantify the risk avoidance. But it must be considered in your analysis. Also along those lines is car insurance. While you may not be willing to pay for \"\"full coverage\"\" it's a great idea to max out your personal liability if you have sufficient assets.\"" } ]

[ { "docid": "236899", "title": "", "text": "Just to add to @duffbeer703 comment, additionally, the cash value is NOT part of the death benefit. The policy is intended to grow the cash value to the point where it matches the death benefit and then it 'matures' and you get the cash. My point being, is that since they don't give you both, you are really transferring the reponsiblity from them to you over time, your savings (that you lose) becomes part of the death benefit and they supliment it with less and less over the years so that it would equal the death benefit. @duffbeer703 nailed it right on the head, buy term and invest the difference and once you've got your savings built, really the need for insurance isn't there any longer (if you've got 1/2 million saved, do you really need insurance?)" } ]

[ { "docid": "272590", "title": "", "text": "I need to see the policy you are referring to give a more accurate answer. However what could be happening, it’s again the way these instruments are structured; For example if the insurance premium is say 11,000 of which 1000 is toward expenses and Term insurance amount. The Balance 10,000 is invested in growth. The promise is that this will grow max of 9.5% and never below zero. IE say if we are talking only about a year, you can get anything between 10,000 to 10,950. The S & P long-term average return is in the range of 12 -15% [i don't remember correctly] So the company by capping it at 9.5% is on average basis making a profit of 2.5% to 5.5%. IE in a good year say the S & P return is around 18%, the company has pocketed close to 9% more money; On a bad year say the Index gave a -ve return of say 5% ... The Insurance company would take this loss out of the good years. If say when your policy at the S & P for that year has given poor returns, you would automatically get less returns. Typically one enters into Life Insurance on a long term horizon and hence the long term averages should be used as a better reference, and going by that, one would make more money just by investing this in an Index directly. As you whether you want to invest in such a scheme, should be your judgment, in my opinion I prefer to stay away from things that are not transparent." }, { "docid": "211622", "title": "", "text": "\"On reflection there are financial products that do what you want, whole-life insurance policies that guarantee an annual dividend calculation on some index with a ceiling and floor. So you will have a return within a defined minimum and maximum range. There are a lot of opinions on the internet on this. This Consumer Reports article is balanced These have a reputation for being bad for the consumer compared to buying term life and investing in a mutual fund separately, but if you want the guarantee (or are a \"\"moral hazard\"\" for a life insurance policy, closer to death than you appear on paper) it may be a product for you. If you're very wealthy, there is an estate tax exploit in insurance death benefits that can make this an exceptional shield on assets for your heirs, with the market return just the gravy.\"" }, { "docid": "178746", "title": "", "text": "Generally speaking: 401k good. Whole life bad. You'll come out ahead if you buy term life (which will cost like 10% of what whole life costs) and invest the other 90% that you would have paid in premium. The only merit that whole life has is if you're estate planning and and want to leave your kids a ton of money, tax free. If you're thinking about saving money for yourself, whole life is not a good choice." }, { "docid": "564675", "title": "", "text": "\"From the details you have given it looks like you have \"\"Unit Linked\"\" insurance policy. In such policies a part of the premium goes towards the \"\"Insurance\"\", the balance is invested into \"\"Mutual Funds / stock Market\"\". It is generally not advisable to have \"\"Unit Linked\"\" policy compared to pure \"\"Term\"\" policy. Generally the amount of fees charged for \"\"Unit Linked\"\" policy is high and hence the returns to the end user are low. i.e. if you buy a \"\"Term\"\" insurance for the same sum insured and invest on your own the balance in any \"\"Mutual Fund\"\" you will end up making more that what you are getting now. Typically these policies have 3 years lock-in period. As you have purchased this in 2008, you can cancel the policy without any penalties. This will save you future premium and you can buy a term insurance and invest the difference yourself. Note the unit linked policy is useful for people who do not invest on their own and this is a good way to be forced into saving than nothing else.\"" }, { "docid": "147243", "title": "", "text": "\"While a lot of the answers focus on cost to replace and how much money you should have for tangible goods. There are a few more issues to consider. However before we get started, these issues are not related to ones net worth. They are related to other factors. Having money certainly helps, but someone worth only $10 may not need to insure their stuff under some circumstances. Insurance is a risk avoidance strategy. As such, it should be used to avoid risks that would otherwise cause issues for you. The normal example is a house. If you lost your house due to fire, would you be able to \"\"make it\"\" while you paid the mortgage off, and got a new mortgage to pay for a new house? This is a relatively simple view, but a good one. These days people tend to look at insurance as a savings account. I payed in X so I am entitled to Y. Heath insurance (a bit more on this later) is exacerbating the issue by selling it's self that way, but it simply isn't true. What your paying the premium for to avoid the risk of loss. Not so you can have a pool of money to draw from in time of need, but so that a time of need should never arise. Which brings us back to, should you get insurance? Tangible Assets Let's assume you have no legal or contractual obligation to have insurance. If you put the money you were spending aside would you have enough money to secure a new asset should your current one just vanish? This is the normal argument. But it has a second side. Do you need the asset at all, or can you just accept the loss. Lets pick on a red neck for a second. While certainly not millionaires, or \"\"well off\"\" by conventional means, the guy with 6 cars on bricks in his lawn does not need to insure 6 cars. If one were to vanish, it may make a hardship but hey, he's got 5 more. So with tangible goods it's more of a question of can you afford to replace the item, do you need to replace the item, and how big a risk is it to you to loose the item? What would you rather loose, the item, or the cost of the insurance? Non-tangible Assets I am going to try to keep this as un-rant like as I can manage, but be aware that I am biased. There are two big examples of non-tangible assets that are commonly insured. Life Insurance, and Health insurance. There are others, but it's very hard to get people to pay money to insure something that they don't actually have. Ideas can be insured, for example, but in order to insure an idea you have to spell it out, at that point why not just file for the patent etc. etc. Keep in mind that a lot of people and companies will insure against losses due to IP theft or other such intangible things. Largely these follow the same rules as tangible assets. This section is meant to focus on those insurances that do not. Life Insurance Life insurance is a bit odd. Were all going to die, so it seems like a \"\"good bet\"\" but what your insuring against with life insurance is an early death. For term life insurance it's a gamble. Will you die before your term runs out. For full life insurance (with no term) it's a different gamble. Will you die before you have paid in what they agreed to pay out. In many cases it's also a gamble that you will miss a payment or two and cancel the policy before you die. If the risk of your death worth the insurance. Usually while young the answer is yes. Do you leave your Family short one earner? Will they make it without the insurance? But as you get older, as life insurance becomes more of a sure thing it also becomes less needed. Your kids move out, there not dependent on you any more. You have retirement accounts setup so your partner need not worry should something happen. What risk exactly are your trying to avoid at this point. You will die. You have planned for that eventuality, it's not a risk anymore, it's a fact. Heath Insurance Is another beast all together. Historically you insured against some catastrophic event, that you couldn't really plan for. Say a heart attack. Surgery and treatment would run in the tens of thousands, so it would ruin you if you didn't have insurance to cover that. That was the risk that you were avoiding. A big, expensive event, causing financial ruin. However, over time it has shifted into something else. The general concept is still there, insure to avoid a risk. But the \"\"risk\"\" has been widened to include all manor of things that are not actually risks. For example a flu. You would go to your doctor, pay your co-pay, and your insurance would pay the rest of the visit. Then you would go to the drug store and get the drugs, pay your co-pay and the insurance pays the rest. But what risk, in this instance are you insuring against? That you can't cover the cost of a doctors visit? That you can't cover the cost of the medication? In this example, a common one, historically the \"\"mother of the house\"\" would go you have a flu, have some chicken noodle soup and go to bed. That would be the end of it. Cost of care is a day's lost wages (or maybe a weeks) and a few cans of soup. However today, because we choose to, the cost of care is much higher. We go to the doctor, pay our co-pays, the insurance has to pay it's part. The doctors office has to carry the cost of the staff it takes to see you, and the staff it takes to handle the claims with the insurance company. And now your flu, cost $1,500. But again that's not exactly true either. With heath insurance and \"\"normal\"\" medical care (like sprained ankles, and colds, etc.) the insurance only really covers the cost of having insurance. In that same flu example, if you went to the doctor as a \"\"self pay\"\" (no insurance) you would often time get a much lower, and reasonable rate. Frequently, under the cost of your standard co-pay. This seems like the doctors being \"\"bad\"\" but it's not. They don't have to file a claim, they don't have to keep track of it. They get immediate payment, not payment 6 months down the line that they need to share with other businesses. With \"\"critical\"\" or \"\"catastrophic\"\" care, heath insurance is still a good thing. If you have a big, unforeseen event, then heath insurance is great at helping you avoid that risk. With chronic (long term) care, your back in the same boat as the flu. Often times you can get better, and cheaper, care as a self pay patent, then as a insured patent. That is not always the case however. So you have to measure your own circumstance, and decide if insurance is right for you. But remember insurance is about risk avoidance, and not about paying less. You will ALWAYS pay more for insurance. It's designed that way. Even if the cost is hidden in many ways. (Taxes, spread out over visits, or prescriptions, etc.)\"" }, { "docid": "13032", "title": "", "text": "&gt; And just out of curiosity what do you do to unwind? Run, go to the gym, come on the computer, go out with friends, watch a movie, etc... You don't need a drug to unwind, if you need a drug, see a psychologist. &gt; You don't drink or use tobacco or anything of the like? I drink like once a month socially. I have an issue with daily users who complain they can't get a job or don't want to take responsibility for their actions. &gt; But judging other people for wanting a beer or a cigarette or a joint is no way to go through life Why not if they cost me and everyone else money and cause tons of other problems. They cost insurance rates to go higher, they cause accidents, they kill people, the smoke drifts in my face, etc... If they weren't losers and were actually responsible, it would be a different situation. A big difference I see between alcohol and weed is that there are actually restrictions on when, where, and how you can have alcohol." }, { "docid": "491528", "title": "", "text": "\"Disclaimer: I work in life insurance, but I am not an agent. First things first, there is not enough information here to give you an answer. When discussing life insurance, the very first things we need to fully consider are the illustration of policy values, and the contract itself. Without these, there is no way to tell if this is a good idea or not. So what are the things to look for? A. Risk appetite. People love to discuss projections of the market, like for example, \"\"7-8% a year compounded annually\"\". Go look at the historical returns of the stock market. It is never close to that projection. Life insurance, however, can give you a GUARANTEED return (this would be show in the 'Guaranteed' section of the life insurance illustration). As long as you pay your premiums, this money is guaranteed to accrue. Now most life insurance companies also show 'Non-Guaranteed' elements in their illustrations - these are non-guaranteed projections based on a scale at this point in time. These columns will show how your cash value may grow when dividends are credited to your policy (and used to buy paid-up additional insurance, which generates more dividends - this can be compared to the compounding nature of interest). B. Tax treatment. I am definitely not an expert in this area, but life insurance does have preferential tax treatment, particularly to your beneficiaries. C. Beneficiaries. Any death benefit (again, listed as guaranteed and maybe non-guaranteed values) is generally completely tax free for the beneficiary. D. Strategy. Tying all of this together, what exactly is the point of this? To transfer wealth, to accrue wealth, or some combination thereof? This is important and unstated in your question. So again, without knowing more, there is no way to answer your question. But I am surprised that in this forum, so many people are quick to jump in and say in general that whole life insurance is a scam. And even more surprising is the fact the accepted answer has already been accepted. My personal take is that if you are just trying to accrue wealth, you should probably stick to the market and maybe buy term if you want a death benefit component. This is mostly due to your age (higher risk of death = higher premiums = lower buildup) and how long of a time period you have to build up money in the policy. But if a 25 year old asked this same question, depending on his purposes, I may suggest that a WL policy is in fact a good idea.\"" }, { "docid": "495874", "title": "", "text": "\"The two questions inherent in any decision to purchase an insurance plan is, \"\"how likely am I to need it?\"\", and \"\"what's the worst case scenario if I don't have it?\"\". The actuary that works for the insurance company is asking these same questions from the other end (with the second question thus being \"\"what would we be expected to have to pay out for a claim\"\"), using a lot of data about you and people like you to arrive at an answer. It really boils down to little more than a bet between you and the insurance company, and like any casino, the insurer has a house edge. The question is whether you think you'll beat that edge; if you're more likely than the insurer thinks you are to have to file a claim, then additional insurance is a good bet. So, the reasons you might decide against getting umbrella insurance include: Your everyday liability is low - Most people don't live in an environment where the \"\"normal\"\" insurance they carry won't pay for their occasional mistakes or acts of God. The scariest one for most is a car accident, but when you think of all the mistakes that have to be made by both sides in order for you to burn through the average policy's liability limits and still be ruined for life, you start feeling better. For instance, in Texas, minimum insurance coverage levels are 50/100/50; assuming neither party is hurt but the car is a total loss, your insurer will pay the fair market value of the car up to $50,000. That's a really nice car, to have a curbside value of 50 grand; remember that most cars take an initial hit of up to 25% of their sticker value and a first year depreciation of up to 50%. That 50 grand would cover an $80k Porsche 911 or top-end Lexus ES, and the owner of that car, in the U.S. at least, cannot sue to recover replacement value; his damages are only the fair market value of the car (plus medical, lost wages, etc, which are covered under your two personal injury liability buckets). If that's a problem, it's the other guy's job to buy his own supplemental insurance, such as gap insurance which covers the remaining payoff balance of a loan or lease above total loss value. Beyond that level, up into the supercars like the Bentleys, Ferraris, A-Ms, Rollses, Bugattis etc, the drivers of these cars know full well that they will never get the blue book value of the car from you or your insurer, and take steps to protect their investment. The guys who sell these cars also know this, and so they don't sell these cars outright; they require buyers to sign \"\"ownership contracts\"\", and one of the stipulations of such a contract is that the buyer must maintain a gold-plated insurance policy on the car. That's usually not the only stipulation; The total yearly cost to own a Bugatti Veyron, according to some estimates, is around $300,000, of which insurance is only 10%; the other 90% is obligatory routine maintenance including a $50,000 tire replacement every 10,000 miles, obligatory yearly detailing at $10k, fuel costs (that's a 16.4-liter engine under that hood; the car requires high-octane and only gets 3 mpg city, 8 highway), and secure parking and storage (the moguls in Lower Manhattan who own one of these could expect to pay almost as much just for the parking space as for the car, with a monthly service contract payment to boot). You don't have a lot to lose - You can't get blood from a turnip. Bankruptcy laws typically prevent creditors from taking things you need to live or do your job, including your home, your car, wardrobe, etc. For someone just starting out, that may be all you have. It could still be bad for you, but comparing that to, say, a small business owner with a net worth in the millions who's found liable for a slip and fall in his store, there's a lot more to be lost in the latter case, and in a hurry. For the same reason, litigious people and their legal representation look for deep pockets who can pay big sums quickly instead of $100 a month for the rest of their life, and so very few lawyers will target you as an individual unless you're the only one to blame (rare) or their client insists on making it personal. Most of your liability is already covered, one way or the other - When something happens to someone else in your home, your homeowner's policy includes a personal liability rider. The first two \"\"buckets\"\" of state-mandated auto liability insurance are for personal injury liability; the third is for property (car/house/signpost/mailbox). Health insurance covers your own emergency care, no matter who sent you to the ER, and life and AD&D insurance covers your own death or permanent disability no matter who caused it (depending on who's offering it; sometimes the AD&D rider is for your employer's benefit and only applies on the job). 99 times out of 100, people just want to be made whole when it's another Average Joe on the other side who caused them harm, and that's what \"\"normal\"\" insurance is designed to cover. It's fashionable to go after big business for big money when they do wrong (and big business knows this and spends a lot of money insuring against it), but when it's another little guy on the short end of the stick, rabidly pursuing them for everything they're worth is frowned on by society, and the lawyer virtually always walks away with the lion's share, so this strategy is self-defeating for those who choose it; no money and no friends. Now, if you are the deep pockets that people look for when they get out of the hospital, then a PLP or other supplemental liability insurance is definitely in order. You now think (as you should) that you're more likely to be sued for more than your normal insurance will cover, and even if the insurance company thinks the same as you and will only offer a rather expensive policy, it becomes a rather easy decision of \"\"lose a little every month\"\" or \"\"lose it all at once\"\".\"" }, { "docid": "261087", "title": "", "text": "\"Cash/CD's for a house downpayment = Good. Resist the urge to invest this money unless you're not planning on the house for at least 5 years. Roth IRA - Good. Amounts contributed are able to be withdrawn without tax penalties, though you would really need to be in a crisis for this to be a good idea. It's your long-term, retirement money. The earlier you start, the better. Use your 401K at work, if it's offered. Contribute to the Roth as much as you can, as well. Whole life (\"\"Cash value\"\") life insurance: Be careful... Cash-value life insurance (Whole, Universal, Variable Universal) must be watched more closely as you age. Once they reach that \"\"magical\"\" point of being self-sustaining, you cannot relax. The annual cost of insurance is taken from the cash value, which your premium payments replenish. If you stop making premium payments, eventually the cost of insurance (which goes up every year) will erode your cash value down to nothing, at which point more premium must be paid to keep the policy in force. This often happens in your old age, when you can least afford the surprise, and costs are highest. Some advisors get messed up in their priorities when they start depending on the 8-10% commissions they are paid on insurance policies. Since premiums for cash-value policies are far higher than for term policies, you might get some insight into your advisor if they ignore your attempts to consider a term policy. Because of the insurance costs' effects on your cash value, these types of policies are some of the most inefficient and expensive ways to invest. You are better off not investing via a life insurance policy. You don't need life insurance unless someone depends on your financial contribution to their life (spouse and children, for example). Some people just like the peace of mind it brings, and some people want a lump sum to leave as a gift to their loved ones (which is an expensive way to leave a gift). You can have these \"\"feel-good\"\" benefits with a term policy for much less money, if you must have them. Unless you expect to become uninsurable at some point in the future, you should consider using term insurance to meet your life insurance needs until it is no longer needed.\"" }, { "docid": "233472", "title": "", "text": "Other people have belabored the point that you will get a better rate on a 15 year mortgage, typically around 1.25 % lower. The lower rate makes the 15 year mortgage financially wiser than paying a 30 year mortgage off in 15 years. So go with the 15 year if your income is stable, you will never lose your job, your appliances never break, your vehicles never need major repairs, the pipes in your house never burst, you and your spouse never get sick, and you have no kids. Or if you do have kids, they happen to have good eyesight, straight teeth, they have no aspirations for college, don't play any expensive sports, and they will never ask for help paying the rent when they get older and move out. But if any of those things are likely possibilities, the 30 year mortgage would give you some flexibility to cover short term cash shortages by reverting to your normal 30 year payment for a month or two. Now, the financially wise may balk at this because you are supposed to have enough cash in reserves to cover stuff like this, and that is good advice. But how many people struggle to maintain those reserves when they buy a new house? Consider putting together spreadsheet and calculating the interest cost difference between the two strategies. How much more will the 30 year mortgage cost you in interest if you pay it off in 15 years? That amount equates to the cost of an insurance policy for dealing with an occasional cash shortage. Do you want to pay thousands in extra interest for that insurance? (it is pretty pricey insurance) One strategy would be to go with the 30 year now, make the extra principal payments to keep you on a 15 year schedule, see how life goes, and refinance to a 15 year mortgage after a couple years if everything goes well and your cash reserves are strong. Unfortunately, rates are likely to rise over the next couple years, which makes this strategy less attractive. If at all possible, go with the 15 year so you lock in these near historic low rates. Consider buying less house or dropping back to the 30 year if you are worried that your cash reserves won't be able to handle life's little surprises." }, { "docid": "326506", "title": "", "text": "We frequently get whole insurance vs term insurance questions; and most of the answers will support term insurance. We get questions regarding getting insurance before there is a need in case there is a problem getting it later. And for most people it doesn't make sense to over-insure early. You have asked from a slightly different position, you have a more solid reason to be concerned about your health. You don't have a need now, and can't estimate what your need will be, or when it will be. Those numbers you quote may seem high, but when you don't know how many kids you may have, or what you will need to protect against, they may turn out to be inadequate when you do need the insurance. You need to sit down with a fee only financial planner. They can lay out your options today, and as your situation changes. Then as the years go by, have that plan reexamined. The fee only planner will not tell you what company to buy insurance from, or what funds to invest in, but they will help you decide what types of protection and investment you need." }, { "docid": "56147", "title": "", "text": "\"Week after week, I make remarks regarding expenses within retirement accounts. A 401(k) with a 1% or greater fee is criminal, in my opinion. Whole life insurance usually starts with fees north of 2%, and I've seen as high as 3.5% per year. Compare that to my own 401(k) with charges .02% for its S&P fund. When pressed to say something nice about whole life insurance, I offer \"\"whole life has sent tens of thousands of children to college, the children of the people selling it.\"\" A good friend would never suggest whole life, a great friend will physically restrain you from buying such a product.\"" }, { "docid": "223382", "title": "", "text": "\"Why would you give them the money and borrow it back? If you didn't give it to them in the first place you wouldn't need to borrow! It makes no sense at all. It USED to have a different use--as a tax dodge. You would buy \"\"life insurance\"\" for a low amount of coverage and way overfund it. Let the money grow and in your later years you would \"\"borrow\"\" against the extra value you had built up in the policy. Since this was a loan rather than a payout it wasn't income. When you died the tax liability went poof. Thus so long as what you had to pay in life insurance + the inefficiency of the insurance company was less than the tax rate it was a good deal. Congress closed this loophole a long time ago by prohibiting too great overfunding.\"" }, { "docid": "8057", "title": "", "text": "Actually, most insurance policies DON'T have a cash value if you don't make a claim. The reason that some life insurance policies do this is that they are really tax sheltered investments posing as insurance. With that in mind, the root of your question is really whether insurance premiums are wasted if you never make a claim. It really makes no difference if you are talking about EI, Auto, or Homeowner's insurance. My answer to that is no. What you are paying for when you buy insurance is financial risk avoidance. Look at it this way, you don't buy EI as an investment where you hope to get a return on your investment. You are buying the right to be protected against catastrophic financial difficulty associated with losing your job. Whether you claim it or not you did receive that protection. This is what drives me so crazy when I hear people talk about how an insurance company is ripping you off because you paid more in premiums than they paid out in benefits. Of course you did! If most people didn't pay in more than the company paid out there would be no financial interest for someone to form an insurance company." }, { "docid": "402325", "title": "", "text": "\"&gt; So I asked this question in /r/DebateaCommunist and got some interesting answers, mostly about how banks exist to make money out of nowhere and to fool people. What do yall have to say? That isn't what they said. Nobody mentioned fooling people from what I can see from a cursory glance. And if they did, they're being facetious. Also, they didn't mean \"\"make money from thin air\"\" in the sense of it being a magical trick. They make money from a sort of market inefficiency: they broker between people who want to invest money and those who want to borrow it. The top two answers are about right: a bank borrows money from investors (who deposit money in checking and savings accounts), and lends it to borrowers in the form of loans or mortgages. The difference between the interest rates is their profit. You deposit $1000 with me at 2% for 20 years. I give you $1485.95 at the end of that term. Where did I get the extra five hundred books? Well I lent it out in mortgages over the same terms at 6% and received $3207.14 over the same period of time. Your $1000 made you $485.95, and made me $1721.19 which I keep for the purposes of providing you with ATMs, dealing with bad debts and staffing the place. Simple, eh? Of course, they also provide other services in addition to this, and the way in which they do it is regulated, but that's all a bank is at its core. A central bank is slightly different: they issue money (i.e. \"\"print\"\" it), and supply it at a headline interest rate to the commercial banks. And of course banks borrow amongst themselves. But then we get ourselves down the rabbit hole of \"\"grown up\"\" economics and LIBOR and the like... there are whole textbooks used to explain exactly how that mechanism works and what's going on there. But if you want to get rich, find a way to start a bank. Seriously. Doing it to the old school way is seriously profitable if you can be trusted.\"" }, { "docid": "155640", "title": "", "text": "\"John's answer is similar to what I was thinking. You should invest in insurance \"\"because there's an insurance salesman who needs to pay to send his kid to college.\"\" I will never be a fan of any type of permanent insurance, and I think it wrong to sell a single person with no dependents such a policy. I've used the expression \"\"Variable Annuities are sold, not bought.\"\" I feel the same about these insurance policies. The best advice I can offer in a short reply is this: If you need life insurance, buy term. Save as much as you can, 10% minimum, more if you are able. A young person should be saving for retirement and to position them self to buy their first house, if that's what they wish. What good is a full up Whole Life policy when you need to raise $40K to put down on a house? Sorry to sound like I'm lecturing, this is one of my hot points.\"" }, { "docid": "366976", "title": "", "text": "There's a cool calculator at Money Chimp that lets you plug in a start and end year and see what the compound annual growth rate of the S&P 500. The default date range of 1871 through 2010 gives a rate of 8.92% for example. Something you need to take into account when comparing returns to a whole life policy is what happens to the cash value in your policy when you die. Many of these policies are written so that your beneficiaries only get the face value of the policy, and the insurance company keeps the cash value." }, { "docid": "592714", "title": "", "text": "The reason that I and many others recommend term rather than permanent life insurance is that the expenses charged for investing through permanent life insurance are so high. Everyone was alluding to that truth in their comments above, but the actual numbers would astound you. The commission that your agent receives for your purchase can be as high as the entire first year of premiums that you pay. (Only on the whole life portion). Instead you could get a term life policy from a company like USAA (I mention them because they are very competitive, so compare your other quotes to them) for $500k at a cost of about $30/month on a 30 year term. Don't take my word for it, get quotes on the Internet and consider the cost savings. Ask this salesman, ahem, I mean advisor, what kind of commission he will earn over the lifetime of your investment. He won't give you a straight answer. He'll talk about tax advantages as if there aren't better retirement accounts that were designed to be retirement accounts. Or buy it from him, it's only money." }, { "docid": "318971", "title": "", "text": "\"In general, \"\"billed amounts\"\" don't mean a whole lot, since if the provider has a contract with the insurance company (usually called \"\"in-network\"\"), the insurance company picks what the rates are that the treatment \"\"should\"\" cost, and how that cost gets allocated between what the insurance company pays and what the patient pays. Due to that contract, the insurance company and provider should agree on how much the patient owes, and one shouldn't pay a provider more than what the insurance company says you should. On the other hand, some insurance plans have a level of \"\"out of network\"\" coverage. In that case, the insurance company has its same sense of what the treatment \"\"should\"\" cost, but is really only concerned with paying its share. The EOB then should show how much they pay, but will generally show the full \"\"billed amount\"\" minus their payment as the amount the patient owes. That is, since there's no contract between the provider and the insurance company, the insurance company has no way to stop the provider from \"\"balance billing\"\" you for whatever they want beyond the amount that the insurance is paying, since any payment amount is purely a transaction between you and the provider. In general (as with anything involving large amounts of money), it's best to get all you can in writing. The provider should be able to provide you with a statement showing zero remaining due, and including both any payment you've made to them and any payments made by the insurance company. It may take a while for the payment from the insurance company to be processed, and until it does there may be something on the statement showing \"\"estimated amount to be paid by insurance\"\", which isn't as comforting as one showing \"\"actual amount paid by insurance\"\" and \"\"zero due\"\".\"" } ]

[ { "docid": "323498", "title": "", "text": "Term life insurance is just that - life insurance that pays out if you die, just like car insurance pays out if you have an accident. Like car insurance, it's easy to compare amongst term life insurance policies - you can even compare quotes online. Whole life insurance is life insurance plus an investment component. The money that you pay goes to pay for your life insurance and it also is invested by the insurance company. Insurance companies love whole life because it is not a commodity; they can come up with a large variety of variants, and that fact plus the fact that it combines insurance and investment means that is very difficult to compare policies. Not to mention that fact that none of the companies - as far as I can tell - publish their whole life insurance rates, so it is very difficult to shop around." } ]

[ { "docid": "79142", "title": "", "text": "Like others mentioned you need to look at the big picture. Personally I'm not a fan of insurance based investments. They tend to have horrible track records and you're locked it and paying way to much money for them. I had one for a number of years and when I finally cancelled it I pulled out almost the exact amount I put in. So it basically grew at either zero or negative interest for 5+ years. I ended up buying Term Life and took the difference and invested it in a Roth 401K. Much better use of my money. The reason why insurance people push these policies so hard is that they make insane commission on it over 2-3 years (I asked my insurance guy about it and he admitted that, plus doing some research you'll find that out as well). Hope this helps somewhat." }, { "docid": "568929", "title": "", "text": "\"It's Permanent Insurance, sold as a savings scheme that is a bad deal for most people. The insurance aspect really doesn't mean much to most people. The classic example that's been around for decades is the \"\"Gerber Grow Up Plan\"\". Basically, it's a whole-life policy that accumulates a cash value. The pitch is typically given to grandparents, who kick in $10/mo and end up with a policy that is worth a little more than what was paid in. Why do people do it? Like most permanent life, it's usually an expensive investment choice.\"" }, { "docid": "219351", "title": "", "text": "DJClayworth's response is generally correct. You wouldn't have to pay taxes on insurance benefits, since those are in fact bringing you whole to what you've lost. However, in some cases you do need to consider taxes. Specifically, if the insurance payout is higher than your cost basis in the lost property. While you may think that this never happens (why would the insurance company pay more than what it cost you?), it in fact quite frequently does. Specific example would be a car used in your business. If you used your car as part of your business and deducted car depreciation on your tax return - your cost basis was reduced by the depreciation. Getting a full car cost payout form insurance would in fact constitute taxable income to you for the difference between your cost basis (adjusted for the depreciation) and the payout. Another example would be collectibles. Say you bought a car 20 years ago at $5000, you maintained it well during the years (assume you spend another $5000 on repairs), and it is now insured at FMV of $50000. But, alas, it got destroyed by a mountain lion who climbed over the fence and pushed it over a cliff. You got a $50000 payout from your insurance company (because you insured it for full FMV coverage, as a collectible should be insured), of which $40000 will be taxable to you. There may be more specific cases where insurance payouts are (partially) taxable. However, as a general rule, they're not, as long as they're at or below your cost basis level." }, { "docid": "217596", "title": "", "text": "This is going to be a philosophical answer, but here it goes. What is the purpose of an insurance? In my perspective, insurance is a way to protect yourself from risks in life you can not afford to take. Following this principle, most of the people do not have enough money to fix a Ferrari, or pay the medical expenses of a third party--so insurance against liabilities makes financial sense, but many can afford buying an equivalent car as they are insuring. If you have enough money to buy an equivalent car, you are paying for a risk you can take yourself. Then, instead of paying the comprehensive fee which is used to pay the different accidents, the company's administrative fees and the shareholder profits; I would save your money in a separate account and use it as a self-insurance. That is at least what I do. I even put other insurances and extended warranties, which respective risks I have decided to absorve; that way I diversify my fund." }, { "docid": "407726", "title": "", "text": "\"An annuity is a product. In simple terms, you hand over a lump sum of cash and receive an agreed annual income until you die. The underlying investment required to reach that income level is not your concern, it's the provider's worry. So there is a huge mount of security to the retiree in having an annuity. It is worth pointing out that with simple annuities where one gives a lump sum of money to (typically) an insurance company, the annuity payments cease upon the death of the annuitant. If any part of the lump sum is still left, that money belongs to the company, not to the heirs of the deceased. Fancier versions of annuities cover the spouse of the annuitant as well (joint and survivor annuity) or guarantee a certain number of payments (e.g. 10-year certain) regardless of when the annuitant dies (payments for the remaining certain term go to the residual beneficiary) etc. How much of an annuity payment the company offers for a fixed lump sum of £X depends on what type of annuity is chosen; usually simple annuities give the maximum bang for the buck. Also, different companies may offer slightly different rates. So, why should one choose to buy an annuity instead of keeping the lump sum in a bank or in fixed deposits (CDs in US parlance), or invested in the stock market or the bond market, etc., and making periodic withdrawals from these assets at a \"\"safe rate of withdrawal\"\"? Safe rates of withdrawal are often touted as 4% per annum in the US, though there are newer studies saying that a smaller rate should be used. Well, safe rates of withdrawal are designed to ensure that the retiree does not use up all the money and is left destitute just when medical bills and other costs are likely to be peaking. Indeed, if all the money were kept in a sock at home (no growth at all), a 4% per annum withdrawal rate will last the retiree for 25 years. With some growth of the lump sum in an investment, somewhat larger withdrawals might be taken in good years, but that 4% is needed even when the investments have declined in value because of economic conditions beyond one's control. So, there are good things and bad things that can happen if one chooses to not buy an annuity. On the other hand, with an annuity, the payments will continue till death and so the retiree feels safer, as Chris mentioned. There is also the serenity in not having to worry how the investments are doing; that's the company's business. A down side, of course, is that the payments are fixed and if inflation is raging, the retiree still gets the same amount. If extra cash is needed one year for unavoidable expenses, the annuity will not provide it, whereas the lump sum (whether kept in a sock or invested) can be drawn on for the extra expense. Another down side is that any money remaining is gone, with nothing left for the heirs. On the plus side, the annuity payments are usually larger than those that the retiree will get via the safe rate of withdrawal method from the lump sum. This is because the insurance company is applying the laws of large numbers: many annuitants will not survive past their life expectancy, and their leftover monies are pure profit to the insurance company, often more than enough (when invested properly by the company) to pay those old codgers who continue to live past their life expectancy. Personally, I wouldn't want to buy an annuity with all my money, but getting an annuity with part of the money is worthwhile. Important: The annuity discussed in this answer is what is sometimes called a single-premium or an immediate annuity. It is purchased at the time of retirement with a single (large) lump sum payment. This is not the kind of annuity that is described in JAGAnalyst's answer which requires payment of (much smaller) premiums over many years. Search this forum for variable annuity to learn about these types of annuities.\"" }, { "docid": "433018", "title": "", "text": "As you say life insurance is about covering the loss of income, so unless your child is an actor or musical prodigy or similar and already earning money, there is no income to cover, and in fact you would have less of a financial commitment without a child to provide for. The other angle is that child life insurance is cheap and they'll have lower premiums than an adult. I'll quote the referenced article directly to address that: Another ploy is that children's life insurance is cheap. It is inexpensive compared to adult life insurance because, plain and simply, children rarely die. While the numbers that the sales agent puts together may make children's life insurance sound like a great deal, take the time to run what you'd have if you instead invested the exact same amount used on the insurance fees into a Roth IRA and you'll find the true cost of purchasing this type of life insurance." }, { "docid": "172251", "title": "", "text": "It probably does make sense for you to buy term life insurance separate from your employer, for a few reasons: There are a number of life insurance calculators on the web. Try two or three -- some of them ask different questions and can give you a range of answers regarding how much coverage you should have. Then take a look at some of the online quote sites -- there are a couple that don't require you to enter your personal information, just general age/health/zip code so you can get an accurate quote for a couple of different coverage levels without having to deal with a salesman yet. (It was my experience that these quotes were very close -- within $20/year -- of what I was quoted through an agent.) Using this information, decide how much coverage you need and can afford. If you're a homeowner, and the insurance company with whom you have your homeowner's policy offers life insurance, call them up and get a quote. They may be able to give you a discount because of your existing relationship; sanity check this against what you got from the quotes website." }, { "docid": "45544", "title": "", "text": "If the insurance policy is a whole-life (or variable life) policy, it might have a surrender value that the owner of the policy might be able to get by surrendering the policy in whole; if it is a term life policy, it has no surrender value. In many cases, the owner of the policy is also the insured and so ask Uncle Joe whether he would be willing to surrender the life insurance policy and give you the proceeds now instead of making you wait till he passes away. If it is a term life policy, ask him to consider not renewing the policy and from now on, just give you the premium he would have been paying to the insurance company. Whether he will pay you increasing amounts in later years (as a renewable five-year level term policy might require) is a more delicate matter that you can negotiate with him. On the other hand, if the policy owner is Aunt Annie but the insured is Uncle Joe (and you are the beneficiary), talk to Aunt Annie instead; she is the one who can cancel the policy, not Uncle Joe. And for heaven's sake, don't grease the skids to facilitate Uncle Joe's first step onto the stairway to heaven; there are, depending on where you live, various laws prohibiting payments to beneficiaries who have had a hand in arranging for the happy event to occur." }, { "docid": "261087", "title": "", "text": "\"Cash/CD's for a house downpayment = Good. Resist the urge to invest this money unless you're not planning on the house for at least 5 years. Roth IRA - Good. Amounts contributed are able to be withdrawn without tax penalties, though you would really need to be in a crisis for this to be a good idea. It's your long-term, retirement money. The earlier you start, the better. Use your 401K at work, if it's offered. Contribute to the Roth as much as you can, as well. Whole life (\"\"Cash value\"\") life insurance: Be careful... Cash-value life insurance (Whole, Universal, Variable Universal) must be watched more closely as you age. Once they reach that \"\"magical\"\" point of being self-sustaining, you cannot relax. The annual cost of insurance is taken from the cash value, which your premium payments replenish. If you stop making premium payments, eventually the cost of insurance (which goes up every year) will erode your cash value down to nothing, at which point more premium must be paid to keep the policy in force. This often happens in your old age, when you can least afford the surprise, and costs are highest. Some advisors get messed up in their priorities when they start depending on the 8-10% commissions they are paid on insurance policies. Since premiums for cash-value policies are far higher than for term policies, you might get some insight into your advisor if they ignore your attempts to consider a term policy. Because of the insurance costs' effects on your cash value, these types of policies are some of the most inefficient and expensive ways to invest. You are better off not investing via a life insurance policy. You don't need life insurance unless someone depends on your financial contribution to their life (spouse and children, for example). Some people just like the peace of mind it brings, and some people want a lump sum to leave as a gift to their loved ones (which is an expensive way to leave a gift). You can have these \"\"feel-good\"\" benefits with a term policy for much less money, if you must have them. Unless you expect to become uninsurable at some point in the future, you should consider using term insurance to meet your life insurance needs until it is no longer needed.\"" }, { "docid": "151817", "title": "", "text": "\"Technically, this doesn't seem like a scam, but I don't think the system is beneficial. They use a lot of half-truths to convince you that their product is right for you. Some of the arguments presented and my thoughts. Don't buy term and invest the rest because you can't predict how much you'll earn from the \"\"rest\"\" Also Don't invest in a 401k because you can't predict how much you'll earn They are correct that you won't know exactly how much you'll have due to stock market, but that doesn't mean the stock market is a bad place to put your money. Investing in a 401k is risky because of the harsh 401k withdrawal rules Yes, 401ks have withdrawal rules (can't typically start before 59.5, must start by 70.5) but those rules don't hamper my investing style in any way. Most Term Life Insurance policies don't pay out They are correct again, but their conclusions are wrong. Yes, most people don't die while you have a term insurance policy which is why Term life insurance is relatively cheap. But they aren't arguing you don't need insurance, just that you need their insurance which is \"\"better\"\" You need the Guaranteed growth they offer The chart used to illustrate their guaranteed growth includes non-guaranteed dividends. They invest $10,000 per year for 36 years and end up with $1,000,000. That's a 5% return! I use 10% for my estimate of stock market performance, but let's say it's only 8%. The same $10,000 per year results in over $2 Million dollars. Using 10.5% (average return of the S&P 500 over it's lifetime) the result is a staggering $3.7 MILLION. So if I'm looking at $3.7M vs. $1M, It costs me $2.7 Million dollars to give me the same coverage as my term life policy. That's one expensive Term Life Insurance policy. My personal favorite: Blindly following the advice of Wall Street and financial “gurus” such as Dave Ramsey and Suze Orman got you where you are. Are you happy with the state of your finances? Do you still believe their fairytale, “Buy Term (insurance) and Invest the Difference”? Yes, I sure do believe that fairytale and I'm prospering quite well thank you. :) While I don't think this is a scam, it's outrageously expensive and not a good financial choice.\"" }, { "docid": "257187", "title": "", "text": "\"Sometimes 403b's contain annuities or other insurance related instruments. I know that in many New York schools the local teacher unions administer the 403b plan, and sometimes choose proprietary investments like variable annuities or other insurance products. In New York the Attorney General sued and settled with the state teacher's union for their endorsement of a high cost ING 403b plan -- I believe the maintenance fees were in excess of 3%/year! In a tax deferred plan like a 401k, 403b or 457 plan, the low risk \"\"insurance fund\"\" is generally a GIC \"\"Guaranteed Investment Contract\"\". A GIC (aka \"\"Stable Value Fund\"\") is sort of cross between a CD and a Money Market fund. It's used by insurance companies to raise short term capital. GICs usually yield a premium versus a money market and are a safe investment. If your wife is in a 403b with annuities or other life-insurance tie ins other than GICs, make sure that you understand the fee structure and ask lots of questions.\"" }, { "docid": "155640", "title": "", "text": "\"John's answer is similar to what I was thinking. You should invest in insurance \"\"because there's an insurance salesman who needs to pay to send his kid to college.\"\" I will never be a fan of any type of permanent insurance, and I think it wrong to sell a single person with no dependents such a policy. I've used the expression \"\"Variable Annuities are sold, not bought.\"\" I feel the same about these insurance policies. The best advice I can offer in a short reply is this: If you need life insurance, buy term. Save as much as you can, 10% minimum, more if you are able. A young person should be saving for retirement and to position them self to buy their first house, if that's what they wish. What good is a full up Whole Life policy when you need to raise $40K to put down on a house? Sorry to sound like I'm lecturing, this is one of my hot points.\"" }, { "docid": "528077", "title": "", "text": "Absolutely! Just because a spouse doesn't have a taxable income, doesn't mean they aren't providing real, tangible benefit to the family economy with an important job. As tragic as it is to consider losing your spouse, are you truly in a position to replace everything they do you for you? Knowing what they do for you and appreciating the effort your spouse gives is important, but don't sell short the dollar amount of what they provide. Your life insurance policy should be to keep you whole. Without your spouse, you will need childcare. You might need domestic services to the home. What about a nanny or similar service? Would $50K cover that until your child is an adult? There are a number of added expenses in the short and long term that would occur if a spouse died. How much for a funeral? Obviously you know the amount and term depends on the age of your kid. But I think you should really try to account for the number of daily hours you spouse puts in, and try to attach a cost to those hours. Then buy insurance for them just as you would for a wage earning. For example, buy a policy that is 10x the annual cost for services it would take to compensate for your spouse. Your tolerance for risk and cost can adjust it up and down from there." }, { "docid": "488638", "title": "", "text": "\"Really this is no different from any kind of large lump sum and having a mortgage. There are probably many questions and answers on this subject. It really doesn't matter that the proceeds were the result of a sale, an inheritance would not change the answer. I think it is important to note that the proceeds will not eliminate the house 2 mortgage. A high level choice of investment one makes is between equity (such as stock) and debt investments (such as bonds and mortgages). You are in a unique case of being able to invest in your own mortgage with no investment fee. This may tip the scales in favor of paying down the mortgage. It is difficult to answer in your specific case as we don't know the rest of your finances. Do you have a sizable 401K that is heavily invested in stocks? Do you have the need for a college fund? Do you have an emergency fund? Do you have a desire to own several homes generating income property? If it was me I'd do the following in order, skipping steps I may have already completed: I've heard that the bank may agree to a \"\"one time adjustment\"\" to lower the payments on Mortgage #2 because of paying a very large payment. Is this something that really happens? I really kind of hate this attitude. Your goal is to get rid of the mortgage in a timely manner. Doing such makes paying for kids college a snap, reduces the income one might need in retirement, basically eliminates the need for life insurance, and gives one a whole lot of money to have fun with.\"" }, { "docid": "211622", "title": "", "text": "\"On reflection there are financial products that do what you want, whole-life insurance policies that guarantee an annual dividend calculation on some index with a ceiling and floor. So you will have a return within a defined minimum and maximum range. There are a lot of opinions on the internet on this. This Consumer Reports article is balanced These have a reputation for being bad for the consumer compared to buying term life and investing in a mutual fund separately, but if you want the guarantee (or are a \"\"moral hazard\"\" for a life insurance policy, closer to death than you appear on paper) it may be a product for you. If you're very wealthy, there is an estate tax exploit in insurance death benefits that can make this an exceptional shield on assets for your heirs, with the market return just the gravy.\"" }, { "docid": "85229", "title": "", "text": "Insurance - get estimate from an insurance agent who works with policies for commercial real estate. See comments below regarding incorporation. Taxes - if this was basic income for a simple LLC, estimating 25-40% and adjusting over time might work. Rental property is a whole different prospect. Financial experts who specialize in rental properties would be a good source of advice, and worth the cost. See below regarding incorporating. Real estate appreciation - not something you can count on for developed property. Appreciation used to be almost guaranteed to at least keep up with inflation. Now property values are not even guaranteed to go up. Never have been but the general rule was improved real estate in good repair appreciated in price. Even if property values increase over time, rental properties depreciate. In fact, for rental properties, you can claim a certain rate of depreciation over time as an expense on taxes. This depreciation could mean selling for less than you paid for the property after a number of years, and owing capital gains taxes, since you would owe the difference between the depreciated value and the sale price. Related to taxes are local codes. Some areas require you to have a property management license to handle buildings with more than a certain number of units. If you are going to own rental properties, you should protect your private financial life by incorporating. Form a company. The company will own the property and hire any maintenance people or property managers or security staff or any similar employment activities. The company takes out the insurance and pays taxes. The company can pay you a salary. So, bottom line, you can have the company pay all the expenses and take all the risks. Then, assuming there's any money left after expenses, the company can pay you a manager's salary. That way if the worst happens and a tenant breaks their hip in the shower and sues you for ONE MILLION DOLLARS and wins, the company folds and you walk away. You might even consider two companies. One to own the property and lease it to a property management company. The property management company can then go bankrupt in case of some sort of liability issue, in which case you still keep the property, form a new management company, repaint and rename the property and move on. TL;DR: Get insurance advice from insurance agent before you buy. Same for taxes from an accountant. Get trained as a property manager if your local codes require it (might be a good idea anyway). Incorporate and have the company take all the risks." }, { "docid": "392909", "title": "", "text": "\"I think at this point you and the other person who seems to ask this question in multiple permutations needs to talk to a local expert rather than continuing to ask the same questions with slight fact variations. This all happened when you were 9. If you think there was foul play involved, at the minimum it will be difficult to prove 16 years on. Somehow I doubt there are 2 people on Toronto whose parents bought them whole life insurance policies in 2000 asking the same questions at the same time. If you don't want the coverage or you think the whole thing was a mistake, cash the policy out. According to the other question about this policy there's nearly $7,000 of cash value there. Just take the money out and move on with your life. Unless you're willing to sue your \"\"mentally ill\"\" mother over the $1,500 net loss ($530 premium times 16 years minus $7,000 cash value) I'm not sure what recourse or advice you're looking for. And even that assumes she's paying the premium with your money. Separately, if your mother is the owner of the policy and paying with her money I'm not sure why this involves you at all. Parents buy life insurance on their children all the time.\"" }, { "docid": "53669", "title": "", "text": "Options do act, somewhat, like insurance.... However.... An insurance policy will not have such short term expiration time frames. A 20 year term life insurance policy can be thought of as insurance with an expiration. But the expiration on options is in weeks, not decades. So (IMO) options make terrible insurance policies because of the very short term expirations they have." }, { "docid": "318971", "title": "", "text": "\"In general, \"\"billed amounts\"\" don't mean a whole lot, since if the provider has a contract with the insurance company (usually called \"\"in-network\"\"), the insurance company picks what the rates are that the treatment \"\"should\"\" cost, and how that cost gets allocated between what the insurance company pays and what the patient pays. Due to that contract, the insurance company and provider should agree on how much the patient owes, and one shouldn't pay a provider more than what the insurance company says you should. On the other hand, some insurance plans have a level of \"\"out of network\"\" coverage. In that case, the insurance company has its same sense of what the treatment \"\"should\"\" cost, but is really only concerned with paying its share. The EOB then should show how much they pay, but will generally show the full \"\"billed amount\"\" minus their payment as the amount the patient owes. That is, since there's no contract between the provider and the insurance company, the insurance company has no way to stop the provider from \"\"balance billing\"\" you for whatever they want beyond the amount that the insurance is paying, since any payment amount is purely a transaction between you and the provider. In general (as with anything involving large amounts of money), it's best to get all you can in writing. The provider should be able to provide you with a statement showing zero remaining due, and including both any payment you've made to them and any payments made by the insurance company. It may take a while for the payment from the insurance company to be processed, and until it does there may be something on the statement showing \"\"estimated amount to be paid by insurance\"\", which isn't as comforting as one showing \"\"actual amount paid by insurance\"\" and \"\"zero due\"\".\"" } ]

[ { "docid": "26292", "title": "", "text": "In my opinion, the average investor should not be buying individual stocks. One reason why is that the average investor is not capable of reading financial statements and evaluating whether a stock is overpriced or underpriced. As such, they're often tempted to make buy/sell decisions based solely on the current value of a stock as compared to the price at which they bought it. The real reasons to buy (or sell) a stock is the expectation of future growth of the company (or continued profit and expected dividends). If you aren't able to analyze a company's financial statements and business plan, then you really aren't in a position to evaluate that company's stock price. So instead of asking whether to sell based on a recent drop in stock price, you should be investigating why the stock price is falling, and deciding whether those reasons indicate a trend that you expect to continue. If you buy and sell stocks based solely on recent trends in the stock price, you probably will end up buying stocks that have recently risen and selling stocks that have recently fallen. In that case, you are buying high and selling low, which is a recipe for poor financial outcomes." } ]

[ { "docid": "543193", "title": "", "text": "\"Following up on @petebelford's answer: If you can find a less expensive loan, you can refinance the car and reduce the total interest you pay that way. Or, if your loan permits it (not all do; talk to the bank which holds the loan and,/or read the paperwork you didn't look at), you may be able to make additional payments to reduce the principal of the loan, which will reduce the amount and duration of the loan and could significantly reduce the total interest paid ... at the cost of requiring you pay more each month, or pay an additional sum up front. Returning the car is not an option. A new car loses a large portion of its value the moment you drive it off the dealer's lot and it ceases to be a \"\"new\"\" car. You can't return it. You can sell it as a recent model used car, but you will lose money on the deal so even if you use that to pay down the loan you will still owe the bank money. Given the pain involved that way, you might as well keep the car and just try to refinance or pay it off. Next time, read and understand all the paperwork before signing. (If you had decided this was a mistake within 3 days of buying, you might have been able to take advantage of \"\"cooling down period\"\" laws to cancel the contract, if such laws exist in your area. A month later is much too late.)\"" }, { "docid": "128077", "title": "", "text": "\"The question you should be asking yourself is this: \"\"Why am I putting money into a 401(k)?\"\" For many people, the answer is to grow a (large) nest egg and save for future retirement expenses. Investors are balancing risk and potential reward, so the asset categories you're putting your 401(k) contribution towards will be a reflection on how much risk you're willing to take. Per a US News & World Report article: Ultimately, investors would do well to remember one of the key tenants of investing: diversify. The narrower you are with your investments, the greater your risk, says Vanguard's Bruno: \"\"[Diversification] doesn't ensure against a loss, but it does help lessen a significant loss.\"\" Generally, investing in your employer's stock in your 401(k) is considered very risk. In fact, one Forbes columnist recommends not putting any money into company stock. FINRA notes: Simply stated, if you put too many eggs in one basket, you can expose yourself to significant risk. In financial terms, you are under-diversified: you have too much of your holdings tied to a single investment—your company's stock. Investing heavily in company stock may seem like a good thing when your company and its stock are doing well. But many companies experience fluctuations in both operational performance and stock price. Not only do you expose yourself to the risk that the stock market as a whole could flounder, but you take on a lot of company risk, the risk that an individual firm—your company—will falter or fail. In simpler terms, if you invest a large portion of your 401(k) funds into company stock, if your company runs into trouble, you could lose both your job AND your retirement investments. For the other investment assets/vehicles, you should review a few things: Personally, I prefer to keep my portfolio simple and just pick just a few options based on my own risk tolerance. From your fund examples, without knowing specifics about your financial situation and risk tolerance, I would have created a portfolio that looks like this when I was in my 20's: I avoided the bond and income/money market funds because the growth potential is too low for my investing horizon. Like some of the other answers have noted, the Target Date funds invest in other funds and add some additional fee overhead, which I'm trying to avoid by investing primarily in index funds. Again, your risk tolerance and personal preference might result in a completely different portfolio mix.\"" }, { "docid": "268022", "title": "", "text": "One risk not mentioned is that foreign stock might be thinly traded on your local stock market, so you will find it harder to buy and sell, and you will be late to the game if there is some sudden change in the share price in the original country." }, { "docid": "362473", "title": "", "text": "\"Seems like you are concerned with something called assignment risk. It's an inherent risk of selling options: you are giving somebody the right, but not the obligation, to sell to you 100 shares of GOOGL. Option buyers pay a premium to have that right - the extrinsic value. When they exercise the option, the option immediately disappears. Together with it, all the extrinsic value disappears. So, the lower the extrinsic value, the higher the assignment risk. Usually, option contracts that are very close to expiration (let's say, around 2 to 3 weeks to expiration or less) have significantly lower extrinsic value than longer option contracts. Also, generally speaking, the deeper ITM an option contract is, the lower extrinsic value it will have. So, to reduce assignment risk, I usually close out my option positions 1-2 weeks before expiration, especially the contracts that are deep in the money. edit: to make sure this is clear, based on a comment I've just seen on your question. To \"\"close out an options position\"\", you just have to create the \"\"opposite\"\" trade. So, if you sell a Put, you close that by buying back that exact same put. Just like stock: if you buy stock, you have a position; you close that position by selling the exact same stock, in the exact same amount. That's a very common thing to do with options. A post in Tradeking's forums, very old post, but with an interesting piece of data from the OCC, states that 35% of the options expire worthless, and 48% are bought or sold before expiration to close the position - only 17% of the contracts are actually exercised! (http://community.tradeking.com/members/optionsguy/blogs/11260-what-percentage-of-options-get-exercised) A few other things to keep in mind: certain stocks have \"\"mini options contracts\"\", that would correspond to a lot of 10 shares of stock. These contracts are usually not very liquid, though, so you might not get great prices when opening/closing positions you said in a comment, \"\"I cannot use this strategy to buy stocks like GOOGL\"\"; if the reason is because 100*GOOGL is too much to fit in your buying power, that's a pretty big risk - the assignment could result in a margin call! if margin call is not really your concern, but your concern is more like the risk of holding 100 shares of GOOGL, you can help manage that by buying some lower strike Puts (that have smaller absolute delta than your Put), or selling some calls against your short put. Both strategies, while very different, will effectively reduce your delta exposure. You'd get 100 deltas from the 100 shares of GOOGL, but you'd get some negative deltas by holding the lower strike Put, or by writing the higher strike Call. So as the stock moves around, your account value would move less than the exposure equivalent to 100 shares of stock.\"" }, { "docid": "271076", "title": "", "text": "Any way you look at it, this is a terrible idea. Cars lose value. They are a disposable item that gets used up. The more expensive the car, the more value they lose. If you spend $100,000 on a new car, in four years it will be worth less than $50,000.* That is a lot of money to lose in four years. In addition to the loss of value, you will need to buy insurance, which, for a $100,000 car, is incredible. If your heart is set on this kind of car, you should definitely save up the cash and wait to buy the car. Do not get a loan. Here is why: Your plan has you saving $1,300 a month ($16,000 a year) for 6.5 years before you will be able to buy this car. That is a lot of money for a long range goal. If you faithfully save this money that long, and at the end of the 6.5 years you still want this car, it is your money to spend as you want. You will have had a long time to reconsider your course of action, but you will have sacrificed for a long time, and you will have the money to lose. However, you may find out a year into this process that you are spending too much money saving for this car, and reconsider. If, instead, you take out a loan for this car, then by the time you decide the car was too much of a stretch financially, it will be too late. You will be upside down on the loan, and it will cost you thousands to sell the car. So go ahead and start saving. If you haven't given up before you reach your goal, you may find that in 6.5 years when it is time to write that check, you will look back at the sacrifices you have made and decide that you don't want to simply blow that money on a car. Consider a different goal. If you invest this $1300 a month and achieve 8% growth, you will be a millionaire in 23 years. * You don't need to take my word for it. Look at the car you are interested in, go to kbb.com, select the 2012 version of the car, and look up the private sale value. You'll most likely see a price that is about half of what a new one costs." }, { "docid": "57994", "title": "", "text": "\"I'm a manager of a charity shop so work with a wide range of unpaid volunteers, which requires an especially soft touch (most of the time, everyone is different) or people will just leave. It takes longer, but the overall results are better and more long-lasting. Think of it like pushing a boat from the docks with your hand, always applying a small pressure to get the boat to gradually move where you want, rather than ramming into the side of a boat with a truck - sure it'll get you there quicker, but will cause lasting damage. It's also best to take it slow, as you need time to learn the business and people. Be clear about your approach with your boss, managing their expectations is important. Anyway, here is what I've learnt in my first year or so doing this job, plus things I've learnt along the way in my previous career as a software engineer (radical career change!) where I've managed people and been managed: 1. Be yourself. Don't pretend to be someone you're not, everyone will see right through you in an instant. You'll change over time as you get used to managing people, that's fine, but always be yourself through that. 1. Say \"\"thank you\"\" to everyone at the end of each day as you say goodbye. Mean it. Think of all the work they've done today for you. 1. Spread the shit evenly. Every job has crap parts, make sure you and everyone else gets their fair share and no more. I regularly hoover, clean the bathroom, wash-up, and so on. 1. Ask, don't tell. If you bark orders, people will do them.. but they'll put no effort into it and you'll distance yourself from them. Ask if they could do something for you. It's a politeness, nobody ever says no unless there is an issue which you need to deal with anyway. 1. Pick your battles. Is it worth moaning at someone for that little infraction? Or can you get over that message another way? i.e. I don't like people having drinks on the till counter, so when I take over to cover for them for a break, I just move it. After a while, no drinks appear on the counter. 1. Be honest. If you don't know, say so.. ask for input. Weigh up the options out loud, then pick one, explain why, and go for it - or better yet, get the person that thought of it working with you (not for you) to implement it. If you're wrong, hold your hand up and try the other suggestion(s). 1. Always take responsibility when things go wrong - that is actually your job. When things go well, use *you* and *we*. If things go badly, sometimes *I*, sometimes *we*, but never *you*. 1. Always be pro-active with money. If you owe your staff money for any reason, chase them to give it to them, never let them chase you. If there even *might* be any problems at all with money, let everyone know as soon as you know. Go out of your way to ensure they get what they're owed *now*, not later. I just did this today actually, I forgot to do expenses for someone and switched over the till so there wasn't enough cash in the new till to cover it.. so I just took it from the money to bank, and marked down why there was a discrepancy on the paperwork and will do the same tomorrow when that doesn't match by the opposite amount. I should not do this at all, but it's the right thing to do. 1. Listen carefully. Often employees have problems but won't bring them up, either they don't think anything will get done, or they don't want to get someone in trouble, or something else. However, if you listen and observe carefully, often there are clues to the things that are bothering them and you'll find ways to tackle them. 1. Don't run a team meeting until you know everyone, if you can avoid it. You don't know shit about how the company works, who the people are, what makes them tick, what they do, and so on. All you'll do is come across as a bit of a tool, and distance yourself from them (as boss). When you do run one, just guide it, don't lead it. Always hand over control of the conversation as much as possible, except of course where you've got things that they need to hear. 1. Never joke about your 'power'. i.e. Don't mess about saying how you'll fire them if blah, or how you'll give them all the shit work, or mention pay jokingly, etc. I had a boss that did that when drunk, not in a serious way at all, and he was very widely hated for pretty well nothing other than that. It served as a constant reminder that he's separate from us. 1. Give people room, but don't be taken for a ride. If someone is late once, fine, I wouldn't even mention it. Late again, maybe I'd make a light joke of it. Late again.. we'll have a chat.. always listen to what they have to say, is there any way you can help? But, don't be taken for a ride. I've had people pick me up on being late the very first time I was late, and you know what, I was more late for that job from then on than I've ever been before or since. 1. Try to get your employees to come up with ideas to move the business forwards. It's very easy to look at a business and say \"\"we need this, that, and the other doing.. like this!\"\". But you need to get your employees to buy into it, or they just won't do it properly. It'll be like getting blood out of a stone to start with, but if you're patient and support their ideas most people will come around. You *need* their input as they know their job better than you. 1. EDIT: Always be clear what you want from people, when. Speak with them about the task(s) before-hand to make sure they're comfortable with it and think it can be done in the time. So many times I've been given tasks with unrealistic deadlines, the manager hasn't wanted to listen to my protests, then wonders why it didn't get done in time. It's crazy really, wanting something to be possible doesn't make it so. *A (not so) Quick Example* One volunteer said to me that we should halve the price of all the fiction books to .99 to compete with other shops. I personally don't think that's a good idea (our shop has better quality stock and is much more organised), but I have no evidence to the contrary, and I honestly don't really know.. so I say go for it and support it completely as a good idea. We tried it for a month, and we made exactly the same amount of money.. sold twice as many books, but no extra cash. So it was valuable to do, and we discovered that maybe 1.49 might be a good option to try. But, far more importantly, they saw their ideas put into action right away, and saw the results of that. It empowered them, which is incredibly important for a wide variety of reasons that are too much to go into here, but basically it makes them feel more respected, enjoy their job more, think more about the business, and so on - you know what it's like when you're empowered, how good it feels. However, it's being empowered with the support that's important, something which you personally going into your new job don't feel you have, which leads to the anxiety and so on I'm sure you're feeling now. Don't put your employees in that position if you can help it. There is also another reason why I outright supported their idea from the offset. It didn't work (although we didn't loose anything) and I thought it wouldn't, but I can say \"\"*we* tried\"\". It wasn't down to that one person, they didn't feel bad that it didn't work because I was right behind it, and it's my job to take responsibility. If it had been *their* idea that had failed, they wouldn't give any ideas ever again, and everyone else would be put off too. As soon as anyone tries to take personal responsibility, and they will, stick to your guns in supporting them.. stronger than ever. Now we're getting a lot of ideas all the time, they're having in-depth discussions amongst each other, they're pro-active, and so on. As a business we're doing much better now because of it.. profits are up 15% from last year and we've only just begun to kick things off, and that's going against a national trend downwards. We've had several critical changes to our shop layout, back-room organisation, results reporting, stock handling processes, and so on.. all from volunteer ideas and feedback. So the 15% is actually the tip of the iceberg, what we've got in place now should allow us to grow more quickly too. And remember, you can make suggestions too of course.. but they're just that, suggestions. Suggest them to your employees, speak with several of them, then get back to them when you've made a decision. Don't say \"\"I'm thinking of trying this\"\", say \"\"I was just thinking.. what about this? Do you think it would work?\"\" and talk about it. Think of arguments against your idea, see if they counter them, and so on. Now.. how many of these changes did I think of before-hand and want to enact? About half.. so we've got a significant number of successful ideas that I personally hadn't thought of, everyone's happier and working harder for the business, and we have a bright future. I have more ideas too, and people listen to and respect them now just like I have with them. I think that's the key to it all really. Show your employees respect, and they'll show you it in return.\"" }, { "docid": "573077", "title": "", "text": "\"Being \"\"Long\"\" something means you own it. Being \"\"Short\"\" something means you have created an obligation that you have sold to someone else. If I am long 100 shares of MSFT, that means that I possess 100 shares of MSFT. If I am short 100 shares of MSFT, that means that my broker let me borrow 100 shares of MSFT, and I chose to sell them. While I am short 100 shares of MSFT, I owe 100 shares of MSFT to my broker whenever he demands them back. Until he demands them back, I owe interest on the value of those 100 shares. You short a stock when you feel it is about to drop in price. The idea there is that if MSFT is at $50 and I short it, I borrow 100 shares from my broker and sell for $5000. If MSFT falls to $48 the next day, I buy back the 100 shares and give them back to my broker. I pocket the difference ($50 - $48 = $2/share x 100 shares = $200), minus interest owed. Call and Put options. People manage the risk of owning a stock or speculate on the future move of a stock by buying and selling calls and puts. Call and Put options have 3 important components. The stock symbol they are actionable against (MSFT in this case), the \"\"strike price\"\" - $52 in this case, and an expiration, June. If you buy a MSFT June $52 Call, you are buying the right to purchase MSFT stock before June options expiration (3rd Saturday of the month). They are priced per share (let's say this one cost $0.10/share), and sold in 100 share blocks called a \"\"contract\"\". If you buy 1 MSFT June $52 call in this scenario, it would cost you 100 shares x $0.10/share = $10. If you own this call and the stock spikes to $56 before June, you may exercise your right to purchase this stock (for $52), then immediately sell the stock (at the current price of $56) for a profit of $4 / share ($400 in this case), minus commissions. This is an overly simplified view of this transaction, as this rarely happens, but I have explained it so you understand the value of the option. Typically the exercise of the option is not used, but the option is sold to another party for an equivalent value. You can also sell a Call. Let's say you own 100 shares of MSFT and you would like to make an extra $0.10 a share because you DON'T think the stock price will be up to $52/share by the end of June. So you go to your online brokerage and sell one contract, and receive the $0.10 premium per share, being $10. If the end of June comes and nobody exercises the option you sold, you get to keep the $10 as pure profit (minus commission)! If they do exercise their option, your broker makes you sell your 100 shares of MSFT to that party for the $52 price. If the stock shot up to $56, you don't get to gain from that price move, as you have already committed to selling it to somebody at the $52 price. Again, this exercise scenario is overly simplified, but you should understand the process. A Put is the opposite of a Call. If you own 100 shares of MSFT, and you fear a fall in price, you may buy a PUT with a strike price at your threshold of pain. You might buy a $48 June MSFT Put because you fear the stock falling before June. If the stock does fall below the $48, you are guaranteed that somebody will buy yours at $48, limiting your loss. You will have paid a premium for this right (maybe $0.52/share for example). If the stock never gets down to $48 at the end of June, your option to sell is then worthless, as who would sell their stock at $48 when the market will pay you more? Owning a Put can be treated like owning insurance on the stock from a loss in stock price. Alternatively, if you think there is no way possible it will get down to $48 before the end of June, you may SELL a $48 MSFT June Put. HOWEVER, if the stock does dip down below $48, somebody will exercise their option and force you to buy their stock for $48. Imagine a scenario that MSFT drops to $30 on some drastically terrible news. While everybody else may buy the stock at $30, you are obligated to buy shares for $48. Not good! When you sold the option, somebody paid you a premium for buying that right from you. Often times you will always keep this premium. Sometimes though, you will have to buy a stock at a steep price compared to market. Now options strategies are combinations of buying and selling calls and puts on the same stock. Example -- I could buy a $52 MSFT June Call, and sell a $55 MSFT June Call. I would pay money for the $52 Call that I am long, and receive money for the $55 Call that I am short. The money I receive from the short $55 Call helps offset the cost of buying the $52 Call. If the stock were to go up, I would enjoy the profit within in $52-$55 range, essentially, maxing out my profit at $3/share - what the long/short call spread cost me. There are dozens of strategies of mixing and matching long and short calls and puts depending on what you expect the stock to do, and what you want to profit or protect yourself from. A derivative is any financial device that is derived from some other factor. Options are one of the most simple types of derivatives. The value of the option is derived from the real stock price. Bingo? That's a derivative. Lotto? That is also a derivative. Power companies buy weather derivatives to hedge their energy requirements. There are people selling derivatives based on the number of sunny days in Omaha. Remember those calls and puts on stock prices? There are people that sell calls and puts based on the number of sunny days in Omaha. Sounds kind of ridiculous -- but now imagine that you are a solar power company that gets \"\"free\"\" electricity from the sun and they sell that to their customers. On cloudy days, the solar power company is still on the hook to provide energy to their customers, but they must buy it from a more expensive source. If they own the \"\"Sunny Days in Omaha\"\" derivative, they can make money for every cloudy day over the annual average, thus, hedging their obligation for providing more expensive electricity on cloudy days. For that derivative to work, somebody in the derivative market puts a price on what he believes the odds are of too many cloudy days happening, and somebody who wants to protect his interests from an over abundance of cloudy days purchases this derivative. The energy company buying this derivative has a known cost for the cost of the derivative and works this into their business model. Knowing that they will be compensated for any excessive cloudy days allows them to stabilize their pricing and reduce their risk. The person selling the derivative profits if the number of sunny days is higher than average. The people selling these types of derivatives study the weather in order to make their offers appropriately. This particular example is a fictitious one (I don't believe there is a derivative called \"\"Sunny days in Omaha\"\"), but the concept is real, and the derivatives are based on anything from sunny days, to BLS unemployment statistics, to the apartment vacancy rate of NYC, to the cost of a gallon of milk in Maine. For every situation, somebody is looking to protect themselves from something, and somebody else believes they can profit from it. Now these examples are highly simplified, many derivatives are highly technical, comprised of multiple indicators as a part of its risk profile, and extremely difficult to explain. These things might sound ridiculous, but if you ran a lemonade stand in Omaha, that sunny days derivative just might be your best friend...\"" }, { "docid": "378173", "title": "", "text": "\"If you are already invested in a particular stock, I like JoeTaxpayer's answer. Think about it as if you are re-buying the stocks you own every day you decide to keep them and don't set emotional anchor points about what you paid for them or what they might be worth tomorrow. These lead to two major logical fallacies that investor's commonly fall prey to, Loss Aversion and Sunk Cost, both of which can be bad for your portfolio in the long run. To avert these natural tendencies, I suggest having a game plan before you purchase a stock based on on your investment goals for that stock. For example a combination of one or more of the following: I'm investing for the long term and I expect this stock to appreciate and will hold it until (specific event/time) at which point I will (sell it all/sell it gradually over a fixed time period) right around the time I need the money. I'm going to bail on this stock if it falls more than X % from my purchase price. I'm going to cash out (all/half/some) of this investment if it gains more than x % from my purchase price to lock in my returns. The important thing is to arrive at a strategy before you are invested and are likely to be more emotional than rational. Otherwise, it can be very hard to sell a \"\"hot\"\" stock that has suddenly jumped in price 25% because \"\"it has momentum\"\" (gambler's fallacy). Conversely it can be hard to sell a stock when it drops by 25% because \"\"I know it will bounce back eventually\"\" (Sunk Cost/Loss Aversion Fallacy). Also, remember that there is opportunity cost from sticking with a losing investment because your brain is saying \"\"I really haven't lost money until I give up and sell it.\"\" When logically you should be thinking, \"\"If I move my money to a more promising investment I could get a better return than I am likely to on what I'm holding.\"\"\"" }, { "docid": "583378", "title": "", "text": "There's a lot of hype about HFT. It involves computers doing things that people don't really understand and making a bunch of rich guys a bunch of money, and there was a crisis and so we hate rich wall street guys this year, and so it's a hot-button issue. Meh. There's some reason for concern about the safety of the markets, but I think there's also a lot more of people trying to sell you a newspaper. Remember that while HFT may mean there are a lot of trades, the buying and the selling add up to the same thing. Meanwhile, people who buy stock to hold on to it for significant periods of time will still affect the quantity of stock out there on the market, applying pressure to the price, buying and selling at the prices that they think the security is worth. As a result, it's unlikely that high-frequency trading moves the stock price very far from the price that the rest of the market would determine for very long; if it did, the lower-frequency traders could take advantage of it, buying if it's too low and selling if it's too high. How long do you plan to hold a stock? If you're trying to do day-trading, you might have some trouble; these people are competing with you to do the same thing, and have significant resources at their disposal. If you're holding onto your stock for years on end (like you probably should be doing with most stock) then a trivial premium or discount on the price probably isn't going to be a big deal for you." }, { "docid": "370995", "title": "", "text": "\"My theory is that for every stock you buy, you should have an exit strategy and follow it. It is too hard to let emotions rule if you let your default strategy be \"\"let's see what happens.\"\" and emotional investing will almost never serve you well. So before buying a stock, set a maximum loss and maximum gain that you will watch for on the stock, and when it hits that number sell. At the very least, when it hits one of your numbers, consciously make a decision that you are effectively buying it again at the current price if you decide to stay in. When you do this, set a new high and low price and repeat the above strategy.\"" }, { "docid": "576694", "title": "", "text": "Remember, carrying debt on a credit card and waiting to pay it is increased risk in the event something happens and you can't pay it off. I have 1 CC and I have it set to auto-pay on the day it's due (paid in full each month as I don't carry debt anymore - learned that lesson a hard way :) ). So the day it's due it auto-drafts out of my checking. No worries of late payments, missed payments, etc. If you feel that having any balance is bad then by all means pay it off the minute you get your statement. It should come at the same time each month (or close to the same time) and you should be able to setup an auto-payment to pay it off in full as soon as the new statement goes live. To be honest, those extra few days of supposed interest saved by keeping the money in your checking account is so minimal that's it's probably not worth it. Most checking is horrible in interest (all my 'high interest' checking accounts are now less than 1% APR. boo.) and if you're late 1 day then bam! All that earned interest is gone in 1 late fee..." }, { "docid": "595121", "title": "", "text": "There are penalties for failure to file and penalties for failure to pay tax. The penalties for both are based on the amount of tax due. So you would owe % penalties of zero, otherwise meaning no penalties at all. The IRS on late 1040 penalties: Here are eight important points about penalties for filing or paying late. A failure-to-file penalty may apply if you did not file by the tax filing deadline. A failure-to-pay penalty may apply if you did not pay all of the taxes you owe by the tax filing deadline. The failure-to-file penalty is generally more than the failure-to-pay penalty. You should file your tax return on time each year, even if you’re not able to pay all the taxes you owe by the due date. You can reduce additional interest and penalties by paying as much as you can with your tax return. You should explore other payment options such as getting a loan or making an installment agreement to make payments. The IRS will work with you. The penalty for filing late is normally 5 percent of the unpaid taxes for each month or part of a month that a tax return is late. That penalty starts accruing the day after the tax filing due date and will not exceed 25 percent of your unpaid taxes. If you do not pay your taxes by the tax deadline, you normally will face a failure-to-pay penalty of ½ of 1 percent of your unpaid taxes. That penalty applies for each month or part of a month after the due date and starts accruing the day after the tax-filing due date. If you timely requested an extension of time to file your individual income tax return and paid at least 90 percent of the taxes you owe with your request, you may not face a failure-to-pay penalty. However, you must pay any remaining balance by the extended due date. If both the 5 percent failure-to-file penalty and the ½ percent failure-to-pay penalties apply in any month, the maximum penalty that you’ll pay for both is 5 percent. If you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax. You will not have to pay a late-filing or late-payment penalty if you can show reasonable cause for not filing or paying on time. If the IRS owes you a refund, April 15 isn't much of a deadline. I suppose the real deadline is April 15, three years later - that's when the IRS keeps your refund and it becomes property of the Treasury. Of course, there's little reason to wait that long. Don't let the Treasury get all your interest." }, { "docid": "160169", "title": "", "text": "Yes, theoretically you can flip the shares you agreed to buy and make a profit, but you're banking on the market behaving in some very precise and potentially unlikely ways. In practice it's very tricky for you to successfully navigate paying arbitrarily more for a stock than it's currently listed for, and selling it back again for enough to cover the difference. Yes, the price could drop to $28, but it could just as easily drop to $27.73 (or further) and now you're hurting, before even taking into account the potentially hefty commissions involved. Another way to think about it is to recognize that an option transaction is a bet; the buyer is betting a small amount of money that a stock will move in the direction they expect, the seller is betting a large amount of money that the same stock will not. One of you has to lose. And unless you've some reason to be solidly confident in your predictive powers the loser, long term, is quite likely to be you. Now that said, it is possible (particularly when selling puts) to create win-win scenarios for yourself, where you're betting one direction, but you'd be perfectly happy with the alternative(s). Here's an example. Suppose, unrelated to the option chain, you've come to the conclusion that you'd be happy paying $28 for BBY. It's currently (June 2011) at ~$31, so you can't buy it on the open market for a price you'd be happy with. But you could sell a $28 put, promising to buy it at that price should someone want to sell it (presumably, because the price is now below $28). Either the put expires worthless and you pocket a few bucks and you're basically no worse off because the stock is still overpriced by your estimates, or the option is executed, and you receive 100 shares of BBY at a price you previously decided you were willing to pay. Even if the list price is now lower, long term you expect the stock to be worth more than $28. Conceptually, this makes selling a put very similar to being paid to place a limit order to buy the stock itself. Of course, you could be wrong in your estimate (too low, and you now have a position that might not become profitable; too high, and you never get in and instead just watch the stock gain in value), but that is not unique to options - if you're bad at estimating value (which is not to be confused with predicting price movement) you're doomed just about whatever you do." }, { "docid": "340730", "title": "", "text": "When your options vest, you will have the option to buy your company's stock at a particular price (the strike price). A big part of the value of the option is the difference between the price that your company's stock is trading at, and the strike price of the option. If the price of the company stock in the market is lower than the strike price of the option, they are almost worthless. I say 'almost' because there is still the possibility that the stock price could go up before the options expire. If your company is big enough that their stock is not only listed on an exchange, but there is an active options market in your company's stock, you could get a feel for what they are worth by seeing what the market is willing to buy or sell similar exchange listed options. Once the options have vested, you now have the right to purchase your company's stock at the specified strike price until the options expire. When you use that right, you are exercising the option. You don't have to do that until you think it is worthwhile buying company stock at that price. If the company pays a dividend, it would probably be worth exercising the options sooner, (options don't receive a dividend). Ultimately you are buying your company's stock (albeit at a discount). You need to see if your company's stock is still a good investment. If you think your company has growth prospects, you might want to hold onto the stock. If you think you'd be better off putting your money elsewhere in the market, sell the stock you acquired at a discount and use the money to invest in something else. If there are any additional benefits to holding on to the stock for a period of time (e.g. selling part to fit within your capital gain allowance for that year) you should factor that into your investment decision, but it shouldn't force you to invest in, or remain invested in something you would otherwise view as too risky to invest in. A reminder of that fact is that some employees of Enron invested their entire retirement plans into Enron stock, so when Enron went bankrupt, these employees not only lost their job but their savings for retirement as well..." }, { "docid": "420046", "title": "", "text": "You should be worried. You have made the mistake of entering an investment on the recommendation of family/friend. The last think you should do is make another mistake of just leaving it and hoping it will go up again. Your stock has dropped 37.6% from its high of $74.50. That means it has to go up over 60% just to reach the high of $74.50. You are correct this may never happen or if it does it could take a long, long time to get up to its previous highs. What is the company doing to turn its fortunes around? Take a look at some other examples: QAN.AX - Qantas Airways This stock reached a high of around $6 in late 2007 after a nice uptrend over a year and a half, it then dropped drastically at the start of the GFC, and has since kept falling and is now priced at just $1.15. QAN reported its first ever loss earlier this year, but its problems were evident much earlier. AAPL - Apple Inc. AAPL reach a high of just over $700 in September 2013, then dropped to around $400 and has recovered a bit to about $525 (still 25% below its highs) and looks to be at the start of another downtrend. How long will it take AAPL to get back to $700, more than 33% from its current price? TEN.AX - Ten Network Holdings Limited TEN reached a high of $4.26 in late 2004 after a nice uptrend during 2004. It then started a steep journey downwards and is still going down. It is now priced at just $0.25, a whopping 94% below its high. It will have to increase by 1600% just to reach its high of $4.26 (which I think will never happen). Can a stock come back from a drastic downtrend? Yes it can. It doesn't always happen, but a company can turn around and can reach and even surpass it previous highs. The question is how and when will this happen? How long will you keep your capital tied up in a stock that is going nowhere and has every chance of going further down? The most important thing with any investment is to protect your current capital. If you lose all your capital you cannot make any new investments until you build up more capital. That is why it is so important to have a risk management strategy and decide what is your get out point if things go against you before you get into any new investment. Have a stop loss. I would get out of your investment before you lose more capital. If you had set a stop loss at 20% off the stock's last highs, you would have gotten out at about $59.60, 28% higher than the current share price of $46.50. If you do further analysis on this company and find that it is improving its prospects and the stock price breaks up through its current ranging band, then you can always buy back in. However, do you still want to be in the stock if it breaks the range band on the downside? In this case who knows how low it can continue to go. N.B. This is my opinion, as others would have theirs, and what I would do in your current situation with this stock." }, { "docid": "352894", "title": "", "text": "\"Offtopic, but what do you think of the idea of the stock market being a \"\"ponzi scheme\"\"? I've had this same idea that [Mark Cuban reiterated well by writing](http://blogmaverick.com/2008/09/08/talking-stocks-and-money/): &gt;Ive said a lot of this before. The stock market is by definition a ponzi scheme. As long as money keeps on coming in, then there is someone to take the stocks from the sellers. If the amount of money coming in is reduced, the stocks, indexes, et al go down. What if, for who knows whatever reason, the amount of money going into stocks declined significantly ? Who would buy stock from the sellers. I mean goodness gracious, you could see something disastrous happen. Like the Nasdaq dropping from 5000, to under 2000 in just a few years. Its happened before, it can happen again. &gt; &gt;Which is exactly why we get all these nonsensical commercials from brokerages. To keep the money coming in . I wish someone would index the amount of money spent on marketing by mutual funds and brokerages to the Nasdaq and Dow and see if it correlates. &gt; &gt;Money inflows drives the business. We can get all the economic data we ever dreamed of getting, but if money inflows declined significantly for an extended period of time, then every rule of thumb would go out the window until money started flowing in. Yes it would flow in eventually as prices dropped. From big investors like me who wouldnt have gotten hurt by a huge market decline and could come in and buy huge chunks, or companies outright. &gt; &gt;You ? You probably would be like Charles Ponzi’s customers. You wouldnt be able to get your money out of the fund when it went down, and by the time you did, it would be too late. You would have been crushed. &gt; &gt;Ive said it before, a stock that doesnt pay dividends is valued like a baseball card. Just whatever you can sell it for. The concept that you own “your share” of the company is a joke. You are completely at the whim of the CEO and board who will dilute you on a daily basis with stock options, then try to buy back stock to cover it up and push up the price, rewarding the shareholders who get out, rather than those that continue to hold the shares. Meaning you. &gt; &gt;Have you ever seen Warren Buffet talk about buying 100 shares of anything k shares ? or does he take control of , or purchase a material percentage of a company ? &gt; &gt;If you have enough money to have influence , take control or buy it outright, then the stock market can work for you. Thats why I buy stock in public companies that relate to my other business entities. When i pick up the phone and call the CEO of a company i own shares in, they call me back very quickly. When I ask if there are business opportunities that make sense for the company and another company of mine to work together, I wont always get the business, but I will always get a meeting. If Im smart about the investments I make, the more important returns come from the relationships with the companies than the action of the stock. &gt; &gt;If the best you can do is buy shares that are going to be continuously diluted, then you are merely a sucker. There is a good chance that the shares you bought came from shares an insider who got stock options. You just helped dilute yourself with your first share purchase. &gt; &gt;The wealthy can make the stockmarket work for them. Individuals buying shares of stock in non dividend paying stocks… they work for the stockmarket. &gt; &gt;I know Ive painted a pretty bleak picture. &gt; &gt;The stockmarket isnt going away. Would it shock me if the whole thing collapsed ? yes. it would. Its just too engrained in our way of life in the USA. What would change my mind is if a better investment vehicle came along. &gt; &gt;The stockmarket used to be about investing capital in companies that came public or did secondary offerings. That money was used to create amazing businesses and return dividends back to people who truly were investors. There once was a day where most companies paid dividends higher than the interest rates on their bonds. Why ? Because stocks are inherently more risky. If a company goes belly up, bondholders collect first, shareholders usually last. People could buy and hold stocks, and get paid real cash money for being a shareholder in the company at rates far higher than the divident yields we see today. If the company did well, the dividends went up. Investors who held, actually got all their money back in dividends at some point and the rest was gravy. The good ole days. &gt; &gt;But that changed when mutual funds came along and started marketing the concept of growth as a way to attract investors. &gt; &gt;Its not inconceivable that the old mindset could comeback. That a new market of stocks could be created where companies didnt continuously dilute shareholders by issuing stock and options to themselves. Where earnings were earned for the same reason they are in private companies, to not only fund growth, but also provide cash back to investors. Now if that market existed today. Where I could buy 100 shares of stock, and even if it represented just 1/100000 of ownership in the company, I could have confidence that year after year, I would still own 1/100000th of that company, and if that company generated earnings , I would have at least some of that money returned to me. Well then, that wouldnt be a ponzi scheme. That would be a true market of stocks, and I would be happy to recommend to anyone to be careful, but buying stocks in that market could be something worth considering if your appetite for risk canhandle it.\"" }, { "docid": "509879", "title": "", "text": "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." }, { "docid": "289989", "title": "", "text": "If the stock has dropped from $10 to $2 and now is range trading between $2 and $3, and you were not able to sell your shares earlier, then I would no be holding on to them now. As soon as the price hit $3 sell them. After you have sold them and you noticed the stock still range trading one strategy you could apply is to go long after the price bounces off the $2 support placing a stop just below $2, then as the price moves up you trail your stop up with the price. As it starts getting close to $3 tighten your stop. If it keeps range trading and bounces off the resistance at $3 and you get stopped out, you can either go short and reverse the process or wait for it to bounce off the support at $2 again. One word of warning though, the longer a stock range trades, the bigger the outbreak out of the rage (either up or down) will be, that is the reason why you should first wait for confirmation that the price has bounced off support/resistance before opening a position, and secondly why you should use a stop loss to get you out instead of just selling when it hits $3, because if it breaks through $3 you can continue profiting as it moves up." }, { "docid": "554997", "title": "", "text": "\"An attempt at a simple answer for the normal investor: A normal investor buys stock then later sells that stock. (This is known as \"\"going long\"\", as opposed to \"\"going short\"\"). For the normal investor, a stop order (of either kind) is only used when selling. A stop-loss sell order (or stop sell) is used to sell your stock when it has fallen too much in price, and you don't want to suffer more losses. If the stock is at $50, you could enter a stop sell at $40, which means if the stock ever falls to $40 or lower, your stock will be sold at whatever price is available (e.g. $35). A stop-loss limit sell order (or stop limit sell) is the same, except you are also saying \"\"but don't sell for less than my limit price\"\". So you can enter a stop limit sell at $40 with a limit of $39, meaning that if the stock falls to $40, you will then have a limit order in effect to sell the stock at $39 or higher. Thus your stock will never be sold at $35 or any value below $39, but of course, if the stock falls fast from $40 to $35, your limit sell at $39 will not be done and you will be left still owning the stock (worth at that moment $35, say).\"" } ]

[ { "docid": "192307", "title": "", "text": "\"The price at which a stock was purchased is a sunk cost--that is, you cannot go back in time and reverse the decision you made to purchase that stock. Another example of a sunk cost would be purchasing a non-refundable, non-transferable movie ticket. Sunk costs have the tendency to create a cognitive bias in which we feel that the amount we paid at some point in the past should have some sort of bearing on the decision we make now--the purchaser of the ticket feels he must go see the movie even if he no longer wishes too, lest the ticket \"\"go to waste\"\"... the investor hopelessly clings to a battered stock for that tiny chance that just maybe some day it will return to its former glory. This is referred to as the \"\"sunk cost fallacy\"\" and is considered to be irrational behavior by economists. Keeping this in mind, your hopes and dreams for the stock at the time you purchased it should have no bearing on the decision you make now. Similarly, whether the stock has risen or fallen in price since your purchase date should have no bearing. Instead, you must consider what you expect the stock to do from this very moment on into the future--that is, you must act at the margin. You've indicated that you are faced with two choices--sell the stock now, incur the loss, but benefit from the tax break (Option A). This benefit is quite easily quantifiable--it is your marginal tax rate multiplied by the additive inverse of the loss (assuming you have/will have other gains to offset). Let's just assume that you incurred a $1000 loss, at a marginal tax rate of 20%, which means your tax benefit for the loss is $200. The second choice--to hold the stock in hopes of it rising in price (Option B)--is a bit harder to quantify. You must assume that today is day zero, and that every cent in price the stock rises is a gain to you, and every cent in price the stock looses is a loss to you. If you believe that the stock will rise to a price that will net your more than your tax benefit from option A, then holding the stock is more favorable than selling it at a loss today. Conversely, if you believe this stock will fall even further in the future, or not rise enough to net you $200 (per the example), then Option A is preferable. Granted, there are some additional complications that play into your decision. By selling the stock today, you not only get a tax benefit from the loss, but you've also freed up the funds previously used to purchase that stock to be invested elsewhere (in hopefully a better performing asset). If you choose to stick with your current stock, then the gains you may have netted elsewhere must be considered as an opportunity cost associated with Option B. Finally, the tax benefit is essentially guaranteed (so in our example, a $200 risk free return), while sticking with the stock in Option B still comes with some risk.\"" } ]

[ { "docid": "57994", "title": "", "text": "\"I'm a manager of a charity shop so work with a wide range of unpaid volunteers, which requires an especially soft touch (most of the time, everyone is different) or people will just leave. It takes longer, but the overall results are better and more long-lasting. Think of it like pushing a boat from the docks with your hand, always applying a small pressure to get the boat to gradually move where you want, rather than ramming into the side of a boat with a truck - sure it'll get you there quicker, but will cause lasting damage. It's also best to take it slow, as you need time to learn the business and people. Be clear about your approach with your boss, managing their expectations is important. Anyway, here is what I've learnt in my first year or so doing this job, plus things I've learnt along the way in my previous career as a software engineer (radical career change!) where I've managed people and been managed: 1. Be yourself. Don't pretend to be someone you're not, everyone will see right through you in an instant. You'll change over time as you get used to managing people, that's fine, but always be yourself through that. 1. Say \"\"thank you\"\" to everyone at the end of each day as you say goodbye. Mean it. Think of all the work they've done today for you. 1. Spread the shit evenly. Every job has crap parts, make sure you and everyone else gets their fair share and no more. I regularly hoover, clean the bathroom, wash-up, and so on. 1. Ask, don't tell. If you bark orders, people will do them.. but they'll put no effort into it and you'll distance yourself from them. Ask if they could do something for you. It's a politeness, nobody ever says no unless there is an issue which you need to deal with anyway. 1. Pick your battles. Is it worth moaning at someone for that little infraction? Or can you get over that message another way? i.e. I don't like people having drinks on the till counter, so when I take over to cover for them for a break, I just move it. After a while, no drinks appear on the counter. 1. Be honest. If you don't know, say so.. ask for input. Weigh up the options out loud, then pick one, explain why, and go for it - or better yet, get the person that thought of it working with you (not for you) to implement it. If you're wrong, hold your hand up and try the other suggestion(s). 1. Always take responsibility when things go wrong - that is actually your job. When things go well, use *you* and *we*. If things go badly, sometimes *I*, sometimes *we*, but never *you*. 1. Always be pro-active with money. If you owe your staff money for any reason, chase them to give it to them, never let them chase you. If there even *might* be any problems at all with money, let everyone know as soon as you know. Go out of your way to ensure they get what they're owed *now*, not later. I just did this today actually, I forgot to do expenses for someone and switched over the till so there wasn't enough cash in the new till to cover it.. so I just took it from the money to bank, and marked down why there was a discrepancy on the paperwork and will do the same tomorrow when that doesn't match by the opposite amount. I should not do this at all, but it's the right thing to do. 1. Listen carefully. Often employees have problems but won't bring them up, either they don't think anything will get done, or they don't want to get someone in trouble, or something else. However, if you listen and observe carefully, often there are clues to the things that are bothering them and you'll find ways to tackle them. 1. Don't run a team meeting until you know everyone, if you can avoid it. You don't know shit about how the company works, who the people are, what makes them tick, what they do, and so on. All you'll do is come across as a bit of a tool, and distance yourself from them (as boss). When you do run one, just guide it, don't lead it. Always hand over control of the conversation as much as possible, except of course where you've got things that they need to hear. 1. Never joke about your 'power'. i.e. Don't mess about saying how you'll fire them if blah, or how you'll give them all the shit work, or mention pay jokingly, etc. I had a boss that did that when drunk, not in a serious way at all, and he was very widely hated for pretty well nothing other than that. It served as a constant reminder that he's separate from us. 1. Give people room, but don't be taken for a ride. If someone is late once, fine, I wouldn't even mention it. Late again, maybe I'd make a light joke of it. Late again.. we'll have a chat.. always listen to what they have to say, is there any way you can help? But, don't be taken for a ride. I've had people pick me up on being late the very first time I was late, and you know what, I was more late for that job from then on than I've ever been before or since. 1. Try to get your employees to come up with ideas to move the business forwards. It's very easy to look at a business and say \"\"we need this, that, and the other doing.. like this!\"\". But you need to get your employees to buy into it, or they just won't do it properly. It'll be like getting blood out of a stone to start with, but if you're patient and support their ideas most people will come around. You *need* their input as they know their job better than you. 1. EDIT: Always be clear what you want from people, when. Speak with them about the task(s) before-hand to make sure they're comfortable with it and think it can be done in the time. So many times I've been given tasks with unrealistic deadlines, the manager hasn't wanted to listen to my protests, then wonders why it didn't get done in time. It's crazy really, wanting something to be possible doesn't make it so. *A (not so) Quick Example* One volunteer said to me that we should halve the price of all the fiction books to .99 to compete with other shops. I personally don't think that's a good idea (our shop has better quality stock and is much more organised), but I have no evidence to the contrary, and I honestly don't really know.. so I say go for it and support it completely as a good idea. We tried it for a month, and we made exactly the same amount of money.. sold twice as many books, but no extra cash. So it was valuable to do, and we discovered that maybe 1.49 might be a good option to try. But, far more importantly, they saw their ideas put into action right away, and saw the results of that. It empowered them, which is incredibly important for a wide variety of reasons that are too much to go into here, but basically it makes them feel more respected, enjoy their job more, think more about the business, and so on - you know what it's like when you're empowered, how good it feels. However, it's being empowered with the support that's important, something which you personally going into your new job don't feel you have, which leads to the anxiety and so on I'm sure you're feeling now. Don't put your employees in that position if you can help it. There is also another reason why I outright supported their idea from the offset. It didn't work (although we didn't loose anything) and I thought it wouldn't, but I can say \"\"*we* tried\"\". It wasn't down to that one person, they didn't feel bad that it didn't work because I was right behind it, and it's my job to take responsibility. If it had been *their* idea that had failed, they wouldn't give any ideas ever again, and everyone else would be put off too. As soon as anyone tries to take personal responsibility, and they will, stick to your guns in supporting them.. stronger than ever. Now we're getting a lot of ideas all the time, they're having in-depth discussions amongst each other, they're pro-active, and so on. As a business we're doing much better now because of it.. profits are up 15% from last year and we've only just begun to kick things off, and that's going against a national trend downwards. We've had several critical changes to our shop layout, back-room organisation, results reporting, stock handling processes, and so on.. all from volunteer ideas and feedback. So the 15% is actually the tip of the iceberg, what we've got in place now should allow us to grow more quickly too. And remember, you can make suggestions too of course.. but they're just that, suggestions. Suggest them to your employees, speak with several of them, then get back to them when you've made a decision. Don't say \"\"I'm thinking of trying this\"\", say \"\"I was just thinking.. what about this? Do you think it would work?\"\" and talk about it. Think of arguments against your idea, see if they counter them, and so on. Now.. how many of these changes did I think of before-hand and want to enact? About half.. so we've got a significant number of successful ideas that I personally hadn't thought of, everyone's happier and working harder for the business, and we have a bright future. I have more ideas too, and people listen to and respect them now just like I have with them. I think that's the key to it all really. Show your employees respect, and they'll show you it in return.\"" }, { "docid": "543193", "title": "", "text": "\"Following up on @petebelford's answer: If you can find a less expensive loan, you can refinance the car and reduce the total interest you pay that way. Or, if your loan permits it (not all do; talk to the bank which holds the loan and,/or read the paperwork you didn't look at), you may be able to make additional payments to reduce the principal of the loan, which will reduce the amount and duration of the loan and could significantly reduce the total interest paid ... at the cost of requiring you pay more each month, or pay an additional sum up front. Returning the car is not an option. A new car loses a large portion of its value the moment you drive it off the dealer's lot and it ceases to be a \"\"new\"\" car. You can't return it. You can sell it as a recent model used car, but you will lose money on the deal so even if you use that to pay down the loan you will still owe the bank money. Given the pain involved that way, you might as well keep the car and just try to refinance or pay it off. Next time, read and understand all the paperwork before signing. (If you had decided this was a mistake within 3 days of buying, you might have been able to take advantage of \"\"cooling down period\"\" laws to cancel the contract, if such laws exist in your area. A month later is much too late.)\"" }, { "docid": "225511", "title": "", "text": "\"I know nothing about this stuff. Am I in trouble? You might be. If you don't file your return the IRS may \"\"make up\"\" one for you based on the (partial) information they have. Then they'll assess taxes and penalties and will go after you to pay those. Will I be hit with interest/penalties? You may if any money is owed. You may also lose the refund if you wait for too long (3 years after the due date). You may also be hit with the penalties for non-filing/late filing by your State. Not owing to IRS doesn't mean you also don't owe to the State - you can get hit with interest and late payment penalties there too. He has all my paperwork (I probably have copies... somewhere...) Should I go somewhere else and start fresh? He must return all the original paperwork you gave him. He can be disbarred if he doesn't. If you did 2013 yourself - what was significantly different in 2012 that you couldn't do yourself? If nothing - then just do it yourself and be done with it. You can buy 2012 preparation software at very deep discounts now. Otherwise - yes, go somewhere else. Busy season is over and it shouldn't be difficult to find another preparer/EA/CPA to do the work for you.\"" }, { "docid": "210514", "title": "", "text": "That is such a vague statement, I highly recommend disregarding it entirely, as it is impossible to know what they meant. Their goal is to convince you that index funds are the way to go, but depending on what they consider an 'active trader', they may be supporting their claim with irrelevant data Their definition of 'active trader' could mean any one or more of the following: 1) retail investor 2) day trader 3) mutual fund 4) professional investor 5) fund continuously changing its position 6) hedge fund. I will go through all of these. 1) Most retail traders lose money. There are many reasons for this. Some rely on technical strategies that are largely unproven. Some buy rumors on penny stocks in hopes of making a quick buck. Some follow scammers on twitter who sell newsletters full of bogus stock tips. Some cant get around the psychology of trading, and thus close out losing positions late and winning positions early (or never at all) [I myself use to do this!!]. I am certain 99% of retail traders cant beat the market, because most of them, to be frank, put less effort into deciding what to trade than in deciding what to have for lunch. Even though your pension funds presentation is correct with respect to retail traders, it is largely irrelevant as professionals managing your money should not fall into any of these traps. 2) I call day traders active traders, but its likely not what your pension fund was referring to. Day trading is an entirely different animal to long or medium term investing, and thus I also think the typical performance is irrelevant, as they are not going to manage your money like a day trader anyway. 3,4,5) So the important question becomes, do active funds lose 99% of the time compared to index funds. NO! No no no. According to the WSJ, actively managed funds outperformed passive funds in 2007, 2009, 2013, 2015. 2010 was basically a tie. So 5 out of 9 years. I dont have a calculator on me but I believe that is less than 99%! Whats interesting is that this false belief that index funds are always better has become so pervasive that you can see active funds have huge outflows and passive have huge inflows. It is becoming a crowded trade. I will spare you the proverb about large crowds and small doors. Also, index funds are so heavily weighted towards a handful of stocks, that you end up becoming a stockpicker anyway. The S&P is almost indistinguishable from AAPL. Earlier this year, only 6 stocks were responsible for over 100% of gains in the NASDAQ index. Dont think FB has a good long term business model, or that Gilead and AMZN are a cheap buy? Well too bad if you bought QQQ, because those 3 stocks are your workhorses now. See here 6) That graphic is for mutual funds but your pension fund may have also been including hedge funds in their 99% figure. While many dont beat their own benchmark, its less than 99%. And there are reasons for it. Many have investors that are impatient. Fortress just had to close one of its funds, whose bets may actually pay off years from now, but too many people wanted their money out. Some hedge funds also have rules, eg long only, which can really limit your performance. While important to be aware of this, that placing your money with a hedge fund may not beat a benchmark, that does not automatically mean you should go with an index fund. So when are index funds useful? When you dont want to do any thinking. When you dont want to follow market news, at all. Then they are appropriate." }, { "docid": "583378", "title": "", "text": "There's a lot of hype about HFT. It involves computers doing things that people don't really understand and making a bunch of rich guys a bunch of money, and there was a crisis and so we hate rich wall street guys this year, and so it's a hot-button issue. Meh. There's some reason for concern about the safety of the markets, but I think there's also a lot more of people trying to sell you a newspaper. Remember that while HFT may mean there are a lot of trades, the buying and the selling add up to the same thing. Meanwhile, people who buy stock to hold on to it for significant periods of time will still affect the quantity of stock out there on the market, applying pressure to the price, buying and selling at the prices that they think the security is worth. As a result, it's unlikely that high-frequency trading moves the stock price very far from the price that the rest of the market would determine for very long; if it did, the lower-frequency traders could take advantage of it, buying if it's too low and selling if it's too high. How long do you plan to hold a stock? If you're trying to do day-trading, you might have some trouble; these people are competing with you to do the same thing, and have significant resources at their disposal. If you're holding onto your stock for years on end (like you probably should be doing with most stock) then a trivial premium or discount on the price probably isn't going to be a big deal for you." }, { "docid": "414215", "title": "", "text": "\"From the Times A Reader Q.&A. on G.M.’s Bankruptcy Q. I own G.M. preferred shares. Should I be looking to sell them, or hold on? I bought them at $25 a share when they were issued in late 2001. — Karen, Manhattan A. When a company files for bankruptcy, its various stock and bondholders essentially get in line. The first investors to be repaid are secured debt holders, then senior bond investors, followed by subordinated debt holders. Preferred shareholders are next, and lastly, holders of common stock. In a bankruptcy, preferred shares are usually worthless, much like shares of common stock. But in the case of G.M., there may be some good — or at least somewhat better — news. Most of G.M.’s preferred shares are actually senior notes or “quarterly interest bonds,” which means you will be treated as a bondholder, according to Marilyn Cohen, president of Envision Capital Management. So you will be able to exchange your preferreds for G.M. stock (bondholders will receive 10 percent of the new company’s stock). It’s not the best deal, but it beats the empty bag true preferred shareholders would have been left holding. Of course this is just one example, and you were hoping to get some larger picture. The article stated \"\"In a bankruptcy, preferred shares are usually worthless, much like shares of common stock\"\" which at least is a bit closer to that, if you accept usually as a statistic.\"" }, { "docid": "291886", "title": "", "text": "\"This stock is the same as any other, but you need to keep clear in your head that you and your company are now different entities. You (the person) will pay tax on capital gains and losses when you sell any stock that you hold in your own name. You'll also owe \"\"regular\"\" tax if you draw a salary, etc. The fact that it may be \"\"your\"\" company does not change these things. The company will not recognize a gain by selling stock to raise capital since it's nominally exchanging things of equal value, say $100 in cash for $100 in stock. In order to sell stock, however, you MIGHT need to register with the SEC depending on how you're going about finding your investors, so keep that in mind.\"" }, { "docid": "128077", "title": "", "text": "\"The question you should be asking yourself is this: \"\"Why am I putting money into a 401(k)?\"\" For many people, the answer is to grow a (large) nest egg and save for future retirement expenses. Investors are balancing risk and potential reward, so the asset categories you're putting your 401(k) contribution towards will be a reflection on how much risk you're willing to take. Per a US News & World Report article: Ultimately, investors would do well to remember one of the key tenants of investing: diversify. The narrower you are with your investments, the greater your risk, says Vanguard's Bruno: \"\"[Diversification] doesn't ensure against a loss, but it does help lessen a significant loss.\"\" Generally, investing in your employer's stock in your 401(k) is considered very risk. In fact, one Forbes columnist recommends not putting any money into company stock. FINRA notes: Simply stated, if you put too many eggs in one basket, you can expose yourself to significant risk. In financial terms, you are under-diversified: you have too much of your holdings tied to a single investment—your company's stock. Investing heavily in company stock may seem like a good thing when your company and its stock are doing well. But many companies experience fluctuations in both operational performance and stock price. Not only do you expose yourself to the risk that the stock market as a whole could flounder, but you take on a lot of company risk, the risk that an individual firm—your company—will falter or fail. In simpler terms, if you invest a large portion of your 401(k) funds into company stock, if your company runs into trouble, you could lose both your job AND your retirement investments. For the other investment assets/vehicles, you should review a few things: Personally, I prefer to keep my portfolio simple and just pick just a few options based on my own risk tolerance. From your fund examples, without knowing specifics about your financial situation and risk tolerance, I would have created a portfolio that looks like this when I was in my 20's: I avoided the bond and income/money market funds because the growth potential is too low for my investing horizon. Like some of the other answers have noted, the Target Date funds invest in other funds and add some additional fee overhead, which I'm trying to avoid by investing primarily in index funds. Again, your risk tolerance and personal preference might result in a completely different portfolio mix.\"" }, { "docid": "179073", "title": "", "text": "Foreign stocks have two extra sources of risk attached to them; exchange rate and political. Exchange rate risk is obvious; if I buy a stock in a foreign currency and there is a currency movement that makes that investment worth less I lose money no matter what the stock does. This can be offset using exchange rate swaps. (This is ceteris paribus, of course; changes in exchange rate can give a comparative advantage to international and exporting companies that will improve the fundamentals and so increase the price of the stock relative to a local firm. The economics of the firms in particular are not explored in this answer as it would get too complicated and long if I did.) Political risk relates not only to the problems surrounding international politics such as a country deciding that foreign nationals may no longer own shares in their national industries or deciding to seize foreign nationals' assets as happens in some areas. Your home country may also decide to apply sanctions to the country in which you are invested thus making it impossible to get your money back even though the foreign country will allow you to redeem them or sell. Diplomatic relations and trade agreements tend to be difficult. There are further problems in lack of understanding of foreign countries' laws, tax code, customs etc. relating to investments and the necessity to find legal representation in a country you may never have visited if there are issues. There is also a hidden risk in that, as an individual investor, you are not likely to be reading the local financial news for that country regularly enough to spot company specific issues arising. By the time these issues get into international media its far too late as all of the local investors have sold out of their positions already. The risks are probably no different if you have the time to monitor international relations and the foreign country's news, and have FX swaps in place to counteract FX risk as the funds and investment banks do but as an individual investor the time required is not feasible." }, { "docid": "8950", "title": "", "text": "\"First of all, never is too late to develop good habits. So, you know what you want to do and you are going about the how now... First, you should pay off any consumer debt except from mortgage which should be planned for. Prioritize your consumer debt (credit cards, consumer loans, etc) according to the interest rates, starting with the one with the highest interest and going to the one with the lowest one. Because you should make quite the investments to pay off this interest debt and still make a profit. Second, you should start saving some money. The 10% rule of thumb is a good one and for starters having aside the money you need to get by for at least 3 months is quite okay. As they say, cash is king. Now, that you actually realize the amount you can spare each month to start investing (assuming you had to do something of the aforementioned) it's time to see the risk you are comfortable taking. Different risk-taking views lead to different investing routes. So, assuming once again that you are risk averse (having a newborn baby and all) and that you want something more than just a savings account, you can start looking for things that don't require much attention (even more so if you are going on you own about it) such as low risk mutual funds, ETF (Exchange Traded Funds) and index funds to track indexes like FTSE and S&P500 (you could get an average annual return of 10-12%, just google \"\"top safe etfs\"\" for example and you could take a quick look at credible sites like forbes etc). Also, you can take a look at fixed income options such as government bonds. Last but not least, you can always get your pick at some value companies stocks (usually big companies that have proven track record, check warren buffet on this). You should look for stocks that pay dividends since you are in for the long run and not just to make a quick buck. I hope I helped a bit and as always be cautious about investing since they have some inherent risks. If you don't feel comfortable with making your own investment choices you should contact a specialist like a financial planner or advisor. No matter what the case may be on this, you should still educate yourself on this... just to get a grasp on this.\"" }, { "docid": "238215", "title": "", "text": "You'd likely be subject to a lock-up period before you could sell the shares along with possibly having other rules about how you could sell your shares as you'd likely be seen as an insider that may have information that gives you an unfair advantage for selling the stock possibly. Depending on how far in advance you hold the shares, you may or may not have adjustments in the valuation and number of shares as some companies may do a split or reverse split when preparing for an IPO. A company I worked for in the late 1990s had an IPO and my stock options had a revised strike price because of a reverse stock split that was done prior to the IPO." }, { "docid": "466121", "title": "", "text": "Honestly? The maximum number really doesn't matter. If you're investing long-term, you buy in when it looks like an OK deal (still undervalued but looks like it'll grow), and you sell when it looks like the stock has reached a peak it won't reach again for a while if ever. However many stocks you can keep track of on those kinds of terms is how many stocks should be in your portfolio." }, { "docid": "550643", "title": "", "text": "If you can afford the cost and risk of 100 shares of stock, then just sell a put option. If you can only afford a few shares, you can still use the information the options market is trying to give you -- see below. A standing limit order to buy a stock is essentially a synthetic short put option position. [1] So deciding on a stock limit order price is the same as valuing an option on that stock. Options (and standing limit orders) are hard to value, and the generally accepted math for doing so -- the Black-Scholes-Merton framework -- is also generally accepted to be wrong, because of black swans. So rather than calculate a stock buy limit price yourself, it's simpler to just sell a put at the put's own midpoint price, accepting the market's best estimate. Options market makers' whole job (and the purpose of the open market) is price discovery, so it's easier to let them fight it out over what price options should really be trading at. The result of that fight is valuable information -- use it. Sell a 1-month ATM put option every month until you get exercised, after which time you'll own 100 shares of stock, purchased at: This will typically give you a much better cost basis (several dollars better) versus buying the stock at spot, and it offloads the valuation math onto the options market. Meanwhile you get to keep the cash from the options premiums as well. Disclaimer: Markets do make mistakes. You will lose money when the stock drops more than the option market's own estimate. If you can't afford 100 shares, or for some reason still want to be in the business of creating synthetic options from pure stock limit orders, then you could maybe play around with setting your stock purchase bid price to (approximately): See your statistics book for how to set ndev -- 1 standard deviation gives you a 30% chance of a fill, 2 gives you a 5% chance, etc. Disclaimer: The above math probably has mistakes; do your own work. It's somewhat invalid anyway, because stock prices don't follow a normal curve, so standard deviations don't really mean a whole lot. This is where market makers earn their keep (or not). If you still want to create synthetic options using stock limit orders, you might be able to get the options market to do more of the math for you. Try setting your stock limit order bid equal to something like this: Where put_strike is the strike price of a put option for the equity you're trading. Which option expiration and strike you use for put_strike depends on your desired time horizon and desired fill probability. To get probability, you can look at the delta for a given option. The relationship between option delta and equity limit order probability of fill is approximately: Disclaimer: There may be math errors here. Again, do your own work. Also, while this method assumes option markets provide good estimates, see above disclaimer about the markets making mistakes." }, { "docid": "513281", "title": "", "text": "\"First, let me say that $1000 is not that much of amount to invest in stocks. You need to remember that each transaction (buy/sell) has fees, which vary between $4-$40 (depending on the broker, you mentioned Scottrade - they charge $7 per transaction for stocks and about twice as much for some mutual funds). Consider this: you invest $1000, you gain $100. You'll pay $15 in fees just to buy/sell, that's 1.5% expense ratio. If you invest in more than 1 stock - multiply your fees. To avoid that you can look into mutual funds. Different brokers offer different funds for free, and almost all of them carry many of the rest for a fee. When looking into funds, you can find their expense ratio and compare. Remember that a fund with 1% expense ratio diversifies and invests in many stocks, while for you 1.5% expense ratio is for investing in a single stock. Is it a good idea to invest only in US or diversify worldwide? You can invest in the US, but in funds that diversify worldwide or across industries. Generally it is a good idea to diversify. I am 28. Should I be a conservative investor or take some risks? Depends on how bad of a shape will you be if you lose all your principle. What online brokerage service is the best? I have heard a lot about Scotttrade but want to be sure before I start. It seems to be the least expensive and most user-friendly to me. \"\"Best\"\" is a problematic term. Scottrade is OK, E*Trade is OK, you can try Sharebuilder, Ameritrade, there are several \"\"discount\"\" online brokers and plenty of on-line reviews and comparisons amongst them. What is a margin account and how would it affect my investing? From what I understand it comes into play when an investor borrows money from the broker. Do I need to use it at all as I won't be investing on a big scale yet. You understand right. There are rules to use margin accounts, and with the amount you have I'd advise against them even if you get approved. Read through the brokers' FAQ's on their requirement. Should I keep adding money on a monthly basis to my brokerage account to give me more money to invest or keep it at a certain amount for an extended period of time? Sharebuilder has a mechanism to purchase monthly at discounted prices. But be careful, they give you discounted prices to buy, but not to sell. You may end up with a lot of positions, and the discounts you've gotten to buy will cause you spend much more on selling. Generally, averaging (investing monthly) is a good way to save and mitigate some risks, but the risks are still there. This is good only for long term savings. How should my breakdown my investments in terms of bonds vs stocks? Depends on your vulnerability and risk thresholds.\"" }, { "docid": "150809", "title": "", "text": "You are not allowed to pick and choose what years to take a loss once the stock/fund is sold. While I realize it might be too late for you to do anything now, in the future if members should read this, they might consider doing a Roth conversion during that year they will have $3000 in losses. This way they will show some income that can be offset by that loss, effectively getting a free conversion to the Roth." }, { "docid": "89484", "title": "", "text": "You could have both options exercised (and assigned to you) on the same day, but I don't think you could lose money on both on the same day. The reason is that while exercises are immediate, assignments are processed after the markets close at the end of each day. See http://www.888options.com/help/faq/assignment.jsp for details. So you would get both assignments at the same time, that night. The net effect should be that you don't own any stock (someone would put you the stock, then it'd be called away) and you don't have the options anymore. You should have incoming cash of $1500 selling the stock to the call exerciser and outgoing cash of $1300 buying from the put exerciser, right? So you would have no more options but $200 more cash in your account in the morning. You bought at 13 and sold at 15. This options position is an agreement to buy at 13 and sell at 15 at someone else's option. The way you lose money is if one of the options isn't exercised while the other is, i.e. if the stock is below 13 so nobody is going to opt to buy from you at 15, but they'll sell to you at 13; or above 15 so nobody is going to opt to sell to you at 13, but they'll buy from you at 15. You make money if neither is exercised (you keep the premium you sold for) or both are exercised (you keep the gap between the two, plus the premium). Having both exercised is surely rare, since early exercise is rare to begin with, and tends to happen when options are deep in the money; so you'd expect both to be exercised if both are deep in the money at some point. Having both be exercised on the same day ... can't be common, but it's maybe most likely just before expiration with minimal time value, if the stock moves around quickly so both options are in the money at some point during the day." }, { "docid": "95415", "title": "", "text": "\"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\"" }, { "docid": "391156", "title": "", "text": "\"I can see two possibilities. Either a deal is struck that someone (the company itself, or a large owner) buys out the remaining shares. This is the scenario @mbhunter is talking about, so I won't go too deeply into it, but it simply means that you get money in your bank account for the shares in question the same as if you were to sell them for that price (in turn possibly triggering tax effects, etc.). I imagine that this is by far the most common approach. The other possibility is that the stock is simply de-listed from a public stock exchange, and not re-listed elsewhere. In this case, you will still have the stock, and it will represent the same thing (a portion of the company), but you will lose out on most of the \"\"market\"\" part of \"\"stock market\"\". That is, the shares will still represent a monetary value, you will have the same right to a portion of the company's profits as you do now, etc., but you will not have the benefit of the market setting a price per share so current valuation will be harder. Should you wish to buy or sell stock, you will have to find someone yourself who is interested in striking a deal with you at a price point that you feel comfortable with.\"" }, { "docid": "528475", "title": "", "text": "\"This is an old post I feel requires some more love for completeness. Though several responses have mentioned the inherent risks that currency speculation, leverage, and frequent trading of stocks or currencies bring about, more information, and possibly a combination of answers, is necessary to fully answer this question. My answer should probably not be the answer, just some additional information to help aid your (and others') decision(s). Firstly, as a retail investor, don't trade forex. Period. Major currency pairs arguably make up the most efficient market in the world, and as a layman, that puts you at a severe disadvantage. You mentioned you were a student—since you have something else to do other than trade currencies, implicitly you cannot spend all of your time researching, monitoring, and investigating the various (infinite) drivers of currency return. Since major financial institutions such as banks, broker-dealers, hedge-funds, brokerages, inter-dealer-brokers, mutual funds, ETF companies, etc..., do have highly intelligent people researching, monitoring, and investigating the various drivers of currency return at all times, you're unlikely to win against the opposing trader. Not impossible to win, just improbable; over time, that probability will rob you clean. Secondly, investing in individual businesses can be a worthwhile endeavor and, especially as a young student, one that could pay dividends (pun intended!) for a very long time. That being said, what I mentioned above also holds true for many large-capitalization equities—there are thousands, maybe millions, of very intelligent people who do nothing other than research a few individual stocks and are often paid quite handsomely to do so. As with forex, you will often be at a severe informational disadvantage when trading. So, view any purchase of a stock as a very long-term commitment—at least five years. And if you're going to invest in a stock, you must review the company's financial history—that means poring through 10-K/Q for several years (I typically examine a minimum ten years of financial statements) and reading the notes to the financial statements. Read the yearly MD&A (quarterly is usually too volatile to be useful for long term investors) – management discussion and analysis – but remember, management pays themselves with your money. I assure you: management will always place a cherry on top, even if that cherry does not exist. If you are a shareholder, any expense the company pays is partially an expense of yours—never forget that no matter how small a position, you have partial ownership of the business in which you're invested. Thirdly, I need to address the stark contrast and often (but not always!) deep conflict between the concepts of investment and speculation. According to Seth Klarman, written on page 21 in his famous Margin of Safety, \"\"both investments and speculations can be bought and sold. Both typically fluctuate in price and can thus appear to generate investment returns. But there is one critical difference: investments throw off cash flow for the benefit of the owners; speculations do not. The return to the owners of speculations depends exclusively on the vagaries of the resale market.\"\" This seems simple and it is; but do not underestimate the profound distinction Mr. Klarman makes here. (and ask yourself—will forex pay you cash flows while you have a position on?) A simple litmus test prior to purchasing a stock might help to differentiate between investment and speculation: at what price are you willing to sell, and why? I typically require the answer to be at least 50% higher than the current salable price (so that I have a margin of safety) and that I will never sell unless there is a material operating change, accounting fraud, or more generally, regime change within the industry in which my company operates. Furthermore, I then research what types of operating changes will alter my opinion and how severe they need to be prior to a liquidation. I then write this in a journal to keep myself honest. This is the personal aspect to investing, the kind of thing you learn only by doing yourself—and it takes a lifetime to master. You can try various methodologies (there are tons of books) but overall just be cautious. Money lost does not return on its own. I've just scratched the surface of a 200,000 page investing book you need to read if you'd like to do this professionally or as a hobbyist. If this seems like too much or you want to wait until you've more time to research, consider index investing strategies (I won't delve into these here). And because I'm an investment professional: please do not interpret anything you've read here as personal advice or as a solicitation to buy or sell any securities or types of securities, whatsoever. This has been provided for general informational purposes only. Contact a financial advisor to review your personal circumstances such as time horizon, risk tolerance, liquidity needs, and asset allocation strategies. Again, nothing written herein should be construed as individual advice.\"" } ]

[ { "docid": "276883", "title": "", "text": "Personally, I have been in that situation too often that now I am selling at the first tick down! (not exactly but you get the idea..) I have learned over the years to not fall in love with any stock, and this is a very hard thing to do. Limit your losses and take profit when you are satisfied with them. Nothing prevents you from buying back in this stock but why buying when it is going down? Just my 2 cents." } ]

[ { "docid": "268022", "title": "", "text": "One risk not mentioned is that foreign stock might be thinly traded on your local stock market, so you will find it harder to buy and sell, and you will be late to the game if there is some sudden change in the share price in the original country." }, { "docid": "181069", "title": "", "text": "No, CFD is not viable as a long term trading strategy. You have a minimum margin to maintain, and you are given X days to top up your margin should you not meet the margin requirements. Failure to meet margin requirements will result in a forced sell where you are no longer able to hold onto the stock. A long term trading strategy is where you hold onto the stock through the bad times of the company and keep it long enough to see the good times. However, with CFD, you may be forced to sell before you see the good times. In addition, you incur additional lending charges (e.g. 4%-6%) for the ability to leverage." }, { "docid": "573077", "title": "", "text": "\"Being \"\"Long\"\" something means you own it. Being \"\"Short\"\" something means you have created an obligation that you have sold to someone else. If I am long 100 shares of MSFT, that means that I possess 100 shares of MSFT. If I am short 100 shares of MSFT, that means that my broker let me borrow 100 shares of MSFT, and I chose to sell them. While I am short 100 shares of MSFT, I owe 100 shares of MSFT to my broker whenever he demands them back. Until he demands them back, I owe interest on the value of those 100 shares. You short a stock when you feel it is about to drop in price. The idea there is that if MSFT is at $50 and I short it, I borrow 100 shares from my broker and sell for $5000. If MSFT falls to $48 the next day, I buy back the 100 shares and give them back to my broker. I pocket the difference ($50 - $48 = $2/share x 100 shares = $200), minus interest owed. Call and Put options. People manage the risk of owning a stock or speculate on the future move of a stock by buying and selling calls and puts. Call and Put options have 3 important components. The stock symbol they are actionable against (MSFT in this case), the \"\"strike price\"\" - $52 in this case, and an expiration, June. If you buy a MSFT June $52 Call, you are buying the right to purchase MSFT stock before June options expiration (3rd Saturday of the month). They are priced per share (let's say this one cost $0.10/share), and sold in 100 share blocks called a \"\"contract\"\". If you buy 1 MSFT June $52 call in this scenario, it would cost you 100 shares x $0.10/share = $10. If you own this call and the stock spikes to $56 before June, you may exercise your right to purchase this stock (for $52), then immediately sell the stock (at the current price of $56) for a profit of $4 / share ($400 in this case), minus commissions. This is an overly simplified view of this transaction, as this rarely happens, but I have explained it so you understand the value of the option. Typically the exercise of the option is not used, but the option is sold to another party for an equivalent value. You can also sell a Call. Let's say you own 100 shares of MSFT and you would like to make an extra $0.10 a share because you DON'T think the stock price will be up to $52/share by the end of June. So you go to your online brokerage and sell one contract, and receive the $0.10 premium per share, being $10. If the end of June comes and nobody exercises the option you sold, you get to keep the $10 as pure profit (minus commission)! If they do exercise their option, your broker makes you sell your 100 shares of MSFT to that party for the $52 price. If the stock shot up to $56, you don't get to gain from that price move, as you have already committed to selling it to somebody at the $52 price. Again, this exercise scenario is overly simplified, but you should understand the process. A Put is the opposite of a Call. If you own 100 shares of MSFT, and you fear a fall in price, you may buy a PUT with a strike price at your threshold of pain. You might buy a $48 June MSFT Put because you fear the stock falling before June. If the stock does fall below the $48, you are guaranteed that somebody will buy yours at $48, limiting your loss. You will have paid a premium for this right (maybe $0.52/share for example). If the stock never gets down to $48 at the end of June, your option to sell is then worthless, as who would sell their stock at $48 when the market will pay you more? Owning a Put can be treated like owning insurance on the stock from a loss in stock price. Alternatively, if you think there is no way possible it will get down to $48 before the end of June, you may SELL a $48 MSFT June Put. HOWEVER, if the stock does dip down below $48, somebody will exercise their option and force you to buy their stock for $48. Imagine a scenario that MSFT drops to $30 on some drastically terrible news. While everybody else may buy the stock at $30, you are obligated to buy shares for $48. Not good! When you sold the option, somebody paid you a premium for buying that right from you. Often times you will always keep this premium. Sometimes though, you will have to buy a stock at a steep price compared to market. Now options strategies are combinations of buying and selling calls and puts on the same stock. Example -- I could buy a $52 MSFT June Call, and sell a $55 MSFT June Call. I would pay money for the $52 Call that I am long, and receive money for the $55 Call that I am short. The money I receive from the short $55 Call helps offset the cost of buying the $52 Call. If the stock were to go up, I would enjoy the profit within in $52-$55 range, essentially, maxing out my profit at $3/share - what the long/short call spread cost me. There are dozens of strategies of mixing and matching long and short calls and puts depending on what you expect the stock to do, and what you want to profit or protect yourself from. A derivative is any financial device that is derived from some other factor. Options are one of the most simple types of derivatives. The value of the option is derived from the real stock price. Bingo? That's a derivative. Lotto? That is also a derivative. Power companies buy weather derivatives to hedge their energy requirements. There are people selling derivatives based on the number of sunny days in Omaha. Remember those calls and puts on stock prices? There are people that sell calls and puts based on the number of sunny days in Omaha. Sounds kind of ridiculous -- but now imagine that you are a solar power company that gets \"\"free\"\" electricity from the sun and they sell that to their customers. On cloudy days, the solar power company is still on the hook to provide energy to their customers, but they must buy it from a more expensive source. If they own the \"\"Sunny Days in Omaha\"\" derivative, they can make money for every cloudy day over the annual average, thus, hedging their obligation for providing more expensive electricity on cloudy days. For that derivative to work, somebody in the derivative market puts a price on what he believes the odds are of too many cloudy days happening, and somebody who wants to protect his interests from an over abundance of cloudy days purchases this derivative. The energy company buying this derivative has a known cost for the cost of the derivative and works this into their business model. Knowing that they will be compensated for any excessive cloudy days allows them to stabilize their pricing and reduce their risk. The person selling the derivative profits if the number of sunny days is higher than average. The people selling these types of derivatives study the weather in order to make their offers appropriately. This particular example is a fictitious one (I don't believe there is a derivative called \"\"Sunny days in Omaha\"\"), but the concept is real, and the derivatives are based on anything from sunny days, to BLS unemployment statistics, to the apartment vacancy rate of NYC, to the cost of a gallon of milk in Maine. For every situation, somebody is looking to protect themselves from something, and somebody else believes they can profit from it. Now these examples are highly simplified, many derivatives are highly technical, comprised of multiple indicators as a part of its risk profile, and extremely difficult to explain. These things might sound ridiculous, but if you ran a lemonade stand in Omaha, that sunny days derivative just might be your best friend...\"" }, { "docid": "550643", "title": "", "text": "If you can afford the cost and risk of 100 shares of stock, then just sell a put option. If you can only afford a few shares, you can still use the information the options market is trying to give you -- see below. A standing limit order to buy a stock is essentially a synthetic short put option position. [1] So deciding on a stock limit order price is the same as valuing an option on that stock. Options (and standing limit orders) are hard to value, and the generally accepted math for doing so -- the Black-Scholes-Merton framework -- is also generally accepted to be wrong, because of black swans. So rather than calculate a stock buy limit price yourself, it's simpler to just sell a put at the put's own midpoint price, accepting the market's best estimate. Options market makers' whole job (and the purpose of the open market) is price discovery, so it's easier to let them fight it out over what price options should really be trading at. The result of that fight is valuable information -- use it. Sell a 1-month ATM put option every month until you get exercised, after which time you'll own 100 shares of stock, purchased at: This will typically give you a much better cost basis (several dollars better) versus buying the stock at spot, and it offloads the valuation math onto the options market. Meanwhile you get to keep the cash from the options premiums as well. Disclaimer: Markets do make mistakes. You will lose money when the stock drops more than the option market's own estimate. If you can't afford 100 shares, or for some reason still want to be in the business of creating synthetic options from pure stock limit orders, then you could maybe play around with setting your stock purchase bid price to (approximately): See your statistics book for how to set ndev -- 1 standard deviation gives you a 30% chance of a fill, 2 gives you a 5% chance, etc. Disclaimer: The above math probably has mistakes; do your own work. It's somewhat invalid anyway, because stock prices don't follow a normal curve, so standard deviations don't really mean a whole lot. This is where market makers earn their keep (or not). If you still want to create synthetic options using stock limit orders, you might be able to get the options market to do more of the math for you. Try setting your stock limit order bid equal to something like this: Where put_strike is the strike price of a put option for the equity you're trading. Which option expiration and strike you use for put_strike depends on your desired time horizon and desired fill probability. To get probability, you can look at the delta for a given option. The relationship between option delta and equity limit order probability of fill is approximately: Disclaimer: There may be math errors here. Again, do your own work. Also, while this method assumes option markets provide good estimates, see above disclaimer about the markets making mistakes." }, { "docid": "442727", "title": "", "text": "\"Bob should treat both positions as incomplete, and explore a viewpoint which does a better job of separating value from volatility. So we should start by recognizing that what Bob is really doing is trading pieces of paper (say Stocks from Fund #1 or Bonds from Fund #2, to pick historically volatile and non-volatile instruments.*) for pieces of paper (Greenbacks). In the end, this is a trade, and should always be thought of as such. Does Bob value his stocks more than his bonds? Then he should probably draw from Fund #2. If he values his bonds more, he should probably draw from Fund #1. However, both Bob and his financial adviser demonstrate an assumption: that an instrument, whether stock bond or dollar bill, has some intrinsic value (which may raise over time). The issue is whether its perceived value is a good measure of its actual value or not. From this perspective, we can see the stock (Fund #1) as having an actual value that grows quickly (6.5% - 1.85% = 4.65%), and the bond (Fund #2) as having an actual value that grows slower (4.5% - 1.15$ = 3.35$). Now the perceived value of the stocks is highly volatile. The Chairman of the Fed sneezes and a high velocity trader drives a stock up or down at a rate that would give you whiplash. This perspective aligns with the broker's opinion. If the stocks are low, it means their perceived value is artificially low, and selling it would be a mistake because the market is perceiving those pieces of paper as being worth less than they actually are. In this case, Bob wins by keeping the stocks, and selling bonds, because the stocks are perceived as undervalued, and thus are worth keeping until perceptions change. On the other hand, consider the assumption we carefully slid into the argument without any fanfare: the assumption that the actual value of the stock aligns with its historical value. \"\"Past performance does not predict future results.\"\" Its entirely possible that the actual value of the stocks is actually much lower than the historical value, and that it was the perceived value that was artificially higher. It may be continuing to do so... who knows how overvalued the perceived value actually was! In this case, Bob wins by keeping the bonds. In this case, the stocks may have \"\"underperformed\"\" to drive perceptions towards their actual value, and Bob has a great chance to get out from under this market. The reality is somewhere between them. The actual values are moving, and the perceived values are moving, and the world mixes them up enough to make Scratchers lottery tickets look like a decent investment instrument. So what can we do? Bob's broker has a smart idea, he's just not fully explaining it because it is unprofessional to do so. Historically speaking, Bobs who lost a bunch of money in the stock market are poor judges of where the stock market is going next (arguably, you should be talking to the Joes who made a bunch of money. They might have more of a clue.). Humans are emotional beings, and we have an emotional instinct to cut ties when things start to go south. The market preys on emotional thinkers, happily giving them what they want in exchange for taking some of their money. Bob's broker is quoting a well recognized phrase that is a polite way of saying \"\"you are being emotional in your judgement, and here is a phrasing to suggest you should temper that judgement.\"\" Of course the broker may also not know what they're doing! (I've seen arguments that they don't!) Plenty of people listened to their brokers all the way to the great crash of 2008. Brokers are human too, they just put their emotions in different places. So now Bob has no clear voice to listen to. Sounds like a trap! However, there is a solution. Bob should think about more than just simple dollars. Bob should think about the rest of his life, and where he would like the risk to appear. If Bob draws from Fund #1 (liquidating stocks), then Bob has made a choice to realize any losses or gains early... specifically now. He may win, he may lose. However, no matter what, he will have a less volatile portfolio, and thus he can rely on it more in the long run. If Bob draws from Fund #2 (liquidating bonds) instead, then Bob has made a choice not to realize any losses or gains right away. He may win, he may lose. However, whether he wins or loses will not be clear, perhaps until retirement when he needs to draw on that money, and finds Fund #1 is still under-performing, so he has to work a few more years before retirement. There is a magical assumption that the stock market will always continue rewarding risk takers, but no one has quite been able to prove it! Once Bob includes his life perspective in the mix, and doesn't look just at the cold hard dollars on the table, Bob can make a more educated decision. Just to throw more options on the table, Bob might rationally choose to do any one of a number of other options which are not extremes, in order to find a happy medium that best fits Bob's life needs: * I intentionally chose to label Fund #1 as stocks and Fund #2 as bonds, even though this is a terribly crude assumption, because I feel those words have an emotional attachment associated to them which #1 and #2 simply do not. Given that part of the argument is that emotions play a part, it seemed reasonable to dig into underlying emotional biases as part of my wording. Feel free to replace words as you see fit to remove this bias if desired.\"" }, { "docid": "179073", "title": "", "text": "Foreign stocks have two extra sources of risk attached to them; exchange rate and political. Exchange rate risk is obvious; if I buy a stock in a foreign currency and there is a currency movement that makes that investment worth less I lose money no matter what the stock does. This can be offset using exchange rate swaps. (This is ceteris paribus, of course; changes in exchange rate can give a comparative advantage to international and exporting companies that will improve the fundamentals and so increase the price of the stock relative to a local firm. The economics of the firms in particular are not explored in this answer as it would get too complicated and long if I did.) Political risk relates not only to the problems surrounding international politics such as a country deciding that foreign nationals may no longer own shares in their national industries or deciding to seize foreign nationals' assets as happens in some areas. Your home country may also decide to apply sanctions to the country in which you are invested thus making it impossible to get your money back even though the foreign country will allow you to redeem them or sell. Diplomatic relations and trade agreements tend to be difficult. There are further problems in lack of understanding of foreign countries' laws, tax code, customs etc. relating to investments and the necessity to find legal representation in a country you may never have visited if there are issues. There is also a hidden risk in that, as an individual investor, you are not likely to be reading the local financial news for that country regularly enough to spot company specific issues arising. By the time these issues get into international media its far too late as all of the local investors have sold out of their positions already. The risks are probably no different if you have the time to monitor international relations and the foreign country's news, and have FX swaps in place to counteract FX risk as the funds and investment banks do but as an individual investor the time required is not feasible." }, { "docid": "349607", "title": "", "text": "I cannot emphasize enough how important it is, when you buy a house with someone you are not married to, to make a legal agreement on how the money should be divided when you sell. I know it's too late for you, but I write this for anyone else reading this answer. From a legal point of view, if you made no agreement otherwise, you each own 50% of the house. If you want to divide it any other way, you will have to agree what an appropriate division is. Dividing according to the amount each of you paid towards it is a good way. Decide for yourselves if that means just mortgage payments, or also taxes, repairs, utilities etc. You should also be aware that if you have been living together a long time, like more than a year, some jurisdictions will allow one party to sue the other as if they were getting divorced. Then the courts would be involved in the division of property." }, { "docid": "180644", "title": "", "text": "Your question is a bit odd in that you are mixing long-term fundamental analysis signals which are generally meant to work on longer time frames with medium term trading where these fundamental signals are mostly irrelevant. Generally you would buy-and-hold on a fundamental signal and ride the short-term fluctuations if you believe you have done good analysis. If you would like to trade on the 2-6 month time scale you would need a signal that works on that sort of time scale. Some people believe that technical analysis can give you those kind of signals, but there are many, many, many different technical signals and how you would trade using them is highly dependent on which one you believe works. Some people do mix fundamental and technical signals, but that can be very complicated. Learning a good amount about technical analysis could get you started. I will note, though, that studies of non-professionals continuously show that the more frequently people trade the more on they underperform on average in the long term when compared with people that buy-and-hold. An aside on technical analysis: michael's comment is generally correct though not well explained. Say Bob found a technical signal that works and he believes that a stock that costs $10 dollars should be $11. He buys it and makes money two months later when the rest of the market figures out the right price is $11 and he sells at that price. This works a bunch of times and he now publishes how the signal works on Stack Exchange to show everyone how awesome he is. Next time, Bob's signal finds a different stock at $10 that should be $11, but Anna just wrote a computer program that checks that signal Bob published faster than he ever could. The computer program buys as much as it can in milliseconds until the price is $11. Bob goes to buy, but now it is too late the price is already $11 and he can't make any money. Eventually, people learn to anticipate/adjust for this signal and even Anna's algorithms don't even work anymore and the hunt for new signals starts again." }, { "docid": "418003", "title": "", "text": "I've read a nice rule of thumb somewhere that you should consider: You should invest (100-YOURAGE)% of your money in stock The rest should be something less volatile and more liquid, so you have some money when the stock market goes down and you need some money nevertheless. So you would start with buying about 75% stock and balance your stock percentage over time by buing more secure assets to keep the stock percentage at the desired level. At some time you might need to sell stock to rebalance and invest in more secure assets." }, { "docid": "372884", "title": "", "text": "\"You need to get the current tax software, the 2013 filing software is out already, even though it needs to update itself before filing, as the final forms aren't ready yet. Then you will look carefully at Schedule E to understand what gets written off. I see you are looking at the $2200 rent vs your own rent of $2100, but of course, the tax form doesn't care about your rent. You offset the expenses of that house against the income. The expenses are the usual suspects, mortgage interest, property tax, repairs, etc. But there's one big thing new landlords are prone to forgetting. Depreciation. It's not optional. Say the house cost you $400K. This is your basis. You need to separate the value of land which is not depreciated. For a condo with no land it can be as little as 10%, when we bought our house, for insurance purposes, the land was nearly 40% of the full value. Say you do the research and decide 30% (for land), then 70% = $280K. Depreciation is taken each year over a 27.5 year period, or just over $10,000 per year. (Note, the forms will help you get your year 1 number, as you didn't have a full year.) This depreciation helps with your cash flow during the year (as you should do the math, and if you keep the house, adjust your W4 withholdings for 2014, that lump sum you'll get in April won't pay the bills each month) but is 'recaptured' on sale. At some point in the future, you may save enough to buy a house where you wish to live, but need to sell the rental. Consider a 1031 Exchange. It's a way to sell a rental and buy a new one without triggering a taxable event. What I don't know is how long the new house must be a rental before the IRS would then allow you to move in. The same way you turned your home into a rental, a rental can be turned back to a primary residence. I just doubt you can do it right after the purchase. As fellow member @littleadv would advise, \"\"get professional advice.\"\" And he's right. I've just offered what you might consider. The first year tax return with that Schedule E is the toughest as it's brand new. The next year is simple in comparison. The question of selling immediately is tough. Only you can decide whether the risk of keeping it is too great. You're saying you don't have the money to cover two month's vacancy. That scares me. I'd focus on beefing up the emergency account. And securing a credit line. You mentioned the tax savings. My opinion is that for any investment,the tax tail should never wag the investing dog. Buy or sell a stock based on the stock, not the potential tax bill for the sale. In your situation, the rent and expenses will cancel each other, and the depreciation is a short term loan, from a tax perspective. If you sold today, what do you net? If you analyzed the numbers now, what is your true income from the property each year? Is that return worth it? A good property will provide cash flow, principal reduction each year, and normal increase in value. This takes a bit of careful looking at the numbers. You might feel you're just breaking even, but if the principal is $12K less after a year, that's something you shouldn't ignore. On the other hand, an exact 'break-even' with little equity at stake offered you a leveraged property where any gains are a magnified percentage of what you have at risk. Last - welcome to Money.SE - consider adding some more details to your profile.\"" }, { "docid": "289989", "title": "", "text": "If the stock has dropped from $10 to $2 and now is range trading between $2 and $3, and you were not able to sell your shares earlier, then I would no be holding on to them now. As soon as the price hit $3 sell them. After you have sold them and you noticed the stock still range trading one strategy you could apply is to go long after the price bounces off the $2 support placing a stop just below $2, then as the price moves up you trail your stop up with the price. As it starts getting close to $3 tighten your stop. If it keeps range trading and bounces off the resistance at $3 and you get stopped out, you can either go short and reverse the process or wait for it to bounce off the support at $2 again. One word of warning though, the longer a stock range trades, the bigger the outbreak out of the rage (either up or down) will be, that is the reason why you should first wait for confirmation that the price has bounced off support/resistance before opening a position, and secondly why you should use a stop loss to get you out instead of just selling when it hits $3, because if it breaks through $3 you can continue profiting as it moves up." }, { "docid": "57994", "title": "", "text": "\"I'm a manager of a charity shop so work with a wide range of unpaid volunteers, which requires an especially soft touch (most of the time, everyone is different) or people will just leave. It takes longer, but the overall results are better and more long-lasting. Think of it like pushing a boat from the docks with your hand, always applying a small pressure to get the boat to gradually move where you want, rather than ramming into the side of a boat with a truck - sure it'll get you there quicker, but will cause lasting damage. It's also best to take it slow, as you need time to learn the business and people. Be clear about your approach with your boss, managing their expectations is important. Anyway, here is what I've learnt in my first year or so doing this job, plus things I've learnt along the way in my previous career as a software engineer (radical career change!) where I've managed people and been managed: 1. Be yourself. Don't pretend to be someone you're not, everyone will see right through you in an instant. You'll change over time as you get used to managing people, that's fine, but always be yourself through that. 1. Say \"\"thank you\"\" to everyone at the end of each day as you say goodbye. Mean it. Think of all the work they've done today for you. 1. Spread the shit evenly. Every job has crap parts, make sure you and everyone else gets their fair share and no more. I regularly hoover, clean the bathroom, wash-up, and so on. 1. Ask, don't tell. If you bark orders, people will do them.. but they'll put no effort into it and you'll distance yourself from them. Ask if they could do something for you. It's a politeness, nobody ever says no unless there is an issue which you need to deal with anyway. 1. Pick your battles. Is it worth moaning at someone for that little infraction? Or can you get over that message another way? i.e. I don't like people having drinks on the till counter, so when I take over to cover for them for a break, I just move it. After a while, no drinks appear on the counter. 1. Be honest. If you don't know, say so.. ask for input. Weigh up the options out loud, then pick one, explain why, and go for it - or better yet, get the person that thought of it working with you (not for you) to implement it. If you're wrong, hold your hand up and try the other suggestion(s). 1. Always take responsibility when things go wrong - that is actually your job. When things go well, use *you* and *we*. If things go badly, sometimes *I*, sometimes *we*, but never *you*. 1. Always be pro-active with money. If you owe your staff money for any reason, chase them to give it to them, never let them chase you. If there even *might* be any problems at all with money, let everyone know as soon as you know. Go out of your way to ensure they get what they're owed *now*, not later. I just did this today actually, I forgot to do expenses for someone and switched over the till so there wasn't enough cash in the new till to cover it.. so I just took it from the money to bank, and marked down why there was a discrepancy on the paperwork and will do the same tomorrow when that doesn't match by the opposite amount. I should not do this at all, but it's the right thing to do. 1. Listen carefully. Often employees have problems but won't bring them up, either they don't think anything will get done, or they don't want to get someone in trouble, or something else. However, if you listen and observe carefully, often there are clues to the things that are bothering them and you'll find ways to tackle them. 1. Don't run a team meeting until you know everyone, if you can avoid it. You don't know shit about how the company works, who the people are, what makes them tick, what they do, and so on. All you'll do is come across as a bit of a tool, and distance yourself from them (as boss). When you do run one, just guide it, don't lead it. Always hand over control of the conversation as much as possible, except of course where you've got things that they need to hear. 1. Never joke about your 'power'. i.e. Don't mess about saying how you'll fire them if blah, or how you'll give them all the shit work, or mention pay jokingly, etc. I had a boss that did that when drunk, not in a serious way at all, and he was very widely hated for pretty well nothing other than that. It served as a constant reminder that he's separate from us. 1. Give people room, but don't be taken for a ride. If someone is late once, fine, I wouldn't even mention it. Late again, maybe I'd make a light joke of it. Late again.. we'll have a chat.. always listen to what they have to say, is there any way you can help? But, don't be taken for a ride. I've had people pick me up on being late the very first time I was late, and you know what, I was more late for that job from then on than I've ever been before or since. 1. Try to get your employees to come up with ideas to move the business forwards. It's very easy to look at a business and say \"\"we need this, that, and the other doing.. like this!\"\". But you need to get your employees to buy into it, or they just won't do it properly. It'll be like getting blood out of a stone to start with, but if you're patient and support their ideas most people will come around. You *need* their input as they know their job better than you. 1. EDIT: Always be clear what you want from people, when. Speak with them about the task(s) before-hand to make sure they're comfortable with it and think it can be done in the time. So many times I've been given tasks with unrealistic deadlines, the manager hasn't wanted to listen to my protests, then wonders why it didn't get done in time. It's crazy really, wanting something to be possible doesn't make it so. *A (not so) Quick Example* One volunteer said to me that we should halve the price of all the fiction books to .99 to compete with other shops. I personally don't think that's a good idea (our shop has better quality stock and is much more organised), but I have no evidence to the contrary, and I honestly don't really know.. so I say go for it and support it completely as a good idea. We tried it for a month, and we made exactly the same amount of money.. sold twice as many books, but no extra cash. So it was valuable to do, and we discovered that maybe 1.49 might be a good option to try. But, far more importantly, they saw their ideas put into action right away, and saw the results of that. It empowered them, which is incredibly important for a wide variety of reasons that are too much to go into here, but basically it makes them feel more respected, enjoy their job more, think more about the business, and so on - you know what it's like when you're empowered, how good it feels. However, it's being empowered with the support that's important, something which you personally going into your new job don't feel you have, which leads to the anxiety and so on I'm sure you're feeling now. Don't put your employees in that position if you can help it. There is also another reason why I outright supported their idea from the offset. It didn't work (although we didn't loose anything) and I thought it wouldn't, but I can say \"\"*we* tried\"\". It wasn't down to that one person, they didn't feel bad that it didn't work because I was right behind it, and it's my job to take responsibility. If it had been *their* idea that had failed, they wouldn't give any ideas ever again, and everyone else would be put off too. As soon as anyone tries to take personal responsibility, and they will, stick to your guns in supporting them.. stronger than ever. Now we're getting a lot of ideas all the time, they're having in-depth discussions amongst each other, they're pro-active, and so on. As a business we're doing much better now because of it.. profits are up 15% from last year and we've only just begun to kick things off, and that's going against a national trend downwards. We've had several critical changes to our shop layout, back-room organisation, results reporting, stock handling processes, and so on.. all from volunteer ideas and feedback. So the 15% is actually the tip of the iceberg, what we've got in place now should allow us to grow more quickly too. And remember, you can make suggestions too of course.. but they're just that, suggestions. Suggest them to your employees, speak with several of them, then get back to them when you've made a decision. Don't say \"\"I'm thinking of trying this\"\", say \"\"I was just thinking.. what about this? Do you think it would work?\"\" and talk about it. Think of arguments against your idea, see if they counter them, and so on. Now.. how many of these changes did I think of before-hand and want to enact? About half.. so we've got a significant number of successful ideas that I personally hadn't thought of, everyone's happier and working harder for the business, and we have a bright future. I have more ideas too, and people listen to and respect them now just like I have with them. I think that's the key to it all really. Show your employees respect, and they'll show you it in return.\"" }, { "docid": "420046", "title": "", "text": "You should be worried. You have made the mistake of entering an investment on the recommendation of family/friend. The last think you should do is make another mistake of just leaving it and hoping it will go up again. Your stock has dropped 37.6% from its high of $74.50. That means it has to go up over 60% just to reach the high of $74.50. You are correct this may never happen or if it does it could take a long, long time to get up to its previous highs. What is the company doing to turn its fortunes around? Take a look at some other examples: QAN.AX - Qantas Airways This stock reached a high of around $6 in late 2007 after a nice uptrend over a year and a half, it then dropped drastically at the start of the GFC, and has since kept falling and is now priced at just $1.15. QAN reported its first ever loss earlier this year, but its problems were evident much earlier. AAPL - Apple Inc. AAPL reach a high of just over $700 in September 2013, then dropped to around $400 and has recovered a bit to about $525 (still 25% below its highs) and looks to be at the start of another downtrend. How long will it take AAPL to get back to $700, more than 33% from its current price? TEN.AX - Ten Network Holdings Limited TEN reached a high of $4.26 in late 2004 after a nice uptrend during 2004. It then started a steep journey downwards and is still going down. It is now priced at just $0.25, a whopping 94% below its high. It will have to increase by 1600% just to reach its high of $4.26 (which I think will never happen). Can a stock come back from a drastic downtrend? Yes it can. It doesn't always happen, but a company can turn around and can reach and even surpass it previous highs. The question is how and when will this happen? How long will you keep your capital tied up in a stock that is going nowhere and has every chance of going further down? The most important thing with any investment is to protect your current capital. If you lose all your capital you cannot make any new investments until you build up more capital. That is why it is so important to have a risk management strategy and decide what is your get out point if things go against you before you get into any new investment. Have a stop loss. I would get out of your investment before you lose more capital. If you had set a stop loss at 20% off the stock's last highs, you would have gotten out at about $59.60, 28% higher than the current share price of $46.50. If you do further analysis on this company and find that it is improving its prospects and the stock price breaks up through its current ranging band, then you can always buy back in. However, do you still want to be in the stock if it breaks the range band on the downside? In this case who knows how low it can continue to go. N.B. This is my opinion, as others would have theirs, and what I would do in your current situation with this stock." }, { "docid": "225511", "title": "", "text": "\"I know nothing about this stuff. Am I in trouble? You might be. If you don't file your return the IRS may \"\"make up\"\" one for you based on the (partial) information they have. Then they'll assess taxes and penalties and will go after you to pay those. Will I be hit with interest/penalties? You may if any money is owed. You may also lose the refund if you wait for too long (3 years after the due date). You may also be hit with the penalties for non-filing/late filing by your State. Not owing to IRS doesn't mean you also don't owe to the State - you can get hit with interest and late payment penalties there too. He has all my paperwork (I probably have copies... somewhere...) Should I go somewhere else and start fresh? He must return all the original paperwork you gave him. He can be disbarred if he doesn't. If you did 2013 yourself - what was significantly different in 2012 that you couldn't do yourself? If nothing - then just do it yourself and be done with it. You can buy 2012 preparation software at very deep discounts now. Otherwise - yes, go somewhere else. Busy season is over and it shouldn't be difficult to find another preparer/EA/CPA to do the work for you.\"" }, { "docid": "31374", "title": "", "text": "I think he is saying that the vote was not the reform needed. Some of you will be too young to understand but my only class action that I was in was Blockbuster. I ended up with like $1.45. If I had to guess I would spend about 20-50 bucks a month in late fees. Sometimes it was my fault because if I missed the weird time to return them I felt I might as well keep them for the fees and would be late again. I did not agree to sue them. I just did not opt out. Blockbuster made tons off of me and people like me. The lawyers who really just put people together as a class made millions. The customer is a pawn. That is what I think he means. You would need meaningful reform in the class action space for this to really matter. This is one of our boys are going to be sued and we should help them. Congress has basically protected Equifax downside risk. Yetto address the reality of the fact that the hack impacts the people congress supposedly works for and was caused by gross negligence. Maybe they should be building an RFP to replace them, not protect them." }, { "docid": "447651", "title": "", "text": "Is the remaining amount tax free? As in, if the amount shown (which I can sell) on etrade is $5000 then if I sell the entire shares will my bank account be increased by $5000? The stocks they sell are withholding. So let's say you had $7000 of stock and they sold $2000 for taxes. That leaves you with $5000. But the actual taxes paid might be more or less than $2000. They go in the same bucket as the rest of your withholding. If too much is withheld, you get a refund. Too little and you owe them. Way too little and you have to pay penalties. At the end of the year, you will show $7000 as income and $2000 as withheld for taxes from that transaction. You may also have a capital gain if the stock increases in price. They do not generally withhold on stock sales, as they don't necessarily know what was your gain and what was your loss. You usually have to handle that yourself. The main point that I wanted to make is that the sale is not tax free. It's just that you already had tax withheld. It may or may not be enough." }, { "docid": "509650", "title": "", "text": "\"While I agree with Ben a lot I feel like his answer is really poor here. You do not call a number to give your credit card information out for a refund. That is ridiculous. Just from his answer - he has had 5 cases of fraud lately - you should know that you shouldn't follow this advice. I personally don't ever give my credit card number over the phone, unless it is the very very very last resort. It is not just about money and safety but it is about time. Every time that you give your number out over the phone there is a chance that the employee on the other end (by either scam or legitimate business) will use or sell your info. So you need to determine if the time saved by doing a transaction over the phone is worth hours/days of your time if your card has a fraud issue. And note that fraud sometimes is easily negated, but if done smartly can be hard to prove via a quick call or email to card company. What should you do? Tell company that you will simply get the refund through your credit card company. And if we go back to time element... You fill out form on card website. Card company goes back to vendor and says - \"\"Why are you asking for card numbers via email?\"\" Card company either cancels vendor contract or more likely helps them understand the technology available so they don't have to do this. Therefore that quick form that you filled out will now keep this company from bugging you again. By going through their archaic \"\"systems\"\" you are enabling their behavior.\"" }, { "docid": "496209", "title": "", "text": "Ask yourself a better question: Under my current investment criteria would I buy the stock at this price? If the answer to that question is yes you need to work out at what price you would now sell out of the position. Think of these as totally separate decisions from your original decisions to buy and at what price to sell. If you would buy the stock now if you didn't already hold a position then you should keep that position as if you had sold out at the price that you had originally seen as your take profit level and bought a new position at the current price without incurring the costs. If you would not buy now by those criteria then you should sell out as planned. This is essentially netting off two investing decisions. Something to think about is that the world has changed and if you knew what you know now then you would probably have set your price limit higher. To be disciplined as an investor also means reviewing current positions frequently and without any sympathy for past decisions." }, { "docid": "291886", "title": "", "text": "\"This stock is the same as any other, but you need to keep clear in your head that you and your company are now different entities. You (the person) will pay tax on capital gains and losses when you sell any stock that you hold in your own name. You'll also owe \"\"regular\"\" tax if you draw a salary, etc. The fact that it may be \"\"your\"\" company does not change these things. The company will not recognize a gain by selling stock to raise capital since it's nominally exchanging things of equal value, say $100 in cash for $100 in stock. In order to sell stock, however, you MIGHT need to register with the SEC depending on how you're going about finding your investors, so keep that in mind.\"" } ]

[ { "docid": "588448", "title": "", "text": "The stock price is not only based on the general market trend and the stock's current profitability and prospects, but is also based on prediction of how the stock's prospects might change in the future. In almost every case, there are professional investors analysing the stock's future prospects and considering whether it's over or under values for its current price. However even professionals can be totally wrong. If you feel like you have a good grasp on whether the stock will have improving or declining prospects over time, then you might be (if you're right) equipped to make a sensible decision on whether to hold the stock or not. If you don't think you have a good understanding about the stock, then an understanding of the general market direction might at least make stock in general worth holding. Otherwise, you are simply taking a punt. If you know of another stock that has better prospects, then ask yourself why you would hold onto the stock that you think will perform worse. But also bear in mind that (in my understanding) research has shown that, on average, people who try to pick stocks rarely do better than a random selection, and more stock trades means more brokerage (which thanks to brokerage losses would mean you will end up doing worse than average unless you really do know better than the market)." } ]

[ { "docid": "24856", "title": "", "text": "\"In general, there should be a \"\"liquidity premium\"\" which means that less-liquid stocks should be cheaper. That's because to buy such a stock, you should demand a higher rate of return to compensate for the liquidity risk (the possibility that you won't be able to sell easily). Lower initial price = higher eventual rate of return. That's what's meant when Investopedia says the security would be cheaper (on average). Is liquidity good? It depends. Here's what illiquidity is. Imagine you own a rare piece of art. Say there are 10 people in the world who collect this type of art, and would appreciate what you own. That's an illiquid asset, because when you want to sell, maybe those 10 people aren't buying - maybe they don't want your particular piece, or they all happen to be short on funds. Or maybe worse, only one of them is buying, so they have all the negotiating leverage. You'll have to lower your price if you're really in a hurry to sell. Maybe if you lower your price enough, you can get one of the 10 buyers interested, even if none were initially. An illiquid asset is bad for sellers. Illiquid means there aren't enough buyers for you to get a bidding war going at the time of your choosing. You'll potentially have to wait around for buyers to turn up, or for a stock, maybe you'd have to sell a little bit at a time as buyers want the shares. Illiquid can be bad for buyers, too, if the buyer is for some reason in a hurry; maybe nobody is selling at any given time. But, usually buyers don't have to be in a hurry. An exception may be if you short sell something illiquid (brokers often won't let you do this, btw). In that case you could be a forced buyer and this could be very bad on an illiquid security. If there are only one or two sellers out there, they now have the negotiating leverage and they can ask whatever price they want. Illiquidity is very bad when mixed with margin or short sales because of the potential for forced trades at inopportune times. There are plenty of obscure penny stocks where there might be only one or two trades per day, or fewer. The spread is going to be high on these because the bids at a given time will just be lowball offers from buyers who aren't really all that interested, unless you want to give your stock away, in which case they'll take it. And the asks are going to be from sellers who want to get a decent price, but maybe there aren't really any buyers willing to pay, so the ask is just sitting there with no takers. The bids and asks may be limit orders that have been sitting open for 3 weeks and forgotten about. Contrast with a liquid asset. For example, a popular-model used car in good condition would be a lot more liquid than a rare piece of art, though not nearly as liquid as most stocks. You can probably find several people that want to buy it living nearby, and you're not going to have to drop the price to get a buyer to show up. You might even get those buyers in a bidding war. From illiquid penny stocks, there's a continuum all the way up to the most heavily-traded stocks such as those in the S&P500. With these at a given moment there will be thousands of buyers and sellers, so the spread is going to close down to nearly zero. If you think about it, just statistically, if there are thousands of bids and thousands of asks, then the closest bid-ask pair is going to be close together. That's a narrow spread. While if there are 3 bids and 2 asks on some illiquid penny stock, they might be dollars away from each other, and the number of shares desired might not match up. You can see how liquidity is good in some situations and not in others. An illiquid asset gives you more opportunity to get a good deal because there aren't a lot of other buyers and sellers around and there's some opportunity to \"\"negotiate\"\" within the wide spread. For some assets maybe you can literally negotiate by talking to the other party, though obviously not when trading stocks on an exchange. But an illiquid asset also means you might get a bad deal, especially if you need to sell quickly and the only buyers around are making lowball offers. So the time to buy illiquid assets is when you can take your time on both buying and selling, and will have no reason for a forced trade on a particular timeline. This usually means no debt is involved, since creditors (including your margin broker) can force you to trade. It also means you don't need to spend the money anytime soon, since if you suddenly needed the money you'd have a forced trade on your hands. If you have the time, then you put a price out there that's very good for you, and you wait for someone to show up and give you that price - this is how you get a good deal. One more note, another use of the term liquid is to refer to assets with low or zero volatility, such as money market funds. An asset with a lot of volatility around its intrinsic or true value is effectively illiquid even if there's high trade volume, in that any given point in time might not be a good time to sell, because the price isn't at the right level. Anyway, the general definition of a liquid investment is one that you'd be comfortable cashing out of at a moment's notice. In this sense, most stocks are not all that liquid, despite high trading volume. In different contexts people may use \"\"liquid\"\" in this sense or to mean a low bid-ask spread.\"" }, { "docid": "109455", "title": "", "text": "\"You have heard the old adage \"\"Buy low, sell high\"\", right? That sounds so obvious that you'd have to wonder why they would ever bother coining such an expression. It should rank up there with \"\"Don't walk in front of a moving car\"\" on the Duh scale of advice. Well, your question demonstrates exactly why it isn't quite so obvious in the real world and that people need to be reminded of it. So, in your example, the stock prices are currently low (relative to what they have been). So per that adage, do you sell or buy when prices are low? Hint: It isn't sell. Yes. Your gut is going to tell you the exact opposite thanks to the fact that our brains are unfortunately wired to make us susceptible to the loss aversion fallacy. When the market has undergone a big drop is the WORST time to stop contributing (buying stocks). This example might help get your brain and gut to agree a little more easily: If you were talking about any other non-investment commodity, cars for instance. Your question equates to.. I really need a car, but the prices have been dropping like crazy lately. Maybe I should wait until the car dealers start raising their prices again before I buy one. Dollar Cost Averaging As littleadv suggested, if you have an automatic payroll deduction for your retirement account, you are getting the benefit of Dollar Cost Averaging. Because you are investing the same amount on a scheduled interval, you are buying more shares when they are cheap and fewer when they are expensive. It is like an automatic buy low strategy is built into the account. The alternative, which you are implying, is a market timing strategy. Under this strategy, instead of investing regularly you try to get in and out of investments right before they go up/drop. There are two MAJOR flaws with this approach: 1) Your brain will work against you (see above) and encourage you to do the exact opposite of what you should be doing. 2) Unless you are clairvoyant, this strategy isn't much better than gambling. If you are lucky it can work, but because of #1, the odds are stacked against you.\"" }, { "docid": "95415", "title": "", "text": "\"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\"" }, { "docid": "210514", "title": "", "text": "That is such a vague statement, I highly recommend disregarding it entirely, as it is impossible to know what they meant. Their goal is to convince you that index funds are the way to go, but depending on what they consider an 'active trader', they may be supporting their claim with irrelevant data Their definition of 'active trader' could mean any one or more of the following: 1) retail investor 2) day trader 3) mutual fund 4) professional investor 5) fund continuously changing its position 6) hedge fund. I will go through all of these. 1) Most retail traders lose money. There are many reasons for this. Some rely on technical strategies that are largely unproven. Some buy rumors on penny stocks in hopes of making a quick buck. Some follow scammers on twitter who sell newsletters full of bogus stock tips. Some cant get around the psychology of trading, and thus close out losing positions late and winning positions early (or never at all) [I myself use to do this!!]. I am certain 99% of retail traders cant beat the market, because most of them, to be frank, put less effort into deciding what to trade than in deciding what to have for lunch. Even though your pension funds presentation is correct with respect to retail traders, it is largely irrelevant as professionals managing your money should not fall into any of these traps. 2) I call day traders active traders, but its likely not what your pension fund was referring to. Day trading is an entirely different animal to long or medium term investing, and thus I also think the typical performance is irrelevant, as they are not going to manage your money like a day trader anyway. 3,4,5) So the important question becomes, do active funds lose 99% of the time compared to index funds. NO! No no no. According to the WSJ, actively managed funds outperformed passive funds in 2007, 2009, 2013, 2015. 2010 was basically a tie. So 5 out of 9 years. I dont have a calculator on me but I believe that is less than 99%! Whats interesting is that this false belief that index funds are always better has become so pervasive that you can see active funds have huge outflows and passive have huge inflows. It is becoming a crowded trade. I will spare you the proverb about large crowds and small doors. Also, index funds are so heavily weighted towards a handful of stocks, that you end up becoming a stockpicker anyway. The S&P is almost indistinguishable from AAPL. Earlier this year, only 6 stocks were responsible for over 100% of gains in the NASDAQ index. Dont think FB has a good long term business model, or that Gilead and AMZN are a cheap buy? Well too bad if you bought QQQ, because those 3 stocks are your workhorses now. See here 6) That graphic is for mutual funds but your pension fund may have also been including hedge funds in their 99% figure. While many dont beat their own benchmark, its less than 99%. And there are reasons for it. Many have investors that are impatient. Fortress just had to close one of its funds, whose bets may actually pay off years from now, but too many people wanted their money out. Some hedge funds also have rules, eg long only, which can really limit your performance. While important to be aware of this, that placing your money with a hedge fund may not beat a benchmark, that does not automatically mean you should go with an index fund. So when are index funds useful? When you dont want to do any thinking. When you dont want to follow market news, at all. Then they are appropriate." }, { "docid": "349607", "title": "", "text": "I cannot emphasize enough how important it is, when you buy a house with someone you are not married to, to make a legal agreement on how the money should be divided when you sell. I know it's too late for you, but I write this for anyone else reading this answer. From a legal point of view, if you made no agreement otherwise, you each own 50% of the house. If you want to divide it any other way, you will have to agree what an appropriate division is. Dividing according to the amount each of you paid towards it is a good way. Decide for yourselves if that means just mortgage payments, or also taxes, repairs, utilities etc. You should also be aware that if you have been living together a long time, like more than a year, some jurisdictions will allow one party to sue the other as if they were getting divorced. Then the courts would be involved in the division of property." }, { "docid": "528475", "title": "", "text": "\"This is an old post I feel requires some more love for completeness. Though several responses have mentioned the inherent risks that currency speculation, leverage, and frequent trading of stocks or currencies bring about, more information, and possibly a combination of answers, is necessary to fully answer this question. My answer should probably not be the answer, just some additional information to help aid your (and others') decision(s). Firstly, as a retail investor, don't trade forex. Period. Major currency pairs arguably make up the most efficient market in the world, and as a layman, that puts you at a severe disadvantage. You mentioned you were a student—since you have something else to do other than trade currencies, implicitly you cannot spend all of your time researching, monitoring, and investigating the various (infinite) drivers of currency return. Since major financial institutions such as banks, broker-dealers, hedge-funds, brokerages, inter-dealer-brokers, mutual funds, ETF companies, etc..., do have highly intelligent people researching, monitoring, and investigating the various drivers of currency return at all times, you're unlikely to win against the opposing trader. Not impossible to win, just improbable; over time, that probability will rob you clean. Secondly, investing in individual businesses can be a worthwhile endeavor and, especially as a young student, one that could pay dividends (pun intended!) for a very long time. That being said, what I mentioned above also holds true for many large-capitalization equities—there are thousands, maybe millions, of very intelligent people who do nothing other than research a few individual stocks and are often paid quite handsomely to do so. As with forex, you will often be at a severe informational disadvantage when trading. So, view any purchase of a stock as a very long-term commitment—at least five years. And if you're going to invest in a stock, you must review the company's financial history—that means poring through 10-K/Q for several years (I typically examine a minimum ten years of financial statements) and reading the notes to the financial statements. Read the yearly MD&A (quarterly is usually too volatile to be useful for long term investors) – management discussion and analysis – but remember, management pays themselves with your money. I assure you: management will always place a cherry on top, even if that cherry does not exist. If you are a shareholder, any expense the company pays is partially an expense of yours—never forget that no matter how small a position, you have partial ownership of the business in which you're invested. Thirdly, I need to address the stark contrast and often (but not always!) deep conflict between the concepts of investment and speculation. According to Seth Klarman, written on page 21 in his famous Margin of Safety, \"\"both investments and speculations can be bought and sold. Both typically fluctuate in price and can thus appear to generate investment returns. But there is one critical difference: investments throw off cash flow for the benefit of the owners; speculations do not. The return to the owners of speculations depends exclusively on the vagaries of the resale market.\"\" This seems simple and it is; but do not underestimate the profound distinction Mr. Klarman makes here. (and ask yourself—will forex pay you cash flows while you have a position on?) A simple litmus test prior to purchasing a stock might help to differentiate between investment and speculation: at what price are you willing to sell, and why? I typically require the answer to be at least 50% higher than the current salable price (so that I have a margin of safety) and that I will never sell unless there is a material operating change, accounting fraud, or more generally, regime change within the industry in which my company operates. Furthermore, I then research what types of operating changes will alter my opinion and how severe they need to be prior to a liquidation. I then write this in a journal to keep myself honest. This is the personal aspect to investing, the kind of thing you learn only by doing yourself—and it takes a lifetime to master. You can try various methodologies (there are tons of books) but overall just be cautious. Money lost does not return on its own. I've just scratched the surface of a 200,000 page investing book you need to read if you'd like to do this professionally or as a hobbyist. If this seems like too much or you want to wait until you've more time to research, consider index investing strategies (I won't delve into these here). And because I'm an investment professional: please do not interpret anything you've read here as personal advice or as a solicitation to buy or sell any securities or types of securities, whatsoever. This has been provided for general informational purposes only. Contact a financial advisor to review your personal circumstances such as time horizon, risk tolerance, liquidity needs, and asset allocation strategies. Again, nothing written herein should be construed as individual advice.\"" }, { "docid": "391156", "title": "", "text": "\"I can see two possibilities. Either a deal is struck that someone (the company itself, or a large owner) buys out the remaining shares. This is the scenario @mbhunter is talking about, so I won't go too deeply into it, but it simply means that you get money in your bank account for the shares in question the same as if you were to sell them for that price (in turn possibly triggering tax effects, etc.). I imagine that this is by far the most common approach. The other possibility is that the stock is simply de-listed from a public stock exchange, and not re-listed elsewhere. In this case, you will still have the stock, and it will represent the same thing (a portion of the company), but you will lose out on most of the \"\"market\"\" part of \"\"stock market\"\". That is, the shares will still represent a monetary value, you will have the same right to a portion of the company's profits as you do now, etc., but you will not have the benefit of the market setting a price per share so current valuation will be harder. Should you wish to buy or sell stock, you will have to find someone yourself who is interested in striking a deal with you at a price point that you feel comfortable with.\"" }, { "docid": "509650", "title": "", "text": "\"While I agree with Ben a lot I feel like his answer is really poor here. You do not call a number to give your credit card information out for a refund. That is ridiculous. Just from his answer - he has had 5 cases of fraud lately - you should know that you shouldn't follow this advice. I personally don't ever give my credit card number over the phone, unless it is the very very very last resort. It is not just about money and safety but it is about time. Every time that you give your number out over the phone there is a chance that the employee on the other end (by either scam or legitimate business) will use or sell your info. So you need to determine if the time saved by doing a transaction over the phone is worth hours/days of your time if your card has a fraud issue. And note that fraud sometimes is easily negated, but if done smartly can be hard to prove via a quick call or email to card company. What should you do? Tell company that you will simply get the refund through your credit card company. And if we go back to time element... You fill out form on card website. Card company goes back to vendor and says - \"\"Why are you asking for card numbers via email?\"\" Card company either cancels vendor contract or more likely helps them understand the technology available so they don't have to do this. Therefore that quick form that you filled out will now keep this company from bugging you again. By going through their archaic \"\"systems\"\" you are enabling their behavior.\"" }, { "docid": "167947", "title": "", "text": "I definitely get that, my company has been really big on ILS’s lately, so in a meeting the other day I was looking at ways to short Cat Bonds.... The problem is you’d have to offer a big premium to someone that you sell the risk too since the whole industry is having to do that now. And on risky areas like Oklahoma or California for earthquakes I couldn’t imagine the premium you’d have to pay since the risk is up front and present. If you don’t want to pay the premium and choose some risk that isn’t as foreseen you should probably have a good method of evaluating that risk. Which is the point I have ran into in my quest to short ILSs." }, { "docid": "504235", "title": "", "text": "There is an approach which suggests that each weekend you should review your positions as if they were stocks to be considered for purchase on Monday. I can't offer advice on picking stocks, but it's fair to say that you need to determine if the criteria you used to buy it the first time is still valid. I own a stock trading at over $300, purchased for $5. Its P/E is still reasonable as the darn E just keeps rising. Unless your criteria is to simply grab small gains, which in my opinion is a losing strategy, an 8% move up would never be a reason to sell, in and of itself. Doing so strikes me as day trading, which I advise againgst." }, { "docid": "102209", "title": "", "text": "ode2k noted the liquidity can very wildly especially 9 months out and there will be little volume even in the largest stocks. Victor noted standard measures of liquidity don't always apply cleanly to options as they are priced using a hybrid of model and market inputs. So your question is generally very hard to answer on SE, but you can get an answer yourself without too much trouble. The best way to get a feel for slippage in your case is to just get quotes. Most systems should let you get a quote for both buying and selling options at the same time. This will give you a feeling for how much you are paying in spread. Do the same for near dated options to get a feeling for spread size when you end up selling. You should factor in some widening of spreads at bad times, but this should get you a feeling for the scale of the slippage problem." }, { "docid": "57994", "title": "", "text": "\"I'm a manager of a charity shop so work with a wide range of unpaid volunteers, which requires an especially soft touch (most of the time, everyone is different) or people will just leave. It takes longer, but the overall results are better and more long-lasting. Think of it like pushing a boat from the docks with your hand, always applying a small pressure to get the boat to gradually move where you want, rather than ramming into the side of a boat with a truck - sure it'll get you there quicker, but will cause lasting damage. It's also best to take it slow, as you need time to learn the business and people. Be clear about your approach with your boss, managing their expectations is important. Anyway, here is what I've learnt in my first year or so doing this job, plus things I've learnt along the way in my previous career as a software engineer (radical career change!) where I've managed people and been managed: 1. Be yourself. Don't pretend to be someone you're not, everyone will see right through you in an instant. You'll change over time as you get used to managing people, that's fine, but always be yourself through that. 1. Say \"\"thank you\"\" to everyone at the end of each day as you say goodbye. Mean it. Think of all the work they've done today for you. 1. Spread the shit evenly. Every job has crap parts, make sure you and everyone else gets their fair share and no more. I regularly hoover, clean the bathroom, wash-up, and so on. 1. Ask, don't tell. If you bark orders, people will do them.. but they'll put no effort into it and you'll distance yourself from them. Ask if they could do something for you. It's a politeness, nobody ever says no unless there is an issue which you need to deal with anyway. 1. Pick your battles. Is it worth moaning at someone for that little infraction? Or can you get over that message another way? i.e. I don't like people having drinks on the till counter, so when I take over to cover for them for a break, I just move it. After a while, no drinks appear on the counter. 1. Be honest. If you don't know, say so.. ask for input. Weigh up the options out loud, then pick one, explain why, and go for it - or better yet, get the person that thought of it working with you (not for you) to implement it. If you're wrong, hold your hand up and try the other suggestion(s). 1. Always take responsibility when things go wrong - that is actually your job. When things go well, use *you* and *we*. If things go badly, sometimes *I*, sometimes *we*, but never *you*. 1. Always be pro-active with money. If you owe your staff money for any reason, chase them to give it to them, never let them chase you. If there even *might* be any problems at all with money, let everyone know as soon as you know. Go out of your way to ensure they get what they're owed *now*, not later. I just did this today actually, I forgot to do expenses for someone and switched over the till so there wasn't enough cash in the new till to cover it.. so I just took it from the money to bank, and marked down why there was a discrepancy on the paperwork and will do the same tomorrow when that doesn't match by the opposite amount. I should not do this at all, but it's the right thing to do. 1. Listen carefully. Often employees have problems but won't bring them up, either they don't think anything will get done, or they don't want to get someone in trouble, or something else. However, if you listen and observe carefully, often there are clues to the things that are bothering them and you'll find ways to tackle them. 1. Don't run a team meeting until you know everyone, if you can avoid it. You don't know shit about how the company works, who the people are, what makes them tick, what they do, and so on. All you'll do is come across as a bit of a tool, and distance yourself from them (as boss). When you do run one, just guide it, don't lead it. Always hand over control of the conversation as much as possible, except of course where you've got things that they need to hear. 1. Never joke about your 'power'. i.e. Don't mess about saying how you'll fire them if blah, or how you'll give them all the shit work, or mention pay jokingly, etc. I had a boss that did that when drunk, not in a serious way at all, and he was very widely hated for pretty well nothing other than that. It served as a constant reminder that he's separate from us. 1. Give people room, but don't be taken for a ride. If someone is late once, fine, I wouldn't even mention it. Late again, maybe I'd make a light joke of it. Late again.. we'll have a chat.. always listen to what they have to say, is there any way you can help? But, don't be taken for a ride. I've had people pick me up on being late the very first time I was late, and you know what, I was more late for that job from then on than I've ever been before or since. 1. Try to get your employees to come up with ideas to move the business forwards. It's very easy to look at a business and say \"\"we need this, that, and the other doing.. like this!\"\". But you need to get your employees to buy into it, or they just won't do it properly. It'll be like getting blood out of a stone to start with, but if you're patient and support their ideas most people will come around. You *need* their input as they know their job better than you. 1. EDIT: Always be clear what you want from people, when. Speak with them about the task(s) before-hand to make sure they're comfortable with it and think it can be done in the time. So many times I've been given tasks with unrealistic deadlines, the manager hasn't wanted to listen to my protests, then wonders why it didn't get done in time. It's crazy really, wanting something to be possible doesn't make it so. *A (not so) Quick Example* One volunteer said to me that we should halve the price of all the fiction books to .99 to compete with other shops. I personally don't think that's a good idea (our shop has better quality stock and is much more organised), but I have no evidence to the contrary, and I honestly don't really know.. so I say go for it and support it completely as a good idea. We tried it for a month, and we made exactly the same amount of money.. sold twice as many books, but no extra cash. So it was valuable to do, and we discovered that maybe 1.49 might be a good option to try. But, far more importantly, they saw their ideas put into action right away, and saw the results of that. It empowered them, which is incredibly important for a wide variety of reasons that are too much to go into here, but basically it makes them feel more respected, enjoy their job more, think more about the business, and so on - you know what it's like when you're empowered, how good it feels. However, it's being empowered with the support that's important, something which you personally going into your new job don't feel you have, which leads to the anxiety and so on I'm sure you're feeling now. Don't put your employees in that position if you can help it. There is also another reason why I outright supported their idea from the offset. It didn't work (although we didn't loose anything) and I thought it wouldn't, but I can say \"\"*we* tried\"\". It wasn't down to that one person, they didn't feel bad that it didn't work because I was right behind it, and it's my job to take responsibility. If it had been *their* idea that had failed, they wouldn't give any ideas ever again, and everyone else would be put off too. As soon as anyone tries to take personal responsibility, and they will, stick to your guns in supporting them.. stronger than ever. Now we're getting a lot of ideas all the time, they're having in-depth discussions amongst each other, they're pro-active, and so on. As a business we're doing much better now because of it.. profits are up 15% from last year and we've only just begun to kick things off, and that's going against a national trend downwards. We've had several critical changes to our shop layout, back-room organisation, results reporting, stock handling processes, and so on.. all from volunteer ideas and feedback. So the 15% is actually the tip of the iceberg, what we've got in place now should allow us to grow more quickly too. And remember, you can make suggestions too of course.. but they're just that, suggestions. Suggest them to your employees, speak with several of them, then get back to them when you've made a decision. Don't say \"\"I'm thinking of trying this\"\", say \"\"I was just thinking.. what about this? Do you think it would work?\"\" and talk about it. Think of arguments against your idea, see if they counter them, and so on. Now.. how many of these changes did I think of before-hand and want to enact? About half.. so we've got a significant number of successful ideas that I personally hadn't thought of, everyone's happier and working harder for the business, and we have a bright future. I have more ideas too, and people listen to and respect them now just like I have with them. I think that's the key to it all really. Show your employees respect, and they'll show you it in return.\"" }, { "docid": "447651", "title": "", "text": "Is the remaining amount tax free? As in, if the amount shown (which I can sell) on etrade is $5000 then if I sell the entire shares will my bank account be increased by $5000? The stocks they sell are withholding. So let's say you had $7000 of stock and they sold $2000 for taxes. That leaves you with $5000. But the actual taxes paid might be more or less than $2000. They go in the same bucket as the rest of your withholding. If too much is withheld, you get a refund. Too little and you owe them. Way too little and you have to pay penalties. At the end of the year, you will show $7000 as income and $2000 as withheld for taxes from that transaction. You may also have a capital gain if the stock increases in price. They do not generally withhold on stock sales, as they don't necessarily know what was your gain and what was your loss. You usually have to handle that yourself. The main point that I wanted to make is that the sale is not tax free. It's just that you already had tax withheld. It may or may not be enough." }, { "docid": "424437", "title": "", "text": "Keeping your “big emergency” fund in stocks if you have 12 months income saved is OK. However you should keep your “small emergency” fund in cash. (However I find that even my stock broker accounts have some cash in them, as I like to let the dividends build up enough to make the dealing charges worthwhile. You don’t wish to be forced to sell at a bad time due to your boiler needing replacing or your car breaking down. However if you lost your job in the same week that your boiler broke down and your car needed replacing then being forced to sell stocks at a bad time is not much of an issue. Also if you are saving say 1/3 of your income each month and you have a credit card with large unused credit limit that is paid of each month, then most “small emergency” that are under 2/3 of your monthly income can be covered on the credit card with little or no interest charges. One option is to check you bank balance on the day after you are paid, and if it is more than 2x your monthly income, then move some of it to long term savings, but only if you tend to spend a lot less then you earn most months." }, { "docid": "181069", "title": "", "text": "No, CFD is not viable as a long term trading strategy. You have a minimum margin to maintain, and you are given X days to top up your margin should you not meet the margin requirements. Failure to meet margin requirements will result in a forced sell where you are no longer able to hold onto the stock. A long term trading strategy is where you hold onto the stock through the bad times of the company and keep it long enough to see the good times. However, with CFD, you may be forced to sell before you see the good times. In addition, you incur additional lending charges (e.g. 4%-6%) for the ability to leverage." }, { "docid": "8950", "title": "", "text": "\"First of all, never is too late to develop good habits. So, you know what you want to do and you are going about the how now... First, you should pay off any consumer debt except from mortgage which should be planned for. Prioritize your consumer debt (credit cards, consumer loans, etc) according to the interest rates, starting with the one with the highest interest and going to the one with the lowest one. Because you should make quite the investments to pay off this interest debt and still make a profit. Second, you should start saving some money. The 10% rule of thumb is a good one and for starters having aside the money you need to get by for at least 3 months is quite okay. As they say, cash is king. Now, that you actually realize the amount you can spare each month to start investing (assuming you had to do something of the aforementioned) it's time to see the risk you are comfortable taking. Different risk-taking views lead to different investing routes. So, assuming once again that you are risk averse (having a newborn baby and all) and that you want something more than just a savings account, you can start looking for things that don't require much attention (even more so if you are going on you own about it) such as low risk mutual funds, ETF (Exchange Traded Funds) and index funds to track indexes like FTSE and S&P500 (you could get an average annual return of 10-12%, just google \"\"top safe etfs\"\" for example and you could take a quick look at credible sites like forbes etc). Also, you can take a look at fixed income options such as government bonds. Last but not least, you can always get your pick at some value companies stocks (usually big companies that have proven track record, check warren buffet on this). You should look for stocks that pay dividends since you are in for the long run and not just to make a quick buck. I hope I helped a bit and as always be cautious about investing since they have some inherent risks. If you don't feel comfortable with making your own investment choices you should contact a specialist like a financial planner or advisor. No matter what the case may be on this, you should still educate yourself on this... just to get a grasp on this.\"" }, { "docid": "180644", "title": "", "text": "Your question is a bit odd in that you are mixing long-term fundamental analysis signals which are generally meant to work on longer time frames with medium term trading where these fundamental signals are mostly irrelevant. Generally you would buy-and-hold on a fundamental signal and ride the short-term fluctuations if you believe you have done good analysis. If you would like to trade on the 2-6 month time scale you would need a signal that works on that sort of time scale. Some people believe that technical analysis can give you those kind of signals, but there are many, many, many different technical signals and how you would trade using them is highly dependent on which one you believe works. Some people do mix fundamental and technical signals, but that can be very complicated. Learning a good amount about technical analysis could get you started. I will note, though, that studies of non-professionals continuously show that the more frequently people trade the more on they underperform on average in the long term when compared with people that buy-and-hold. An aside on technical analysis: michael's comment is generally correct though not well explained. Say Bob found a technical signal that works and he believes that a stock that costs $10 dollars should be $11. He buys it and makes money two months later when the rest of the market figures out the right price is $11 and he sells at that price. This works a bunch of times and he now publishes how the signal works on Stack Exchange to show everyone how awesome he is. Next time, Bob's signal finds a different stock at $10 that should be $11, but Anna just wrote a computer program that checks that signal Bob published faster than he ever could. The computer program buys as much as it can in milliseconds until the price is $11. Bob goes to buy, but now it is too late the price is already $11 and he can't make any money. Eventually, people learn to anticipate/adjust for this signal and even Anna's algorithms don't even work anymore and the hunt for new signals starts again." }, { "docid": "574654", "title": "", "text": "I would say that, for the most part, money should not be invested in the stock market or real estate. Mostly this money should be kept in savings: I feel like your emergency fund is light. You do not indicate what your expenses are per month, but unless you can live off of 1K/month, that is pretty low. I would bump that to about 15K, but that really depends upon your expenses. You may want to go higher when you consider your real estate investments. What happens if a water heater needs replacement? (41K left) EDIT: As stated you could reduce your expenses, in an emergency, to 2K. At the bare minimum your emergency fund should be 12K. I'd still be likely to have more as you don't have any money in sinking funds or designated savings and the real estate leaves you a bit exposed. In your shoes, I'd have 12K as a general emergency fund. Another 5K in a car fund (I don't mind driving a 5,000 car), 5k in a real estate/home repair fund, and save about 400 per month for yearly insurance and tax costs. Your first point is incorrect, you do have debt in the form of a car lease. That car needs to be replaced, and you might want to upgrade the other car. How much? Perhaps spend 12K on each and sell the existing car for 2K? (19K left). Congratulations on attempting to bootstrap a software company. What kind of cash do you anticipate needing? How about keeping 10K designated for that? (9K left) Assuming that medical school will run you about 50K per year for 4 years how do you propose to pay for it? Assuming that you put away 4K per month for 24 months and have 9K, you will come up about 95K short assuming some interests in your favor. The time frame is too short to invest it, so you are stuck with crappy bank rates." }, { "docid": "513281", "title": "", "text": "\"First, let me say that $1000 is not that much of amount to invest in stocks. You need to remember that each transaction (buy/sell) has fees, which vary between $4-$40 (depending on the broker, you mentioned Scottrade - they charge $7 per transaction for stocks and about twice as much for some mutual funds). Consider this: you invest $1000, you gain $100. You'll pay $15 in fees just to buy/sell, that's 1.5% expense ratio. If you invest in more than 1 stock - multiply your fees. To avoid that you can look into mutual funds. Different brokers offer different funds for free, and almost all of them carry many of the rest for a fee. When looking into funds, you can find their expense ratio and compare. Remember that a fund with 1% expense ratio diversifies and invests in many stocks, while for you 1.5% expense ratio is for investing in a single stock. Is it a good idea to invest only in US or diversify worldwide? You can invest in the US, but in funds that diversify worldwide or across industries. Generally it is a good idea to diversify. I am 28. Should I be a conservative investor or take some risks? Depends on how bad of a shape will you be if you lose all your principle. What online brokerage service is the best? I have heard a lot about Scotttrade but want to be sure before I start. It seems to be the least expensive and most user-friendly to me. \"\"Best\"\" is a problematic term. Scottrade is OK, E*Trade is OK, you can try Sharebuilder, Ameritrade, there are several \"\"discount\"\" online brokers and plenty of on-line reviews and comparisons amongst them. What is a margin account and how would it affect my investing? From what I understand it comes into play when an investor borrows money from the broker. Do I need to use it at all as I won't be investing on a big scale yet. You understand right. There are rules to use margin accounts, and with the amount you have I'd advise against them even if you get approved. Read through the brokers' FAQ's on their requirement. Should I keep adding money on a monthly basis to my brokerage account to give me more money to invest or keep it at a certain amount for an extended period of time? Sharebuilder has a mechanism to purchase monthly at discounted prices. But be careful, they give you discounted prices to buy, but not to sell. You may end up with a lot of positions, and the discounts you've gotten to buy will cause you spend much more on selling. Generally, averaging (investing monthly) is a good way to save and mitigate some risks, but the risks are still there. This is good only for long term savings. How should my breakdown my investments in terms of bonds vs stocks? Depends on your vulnerability and risk thresholds.\"" } ]

[ { "docid": "165970", "title": "", "text": "The standard answer on any long term stock is hold on during the rough times. You have not lost anything until you sell. If your concern is just that you are not certain where the stock price is headed, unless you need the money now and can not afford to hold on to the stock then I would hold it." } ]

[ { "docid": "585494", "title": "", "text": "\"Pay off the credit cards. From now on, pay off the credit cards monthly. Under no circumstances should you borrow money. You have net worth but no external income. Borrowing is useless to you. $200,000 in two bank accounts, because if one bank collapses, you want to have a spare while you wait for the government to pay off the guarantee. Keep $50,000 in checking and another $50k in savings. The remainder put into CDs. Don't expect interest income beyond inflation. Real interest rates (after inflation) are often slightly negative. People ask why you might keep money in the bank rather than stocks/bonds. The problem is that stocks/bonds don't always maintain their value, much less go up. The bank money won't gain, but it won't suddenly lose half its value either. It can easily take five years after a stock market crash for the market to recover. You don't want to be withdrawing from losses. Some people have suggested more bonds and fewer stocks. But putting some of the money in the bank is better than bonds. Bonds sometimes lose money, like stocks. Instead, park some of the money in the bank and pick a more aggressive stock/bond mixture. That way you're never desperate for money, and you can survive market dips. And the stock/bond part of the investment will return more at 70/30 than 60/40. $700,000 in stock mutual funds. $300,000 in bond mutual funds. Look for broad indexes rather than high returns. You need this to grow by the inflation rate just to keep even. That's $20,000 to $30,000 a year. Keep the balance between 70/30 and 75/25. You can move half the excess beyond inflation to your bank accounts. That's the money you have to spend each year. Don't withdraw money if you aren't keeping up with inflation. Don't try to time the market. Much better informed people with better resources will be trying to do that and failing. Play the odds instead. Keep to a consistent strategy and let the market come back to you. If you chase it, you are likely to lose money. If you don't spend money this year, you can save it for next year. Anything beyond $200,000 in the bank accounts is available for spending. In an emergency you may have to draw down the $200,000. Be careful. It's not as big a cushion as it seems, because you don't have an external income to replace it. I live in southern California but would like to move overseas after establishing stable investments. I am not the type of person that would invest in McDonald's, but would consider other less evil franchises (maybe?). These are contradictory goals, as stated. A franchise (meaning a local business of a national brand) is not a \"\"stable investment\"\". A franchise is something that you actively manage. At minimum, you have to hire someone to run the franchise. And as a general rule, they aren't as turnkey as they promise. How do you pick a good manager? How will you tell if they know how the business works? Particularly if you don't know. How will you tell that they are honest and won't just embezzle your money? Or more honestly, give you too much of the business revenues such that the business is not sustainable? Or spend so much on the business that you can't recover it as revenue? Some have suggested that you meant brand or stock rather than franchise. If so, you can ignore the last few paragraphs. I would be careful about making moral judgments about companies. McDonald's pays its workers too little. Google invades privacy. Exxon is bad for the environment. Chase collects fees from people desperate for money. Tesla relies on government subsidies. Every successful company has some way in which it can be considered \"\"evil\"\". And unsuccessful companies are evil in that they go out of business, leaving workers, customers, and investors (i.e. you!) in the lurch. Regardless, you should invest in broad index funds rather than individual stocks. If college is out of the question, then so should be stock investing. It's at least as much work and needs to be maintained. In terms of living overseas, dip your toe in first. Rent a small place for a few months. Find out how much it costs to live there. Remember to leave money for bigger expenses. You should be able to live on $20,000 or $25,000 a year now. Then you can plan on spending $35,000 a year to do it for real (including odd expenses that don't happen every month). Make sure that you have health insurance arranged. Eventually you may buy a place. If you can find one that you can afford for something like $100,000. Note that $100,000 would be low in California but sufficient even in many places in the US. Think rural, like the South or Midwest. And of course that would be more money in many countries in South America, Africa, or southern Asia. Even southern and eastern Europe might be possible. You might even pay a bit more and rent part of the property. In the US, this would be a duplex or a bed and breakfast. They may use different terms elsewhere. Given your health, do you need a maid/cook? That would lean towards something like a bed and breakfast, where the same person can clean for both you and the guests. Same with cooking, although that might be a second person (or more). Hire a bookkeeper/accountant first, as you'll want help evaluating potential purchases. Keep the business small enough that you can actively monitor it. Part of the problem here is that a million dollars sounds like a lot of money but isn't. You aren't rich. This is about bare minimum for surviving with a middle class lifestyle in the United States and other first world countries. You can't live like a tourist. It's true that many places overseas are cheaper. But many aren't (including much of Europe, Japan, Australia, New Zealand, etc.). And the ones that aren't may surprise you. And you also may find that some of the things that you personally want or need to buy are expensive elsewhere. Dabble first and commit slowly; be sure first. Include rarer things like travel in your expenses. Long term, there will be currency rate worries overseas. If you move permanently, you should certainly move your bank accounts there relatively soon (perhaps keep part of one in the US for emergencies that may bring you back). And move your investments as well. Your return may actually improve, although some of that is likely to be eaten up by inflation. A 10% return in a country with 12% inflation is a negative real return. Try to balance your investments by where your money gets spent. If you are eating imported food, put some of the investment in the place from which you are importing. That way, if exchange rates push your food costs up, they will likely increase your investments at the same time. If you are buying stuff online from US vendors and having it shipped to you, keep some of your investments in the US for the same reason. Make currency fluctuations work with you rather than against you. I don't know what your circumstances are in terms of health. If you can work, you probably should. Given twenty years, your million could grow to enough to live off securely. As is, you would be in trouble with another stock market crash. You'd have to live off the bank account money while you waited for your stocks and bonds to recover.\"" }, { "docid": "372884", "title": "", "text": "\"You need to get the current tax software, the 2013 filing software is out already, even though it needs to update itself before filing, as the final forms aren't ready yet. Then you will look carefully at Schedule E to understand what gets written off. I see you are looking at the $2200 rent vs your own rent of $2100, but of course, the tax form doesn't care about your rent. You offset the expenses of that house against the income. The expenses are the usual suspects, mortgage interest, property tax, repairs, etc. But there's one big thing new landlords are prone to forgetting. Depreciation. It's not optional. Say the house cost you $400K. This is your basis. You need to separate the value of land which is not depreciated. For a condo with no land it can be as little as 10%, when we bought our house, for insurance purposes, the land was nearly 40% of the full value. Say you do the research and decide 30% (for land), then 70% = $280K. Depreciation is taken each year over a 27.5 year period, or just over $10,000 per year. (Note, the forms will help you get your year 1 number, as you didn't have a full year.) This depreciation helps with your cash flow during the year (as you should do the math, and if you keep the house, adjust your W4 withholdings for 2014, that lump sum you'll get in April won't pay the bills each month) but is 'recaptured' on sale. At some point in the future, you may save enough to buy a house where you wish to live, but need to sell the rental. Consider a 1031 Exchange. It's a way to sell a rental and buy a new one without triggering a taxable event. What I don't know is how long the new house must be a rental before the IRS would then allow you to move in. The same way you turned your home into a rental, a rental can be turned back to a primary residence. I just doubt you can do it right after the purchase. As fellow member @littleadv would advise, \"\"get professional advice.\"\" And he's right. I've just offered what you might consider. The first year tax return with that Schedule E is the toughest as it's brand new. The next year is simple in comparison. The question of selling immediately is tough. Only you can decide whether the risk of keeping it is too great. You're saying you don't have the money to cover two month's vacancy. That scares me. I'd focus on beefing up the emergency account. And securing a credit line. You mentioned the tax savings. My opinion is that for any investment,the tax tail should never wag the investing dog. Buy or sell a stock based on the stock, not the potential tax bill for the sale. In your situation, the rent and expenses will cancel each other, and the depreciation is a short term loan, from a tax perspective. If you sold today, what do you net? If you analyzed the numbers now, what is your true income from the property each year? Is that return worth it? A good property will provide cash flow, principal reduction each year, and normal increase in value. This takes a bit of careful looking at the numbers. You might feel you're just breaking even, but if the principal is $12K less after a year, that's something you shouldn't ignore. On the other hand, an exact 'break-even' with little equity at stake offered you a leveraged property where any gains are a magnified percentage of what you have at risk. Last - welcome to Money.SE - consider adding some more details to your profile.\"" }, { "docid": "362473", "title": "", "text": "\"Seems like you are concerned with something called assignment risk. It's an inherent risk of selling options: you are giving somebody the right, but not the obligation, to sell to you 100 shares of GOOGL. Option buyers pay a premium to have that right - the extrinsic value. When they exercise the option, the option immediately disappears. Together with it, all the extrinsic value disappears. So, the lower the extrinsic value, the higher the assignment risk. Usually, option contracts that are very close to expiration (let's say, around 2 to 3 weeks to expiration or less) have significantly lower extrinsic value than longer option contracts. Also, generally speaking, the deeper ITM an option contract is, the lower extrinsic value it will have. So, to reduce assignment risk, I usually close out my option positions 1-2 weeks before expiration, especially the contracts that are deep in the money. edit: to make sure this is clear, based on a comment I've just seen on your question. To \"\"close out an options position\"\", you just have to create the \"\"opposite\"\" trade. So, if you sell a Put, you close that by buying back that exact same put. Just like stock: if you buy stock, you have a position; you close that position by selling the exact same stock, in the exact same amount. That's a very common thing to do with options. A post in Tradeking's forums, very old post, but with an interesting piece of data from the OCC, states that 35% of the options expire worthless, and 48% are bought or sold before expiration to close the position - only 17% of the contracts are actually exercised! (http://community.tradeking.com/members/optionsguy/blogs/11260-what-percentage-of-options-get-exercised) A few other things to keep in mind: certain stocks have \"\"mini options contracts\"\", that would correspond to a lot of 10 shares of stock. These contracts are usually not very liquid, though, so you might not get great prices when opening/closing positions you said in a comment, \"\"I cannot use this strategy to buy stocks like GOOGL\"\"; if the reason is because 100*GOOGL is too much to fit in your buying power, that's a pretty big risk - the assignment could result in a margin call! if margin call is not really your concern, but your concern is more like the risk of holding 100 shares of GOOGL, you can help manage that by buying some lower strike Puts (that have smaller absolute delta than your Put), or selling some calls against your short put. Both strategies, while very different, will effectively reduce your delta exposure. You'd get 100 deltas from the 100 shares of GOOGL, but you'd get some negative deltas by holding the lower strike Put, or by writing the higher strike Call. So as the stock moves around, your account value would move less than the exposure equivalent to 100 shares of stock.\"" }, { "docid": "271076", "title": "", "text": "Any way you look at it, this is a terrible idea. Cars lose value. They are a disposable item that gets used up. The more expensive the car, the more value they lose. If you spend $100,000 on a new car, in four years it will be worth less than $50,000.* That is a lot of money to lose in four years. In addition to the loss of value, you will need to buy insurance, which, for a $100,000 car, is incredible. If your heart is set on this kind of car, you should definitely save up the cash and wait to buy the car. Do not get a loan. Here is why: Your plan has you saving $1,300 a month ($16,000 a year) for 6.5 years before you will be able to buy this car. That is a lot of money for a long range goal. If you faithfully save this money that long, and at the end of the 6.5 years you still want this car, it is your money to spend as you want. You will have had a long time to reconsider your course of action, but you will have sacrificed for a long time, and you will have the money to lose. However, you may find out a year into this process that you are spending too much money saving for this car, and reconsider. If, instead, you take out a loan for this car, then by the time you decide the car was too much of a stretch financially, it will be too late. You will be upside down on the loan, and it will cost you thousands to sell the car. So go ahead and start saving. If you haven't given up before you reach your goal, you may find that in 6.5 years when it is time to write that check, you will look back at the sacrifices you have made and decide that you don't want to simply blow that money on a car. Consider a different goal. If you invest this $1300 a month and achieve 8% growth, you will be a millionaire in 23 years. * You don't need to take my word for it. Look at the car you are interested in, go to kbb.com, select the 2012 version of the car, and look up the private sale value. You'll most likely see a price that is about half of what a new one costs." }, { "docid": "106740", "title": "", "text": "\"TL;DR; There is no silver bullet. You have to decide how much to invest and when on your own. Averaging down definition: DEFINITION of 'Average Down' The process of buying additional shares in a company at lower prices than you originally purchased. This brings the average price you've paid for all your shares down. BREAKING DOWN 'Average Down' Sometimes this is a good strategy, other times it's better to sell off a beaten down stock rather than buying more shares. So let us tackle your questions: At what percentage drop of the stock price should I buy more shares. (Ex: should I wait for the price to fall by 5% or 10% to buy more.) It depends on the behaviour of the security and the issuer. Is it near its historical minimum? How healthy is the issuer? There is no set percentage. You can maximize your gains or your losses if the security does not rebound. Investopedia: The strategy is often favored by investors who have a long-term investment horizon and a contrarian approach to investing. A contrarian approach refers to a style of investing that is against, or contrary, to the prevailing investment trend. (...) On the other side of the coin are the investors and traders who generally have shorter-term investment horizons and view a stock decline as a portent of things to come. These investors are also likely to espouse trading in the direction of the prevailing trend, rather than against it. They may view buying into a stock decline as akin to trying to \"\"catch a falling knife.\"\" Your second question: How many additional shares should I buy. (Ex: Initially I bought 10 shares, should I buy 5,10 or 20.) That depends on your portfolio allocation before and after averaging down and your investor profile (risk apettite). Take care when putting more money on a falling security, if your portfolio allocation shifts too much. That may expose you to risks you shouldn't be taking. You are assuming a risk for example, if the market bears down like 2008: Averaging down or doubling up works well when the stock eventually rebounds because it has the effect of magnifying gains, but if the stock continues to decline, losses are also magnified. In such cases, the investor may rue the decision to average down rather than either exiting the position or failing to add to the initial holding. One of the pitfalls of averaging down is when the security does not rebound, and you become too attached to be able to cut your losses and move on. Also if you are bullish on a position, be careful not to slip the I down and add a T on said position. Invest with your head, not your heart.\"" }, { "docid": "151132", "title": "", "text": "\"First, keep in mind that there are generally 2 ways to buy a corporation's shares: You can buy a share directly from the corporation. This does not happen often; it usually happens at the Initial Public Offering [the first time the company becomes \"\"public\"\" where anyone with access to the stock exchange can become a part-owner], plus maybe a few more times during the corporations existence. In this case, the corporation is offering new ownership in exchange for a price set the corporation (or a broker hired by the corporation). The price used for a public offering is the highest amount that the company believes it can get - this is a very complicated field, and involves many different methods of evaluating what the company should be worth. If the company sets the price too low, then they have missed out on possible value which would be earned by the previous, private shareholders (they would have gotten the same share % of a corporation which would now have more cash to spend, because of increased money paid by new shareholders). If the company sets the price too high, then the share subscription might only be partially filled, so there might not be enough cash to do what the company wanted. You can buy a share from another shareholder. This is more common - when you see the company's share price on the stock exchange, it is this type of transaction - buying out other current shareholders. The price here is simply set based on what current owners are willing to sell at. The \"\"Bid Price\"\" listed by an exchange is the current highest bid that a purchaser is offering for a single share. The \"\"Ask Price\"\" is the current lowest offer that a seller is offering to sell a single share they currently own. When the bid price = the ask price, a share transaction happens, and the most recent stock price changes.\"" }, { "docid": "109455", "title": "", "text": "\"You have heard the old adage \"\"Buy low, sell high\"\", right? That sounds so obvious that you'd have to wonder why they would ever bother coining such an expression. It should rank up there with \"\"Don't walk in front of a moving car\"\" on the Duh scale of advice. Well, your question demonstrates exactly why it isn't quite so obvious in the real world and that people need to be reminded of it. So, in your example, the stock prices are currently low (relative to what they have been). So per that adage, do you sell or buy when prices are low? Hint: It isn't sell. Yes. Your gut is going to tell you the exact opposite thanks to the fact that our brains are unfortunately wired to make us susceptible to the loss aversion fallacy. When the market has undergone a big drop is the WORST time to stop contributing (buying stocks). This example might help get your brain and gut to agree a little more easily: If you were talking about any other non-investment commodity, cars for instance. Your question equates to.. I really need a car, but the prices have been dropping like crazy lately. Maybe I should wait until the car dealers start raising their prices again before I buy one. Dollar Cost Averaging As littleadv suggested, if you have an automatic payroll deduction for your retirement account, you are getting the benefit of Dollar Cost Averaging. Because you are investing the same amount on a scheduled interval, you are buying more shares when they are cheap and fewer when they are expensive. It is like an automatic buy low strategy is built into the account. The alternative, which you are implying, is a market timing strategy. Under this strategy, instead of investing regularly you try to get in and out of investments right before they go up/drop. There are two MAJOR flaws with this approach: 1) Your brain will work against you (see above) and encourage you to do the exact opposite of what you should be doing. 2) Unless you are clairvoyant, this strategy isn't much better than gambling. If you are lucky it can work, but because of #1, the odds are stacked against you.\"" }, { "docid": "509879", "title": "", "text": "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." }, { "docid": "554997", "title": "", "text": "\"An attempt at a simple answer for the normal investor: A normal investor buys stock then later sells that stock. (This is known as \"\"going long\"\", as opposed to \"\"going short\"\"). For the normal investor, a stop order (of either kind) is only used when selling. A stop-loss sell order (or stop sell) is used to sell your stock when it has fallen too much in price, and you don't want to suffer more losses. If the stock is at $50, you could enter a stop sell at $40, which means if the stock ever falls to $40 or lower, your stock will be sold at whatever price is available (e.g. $35). A stop-loss limit sell order (or stop limit sell) is the same, except you are also saying \"\"but don't sell for less than my limit price\"\". So you can enter a stop limit sell at $40 with a limit of $39, meaning that if the stock falls to $40, you will then have a limit order in effect to sell the stock at $39 or higher. Thus your stock will never be sold at $35 or any value below $39, but of course, if the stock falls fast from $40 to $35, your limit sell at $39 will not be done and you will be left still owning the stock (worth at that moment $35, say).\"" }, { "docid": "418003", "title": "", "text": "I've read a nice rule of thumb somewhere that you should consider: You should invest (100-YOURAGE)% of your money in stock The rest should be something less volatile and more liquid, so you have some money when the stock market goes down and you need some money nevertheless. So you would start with buying about 75% stock and balance your stock percentage over time by buing more secure assets to keep the stock percentage at the desired level. At some time you might need to sell stock to rebalance and invest in more secure assets." }, { "docid": "528475", "title": "", "text": "\"This is an old post I feel requires some more love for completeness. Though several responses have mentioned the inherent risks that currency speculation, leverage, and frequent trading of stocks or currencies bring about, more information, and possibly a combination of answers, is necessary to fully answer this question. My answer should probably not be the answer, just some additional information to help aid your (and others') decision(s). Firstly, as a retail investor, don't trade forex. Period. Major currency pairs arguably make up the most efficient market in the world, and as a layman, that puts you at a severe disadvantage. You mentioned you were a student—since you have something else to do other than trade currencies, implicitly you cannot spend all of your time researching, monitoring, and investigating the various (infinite) drivers of currency return. Since major financial institutions such as banks, broker-dealers, hedge-funds, brokerages, inter-dealer-brokers, mutual funds, ETF companies, etc..., do have highly intelligent people researching, monitoring, and investigating the various drivers of currency return at all times, you're unlikely to win against the opposing trader. Not impossible to win, just improbable; over time, that probability will rob you clean. Secondly, investing in individual businesses can be a worthwhile endeavor and, especially as a young student, one that could pay dividends (pun intended!) for a very long time. That being said, what I mentioned above also holds true for many large-capitalization equities—there are thousands, maybe millions, of very intelligent people who do nothing other than research a few individual stocks and are often paid quite handsomely to do so. As with forex, you will often be at a severe informational disadvantage when trading. So, view any purchase of a stock as a very long-term commitment—at least five years. And if you're going to invest in a stock, you must review the company's financial history—that means poring through 10-K/Q for several years (I typically examine a minimum ten years of financial statements) and reading the notes to the financial statements. Read the yearly MD&A (quarterly is usually too volatile to be useful for long term investors) – management discussion and analysis – but remember, management pays themselves with your money. I assure you: management will always place a cherry on top, even if that cherry does not exist. If you are a shareholder, any expense the company pays is partially an expense of yours—never forget that no matter how small a position, you have partial ownership of the business in which you're invested. Thirdly, I need to address the stark contrast and often (but not always!) deep conflict between the concepts of investment and speculation. According to Seth Klarman, written on page 21 in his famous Margin of Safety, \"\"both investments and speculations can be bought and sold. Both typically fluctuate in price and can thus appear to generate investment returns. But there is one critical difference: investments throw off cash flow for the benefit of the owners; speculations do not. The return to the owners of speculations depends exclusively on the vagaries of the resale market.\"\" This seems simple and it is; but do not underestimate the profound distinction Mr. Klarman makes here. (and ask yourself—will forex pay you cash flows while you have a position on?) A simple litmus test prior to purchasing a stock might help to differentiate between investment and speculation: at what price are you willing to sell, and why? I typically require the answer to be at least 50% higher than the current salable price (so that I have a margin of safety) and that I will never sell unless there is a material operating change, accounting fraud, or more generally, regime change within the industry in which my company operates. Furthermore, I then research what types of operating changes will alter my opinion and how severe they need to be prior to a liquidation. I then write this in a journal to keep myself honest. This is the personal aspect to investing, the kind of thing you learn only by doing yourself—and it takes a lifetime to master. You can try various methodologies (there are tons of books) but overall just be cautious. Money lost does not return on its own. I've just scratched the surface of a 200,000 page investing book you need to read if you'd like to do this professionally or as a hobbyist. If this seems like too much or you want to wait until you've more time to research, consider index investing strategies (I won't delve into these here). And because I'm an investment professional: please do not interpret anything you've read here as personal advice or as a solicitation to buy or sell any securities or types of securities, whatsoever. This has been provided for general informational purposes only. Contact a financial advisor to review your personal circumstances such as time horizon, risk tolerance, liquidity needs, and asset allocation strategies. Again, nothing written herein should be construed as individual advice.\"" }, { "docid": "150809", "title": "", "text": "You are not allowed to pick and choose what years to take a loss once the stock/fund is sold. While I realize it might be too late for you to do anything now, in the future if members should read this, they might consider doing a Roth conversion during that year they will have $3000 in losses. This way they will show some income that can be offset by that loss, effectively getting a free conversion to the Roth." }, { "docid": "550643", "title": "", "text": "If you can afford the cost and risk of 100 shares of stock, then just sell a put option. If you can only afford a few shares, you can still use the information the options market is trying to give you -- see below. A standing limit order to buy a stock is essentially a synthetic short put option position. [1] So deciding on a stock limit order price is the same as valuing an option on that stock. Options (and standing limit orders) are hard to value, and the generally accepted math for doing so -- the Black-Scholes-Merton framework -- is also generally accepted to be wrong, because of black swans. So rather than calculate a stock buy limit price yourself, it's simpler to just sell a put at the put's own midpoint price, accepting the market's best estimate. Options market makers' whole job (and the purpose of the open market) is price discovery, so it's easier to let them fight it out over what price options should really be trading at. The result of that fight is valuable information -- use it. Sell a 1-month ATM put option every month until you get exercised, after which time you'll own 100 shares of stock, purchased at: This will typically give you a much better cost basis (several dollars better) versus buying the stock at spot, and it offloads the valuation math onto the options market. Meanwhile you get to keep the cash from the options premiums as well. Disclaimer: Markets do make mistakes. You will lose money when the stock drops more than the option market's own estimate. If you can't afford 100 shares, or for some reason still want to be in the business of creating synthetic options from pure stock limit orders, then you could maybe play around with setting your stock purchase bid price to (approximately): See your statistics book for how to set ndev -- 1 standard deviation gives you a 30% chance of a fill, 2 gives you a 5% chance, etc. Disclaimer: The above math probably has mistakes; do your own work. It's somewhat invalid anyway, because stock prices don't follow a normal curve, so standard deviations don't really mean a whole lot. This is where market makers earn their keep (or not). If you still want to create synthetic options using stock limit orders, you might be able to get the options market to do more of the math for you. Try setting your stock limit order bid equal to something like this: Where put_strike is the strike price of a put option for the equity you're trading. Which option expiration and strike you use for put_strike depends on your desired time horizon and desired fill probability. To get probability, you can look at the delta for a given option. The relationship between option delta and equity limit order probability of fill is approximately: Disclaimer: There may be math errors here. Again, do your own work. Also, while this method assumes option markets provide good estimates, see above disclaimer about the markets making mistakes." }, { "docid": "513281", "title": "", "text": "\"First, let me say that $1000 is not that much of amount to invest in stocks. You need to remember that each transaction (buy/sell) has fees, which vary between $4-$40 (depending on the broker, you mentioned Scottrade - they charge $7 per transaction for stocks and about twice as much for some mutual funds). Consider this: you invest $1000, you gain $100. You'll pay $15 in fees just to buy/sell, that's 1.5% expense ratio. If you invest in more than 1 stock - multiply your fees. To avoid that you can look into mutual funds. Different brokers offer different funds for free, and almost all of them carry many of the rest for a fee. When looking into funds, you can find their expense ratio and compare. Remember that a fund with 1% expense ratio diversifies and invests in many stocks, while for you 1.5% expense ratio is for investing in a single stock. Is it a good idea to invest only in US or diversify worldwide? You can invest in the US, but in funds that diversify worldwide or across industries. Generally it is a good idea to diversify. I am 28. Should I be a conservative investor or take some risks? Depends on how bad of a shape will you be if you lose all your principle. What online brokerage service is the best? I have heard a lot about Scotttrade but want to be sure before I start. It seems to be the least expensive and most user-friendly to me. \"\"Best\"\" is a problematic term. Scottrade is OK, E*Trade is OK, you can try Sharebuilder, Ameritrade, there are several \"\"discount\"\" online brokers and plenty of on-line reviews and comparisons amongst them. What is a margin account and how would it affect my investing? From what I understand it comes into play when an investor borrows money from the broker. Do I need to use it at all as I won't be investing on a big scale yet. You understand right. There are rules to use margin accounts, and with the amount you have I'd advise against them even if you get approved. Read through the brokers' FAQ's on their requirement. Should I keep adding money on a monthly basis to my brokerage account to give me more money to invest or keep it at a certain amount for an extended period of time? Sharebuilder has a mechanism to purchase monthly at discounted prices. But be careful, they give you discounted prices to buy, but not to sell. You may end up with a lot of positions, and the discounts you've gotten to buy will cause you spend much more on selling. Generally, averaging (investing monthly) is a good way to save and mitigate some risks, but the risks are still there. This is good only for long term savings. How should my breakdown my investments in terms of bonds vs stocks? Depends on your vulnerability and risk thresholds.\"" }, { "docid": "118104", "title": "", "text": "\"Of course CDs are worth it compared to the stock market. In fact, most institutional investors are envious of the CDs you have access to as an individual investor that are unavailable to them. You just need to be competent enough to shop around for the best rates and understand your time horizon. There are several concepts to understand here: Banks give out CDs with competitive rates projecting future interest rates. So while the Federal funds rate is currently extremely low, banks know that in order to get any takers on their CDs they have to factor in the public expectation that rates will rise, so if you lock in a longer term CD you get a competitive rate. Institutional investors do not have access to FDIC insured CDs and the closest analog they participate in are the auctions and secondary markets of US Treasuries. These two types of assets have equivalent default (non-)risk if held to maturity: backed by the full faith and credit of the U.S. Here are the current rates (as of question's date) taken from Vanguard that I can get on CDs versus Treasuries (as an individual investor). Notice that CDs outperform Treasuries across any maturity timescale! For fixed-income and bond allocations, institutional investors are lining up for buying treasuries. And yet here you are saying \"\"CDs are not worth it.\"\" Might want to rethink that. Now going into the stock market as an investor with expectations of those high returns you quote, means you're willing to stay there for the long-term (at least a decade) and stay the course during volatility to actually have any hope of coming up with the average rate of return. Even then, there's the potential downside of risk that you still lose principal after that duration. So given that assumption, it's only fair to compare against >= 10 year CDs which are currently rated at 2 percent APY. In addition, CDs can be laddered -- allowing you to lock-in newer (and potentially higher) rates as they become available. You essentially stagger your buyin into these investments, and either reinvest upon the stilted maturity dates or use as income. Also keep in mind that while personal emergencies requiring quick access to cash can happen at any time, the most common scenario is during the sudden change from a bull market into a recession -- the time when stocks plummet. If you need money right away, selling your stocks at these times would lock in severe losses, whereas with CDs you still won't lose principal with an early exit and the only penalty is usually a sacrifice of a few months of potential interest. It's easy to think of the high yields during a protracted bull market (such as now), but personal finance has a huge behavioral component to it that is largely ignored until it's too late. One risk that isn't taken care of by either CDs or Treasuries is inflation risk. All the rates here and in the original question are nominal rates, and the real return will depend on inflation (or deflation). There are other options here besides CDs, Treasuries, and the stock market to outpace inflation if you'd like to hedge that risk with inflation protection: Series I Savings Bonds and TIPS.\"" }, { "docid": "13299", "title": "", "text": "\"First: do you understand why it dropped? Was it overvalued before, or is this an overreaction to some piece of news about them, or about their industry, or...? Arguably, if you can't answer that, you aren't paying enough attention to have been betting on that individual stock. Assuming you do understand why this price swing occurred -- or if you're convinced you know better than the folks who sold at that price -- do you believe the stock will recover a significant part of its value any time soon, or at least show a nice rate of growth from where it is now? If so, you might want to hold onto it, risking further losses against the chance of recovering part or all of what is -- at this moment -- only a loss on paper. Basically: if, having just seen it drop, you'd still consider buying it at the new price you should \"\"buy it from yourself\"\" and go on from here. That way at least you aren't doing exactly what you hope to avoid, buying high and selling low. Heck, if you really believe in the stock, you could see this as a buying opportunity... On the other hand, if you do not believe you would buy it now at its new price, and if you see an alternative which will grow more rapidly, you should take your losses and move your money to that other stock. Or split the difference if you aren't sure which is better but can figure out approximately how unsure you are. The question is how you move on from here, more than how you got here. What happened happened. What do you think will happen next, and how much are you willing to bet on it? On the gripping hand: This is part of how the market operates. Risk and potential reward tend to be pretty closely tied to each other. You can reduce risk by diversifying across multiple investments so no one company/sector/market can hurt you too badly --- and almost anyone sane will tell you that you should diversify -- but that means giving up some of the chance for big winnings too. You probably want to be cautious with most of your money and go for the longer odds only with a small portion that you can afford to lose on. If this is really stressing you out, you may not want to play with individual stocks. Mutual funds have some volatility too, but they're inherently diversified to a greater or lesser extent. They will rarely delight you, but they won't usually slap you this way either.\"" }, { "docid": "414215", "title": "", "text": "\"From the Times A Reader Q.&A. on G.M.’s Bankruptcy Q. I own G.M. preferred shares. Should I be looking to sell them, or hold on? I bought them at $25 a share when they were issued in late 2001. — Karen, Manhattan A. When a company files for bankruptcy, its various stock and bondholders essentially get in line. The first investors to be repaid are secured debt holders, then senior bond investors, followed by subordinated debt holders. Preferred shareholders are next, and lastly, holders of common stock. In a bankruptcy, preferred shares are usually worthless, much like shares of common stock. But in the case of G.M., there may be some good — or at least somewhat better — news. Most of G.M.’s preferred shares are actually senior notes or “quarterly interest bonds,” which means you will be treated as a bondholder, according to Marilyn Cohen, president of Envision Capital Management. So you will be able to exchange your preferreds for G.M. stock (bondholders will receive 10 percent of the new company’s stock). It’s not the best deal, but it beats the empty bag true preferred shareholders would have been left holding. Of course this is just one example, and you were hoping to get some larger picture. The article stated \"\"In a bankruptcy, preferred shares are usually worthless, much like shares of common stock\"\" which at least is a bit closer to that, if you accept usually as a statistic.\"" }, { "docid": "95415", "title": "", "text": "\"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\"" }, { "docid": "167947", "title": "", "text": "I definitely get that, my company has been really big on ILS’s lately, so in a meeting the other day I was looking at ways to short Cat Bonds.... The problem is you’d have to offer a big premium to someone that you sell the risk too since the whole industry is having to do that now. And on risky areas like Oklahoma or California for earthquakes I couldn’t imagine the premium you’d have to pay since the risk is up front and present. If you don’t want to pay the premium and choose some risk that isn’t as foreseen you should probably have a good method of evaluating that risk. Which is the point I have ran into in my quest to short ILSs." } ]

[ { "docid": "490170", "title": "", "text": "\"You should distinguish between the price and the value of a company: \"\"Price is what you pay, value is what you get\"\". Price is the share price you pay for one share of the company. Value is what a company is worth (based on fundamental analysis, one of the principles of value investing). I would recommend selling the stock only if the company's value has deteriorated due to fundamental changes (e.g. better products from competitors, declining market) and its value is lower than the current share price.\"" } ]

[ { "docid": "585494", "title": "", "text": "\"Pay off the credit cards. From now on, pay off the credit cards monthly. Under no circumstances should you borrow money. You have net worth but no external income. Borrowing is useless to you. $200,000 in two bank accounts, because if one bank collapses, you want to have a spare while you wait for the government to pay off the guarantee. Keep $50,000 in checking and another $50k in savings. The remainder put into CDs. Don't expect interest income beyond inflation. Real interest rates (after inflation) are often slightly negative. People ask why you might keep money in the bank rather than stocks/bonds. The problem is that stocks/bonds don't always maintain their value, much less go up. The bank money won't gain, but it won't suddenly lose half its value either. It can easily take five years after a stock market crash for the market to recover. You don't want to be withdrawing from losses. Some people have suggested more bonds and fewer stocks. But putting some of the money in the bank is better than bonds. Bonds sometimes lose money, like stocks. Instead, park some of the money in the bank and pick a more aggressive stock/bond mixture. That way you're never desperate for money, and you can survive market dips. And the stock/bond part of the investment will return more at 70/30 than 60/40. $700,000 in stock mutual funds. $300,000 in bond mutual funds. Look for broad indexes rather than high returns. You need this to grow by the inflation rate just to keep even. That's $20,000 to $30,000 a year. Keep the balance between 70/30 and 75/25. You can move half the excess beyond inflation to your bank accounts. That's the money you have to spend each year. Don't withdraw money if you aren't keeping up with inflation. Don't try to time the market. Much better informed people with better resources will be trying to do that and failing. Play the odds instead. Keep to a consistent strategy and let the market come back to you. If you chase it, you are likely to lose money. If you don't spend money this year, you can save it for next year. Anything beyond $200,000 in the bank accounts is available for spending. In an emergency you may have to draw down the $200,000. Be careful. It's not as big a cushion as it seems, because you don't have an external income to replace it. I live in southern California but would like to move overseas after establishing stable investments. I am not the type of person that would invest in McDonald's, but would consider other less evil franchises (maybe?). These are contradictory goals, as stated. A franchise (meaning a local business of a national brand) is not a \"\"stable investment\"\". A franchise is something that you actively manage. At minimum, you have to hire someone to run the franchise. And as a general rule, they aren't as turnkey as they promise. How do you pick a good manager? How will you tell if they know how the business works? Particularly if you don't know. How will you tell that they are honest and won't just embezzle your money? Or more honestly, give you too much of the business revenues such that the business is not sustainable? Or spend so much on the business that you can't recover it as revenue? Some have suggested that you meant brand or stock rather than franchise. If so, you can ignore the last few paragraphs. I would be careful about making moral judgments about companies. McDonald's pays its workers too little. Google invades privacy. Exxon is bad for the environment. Chase collects fees from people desperate for money. Tesla relies on government subsidies. Every successful company has some way in which it can be considered \"\"evil\"\". And unsuccessful companies are evil in that they go out of business, leaving workers, customers, and investors (i.e. you!) in the lurch. Regardless, you should invest in broad index funds rather than individual stocks. If college is out of the question, then so should be stock investing. It's at least as much work and needs to be maintained. In terms of living overseas, dip your toe in first. Rent a small place for a few months. Find out how much it costs to live there. Remember to leave money for bigger expenses. You should be able to live on $20,000 or $25,000 a year now. Then you can plan on spending $35,000 a year to do it for real (including odd expenses that don't happen every month). Make sure that you have health insurance arranged. Eventually you may buy a place. If you can find one that you can afford for something like $100,000. Note that $100,000 would be low in California but sufficient even in many places in the US. Think rural, like the South or Midwest. And of course that would be more money in many countries in South America, Africa, or southern Asia. Even southern and eastern Europe might be possible. You might even pay a bit more and rent part of the property. In the US, this would be a duplex or a bed and breakfast. They may use different terms elsewhere. Given your health, do you need a maid/cook? That would lean towards something like a bed and breakfast, where the same person can clean for both you and the guests. Same with cooking, although that might be a second person (or more). Hire a bookkeeper/accountant first, as you'll want help evaluating potential purchases. Keep the business small enough that you can actively monitor it. Part of the problem here is that a million dollars sounds like a lot of money but isn't. You aren't rich. This is about bare minimum for surviving with a middle class lifestyle in the United States and other first world countries. You can't live like a tourist. It's true that many places overseas are cheaper. But many aren't (including much of Europe, Japan, Australia, New Zealand, etc.). And the ones that aren't may surprise you. And you also may find that some of the things that you personally want or need to buy are expensive elsewhere. Dabble first and commit slowly; be sure first. Include rarer things like travel in your expenses. Long term, there will be currency rate worries overseas. If you move permanently, you should certainly move your bank accounts there relatively soon (perhaps keep part of one in the US for emergencies that may bring you back). And move your investments as well. Your return may actually improve, although some of that is likely to be eaten up by inflation. A 10% return in a country with 12% inflation is a negative real return. Try to balance your investments by where your money gets spent. If you are eating imported food, put some of the investment in the place from which you are importing. That way, if exchange rates push your food costs up, they will likely increase your investments at the same time. If you are buying stuff online from US vendors and having it shipped to you, keep some of your investments in the US for the same reason. Make currency fluctuations work with you rather than against you. I don't know what your circumstances are in terms of health. If you can work, you probably should. Given twenty years, your million could grow to enough to live off securely. As is, you would be in trouble with another stock market crash. You'd have to live off the bank account money while you waited for your stocks and bonds to recover.\"" }, { "docid": "513281", "title": "", "text": "\"First, let me say that $1000 is not that much of amount to invest in stocks. You need to remember that each transaction (buy/sell) has fees, which vary between $4-$40 (depending on the broker, you mentioned Scottrade - they charge $7 per transaction for stocks and about twice as much for some mutual funds). Consider this: you invest $1000, you gain $100. You'll pay $15 in fees just to buy/sell, that's 1.5% expense ratio. If you invest in more than 1 stock - multiply your fees. To avoid that you can look into mutual funds. Different brokers offer different funds for free, and almost all of them carry many of the rest for a fee. When looking into funds, you can find their expense ratio and compare. Remember that a fund with 1% expense ratio diversifies and invests in many stocks, while for you 1.5% expense ratio is for investing in a single stock. Is it a good idea to invest only in US or diversify worldwide? You can invest in the US, but in funds that diversify worldwide or across industries. Generally it is a good idea to diversify. I am 28. Should I be a conservative investor or take some risks? Depends on how bad of a shape will you be if you lose all your principle. What online brokerage service is the best? I have heard a lot about Scotttrade but want to be sure before I start. It seems to be the least expensive and most user-friendly to me. \"\"Best\"\" is a problematic term. Scottrade is OK, E*Trade is OK, you can try Sharebuilder, Ameritrade, there are several \"\"discount\"\" online brokers and plenty of on-line reviews and comparisons amongst them. What is a margin account and how would it affect my investing? From what I understand it comes into play when an investor borrows money from the broker. Do I need to use it at all as I won't be investing on a big scale yet. You understand right. There are rules to use margin accounts, and with the amount you have I'd advise against them even if you get approved. Read through the brokers' FAQ's on their requirement. Should I keep adding money on a monthly basis to my brokerage account to give me more money to invest or keep it at a certain amount for an extended period of time? Sharebuilder has a mechanism to purchase monthly at discounted prices. But be careful, they give you discounted prices to buy, but not to sell. You may end up with a lot of positions, and the discounts you've gotten to buy will cause you spend much more on selling. Generally, averaging (investing monthly) is a good way to save and mitigate some risks, but the risks are still there. This is good only for long term savings. How should my breakdown my investments in terms of bonds vs stocks? Depends on your vulnerability and risk thresholds.\"" }, { "docid": "128077", "title": "", "text": "\"The question you should be asking yourself is this: \"\"Why am I putting money into a 401(k)?\"\" For many people, the answer is to grow a (large) nest egg and save for future retirement expenses. Investors are balancing risk and potential reward, so the asset categories you're putting your 401(k) contribution towards will be a reflection on how much risk you're willing to take. Per a US News & World Report article: Ultimately, investors would do well to remember one of the key tenants of investing: diversify. The narrower you are with your investments, the greater your risk, says Vanguard's Bruno: \"\"[Diversification] doesn't ensure against a loss, but it does help lessen a significant loss.\"\" Generally, investing in your employer's stock in your 401(k) is considered very risk. In fact, one Forbes columnist recommends not putting any money into company stock. FINRA notes: Simply stated, if you put too many eggs in one basket, you can expose yourself to significant risk. In financial terms, you are under-diversified: you have too much of your holdings tied to a single investment—your company's stock. Investing heavily in company stock may seem like a good thing when your company and its stock are doing well. But many companies experience fluctuations in both operational performance and stock price. Not only do you expose yourself to the risk that the stock market as a whole could flounder, but you take on a lot of company risk, the risk that an individual firm—your company—will falter or fail. In simpler terms, if you invest a large portion of your 401(k) funds into company stock, if your company runs into trouble, you could lose both your job AND your retirement investments. For the other investment assets/vehicles, you should review a few things: Personally, I prefer to keep my portfolio simple and just pick just a few options based on my own risk tolerance. From your fund examples, without knowing specifics about your financial situation and risk tolerance, I would have created a portfolio that looks like this when I was in my 20's: I avoided the bond and income/money market funds because the growth potential is too low for my investing horizon. Like some of the other answers have noted, the Target Date funds invest in other funds and add some additional fee overhead, which I'm trying to avoid by investing primarily in index funds. Again, your risk tolerance and personal preference might result in a completely different portfolio mix.\"" }, { "docid": "337993", "title": "", "text": "\"This answer is about the USA. Each time you sell a security (a stock or a bond) or some other asset, you are expected to pay tax on the net gain. It doesn't matter whether you use a broker or mutual fund to make the sale. You still owe the tax. Net capital gain is defined this way: Gross sale prices less (broker fees for selling + cost of buying the asset) The cost of buying the asset is called the \"\"basis price.\"\" You, or your broker, needs to keep track of the basis price for each share. This is easy when you're just getting started investing. It stays easy if you're careful about your record keeping. You owe the capital gains tax whenever you sell an asset, whether or not you reinvest the proceeds in something else. If your capital gains are modest, you can pay all the taxes at the end of the year. If they are larger -- for example if they exceed your wage earnings -- you should pay quarterly estimated tax. The tax authorities ding you for a penalty if you wait to pay five- or six-figure tax bills without paying quarterly estimates. You pay NET capital gains tax. If one asset loses money and another makes money, you pay on your gains minus your losses. If you have more losses than gains in a particular year, you can carry forward up to $3,000 (I think). You can't carry forward tens of thousands in capital losses. Long term and short term gains are treated separately. IRS Schedule B has places to plug in all those numbers, and the tax programs (Turbo etc) do too. Dividend payments are also taxable when they are paid. Those aren't capital gains. They go on Schedule D along with interest payments. The same is true for a mutual fund. If the fund has Ford shares in it, and Ford pays $0.70 per share in March, that's a dividend payment. If the fund managers decide to sell Ford and buy Tesla in June, the selling of Ford shares will be a cap-gains taxable event for you. The good news: the mutual fund managers send you a statement sometime in February or March of each year telling what you should put on your tax forms. This is great. They add it all up for you. They give you a nice consolidated tax statement covering everything: dividends, their buying and selling activity on your behalf, and any selling they did when you withdrew money from the fund for any purpose. Some investment accounts like 401(k) accounts are tax free. You don't pay any tax on those accounts -- capital gains, dividends, interest -- until you withdraw the money to live on after you retire. Then that money is taxed as if it were wage income. If you want an easy and fairly reliable way to invest, and don't want to do a lot of tax-form scrambling, choose a couple of different mutual funds, put money into them, and leave it there. They'll send you consolidated tax statements once a year. Download them into your tax program and you're done. You mentioned \"\"riding out bad times in cash.\"\" No, no, NOT a good idea. That investment strategy almost guarantees you will sell when the market is going down and buy when it's going up. That's \"\"sell low, buy high.\"\" It's a loser. Not even Warren Buffett can call the top of the market and the bottom. Ned Johnson (Fidelity's founder) DEFINITELY can't.\"" }, { "docid": "388718", "title": "", "text": "\"I'm not sure what you expect in terms of answers, but it depends on personal factors. It pretty well has to depend on personal factors, since otherwise everyone would want to do the same thing (either everyone thinks the current price is one to sell at, or everyone thinks it's one to buy at), and there would be no trades. You wouldn't be able to do what you want, except on the liquidity provided by market makers. Once that's hit, the price is shifting quickly, so your calculation will change quickly too. Purely in terms of maximising expected value taking into account the time value of money, it's all about the same. The market \"\"should\"\" already know everything you know, which means that one time to sell is as good as any other. The current price is generally below the expected acquisition price because there's a chance the deal will fall through and the stock price will plummet. That's not to say there aren't clever \"\"sure-fire\"\" trading strategies around acquisitions, but they're certain to be based on more than just timing when to sell an existing holding of stock. If you have information that the market doesn't (and assuming it is legal to do so) then you trade based on that information. If you know something the market doesn't that's going to be good for price, hold. If you know something that will reduce the price, sell now. And \"\"know\"\" can be used in a loose sense, if you have a strong opinion against the market then you might like to invest based on that. Nothing beats being paid for being right. Finally, bear in mind that expected return is not the same as utility. You have your own investment goals and your own view of risk. If you're more risk-averse than the market then you might prefer to sell now rather than wait for the acquisition. If you're more risk-prone than the market then you might prefer a 90% chance of $1 to 90c. That's fine, hold the stock. The extreme case of this is that you might have a fixed sum at which you will definitely sell up, put everything into the most secure investments you can find, and retire to the Caribbean. If that's the case then you become totally risk-averse the instant your holding crosses that line. Sell and order cocktails.\"" }, { "docid": "179073", "title": "", "text": "Foreign stocks have two extra sources of risk attached to them; exchange rate and political. Exchange rate risk is obvious; if I buy a stock in a foreign currency and there is a currency movement that makes that investment worth less I lose money no matter what the stock does. This can be offset using exchange rate swaps. (This is ceteris paribus, of course; changes in exchange rate can give a comparative advantage to international and exporting companies that will improve the fundamentals and so increase the price of the stock relative to a local firm. The economics of the firms in particular are not explored in this answer as it would get too complicated and long if I did.) Political risk relates not only to the problems surrounding international politics such as a country deciding that foreign nationals may no longer own shares in their national industries or deciding to seize foreign nationals' assets as happens in some areas. Your home country may also decide to apply sanctions to the country in which you are invested thus making it impossible to get your money back even though the foreign country will allow you to redeem them or sell. Diplomatic relations and trade agreements tend to be difficult. There are further problems in lack of understanding of foreign countries' laws, tax code, customs etc. relating to investments and the necessity to find legal representation in a country you may never have visited if there are issues. There is also a hidden risk in that, as an individual investor, you are not likely to be reading the local financial news for that country regularly enough to spot company specific issues arising. By the time these issues get into international media its far too late as all of the local investors have sold out of their positions already. The risks are probably no different if you have the time to monitor international relations and the foreign country's news, and have FX swaps in place to counteract FX risk as the funds and investment banks do but as an individual investor the time required is not feasible." }, { "docid": "160169", "title": "", "text": "Yes, theoretically you can flip the shares you agreed to buy and make a profit, but you're banking on the market behaving in some very precise and potentially unlikely ways. In practice it's very tricky for you to successfully navigate paying arbitrarily more for a stock than it's currently listed for, and selling it back again for enough to cover the difference. Yes, the price could drop to $28, but it could just as easily drop to $27.73 (or further) and now you're hurting, before even taking into account the potentially hefty commissions involved. Another way to think about it is to recognize that an option transaction is a bet; the buyer is betting a small amount of money that a stock will move in the direction they expect, the seller is betting a large amount of money that the same stock will not. One of you has to lose. And unless you've some reason to be solidly confident in your predictive powers the loser, long term, is quite likely to be you. Now that said, it is possible (particularly when selling puts) to create win-win scenarios for yourself, where you're betting one direction, but you'd be perfectly happy with the alternative(s). Here's an example. Suppose, unrelated to the option chain, you've come to the conclusion that you'd be happy paying $28 for BBY. It's currently (June 2011) at ~$31, so you can't buy it on the open market for a price you'd be happy with. But you could sell a $28 put, promising to buy it at that price should someone want to sell it (presumably, because the price is now below $28). Either the put expires worthless and you pocket a few bucks and you're basically no worse off because the stock is still overpriced by your estimates, or the option is executed, and you receive 100 shares of BBY at a price you previously decided you were willing to pay. Even if the list price is now lower, long term you expect the stock to be worth more than $28. Conceptually, this makes selling a put very similar to being paid to place a limit order to buy the stock itself. Of course, you could be wrong in your estimate (too low, and you now have a position that might not become profitable; too high, and you never get in and instead just watch the stock gain in value), but that is not unique to options - if you're bad at estimating value (which is not to be confused with predicting price movement) you're doomed just about whatever you do." }, { "docid": "480967", "title": "", "text": "\"Aganju has mentioned put options, which are one good possibility. I would suggest considering an even easier strategy: short selling. Technically you are borrowing the stock from someone and selling it. At some point you repurchase the stock to return to the lender (\"\"covering your short\"\"). If the stock price has fallen, then when you repurchase it, it will be cheaper and you keep the profit. Short selling sounds complicated but it's actually very easy--your broker takes care of all the details. Just go to your brokerage and click \"\"sell\"\" or \"\"sell short.\"\" You can use a market or limit order just like you were selling something you own. When it sells, you are done. The money gets credited to your account. At some point (after the price falls) you should repurchase it so you don't have a negative position any more, but your brokerage isn't going to hassle you for this unless you bought a lot and the stock price starts rising. There will be limits on how much you can short, depending on how much money is in your account. Some stocks (distressed and small stocks) may sometimes be hard to short, meaning your broker will charge you a kind of interest and/or may not be able to complete your transaction. You will need a margin account (a type of brokerage account) to either use options or short sell. They are easy to come by, though. Note that for a given amount of starting money in your account, puts can give you a much more dramatic gain if the stock price falls. But they can (and often do) expire worthless, causing you to lose all money you have spent on them. If you want to maximize how much you make, use puts. Otherwise I'd short sell. About IPOs, it depends on what you mean. If the IPO has just completed and you want to bet that the share price will fall, either puts or short selling will work. Before an IPO you can't short sell and I doubt you would be able to buy an option either. Foreign stocks? Depends on whether there is an ADR for them that trades on the domestic market and on the details of your brokerage account. Let me put it this way, if you can buy it, you can short sell it.\"" }, { "docid": "57994", "title": "", "text": "\"I'm a manager of a charity shop so work with a wide range of unpaid volunteers, which requires an especially soft touch (most of the time, everyone is different) or people will just leave. It takes longer, but the overall results are better and more long-lasting. Think of it like pushing a boat from the docks with your hand, always applying a small pressure to get the boat to gradually move where you want, rather than ramming into the side of a boat with a truck - sure it'll get you there quicker, but will cause lasting damage. It's also best to take it slow, as you need time to learn the business and people. Be clear about your approach with your boss, managing their expectations is important. Anyway, here is what I've learnt in my first year or so doing this job, plus things I've learnt along the way in my previous career as a software engineer (radical career change!) where I've managed people and been managed: 1. Be yourself. Don't pretend to be someone you're not, everyone will see right through you in an instant. You'll change over time as you get used to managing people, that's fine, but always be yourself through that. 1. Say \"\"thank you\"\" to everyone at the end of each day as you say goodbye. Mean it. Think of all the work they've done today for you. 1. Spread the shit evenly. Every job has crap parts, make sure you and everyone else gets their fair share and no more. I regularly hoover, clean the bathroom, wash-up, and so on. 1. Ask, don't tell. If you bark orders, people will do them.. but they'll put no effort into it and you'll distance yourself from them. Ask if they could do something for you. It's a politeness, nobody ever says no unless there is an issue which you need to deal with anyway. 1. Pick your battles. Is it worth moaning at someone for that little infraction? Or can you get over that message another way? i.e. I don't like people having drinks on the till counter, so when I take over to cover for them for a break, I just move it. After a while, no drinks appear on the counter. 1. Be honest. If you don't know, say so.. ask for input. Weigh up the options out loud, then pick one, explain why, and go for it - or better yet, get the person that thought of it working with you (not for you) to implement it. If you're wrong, hold your hand up and try the other suggestion(s). 1. Always take responsibility when things go wrong - that is actually your job. When things go well, use *you* and *we*. If things go badly, sometimes *I*, sometimes *we*, but never *you*. 1. Always be pro-active with money. If you owe your staff money for any reason, chase them to give it to them, never let them chase you. If there even *might* be any problems at all with money, let everyone know as soon as you know. Go out of your way to ensure they get what they're owed *now*, not later. I just did this today actually, I forgot to do expenses for someone and switched over the till so there wasn't enough cash in the new till to cover it.. so I just took it from the money to bank, and marked down why there was a discrepancy on the paperwork and will do the same tomorrow when that doesn't match by the opposite amount. I should not do this at all, but it's the right thing to do. 1. Listen carefully. Often employees have problems but won't bring them up, either they don't think anything will get done, or they don't want to get someone in trouble, or something else. However, if you listen and observe carefully, often there are clues to the things that are bothering them and you'll find ways to tackle them. 1. Don't run a team meeting until you know everyone, if you can avoid it. You don't know shit about how the company works, who the people are, what makes them tick, what they do, and so on. All you'll do is come across as a bit of a tool, and distance yourself from them (as boss). When you do run one, just guide it, don't lead it. Always hand over control of the conversation as much as possible, except of course where you've got things that they need to hear. 1. Never joke about your 'power'. i.e. Don't mess about saying how you'll fire them if blah, or how you'll give them all the shit work, or mention pay jokingly, etc. I had a boss that did that when drunk, not in a serious way at all, and he was very widely hated for pretty well nothing other than that. It served as a constant reminder that he's separate from us. 1. Give people room, but don't be taken for a ride. If someone is late once, fine, I wouldn't even mention it. Late again, maybe I'd make a light joke of it. Late again.. we'll have a chat.. always listen to what they have to say, is there any way you can help? But, don't be taken for a ride. I've had people pick me up on being late the very first time I was late, and you know what, I was more late for that job from then on than I've ever been before or since. 1. Try to get your employees to come up with ideas to move the business forwards. It's very easy to look at a business and say \"\"we need this, that, and the other doing.. like this!\"\". But you need to get your employees to buy into it, or they just won't do it properly. It'll be like getting blood out of a stone to start with, but if you're patient and support their ideas most people will come around. You *need* their input as they know their job better than you. 1. EDIT: Always be clear what you want from people, when. Speak with them about the task(s) before-hand to make sure they're comfortable with it and think it can be done in the time. So many times I've been given tasks with unrealistic deadlines, the manager hasn't wanted to listen to my protests, then wonders why it didn't get done in time. It's crazy really, wanting something to be possible doesn't make it so. *A (not so) Quick Example* One volunteer said to me that we should halve the price of all the fiction books to .99 to compete with other shops. I personally don't think that's a good idea (our shop has better quality stock and is much more organised), but I have no evidence to the contrary, and I honestly don't really know.. so I say go for it and support it completely as a good idea. We tried it for a month, and we made exactly the same amount of money.. sold twice as many books, but no extra cash. So it was valuable to do, and we discovered that maybe 1.49 might be a good option to try. But, far more importantly, they saw their ideas put into action right away, and saw the results of that. It empowered them, which is incredibly important for a wide variety of reasons that are too much to go into here, but basically it makes them feel more respected, enjoy their job more, think more about the business, and so on - you know what it's like when you're empowered, how good it feels. However, it's being empowered with the support that's important, something which you personally going into your new job don't feel you have, which leads to the anxiety and so on I'm sure you're feeling now. Don't put your employees in that position if you can help it. There is also another reason why I outright supported their idea from the offset. It didn't work (although we didn't loose anything) and I thought it wouldn't, but I can say \"\"*we* tried\"\". It wasn't down to that one person, they didn't feel bad that it didn't work because I was right behind it, and it's my job to take responsibility. If it had been *their* idea that had failed, they wouldn't give any ideas ever again, and everyone else would be put off too. As soon as anyone tries to take personal responsibility, and they will, stick to your guns in supporting them.. stronger than ever. Now we're getting a lot of ideas all the time, they're having in-depth discussions amongst each other, they're pro-active, and so on. As a business we're doing much better now because of it.. profits are up 15% from last year and we've only just begun to kick things off, and that's going against a national trend downwards. We've had several critical changes to our shop layout, back-room organisation, results reporting, stock handling processes, and so on.. all from volunteer ideas and feedback. So the 15% is actually the tip of the iceberg, what we've got in place now should allow us to grow more quickly too. And remember, you can make suggestions too of course.. but they're just that, suggestions. Suggest them to your employees, speak with several of them, then get back to them when you've made a decision. Don't say \"\"I'm thinking of trying this\"\", say \"\"I was just thinking.. what about this? Do you think it would work?\"\" and talk about it. Think of arguments against your idea, see if they counter them, and so on. Now.. how many of these changes did I think of before-hand and want to enact? About half.. so we've got a significant number of successful ideas that I personally hadn't thought of, everyone's happier and working harder for the business, and we have a bright future. I have more ideas too, and people listen to and respect them now just like I have with them. I think that's the key to it all really. Show your employees respect, and they'll show you it in return.\"" }, { "docid": "89484", "title": "", "text": "You could have both options exercised (and assigned to you) on the same day, but I don't think you could lose money on both on the same day. The reason is that while exercises are immediate, assignments are processed after the markets close at the end of each day. See http://www.888options.com/help/faq/assignment.jsp for details. So you would get both assignments at the same time, that night. The net effect should be that you don't own any stock (someone would put you the stock, then it'd be called away) and you don't have the options anymore. You should have incoming cash of $1500 selling the stock to the call exerciser and outgoing cash of $1300 buying from the put exerciser, right? So you would have no more options but $200 more cash in your account in the morning. You bought at 13 and sold at 15. This options position is an agreement to buy at 13 and sell at 15 at someone else's option. The way you lose money is if one of the options isn't exercised while the other is, i.e. if the stock is below 13 so nobody is going to opt to buy from you at 15, but they'll sell to you at 13; or above 15 so nobody is going to opt to sell to you at 13, but they'll buy from you at 15. You make money if neither is exercised (you keep the premium you sold for) or both are exercised (you keep the gap between the two, plus the premium). Having both exercised is surely rare, since early exercise is rare to begin with, and tends to happen when options are deep in the money; so you'd expect both to be exercised if both are deep in the money at some point. Having both be exercised on the same day ... can't be common, but it's maybe most likely just before expiration with minimal time value, if the stock moves around quickly so both options are in the money at some point during the day." }, { "docid": "264160", "title": "", "text": "\"I started with lending club about a year ago. I love it. It has been insightful. Off topic, but I am in a loan to a guy who make 120K a year and is regularly late and has a pretty high interest rate. Crazy. You gain some economies of scale by going with a bigger note. I have $100 notes that I get hit for 2 or 3 cents for a fee, where $25 notes are always a penny. However, I don't think that should be your deciding factor. I scale my note purchases based on how much I like the status of the borrower. For example, I did $100 (which is currently my max) for a guy with a reasonable loan amount 16K, a stable work history (15+ years), a great credit history, and a great interest rate (16.9%). If one of those things were a bit out of \"\"whack\"\". I might go $50, two $25. I prefer 36 month notes, really 5 years to get out of debt? It is unlikely to happen IMHO. Keep in mind that if you invest $100 in a loan, then you get one $100 note. You can't break them up into 4 $25 notes. For that reason, if you are likely to want to sell the note prematurely, keep it at $25. The market is greater. I've had a lot of success using the trading account, buying further discounted notes for people who want out of lending club, or get spooked by a couple of late payments and a change in billing date. Another advantage of using the trading account is you start earning interest day 1. I've had new notes take a couple of weeks to go through. To summarize: There are some other things, but that is the main stuff I look at.\"" }, { "docid": "285029", "title": "", "text": "\"You say \"\"it's expensive\"\". I'm going to interpret this as \"\"the monthly payments are too high\"\". Basically, you need to get your old loan paid off, presumably by selling the car you have now. This is the tough part. If you sold the car now, how much would you get for it? You can use Kelley Blue Book to figure out what the car is roughly worth. That's not a guarantee that it will actually sell for that much. Look in your local classifieds to see what similar cars are selling for. (Keep in mind that you will usually get less for your old car if you trade it in versus sell it yourself.) Now, if you owe more than your car is worth, you're in a really tight spot. If you don't get enough money when you sell it, you are still stuck with the remainder of the loan. In that case, it is usually best to just stick with the car you have, and be more cautious about payments and loan length the next time you finance a car. Penalties: Most car loans don't have any kind of early repayment penalty. However, you should check your loan paperwork just to make sure.\"" }, { "docid": "118104", "title": "", "text": "\"Of course CDs are worth it compared to the stock market. In fact, most institutional investors are envious of the CDs you have access to as an individual investor that are unavailable to them. You just need to be competent enough to shop around for the best rates and understand your time horizon. There are several concepts to understand here: Banks give out CDs with competitive rates projecting future interest rates. So while the Federal funds rate is currently extremely low, banks know that in order to get any takers on their CDs they have to factor in the public expectation that rates will rise, so if you lock in a longer term CD you get a competitive rate. Institutional investors do not have access to FDIC insured CDs and the closest analog they participate in are the auctions and secondary markets of US Treasuries. These two types of assets have equivalent default (non-)risk if held to maturity: backed by the full faith and credit of the U.S. Here are the current rates (as of question's date) taken from Vanguard that I can get on CDs versus Treasuries (as an individual investor). Notice that CDs outperform Treasuries across any maturity timescale! For fixed-income and bond allocations, institutional investors are lining up for buying treasuries. And yet here you are saying \"\"CDs are not worth it.\"\" Might want to rethink that. Now going into the stock market as an investor with expectations of those high returns you quote, means you're willing to stay there for the long-term (at least a decade) and stay the course during volatility to actually have any hope of coming up with the average rate of return. Even then, there's the potential downside of risk that you still lose principal after that duration. So given that assumption, it's only fair to compare against >= 10 year CDs which are currently rated at 2 percent APY. In addition, CDs can be laddered -- allowing you to lock-in newer (and potentially higher) rates as they become available. You essentially stagger your buyin into these investments, and either reinvest upon the stilted maturity dates or use as income. Also keep in mind that while personal emergencies requiring quick access to cash can happen at any time, the most common scenario is during the sudden change from a bull market into a recession -- the time when stocks plummet. If you need money right away, selling your stocks at these times would lock in severe losses, whereas with CDs you still won't lose principal with an early exit and the only penalty is usually a sacrifice of a few months of potential interest. It's easy to think of the high yields during a protracted bull market (such as now), but personal finance has a huge behavioral component to it that is largely ignored until it's too late. One risk that isn't taken care of by either CDs or Treasuries is inflation risk. All the rates here and in the original question are nominal rates, and the real return will depend on inflation (or deflation). There are other options here besides CDs, Treasuries, and the stock market to outpace inflation if you'd like to hedge that risk with inflation protection: Series I Savings Bonds and TIPS.\"" }, { "docid": "576694", "title": "", "text": "Remember, carrying debt on a credit card and waiting to pay it is increased risk in the event something happens and you can't pay it off. I have 1 CC and I have it set to auto-pay on the day it's due (paid in full each month as I don't carry debt anymore - learned that lesson a hard way :) ). So the day it's due it auto-drafts out of my checking. No worries of late payments, missed payments, etc. If you feel that having any balance is bad then by all means pay it off the minute you get your statement. It should come at the same time each month (or close to the same time) and you should be able to setup an auto-payment to pay it off in full as soon as the new statement goes live. To be honest, those extra few days of supposed interest saved by keeping the money in your checking account is so minimal that's it's probably not worth it. Most checking is horrible in interest (all my 'high interest' checking accounts are now less than 1% APR. boo.) and if you're late 1 day then bam! All that earned interest is gone in 1 late fee..." }, { "docid": "496209", "title": "", "text": "Ask yourself a better question: Under my current investment criteria would I buy the stock at this price? If the answer to that question is yes you need to work out at what price you would now sell out of the position. Think of these as totally separate decisions from your original decisions to buy and at what price to sell. If you would buy the stock now if you didn't already hold a position then you should keep that position as if you had sold out at the price that you had originally seen as your take profit level and bought a new position at the current price without incurring the costs. If you would not buy now by those criteria then you should sell out as planned. This is essentially netting off two investing decisions. Something to think about is that the world has changed and if you knew what you know now then you would probably have set your price limit higher. To be disciplined as an investor also means reviewing current positions frequently and without any sympathy for past decisions." }, { "docid": "528475", "title": "", "text": "\"This is an old post I feel requires some more love for completeness. Though several responses have mentioned the inherent risks that currency speculation, leverage, and frequent trading of stocks or currencies bring about, more information, and possibly a combination of answers, is necessary to fully answer this question. My answer should probably not be the answer, just some additional information to help aid your (and others') decision(s). Firstly, as a retail investor, don't trade forex. Period. Major currency pairs arguably make up the most efficient market in the world, and as a layman, that puts you at a severe disadvantage. You mentioned you were a student—since you have something else to do other than trade currencies, implicitly you cannot spend all of your time researching, monitoring, and investigating the various (infinite) drivers of currency return. Since major financial institutions such as banks, broker-dealers, hedge-funds, brokerages, inter-dealer-brokers, mutual funds, ETF companies, etc..., do have highly intelligent people researching, monitoring, and investigating the various drivers of currency return at all times, you're unlikely to win against the opposing trader. Not impossible to win, just improbable; over time, that probability will rob you clean. Secondly, investing in individual businesses can be a worthwhile endeavor and, especially as a young student, one that could pay dividends (pun intended!) for a very long time. That being said, what I mentioned above also holds true for many large-capitalization equities—there are thousands, maybe millions, of very intelligent people who do nothing other than research a few individual stocks and are often paid quite handsomely to do so. As with forex, you will often be at a severe informational disadvantage when trading. So, view any purchase of a stock as a very long-term commitment—at least five years. And if you're going to invest in a stock, you must review the company's financial history—that means poring through 10-K/Q for several years (I typically examine a minimum ten years of financial statements) and reading the notes to the financial statements. Read the yearly MD&A (quarterly is usually too volatile to be useful for long term investors) – management discussion and analysis – but remember, management pays themselves with your money. I assure you: management will always place a cherry on top, even if that cherry does not exist. If you are a shareholder, any expense the company pays is partially an expense of yours—never forget that no matter how small a position, you have partial ownership of the business in which you're invested. Thirdly, I need to address the stark contrast and often (but not always!) deep conflict between the concepts of investment and speculation. According to Seth Klarman, written on page 21 in his famous Margin of Safety, \"\"both investments and speculations can be bought and sold. Both typically fluctuate in price and can thus appear to generate investment returns. But there is one critical difference: investments throw off cash flow for the benefit of the owners; speculations do not. The return to the owners of speculations depends exclusively on the vagaries of the resale market.\"\" This seems simple and it is; but do not underestimate the profound distinction Mr. Klarman makes here. (and ask yourself—will forex pay you cash flows while you have a position on?) A simple litmus test prior to purchasing a stock might help to differentiate between investment and speculation: at what price are you willing to sell, and why? I typically require the answer to be at least 50% higher than the current salable price (so that I have a margin of safety) and that I will never sell unless there is a material operating change, accounting fraud, or more generally, regime change within the industry in which my company operates. Furthermore, I then research what types of operating changes will alter my opinion and how severe they need to be prior to a liquidation. I then write this in a journal to keep myself honest. This is the personal aspect to investing, the kind of thing you learn only by doing yourself—and it takes a lifetime to master. You can try various methodologies (there are tons of books) but overall just be cautious. Money lost does not return on its own. I've just scratched the surface of a 200,000 page investing book you need to read if you'd like to do this professionally or as a hobbyist. If this seems like too much or you want to wait until you've more time to research, consider index investing strategies (I won't delve into these here). And because I'm an investment professional: please do not interpret anything you've read here as personal advice or as a solicitation to buy or sell any securities or types of securities, whatsoever. This has been provided for general informational purposes only. Contact a financial advisor to review your personal circumstances such as time horizon, risk tolerance, liquidity needs, and asset allocation strategies. Again, nothing written herein should be construed as individual advice.\"" }, { "docid": "370995", "title": "", "text": "\"My theory is that for every stock you buy, you should have an exit strategy and follow it. It is too hard to let emotions rule if you let your default strategy be \"\"let's see what happens.\"\" and emotional investing will almost never serve you well. So before buying a stock, set a maximum loss and maximum gain that you will watch for on the stock, and when it hits that number sell. At the very least, when it hits one of your numbers, consciously make a decision that you are effectively buying it again at the current price if you decide to stay in. When you do this, set a new high and low price and repeat the above strategy.\"" }, { "docid": "268022", "title": "", "text": "One risk not mentioned is that foreign stock might be thinly traded on your local stock market, so you will find it harder to buy and sell, and you will be late to the game if there is some sudden change in the share price in the original country." }, { "docid": "95415", "title": "", "text": "\"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\"" } ]

[ { "docid": "99132", "title": "", "text": "If the stock starts to go down DO NOT SELL!! My reasoning for this is because, when you talk about the stock market, you haven't actually lost any money until you sell the stock. So if you sell it lower than you bought it, you loose money. BUT if you wait for the stock to go back up again, you will have made money." } ]

[ { "docid": "95415", "title": "", "text": "\"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\"" }, { "docid": "466121", "title": "", "text": "Honestly? The maximum number really doesn't matter. If you're investing long-term, you buy in when it looks like an OK deal (still undervalued but looks like it'll grow), and you sell when it looks like the stock has reached a peak it won't reach again for a while if ever. However many stocks you can keep track of on those kinds of terms is how many stocks should be in your portfolio." }, { "docid": "528475", "title": "", "text": "\"This is an old post I feel requires some more love for completeness. Though several responses have mentioned the inherent risks that currency speculation, leverage, and frequent trading of stocks or currencies bring about, more information, and possibly a combination of answers, is necessary to fully answer this question. My answer should probably not be the answer, just some additional information to help aid your (and others') decision(s). Firstly, as a retail investor, don't trade forex. Period. Major currency pairs arguably make up the most efficient market in the world, and as a layman, that puts you at a severe disadvantage. You mentioned you were a student—since you have something else to do other than trade currencies, implicitly you cannot spend all of your time researching, monitoring, and investigating the various (infinite) drivers of currency return. Since major financial institutions such as banks, broker-dealers, hedge-funds, brokerages, inter-dealer-brokers, mutual funds, ETF companies, etc..., do have highly intelligent people researching, monitoring, and investigating the various drivers of currency return at all times, you're unlikely to win against the opposing trader. Not impossible to win, just improbable; over time, that probability will rob you clean. Secondly, investing in individual businesses can be a worthwhile endeavor and, especially as a young student, one that could pay dividends (pun intended!) for a very long time. That being said, what I mentioned above also holds true for many large-capitalization equities—there are thousands, maybe millions, of very intelligent people who do nothing other than research a few individual stocks and are often paid quite handsomely to do so. As with forex, you will often be at a severe informational disadvantage when trading. So, view any purchase of a stock as a very long-term commitment—at least five years. And if you're going to invest in a stock, you must review the company's financial history—that means poring through 10-K/Q for several years (I typically examine a minimum ten years of financial statements) and reading the notes to the financial statements. Read the yearly MD&A (quarterly is usually too volatile to be useful for long term investors) – management discussion and analysis – but remember, management pays themselves with your money. I assure you: management will always place a cherry on top, even if that cherry does not exist. If you are a shareholder, any expense the company pays is partially an expense of yours—never forget that no matter how small a position, you have partial ownership of the business in which you're invested. Thirdly, I need to address the stark contrast and often (but not always!) deep conflict between the concepts of investment and speculation. According to Seth Klarman, written on page 21 in his famous Margin of Safety, \"\"both investments and speculations can be bought and sold. Both typically fluctuate in price and can thus appear to generate investment returns. But there is one critical difference: investments throw off cash flow for the benefit of the owners; speculations do not. The return to the owners of speculations depends exclusively on the vagaries of the resale market.\"\" This seems simple and it is; but do not underestimate the profound distinction Mr. Klarman makes here. (and ask yourself—will forex pay you cash flows while you have a position on?) A simple litmus test prior to purchasing a stock might help to differentiate between investment and speculation: at what price are you willing to sell, and why? I typically require the answer to be at least 50% higher than the current salable price (so that I have a margin of safety) and that I will never sell unless there is a material operating change, accounting fraud, or more generally, regime change within the industry in which my company operates. Furthermore, I then research what types of operating changes will alter my opinion and how severe they need to be prior to a liquidation. I then write this in a journal to keep myself honest. This is the personal aspect to investing, the kind of thing you learn only by doing yourself—and it takes a lifetime to master. You can try various methodologies (there are tons of books) but overall just be cautious. Money lost does not return on its own. I've just scratched the surface of a 200,000 page investing book you need to read if you'd like to do this professionally or as a hobbyist. If this seems like too much or you want to wait until you've more time to research, consider index investing strategies (I won't delve into these here). And because I'm an investment professional: please do not interpret anything you've read here as personal advice or as a solicitation to buy or sell any securities or types of securities, whatsoever. This has been provided for general informational purposes only. Contact a financial advisor to review your personal circumstances such as time horizon, risk tolerance, liquidity needs, and asset allocation strategies. Again, nothing written herein should be construed as individual advice.\"" }, { "docid": "554997", "title": "", "text": "\"An attempt at a simple answer for the normal investor: A normal investor buys stock then later sells that stock. (This is known as \"\"going long\"\", as opposed to \"\"going short\"\"). For the normal investor, a stop order (of either kind) is only used when selling. A stop-loss sell order (or stop sell) is used to sell your stock when it has fallen too much in price, and you don't want to suffer more losses. If the stock is at $50, you could enter a stop sell at $40, which means if the stock ever falls to $40 or lower, your stock will be sold at whatever price is available (e.g. $35). A stop-loss limit sell order (or stop limit sell) is the same, except you are also saying \"\"but don't sell for less than my limit price\"\". So you can enter a stop limit sell at $40 with a limit of $39, meaning that if the stock falls to $40, you will then have a limit order in effect to sell the stock at $39 or higher. Thus your stock will never be sold at $35 or any value below $39, but of course, if the stock falls fast from $40 to $35, your limit sell at $39 will not be done and you will be left still owning the stock (worth at that moment $35, say).\"" }, { "docid": "414215", "title": "", "text": "\"From the Times A Reader Q.&A. on G.M.’s Bankruptcy Q. I own G.M. preferred shares. Should I be looking to sell them, or hold on? I bought them at $25 a share when they were issued in late 2001. — Karen, Manhattan A. When a company files for bankruptcy, its various stock and bondholders essentially get in line. The first investors to be repaid are secured debt holders, then senior bond investors, followed by subordinated debt holders. Preferred shareholders are next, and lastly, holders of common stock. In a bankruptcy, preferred shares are usually worthless, much like shares of common stock. But in the case of G.M., there may be some good — or at least somewhat better — news. Most of G.M.’s preferred shares are actually senior notes or “quarterly interest bonds,” which means you will be treated as a bondholder, according to Marilyn Cohen, president of Envision Capital Management. So you will be able to exchange your preferreds for G.M. stock (bondholders will receive 10 percent of the new company’s stock). It’s not the best deal, but it beats the empty bag true preferred shareholders would have been left holding. Of course this is just one example, and you were hoping to get some larger picture. The article stated \"\"In a bankruptcy, preferred shares are usually worthless, much like shares of common stock\"\" which at least is a bit closer to that, if you accept usually as a statistic.\"" }, { "docid": "425293", "title": "", "text": "\"I've never invested in penny stocks. My #1 investing rule, buy what you know and use. People get burned because they hear about the next big thing, go invest! to just end up losing everything because they have no clue in what they're investing in. From what I've found, until you have minimum of $5k to invest, put everything in a single investment. The reason for this, as others have mentioned, is that commissions eat up just about all your profits. My opinion, don't put it in a bond, returns are garbage right now - however they are \"\"safe\"\". Because this is $1000 we're talking about and not your life savings, put it in a equity like a stock to try and maximize your return. I aim for 15% returns on stocks and can generally achieve 10-15% consistently. The problem is when you get greedy and keep thinking it will go above once you're at 10-15%. Sell it. Sell it right away :) If it drops down -15% you have to be willing to accept that risk. The nice thing is that you can wait it out. I try to put a 3 month time frame on things I buy to make money. Once you start getting a more sizable chunk of money to play around with you should start to diversify. In Canada at least, once you have a trading account with a decent size investment the commissions get reduced to like $10 a trade. With your consistent 10% returns and additional savings you'll start to build up your portfolio. Keep at it and best of luck!\"" }, { "docid": "109455", "title": "", "text": "\"You have heard the old adage \"\"Buy low, sell high\"\", right? That sounds so obvious that you'd have to wonder why they would ever bother coining such an expression. It should rank up there with \"\"Don't walk in front of a moving car\"\" on the Duh scale of advice. Well, your question demonstrates exactly why it isn't quite so obvious in the real world and that people need to be reminded of it. So, in your example, the stock prices are currently low (relative to what they have been). So per that adage, do you sell or buy when prices are low? Hint: It isn't sell. Yes. Your gut is going to tell you the exact opposite thanks to the fact that our brains are unfortunately wired to make us susceptible to the loss aversion fallacy. When the market has undergone a big drop is the WORST time to stop contributing (buying stocks). This example might help get your brain and gut to agree a little more easily: If you were talking about any other non-investment commodity, cars for instance. Your question equates to.. I really need a car, but the prices have been dropping like crazy lately. Maybe I should wait until the car dealers start raising their prices again before I buy one. Dollar Cost Averaging As littleadv suggested, if you have an automatic payroll deduction for your retirement account, you are getting the benefit of Dollar Cost Averaging. Because you are investing the same amount on a scheduled interval, you are buying more shares when they are cheap and fewer when they are expensive. It is like an automatic buy low strategy is built into the account. The alternative, which you are implying, is a market timing strategy. Under this strategy, instead of investing regularly you try to get in and out of investments right before they go up/drop. There are two MAJOR flaws with this approach: 1) Your brain will work against you (see above) and encourage you to do the exact opposite of what you should be doing. 2) Unless you are clairvoyant, this strategy isn't much better than gambling. If you are lucky it can work, but because of #1, the odds are stacked against you.\"" }, { "docid": "89484", "title": "", "text": "You could have both options exercised (and assigned to you) on the same day, but I don't think you could lose money on both on the same day. The reason is that while exercises are immediate, assignments are processed after the markets close at the end of each day. See http://www.888options.com/help/faq/assignment.jsp for details. So you would get both assignments at the same time, that night. The net effect should be that you don't own any stock (someone would put you the stock, then it'd be called away) and you don't have the options anymore. You should have incoming cash of $1500 selling the stock to the call exerciser and outgoing cash of $1300 buying from the put exerciser, right? So you would have no more options but $200 more cash in your account in the morning. You bought at 13 and sold at 15. This options position is an agreement to buy at 13 and sell at 15 at someone else's option. The way you lose money is if one of the options isn't exercised while the other is, i.e. if the stock is below 13 so nobody is going to opt to buy from you at 15, but they'll sell to you at 13; or above 15 so nobody is going to opt to sell to you at 13, but they'll buy from you at 15. You make money if neither is exercised (you keep the premium you sold for) or both are exercised (you keep the gap between the two, plus the premium). Having both exercised is surely rare, since early exercise is rare to begin with, and tends to happen when options are deep in the money; so you'd expect both to be exercised if both are deep in the money at some point. Having both be exercised on the same day ... can't be common, but it's maybe most likely just before expiration with minimal time value, if the stock moves around quickly so both options are in the money at some point during the day." }, { "docid": "480967", "title": "", "text": "\"Aganju has mentioned put options, which are one good possibility. I would suggest considering an even easier strategy: short selling. Technically you are borrowing the stock from someone and selling it. At some point you repurchase the stock to return to the lender (\"\"covering your short\"\"). If the stock price has fallen, then when you repurchase it, it will be cheaper and you keep the profit. Short selling sounds complicated but it's actually very easy--your broker takes care of all the details. Just go to your brokerage and click \"\"sell\"\" or \"\"sell short.\"\" You can use a market or limit order just like you were selling something you own. When it sells, you are done. The money gets credited to your account. At some point (after the price falls) you should repurchase it so you don't have a negative position any more, but your brokerage isn't going to hassle you for this unless you bought a lot and the stock price starts rising. There will be limits on how much you can short, depending on how much money is in your account. Some stocks (distressed and small stocks) may sometimes be hard to short, meaning your broker will charge you a kind of interest and/or may not be able to complete your transaction. You will need a margin account (a type of brokerage account) to either use options or short sell. They are easy to come by, though. Note that for a given amount of starting money in your account, puts can give you a much more dramatic gain if the stock price falls. But they can (and often do) expire worthless, causing you to lose all money you have spent on them. If you want to maximize how much you make, use puts. Otherwise I'd short sell. About IPOs, it depends on what you mean. If the IPO has just completed and you want to bet that the share price will fall, either puts or short selling will work. Before an IPO you can't short sell and I doubt you would be able to buy an option either. Foreign stocks? Depends on whether there is an ADR for them that trades on the domestic market and on the details of your brokerage account. Let me put it this way, if you can buy it, you can short sell it.\"" }, { "docid": "547553", "title": "", "text": "\"Most of the investors who have large holdings in a particular stock have pretty good exit strategies for those positions to ensure they are getting the best price they can by selling gradually into the volume over time. Putting a single large block of stock up for sale is problematic for one simple reason: Let's say you have 100,000 shares of a stock, and for some reason you decide today is the day to sell them, take your profits, and ride off into the sunset. So you call your broker (or log into your brokerage account) and put them up for sale. He puts in an order somewhere, the stock is sold, and your account is credited. Seems simple, right? Well...not so fast. Professionals - I'm keeping this simple, so please don't beat me up for it! The way stocks are bought and sold is through companies known as \"\"market makers\"\". These are entities which sit between the markets and you (and your broker), and when you want to buy or sell a stock, most of the time the order is ultimately handled somewhere along the line by a market maker. If you work with a large brokerage firm, sometimes they'll buy or sell your shares out of their own accounts, but that's another story. It is normal for there to be many, sometimes hundreds, of market makers who are all trading in the same equity. The bigger the stock, the more market makers it attracts. They all compete with each other for business, and they make their money on the spread between what they buy stock from people selling for and what they can get for it selling it to people who want it. Given that there could be hundreds of market makers on a particular stock (Google, Apple, and Microsoft are good examples of having hundreds of market makers trading in their stocks), it is very competitive. The way the makers compete is on price. It might surprise you to know that it is the market makers, not the markets, that decide what a stock will buy or sell for. Each market maker sets their own prices for what they'll pay to buy from sellers for, and what they'll sell it to buyers for. This is called, respectively, the \"\"bid\"\" and the \"\"ask\"\" prices. So, if there are hundreds of market makers then there could be hundreds of different bid and ask prices on the same stock. The prices you see for stocks are what are called the \"\"best bid and best ask\"\" prices. What that means is, you are being shown the highest \"\"bid\"\" price (what you can sell your shares for) and the best \"\"ask\"\" price (what you can buy those shares for) because that's what is required. That being said, there are many other market makers on the same stock whose bid prices are lower and ask prices are higher. Many times there will be a big clump of market makers all at the same bid/ask, or within fractions of a cent of each other, all competing for business. Trading computers are taught to seek out the best prices and the fastest trade fills they can. The point to this very simplistic lesson is that the market makers set the prices that shares trade at. They adjust those prices based (among other factors) on how much buying and selling volume they're seeing. If they see a wave of sell orders coming into the system then they'll start marking down their bid prices. This keeps them from paying too much for shares they're going to have to find a buyer for eventually, and it can sometimes slow down the pace of selling as investors and automated systems notice the price decline and decide to wait to sell. Conversely, if market makers see a wave of buy orders coming into the system, they'll start marking their ask prices up to maximize their gains, since they're selling you shares they bought from someone else, presumably at a lower price. But they typically adjust their prices up or down before they actually fill trades. (sneaky, eh?) Depending on how much volume there is on the shares of the company you're selling, and depending on whether there are more buyers than sellers at the moment, your share sell order may be filled at market by a market maker with no real consequence to the share's price. If the block is large enough then it's possible it will not all sell to one market maker, or it might not all happen in one transaction or even all at the same price. This is a pretty complex subject, as you can see, and I've cut a LOT of corners and oversimplified much to keep it comprehensible. But the short answer to your question is -- it depends. Hope this helps. Good luck!\"" }, { "docid": "271076", "title": "", "text": "Any way you look at it, this is a terrible idea. Cars lose value. They are a disposable item that gets used up. The more expensive the car, the more value they lose. If you spend $100,000 on a new car, in four years it will be worth less than $50,000.* That is a lot of money to lose in four years. In addition to the loss of value, you will need to buy insurance, which, for a $100,000 car, is incredible. If your heart is set on this kind of car, you should definitely save up the cash and wait to buy the car. Do not get a loan. Here is why: Your plan has you saving $1,300 a month ($16,000 a year) for 6.5 years before you will be able to buy this car. That is a lot of money for a long range goal. If you faithfully save this money that long, and at the end of the 6.5 years you still want this car, it is your money to spend as you want. You will have had a long time to reconsider your course of action, but you will have sacrificed for a long time, and you will have the money to lose. However, you may find out a year into this process that you are spending too much money saving for this car, and reconsider. If, instead, you take out a loan for this car, then by the time you decide the car was too much of a stretch financially, it will be too late. You will be upside down on the loan, and it will cost you thousands to sell the car. So go ahead and start saving. If you haven't given up before you reach your goal, you may find that in 6.5 years when it is time to write that check, you will look back at the sacrifices you have made and decide that you don't want to simply blow that money on a car. Consider a different goal. If you invest this $1300 a month and achieve 8% growth, you will be a millionaire in 23 years. * You don't need to take my word for it. Look at the car you are interested in, go to kbb.com, select the 2012 version of the car, and look up the private sale value. You'll most likely see a price that is about half of what a new one costs." }, { "docid": "13299", "title": "", "text": "\"First: do you understand why it dropped? Was it overvalued before, or is this an overreaction to some piece of news about them, or about their industry, or...? Arguably, if you can't answer that, you aren't paying enough attention to have been betting on that individual stock. Assuming you do understand why this price swing occurred -- or if you're convinced you know better than the folks who sold at that price -- do you believe the stock will recover a significant part of its value any time soon, or at least show a nice rate of growth from where it is now? If so, you might want to hold onto it, risking further losses against the chance of recovering part or all of what is -- at this moment -- only a loss on paper. Basically: if, having just seen it drop, you'd still consider buying it at the new price you should \"\"buy it from yourself\"\" and go on from here. That way at least you aren't doing exactly what you hope to avoid, buying high and selling low. Heck, if you really believe in the stock, you could see this as a buying opportunity... On the other hand, if you do not believe you would buy it now at its new price, and if you see an alternative which will grow more rapidly, you should take your losses and move your money to that other stock. Or split the difference if you aren't sure which is better but can figure out approximately how unsure you are. The question is how you move on from here, more than how you got here. What happened happened. What do you think will happen next, and how much are you willing to bet on it? On the gripping hand: This is part of how the market operates. Risk and potential reward tend to be pretty closely tied to each other. You can reduce risk by diversifying across multiple investments so no one company/sector/market can hurt you too badly --- and almost anyone sane will tell you that you should diversify -- but that means giving up some of the chance for big winnings too. You probably want to be cautious with most of your money and go for the longer odds only with a small portion that you can afford to lose on. If this is really stressing you out, you may not want to play with individual stocks. Mutual funds have some volatility too, but they're inherently diversified to a greater or lesser extent. They will rarely delight you, but they won't usually slap you this way either.\"" }, { "docid": "180644", "title": "", "text": "Your question is a bit odd in that you are mixing long-term fundamental analysis signals which are generally meant to work on longer time frames with medium term trading where these fundamental signals are mostly irrelevant. Generally you would buy-and-hold on a fundamental signal and ride the short-term fluctuations if you believe you have done good analysis. If you would like to trade on the 2-6 month time scale you would need a signal that works on that sort of time scale. Some people believe that technical analysis can give you those kind of signals, but there are many, many, many different technical signals and how you would trade using them is highly dependent on which one you believe works. Some people do mix fundamental and technical signals, but that can be very complicated. Learning a good amount about technical analysis could get you started. I will note, though, that studies of non-professionals continuously show that the more frequently people trade the more on they underperform on average in the long term when compared with people that buy-and-hold. An aside on technical analysis: michael's comment is generally correct though not well explained. Say Bob found a technical signal that works and he believes that a stock that costs $10 dollars should be $11. He buys it and makes money two months later when the rest of the market figures out the right price is $11 and he sells at that price. This works a bunch of times and he now publishes how the signal works on Stack Exchange to show everyone how awesome he is. Next time, Bob's signal finds a different stock at $10 that should be $11, but Anna just wrote a computer program that checks that signal Bob published faster than he ever could. The computer program buys as much as it can in milliseconds until the price is $11. Bob goes to buy, but now it is too late the price is already $11 and he can't make any money. Eventually, people learn to anticipate/adjust for this signal and even Anna's algorithms don't even work anymore and the hunt for new signals starts again." }, { "docid": "291886", "title": "", "text": "\"This stock is the same as any other, but you need to keep clear in your head that you and your company are now different entities. You (the person) will pay tax on capital gains and losses when you sell any stock that you hold in your own name. You'll also owe \"\"regular\"\" tax if you draw a salary, etc. The fact that it may be \"\"your\"\" company does not change these things. The company will not recognize a gain by selling stock to raise capital since it's nominally exchanging things of equal value, say $100 in cash for $100 in stock. In order to sell stock, however, you MIGHT need to register with the SEC depending on how you're going about finding your investors, so keep that in mind.\"" }, { "docid": "421987", "title": "", "text": "Since then I had gotten a job at a supermarket stocking shelves, but recently got fired because I kept zoning out at work This is not a good sign for day trading, where you spend all day monitoring investments. If you start focusing on the interesting math problem and ignoring your portfolio, you can easily lose money. Not so big a problem for missed buy opportunities, but this could be fatal for missed sale opportunities. Realize that in day trading, if you miss the uptick, you can get caught in a stock that is now going down. And I agree with those who say that you aren't capitalized well enough to get started. You need significantly more capital so that you can buy a diversified portfolio (diversification is your limitation, not hedging). Let's say that you make money on two out of three stocks on average. What are the chances that you will lose money on three stocks in a row? One in twenty-seven. What if that happens on your first three stocks? What if your odds at starting are really one in three to make money? Then you'll lose money more than half the time on each of your first three stocks. The odds don't favor you. If you really think that finance would interest you, consider signing up for an internship at an investment management firm or hedge fund. Rather than being the person who monitors stocks for changes, you would be the person doing mathematical analysis on stock information. Focusing on the math problem over other things is then what you are supposed to be doing. If you are good at that, you should be able to turn that into a permanent job. If not, then go back to school somewhere. You may not like your schooling options, but they may be better than your work options at this time. Note that most internships will be easier to get if you imply that you are only taking a break from schooling. Avoid outright lying, but saying things like needing to find the right fit should work. You may even want to start applying to schools now. Then you can truthfully say that you are involved in the application process. Be open about your interest in the mathematics of finance. Serious math minds can be difficult to find at those firms. Given your finances, it is not practical to become a day trader. If you want proof, pick a stock that is less than $100. Found it? Write down its current price and the date and time. You just bought that stock. Now sell it for a profit. Ignore historical data. Just monitor the current price. Missed the uptick? Too bad. That's reality. Once you've sold it, pick another stock that you can afford. Don't forget to mark your price down for the trading commission. A quick search suggests that $7 a trade is a cheap price. Realize that you make two trades on each stock (buy and sell), so that's $14 that you need to make on every stock. Keep doing that until you've run out of money. Realize that that is what you are proposing to do. If you can make enough money doing that to replace a minimum wage job, then we're all wrong. Borrow a $100 from your mom and go to town. But as others have said, it is far more realistic to do this with a starting stake of $100,000 where you can invest in multiple stocks at once and spread your $7 trading fee over a hundred shares. Starting with $100, you are more likely to run out of money within ten stocks." }, { "docid": "57994", "title": "", "text": "\"I'm a manager of a charity shop so work with a wide range of unpaid volunteers, which requires an especially soft touch (most of the time, everyone is different) or people will just leave. It takes longer, but the overall results are better and more long-lasting. Think of it like pushing a boat from the docks with your hand, always applying a small pressure to get the boat to gradually move where you want, rather than ramming into the side of a boat with a truck - sure it'll get you there quicker, but will cause lasting damage. It's also best to take it slow, as you need time to learn the business and people. Be clear about your approach with your boss, managing their expectations is important. Anyway, here is what I've learnt in my first year or so doing this job, plus things I've learnt along the way in my previous career as a software engineer (radical career change!) where I've managed people and been managed: 1. Be yourself. Don't pretend to be someone you're not, everyone will see right through you in an instant. You'll change over time as you get used to managing people, that's fine, but always be yourself through that. 1. Say \"\"thank you\"\" to everyone at the end of each day as you say goodbye. Mean it. Think of all the work they've done today for you. 1. Spread the shit evenly. Every job has crap parts, make sure you and everyone else gets their fair share and no more. I regularly hoover, clean the bathroom, wash-up, and so on. 1. Ask, don't tell. If you bark orders, people will do them.. but they'll put no effort into it and you'll distance yourself from them. Ask if they could do something for you. It's a politeness, nobody ever says no unless there is an issue which you need to deal with anyway. 1. Pick your battles. Is it worth moaning at someone for that little infraction? Or can you get over that message another way? i.e. I don't like people having drinks on the till counter, so when I take over to cover for them for a break, I just move it. After a while, no drinks appear on the counter. 1. Be honest. If you don't know, say so.. ask for input. Weigh up the options out loud, then pick one, explain why, and go for it - or better yet, get the person that thought of it working with you (not for you) to implement it. If you're wrong, hold your hand up and try the other suggestion(s). 1. Always take responsibility when things go wrong - that is actually your job. When things go well, use *you* and *we*. If things go badly, sometimes *I*, sometimes *we*, but never *you*. 1. Always be pro-active with money. If you owe your staff money for any reason, chase them to give it to them, never let them chase you. If there even *might* be any problems at all with money, let everyone know as soon as you know. Go out of your way to ensure they get what they're owed *now*, not later. I just did this today actually, I forgot to do expenses for someone and switched over the till so there wasn't enough cash in the new till to cover it.. so I just took it from the money to bank, and marked down why there was a discrepancy on the paperwork and will do the same tomorrow when that doesn't match by the opposite amount. I should not do this at all, but it's the right thing to do. 1. Listen carefully. Often employees have problems but won't bring them up, either they don't think anything will get done, or they don't want to get someone in trouble, or something else. However, if you listen and observe carefully, often there are clues to the things that are bothering them and you'll find ways to tackle them. 1. Don't run a team meeting until you know everyone, if you can avoid it. You don't know shit about how the company works, who the people are, what makes them tick, what they do, and so on. All you'll do is come across as a bit of a tool, and distance yourself from them (as boss). When you do run one, just guide it, don't lead it. Always hand over control of the conversation as much as possible, except of course where you've got things that they need to hear. 1. Never joke about your 'power'. i.e. Don't mess about saying how you'll fire them if blah, or how you'll give them all the shit work, or mention pay jokingly, etc. I had a boss that did that when drunk, not in a serious way at all, and he was very widely hated for pretty well nothing other than that. It served as a constant reminder that he's separate from us. 1. Give people room, but don't be taken for a ride. If someone is late once, fine, I wouldn't even mention it. Late again, maybe I'd make a light joke of it. Late again.. we'll have a chat.. always listen to what they have to say, is there any way you can help? But, don't be taken for a ride. I've had people pick me up on being late the very first time I was late, and you know what, I was more late for that job from then on than I've ever been before or since. 1. Try to get your employees to come up with ideas to move the business forwards. It's very easy to look at a business and say \"\"we need this, that, and the other doing.. like this!\"\". But you need to get your employees to buy into it, or they just won't do it properly. It'll be like getting blood out of a stone to start with, but if you're patient and support their ideas most people will come around. You *need* their input as they know their job better than you. 1. EDIT: Always be clear what you want from people, when. Speak with them about the task(s) before-hand to make sure they're comfortable with it and think it can be done in the time. So many times I've been given tasks with unrealistic deadlines, the manager hasn't wanted to listen to my protests, then wonders why it didn't get done in time. It's crazy really, wanting something to be possible doesn't make it so. *A (not so) Quick Example* One volunteer said to me that we should halve the price of all the fiction books to .99 to compete with other shops. I personally don't think that's a good idea (our shop has better quality stock and is much more organised), but I have no evidence to the contrary, and I honestly don't really know.. so I say go for it and support it completely as a good idea. We tried it for a month, and we made exactly the same amount of money.. sold twice as many books, but no extra cash. So it was valuable to do, and we discovered that maybe 1.49 might be a good option to try. But, far more importantly, they saw their ideas put into action right away, and saw the results of that. It empowered them, which is incredibly important for a wide variety of reasons that are too much to go into here, but basically it makes them feel more respected, enjoy their job more, think more about the business, and so on - you know what it's like when you're empowered, how good it feels. However, it's being empowered with the support that's important, something which you personally going into your new job don't feel you have, which leads to the anxiety and so on I'm sure you're feeling now. Don't put your employees in that position if you can help it. There is also another reason why I outright supported their idea from the offset. It didn't work (although we didn't loose anything) and I thought it wouldn't, but I can say \"\"*we* tried\"\". It wasn't down to that one person, they didn't feel bad that it didn't work because I was right behind it, and it's my job to take responsibility. If it had been *their* idea that had failed, they wouldn't give any ideas ever again, and everyone else would be put off too. As soon as anyone tries to take personal responsibility, and they will, stick to your guns in supporting them.. stronger than ever. Now we're getting a lot of ideas all the time, they're having in-depth discussions amongst each other, they're pro-active, and so on. As a business we're doing much better now because of it.. profits are up 15% from last year and we've only just begun to kick things off, and that's going against a national trend downwards. We've had several critical changes to our shop layout, back-room organisation, results reporting, stock handling processes, and so on.. all from volunteer ideas and feedback. So the 15% is actually the tip of the iceberg, what we've got in place now should allow us to grow more quickly too. And remember, you can make suggestions too of course.. but they're just that, suggestions. Suggest them to your employees, speak with several of them, then get back to them when you've made a decision. Don't say \"\"I'm thinking of trying this\"\", say \"\"I was just thinking.. what about this? Do you think it would work?\"\" and talk about it. Think of arguments against your idea, see if they counter them, and so on. Now.. how many of these changes did I think of before-hand and want to enact? About half.. so we've got a significant number of successful ideas that I personally hadn't thought of, everyone's happier and working harder for the business, and we have a bright future. I have more ideas too, and people listen to and respect them now just like I have with them. I think that's the key to it all really. Show your employees respect, and they'll show you it in return.\"" }, { "docid": "424437", "title": "", "text": "Keeping your “big emergency” fund in stocks if you have 12 months income saved is OK. However you should keep your “small emergency” fund in cash. (However I find that even my stock broker accounts have some cash in them, as I like to let the dividends build up enough to make the dealing charges worthwhile. You don’t wish to be forced to sell at a bad time due to your boiler needing replacing or your car breaking down. However if you lost your job in the same week that your boiler broke down and your car needed replacing then being forced to sell stocks at a bad time is not much of an issue. Also if you are saving say 1/3 of your income each month and you have a credit card with large unused credit limit that is paid of each month, then most “small emergency” that are under 2/3 of your monthly income can be covered on the credit card with little or no interest charges. One option is to check you bank balance on the day after you are paid, and if it is more than 2x your monthly income, then move some of it to long term savings, but only if you tend to spend a lot less then you earn most months." }, { "docid": "370995", "title": "", "text": "\"My theory is that for every stock you buy, you should have an exit strategy and follow it. It is too hard to let emotions rule if you let your default strategy be \"\"let's see what happens.\"\" and emotional investing will almost never serve you well. So before buying a stock, set a maximum loss and maximum gain that you will watch for on the stock, and when it hits that number sell. At the very least, when it hits one of your numbers, consciously make a decision that you are effectively buying it again at the current price if you decide to stay in. When you do this, set a new high and low price and repeat the above strategy.\"" }, { "docid": "160169", "title": "", "text": "Yes, theoretically you can flip the shares you agreed to buy and make a profit, but you're banking on the market behaving in some very precise and potentially unlikely ways. In practice it's very tricky for you to successfully navigate paying arbitrarily more for a stock than it's currently listed for, and selling it back again for enough to cover the difference. Yes, the price could drop to $28, but it could just as easily drop to $27.73 (or further) and now you're hurting, before even taking into account the potentially hefty commissions involved. Another way to think about it is to recognize that an option transaction is a bet; the buyer is betting a small amount of money that a stock will move in the direction they expect, the seller is betting a large amount of money that the same stock will not. One of you has to lose. And unless you've some reason to be solidly confident in your predictive powers the loser, long term, is quite likely to be you. Now that said, it is possible (particularly when selling puts) to create win-win scenarios for yourself, where you're betting one direction, but you'd be perfectly happy with the alternative(s). Here's an example. Suppose, unrelated to the option chain, you've come to the conclusion that you'd be happy paying $28 for BBY. It's currently (June 2011) at ~$31, so you can't buy it on the open market for a price you'd be happy with. But you could sell a $28 put, promising to buy it at that price should someone want to sell it (presumably, because the price is now below $28). Either the put expires worthless and you pocket a few bucks and you're basically no worse off because the stock is still overpriced by your estimates, or the option is executed, and you receive 100 shares of BBY at a price you previously decided you were willing to pay. Even if the list price is now lower, long term you expect the stock to be worth more than $28. Conceptually, this makes selling a put very similar to being paid to place a limit order to buy the stock itself. Of course, you could be wrong in your estimate (too low, and you now have a position that might not become profitable; too high, and you never get in and instead just watch the stock gain in value), but that is not unique to options - if you're bad at estimating value (which is not to be confused with predicting price movement) you're doomed just about whatever you do." } ]

[ { "docid": "418626", "title": "", "text": "You're missing the cost-of-carry aspect: The cost of carry or carrying charge is the cost of storing a physical commodity, such as grain or metals, over a period of time. The carrying charge includes insurance, storage and interest on the invested funds as well as other incidental costs. In interest rate futures markets, it refers to the differential between the yield on a cash instrument and the cost of the funds necessary to buy the instrument. So in a nutshell, you'd have to store the gold (safely), invest your money now, i.e. you're missing out on interests the money could have earned until the futures delivery date. Well and on top of that you need to get the gold shipped to London or wherever the agreed delivery place is. Edit: Forgot to mention that of course there are arbitrageurs that make sure the futures and spot market prices don't diverge. So the idea isn't that bad as I might have made it sound but being in the arbitrage business myself I should disclaim that profits are small and arbitraging is highly automated, so before you spot a $1 profit somewhere between any two contracts, you can be quite sure it's been taken by an arbitrageur already." } ]

[ { "docid": "213861", "title": "", "text": "To me, the most important thing for young people to learn about personal finance is the connection between service and income. Most, rightly look for a way to earn money and advance the lifestyle of their home life. How does one do that? Grinding it out in a 9-5 does not seem attractive while living the lifestyles of those on TV would be awesome. The temptation is to try all these tricks to get money, but absent from their plan is how they serve their fellow man in order to receive that money. Stars, like the Kardashians are a marketing machine despite the carefree life displayed on the TV. They have served many budding companies well by selling their products to certain demographics. Most young people do not make that connection. So they try things like trading Forex, gold or whatever the latest thing is. It does not work as there is no service to their fellow man. They get a job at a fast food chain and complain about their pay in accordance with their work. Well sure, but again they are serving such few people that one can only expect a small income. The better and more people one can serve, in general, the higher a person's income." }, { "docid": "34233", "title": "", "text": "There are bullion dealers who will buy gold no matter its form. You won't get the spot price as it's probably being bought same as junk jewelry or any other gold needing to be melted and recast. If this is your concern, you should buy a fireproof safe, the kind people use to store their important documents, and add the gold value to home insurance policy. Do not get a safe deposit box at the bank, see mbhunter's comment and link." }, { "docid": "309497", "title": "", "text": "@Tim - in this case, a futures contract isn't like an options contract. It's simply a method of entering into an agreement for delivery at a future date. While the speculators appear to have taken over, there are practical examples of use of the futures market. I am a gold miner and I see that my cost is $1200/oz given my quality of ore. I see the price of gold at $1600 and instead of worrying that if it goes too low, I run at a loss, I take advantage and sell contracts to match my production for the next year (or as long as the contracts go, I forget how far out gold futures are). Of course I give up the higher price if gold goes higher, but this scenarion isn't speculation, it's a business decision. The bread maker, on the other hand, might buy wheat futures to guarantee his prices for the next year." }, { "docid": "10549", "title": "", "text": "\"Very interesting. I'm actually glad you mentioned term structure models, because that's something I'm interested in. But I don't think the distinction you draw between \"\"equilibrium\"\" and \"\"arbitrage free\"\" models makes sense with Black-Scholes. My understanding was that the discrepancy between equilibrium and arbitrage-free term structure models arises because term structure models lack market completeness. In other words, when the market is incomplete (as it is with interest rates), you'll have a continuum of bond prices that are compatible with no arbitrage, and the exact price will depend on the market price for risk. However, in Black-Scholes, the market price for risk term basically falls out of the equation because of market completeness. Or in other words, since we have market completeness, there's a *unique* martingale measure that gives the price for the option. So when you have market completeness, there should be no difference between an equilibrium and a no-arbitrage model - they're one and the same.\"" }, { "docid": "511616", "title": "", "text": "\"[There's about 10 trillion in gold](http://en.wikipedia.org/wiki/Gold_reserve) and about [2.8 trillion of US cash](http://visualeconomics.creditloan.com/the-value-of-united-states-currency-in-circulation/) in the world. Neither of these is anywhere large enough to be used for all the transactions in the world. For example, about [4 trillion a **day**](http://en.wikipedia.org/wiki/Foreign_exchange_market) changes hands in the currency markets alone - if that were required to be cash or gold it would be impossible to do so, and you'd suffer from more poorly priced goods since markets could not adjust as quickly, so vendors would charge more premium to handle the risk. Yes, there is not (and has not been) enough cash in circulation to run the world economy. There is also vastly too little gold, unless you want to strangle commerce due to not being enough money to trade. &gt; \"\"posing as the money supply\"\" All money is debt, and always has been. Money is a placeholder that you can trade for goods *later* meaning someone owes you a thing. The value of that money is the debt they (or society) owes you for something you already did to get that money. So there is no posing, just most don't understand money, how it originated, why it exists, or why it works. They never ask the question \"\"how does money come into existance\"\". &gt; Does defaulting on ones debt create inflation since that money is still in the system and not being paid off? Probably not much. Loans are made expecting some default, so the interest others pay on their loans helps offset the defaulted ones. If loans become riskier, the interest demanded increases, so the lender still (if they do their risk analysis well and no external events break their expectations) makes money. When you pay off a debt, that money, as you're paying it, is likely being lent in other loans, so paying it off does not do much. If you could pay off about 100 trillion in debt into the US economy in one payment you might break some things :)\"" }, { "docid": "332924", "title": "", "text": "\"I recommend avoiding trading directly in commodities futures and options. If you're not prepared to learn a lot about how futures markets and trading works, it will be an experience fraught with pitfalls and lost money – and I am speaking from experience. Looking at stock-exchange listed products is a reasonable approach for an individual investor desiring added diversification for their portfolio. Still, exercise caution and know what you're buying. It's easy to access many commodity-based exchange-traded funds (ETFs) on North American stock exchanges. If you already have low-cost access to U.S. markets, consider this option – but be mindful of currency conversion costs, etc. Yet, there is also a European-based company, ETF Securities, headquartered in Jersey, Channel Islands, which offers many exchange-traded funds on European exchanges such as London and Frankfurt. ETF Securities started in 2003 by first offering a gold commodity exchange-traded fund. I also found the following: London Stock Exchange: Frequently Asked Questions about ETCs. The LSE ETC FAQ specifically mentions \"\"ETF Securities\"\" by name, and addresses questions such as how/where they are regulated, what happens to investments if \"\"ETF Securities\"\" were to go bankrupt, etc. I hope this helps, but please, do your own due diligence.\"" }, { "docid": "305069", "title": "", "text": "\"To answer this part of the question: \"\"How can you build an index based on shipping routes - what is the significance of that? Indexes are traditionally built based on companies: e.g. S&P Index is a basket of companies whose price varies. But here you need a basket of FFA contracts from different oil firms (Shell, BP), 5 year Shell FFA's, 10 year shell FFA's. Where do routes enter the picture? Let the tanker any route he feels like.\"\" No, you don't get a basket of FFA contracts from given companies (such as Shell and BP). What you get are rates assessed by a panel of brokers for the main tanker routes (especially in the tanker market, there are comparatively few standard routes, because the major oil loading areas are also comparatively few). The panel will assess the spot and future markets on a daily basis, and issue the rates accordingly.\"" }, { "docid": "10813", "title": "", "text": "&gt;But gold does have other uses. It is a metal that's used for jewelry, it has decorative value. Exchanging something for gold is like a caveman giving you a stone ax if you do some cave paintings for him. That's not quite the point. I was addressing a specific problem. I'm aware that it's more complex, hence my disclaimer of simplicity. But to address your point, not everyone is a goldsmith. Imagine if the medium was saltpeter. Of course someone's going to use it to make explosives, but most people are not in that line of work. To most people, gold has no use except as a store of value. Why is an identically designed plastic necklace so much cheaper than a gold one? Because as many uses as it has, plastic doesn't store value (some say intrinsically, I say artificially) the way gold does. &gt;because they lack the manufacturing capacity to do so. Like I said, they can invest in factory expansion or new factory construction. To stick to the metaphor, they need to plant more apple trees. There may not be a million apples available, but if that's what the demand is -and why else would anyone offer a million apples- that's the potential market size (especially if the supply exists in China). So the farmer ought to increase his yield, thereby lowering his average cost to produce an apple. If he knows he can only plant 100 apple trees, he's not going to promise a million apples when asking for a loan to expand his orchard. EDIT: &gt;with their nominal value that people agreed upon. The same phenomenon occurs in bullion currency." }, { "docid": "384759", "title": "", "text": "I think it might come down to the contract itself. In many states in the US an employer cannot block you from practicing your trade to make a living. In many jurisdictions contract clauses that are designed to prevent you from working in your trade area are generally void and unenforceable however in cases like this only a trip in front of a judge will fix it. What I find interesting about this, is that depending on the details, Sony might have a hard time finding another spokesman in the future. I would imagine most actors would steer clear of that spot in the future if this is how Sony is going to react when they try to get new work." }, { "docid": "339169", "title": "", "text": "It depends on what your goals are, your age, how much debt you have, etc. Assuming -- and we all know what happens when you assume -- that your financial life is otherwise in order, the 5% to 10% range you're talking about isn't overinvesting. You won't have a lot of company; most people don't own any. One comment on this part: I have some gold (GLD), but not much ... Gold and GLD are not the same thing at all. Owning shares of the SPDR Gold Trust is not the same thing as owning gold coins or bars. You're achieving different ends by owning GLD shares as opposed to the physical yellow metal. GLD will follow the spot price of gold pretty closely, but it isn't the same thing as physical ownership." }, { "docid": "181574", "title": "", "text": "Depends what kind of expenses you intend to use this money for. If you plan to buy housing in the future (eg you're saving a deposit), then you need to ensure that the value doesn't deteriorate relative to the value of the housing you are likely to buy - so you could buy a Residential REIT, or buy some investment property. If you expect to use this money for food, then you should buy suitable assets (eg Wheat futures, etc). Link the current asset to the future expense, and you will be fine. If you buy Gold, then you are making a bet that Gold will retain its value compared to the thing you want to purchase in future. It doesn't matter what the price of Gold does in $US." }, { "docid": "242171", "title": "", "text": "\"It's helpful to remember that Charles Ponzi started with a legitimate arbitrage (international postal remittances). Once purveyors of arbitrage reach a certain scale, there's a natural tendency to become lazy and just forgo the arbitrage and just use new investor money to pay off previous investors. Banks wouldn't be any different if it weren't for central banks and government participation. Indeed, the primary reason that the FedResInk came into existence is **because** of ponzi-like bank failures (bankers call them \"\"a run on the bank\"\"). Neoclassical economics is about using the synthesis of state sovereignty and central bank monetary theory to keep the system they've developed intact. ...and, as fun as it might be to sit back and calculate just how much debt can be created from a life-time of labor proceeds (a couple million for the average person-- completely hypothetical back of the envelope inflation excluded, 4.5x10^14, which is still in middle of the trillions), it would be wise to keep in mind that the last banking crisis, while fundamentally caused by the inability to collect future labor proceeds, was precipitated, not by individuals, but by repurchase agreements propping up extremely leveraged positions made by and between massive investment banks. So, the thing to remember is that fractional reserve debt issuance banking is like a 10 to 1 transistor that has a fundamental tolerance requirement on the source signal, but that when the source signal fades, it can draw from the surplus signal created by the 10 to 1 amplification (up to a certain point and then the transistor goes up in a puff of smoke).\"" }, { "docid": "352728", "title": "", "text": "\"Gold ownership has been outlawed before in this country. However, if you research it I think you'll find that there are two components in pricing gold coins: * The spot value of gold * The numismatic value of the coin in question. That second point is where you get fucked. There are a whole lot of outfits selling worthless \"\"investment grade\"\" coins that sell for way more than they should based on gold content, and for way more than any coin collector would ever give you for the value of the coin itself. But it's much harder to find a reasonable price for some supposedly rare coin than it is for the metal itself, so it's easier to scam you. So it's in the best interest of the guys that advertise for these firms to say \"\"buying rare coins is awesome, and buying straight gold is stupid.\"\" Me? If I want to buy going coins I'll buy US Gold Eagles for a small percentage over the spot price. They're probably more liquid than some random chunk of goldish metal that says it's 1oz/10oz/100oz of gold.\"" }, { "docid": "65295", "title": "", "text": "The owner of a long futures contract does not receive dividends, hence this is a disadvantage compared to owning the underlying stock. If the dividend is increased, and the future price would not change, there is an arbitrage possibility. For the sake of simplicity, assume that the stock suddenly starts paying a dividend, and that the risk free rate is zero (so interest does not play a role). One can expect that the future price is (rougly) equal to the stock price before the dividend announcment. If the future price would not change, an investor could buy the stock, and short a futures contract on the stock. At expiration he has to deliver the stock for the price set in the contract, which is under the assumptions here equal to the price he bought the stock for. But because he owned the stock, he receives the announced dividend. Hence he can make a risk-free profit consisting of the divivends. If interest do play a role, the argument is similar." }, { "docid": "201222", "title": "", "text": "I agree that there is no reliable way to buy gold for less than spot, no more than there is for any other commodity. However, you can buy many things below market from motivated sellers. That is why you see so many stores buying gold now. It will be hard to find such sellers now with the saturation of buyers, but if you keep an eye on private sales and auctions you may be able to pick up something others miss." }, { "docid": "362765", "title": "", "text": "\"In general economic theory, there are always two markets created based on a need for a good; a spot market (where people who need something now can go outbid other people who need the same thing), and a futures market (where people who know they will need something later can agree to buy it for a pre-approved price, even if the good in question doesn't exist yet, like a grain crop). Options exist as a natural extension of the futures market. In a traditional future, you're obligated, by buying the contract, to execute it, for good or ill. If it turns out that you could have gotten a lower price when buying, or a higher price when selling, that's tough; you gave up the ability to say no in return for knowing, a month or three months or even a year in advance, the price you'll get to buy or sell this good that you know you need. Futures thus give both sides the ability to plan based on a known price, but that's their only risk-reduction mechanism. Enter the option. You're the Coors Brewing Company, and you want to buy 50 tons of barley grain for delivery in December in order to brew up for the Super Bowl and other assorted sports parties. A co-op bellies up to close the deal. But, since you're Coors, you compete on price with Budweiser and Miller, and if you end up paying more than the grain's really worth, perhaps because of a mild wet fall and a bumper crop that the almanac predicts, then you're going to have a real bad time of it in January. You ask for the right to say \"\"no\"\" when the contract falls due, if the price you negotiate now is too high based on the spot price. The co-op now has a choice; for such a large shipment, if Coors decided to leave them holding the bag on the contract and instead bought it from them anyway on a depressed spot market, they could lose big if they were counting on getting the contract price and bought equipment or facilities on credit against it. To mitigate those losses, the co-op asks for an option price; basically, this is \"\"insurance\"\" on the contract, and the co-op will, in return for this fee (exactly how and when it's paid is also negotiable), agree to eat any future realized losses if Coors were to back out of the contract. Like any insurance premium, the option price is nominally based on an outwardly simple formula: the probability of Coors \"\"exercising\"\" their option, times the losses the co-op would incur if that happened. Long-term, if these two figures are accurate, the co-op will break even by offering this price and Coors either taking the contract or exercising the option. However, coming up with accurate predictions of these two figures, such that the co-op (or anyone offering such a position) would indeed break even at least, is the stuff that keeps actuaries in business (and awake at night).\"" }, { "docid": "1642", "title": "", "text": "\"During Graham's career, gold and currency were the same thing because of the gold standard. Graham did not advise investing in currencies, only in bonds and stocks, the latter only for intelligent speculation. Graham died a couple of years after Nixon closed the gold window, ending the gold standard. Gold may be thought of as a currency even today, as endowments and other investors use it as a store of value or for diversification of risks. However, currency or commodities investing does not seem Graham-like. How could you reliably estimate intrinsic value of a currency or commodity, so that you can have a Graham-like margin of safety after subtracting the intrinsic value from the market value? Saying that gold is \"\"clearly underpriced in today's market\"\" is just hand-waving. A Graham analysis such as \"\"net net\"\" (valuing stocks by their current tangible assets net of all liabilities) is a quantitative analysis of accounting numbers audited by CPAs and offers a true margin of safety.\"" }, { "docid": "412858", "title": "", "text": "The futures market allows you to take delivery at the lowest cost. Most people don't deal in 100oz gold bars and 5000oz of 1000oz silver bars though, especially at the retail level. That said, when you are at the retail level, often times you will find reputable Internet dealers offering the lowest cost of ownership. Keep in mind brand name though when you're doing this. Reputable refiners/mints will often see higher premiums versus generic, and this does matter to some extent. Quantity and weights also matter in terms of pricing; the more you buy the lower the premium." }, { "docid": "516148", "title": "", "text": "\"I was able to find a fairly decent index that trades very close to 1/10th the actual price of gold by the ounce. The difference may be accounted to the indexes operating cost, as it is very low, about 0.1%. The index is the ETFS Gold Trust index (SGOL). By using the SGOL index, along with a Standard Brokerage investment account, I was able to set up an investment that appropriately tracked my gold \"\"shares\"\" as 10x their weight in ounces, the share cost as 1/10th the value of a gold ounce at the time of purchase, and the original cost at time of purchase as the cost basis. There tends to be a 0.1% loss every time I enter a transaction, I'm assuming due to the index value difference against the actual spot value of the price of gold for any day, probably due to their operating costs. This solution should work pretty well, as this particular index closely follows the gold price, and should reflect an investment in gold over a long term very well. It is not 100% accurate, but it is accurate enough that you don't lose 2-3% every time you enter a new transaction, which would skew long-term results with regular purchases by a fair amount.\"" } ]

[ { "docid": "233635", "title": "", "text": "\"As proposed: Buy 100 oz of gold at $1240 spot = -$124,000 Sell 1 Aug 2014 Future for $1256 = $125,600 Profit $1,600 Alternative Risk-Free Investment: 1 year CD @ 1% would earn $1240 on $124,000 investment. Rate from ads on www.bankrate.com \"\"Real\"\" Profit All you are really being paid for this trade is the difference between the profit $1,600 and the opportunity for $1240 in risk free earnings. That's only $360 or around 0.3%/year. Pitfalls of trying to do this: Many retail futures brokers are set up for speculative traders and do not want to deal with customers selling contracts against delivery, or buying for delivery. If you are a trader you have to keep margin money on deposit. This can be a T-note at some brokerages, but currently T-notes pay almost 0%. If the price of gold rises and you are short a future in gold, then you need to deposit more margin money. If gold went back up to $1500/oz, that could be $24,400. If you need to borrow this money, the interest will eat into a very slim profit margin over the risk free rate. Since you can't deliver, the trades have to be reversed. Although futures trades have cheap commissions ~$5/trade, the bid/ask spread, even at 1 grid, is not so minimal. Also there is often noisy jitter in the price. The spot market in physical gold may have a higher bid/ask spread. You might be able to eliminate some of these issues by trading as a hedger or for delivery. Good luck finding a broker to let you do this... but the issue here for gold is that you'd need to trade in depository receipts for gold that is acceptable for delivery, instead of trading physical gold. To deliver physical gold it would likely have to be tested and certified, which costs money. By the time you've researched this, you'll either discover some more costs associated with it or could have spent your time making more money elsewhere.\"" } ]

[ { "docid": "450922", "title": "", "text": "I think you are asking a few questions here. Why is gold chosen as money? In a free market there are five characteristics of a good money: Gold and silver meet all five characteristics. Diamonds are not easily divisible which is why they are not normally used as money. Copper, Iron, and lead are not scarce enough - you would need a lot of these metals to make weekly or daily purchases. Paper is also way too plentiful to be used as money. By the way, historically silver has been used for money more than gold. How does international trade work with gold as money (is this what you are asking with your hypothetical example of 10 countries each with y amount of gold?) Typically a government will issue a currency that is backed by gold. This means you can redeem your currency for actual gold. Then when an American spends 5 US dollars (USD) to purchase a Chinese good the Chinese man now owns 5 USDs. The Chinese man can either redeem the 5 USD for gold or spend the 5 USD in the US. If a government issues more currency then they have gold for then the gold will start to flow from that country to other countries as the citizens of the other countries redeem the over-issued currency for gold. This outflow of gold restricts governments from over-issuing paper currency. Who creates the procedures and who supervises them in modern worldwide economy? The Federal Reserve, IMF, and Bank of International Settlements all are involved in the current system where the US dollar (see Bretton Woods agreement) is the reserve currency used by central banks throughout the world. Some think this system is coming to an end. I tend to agree." }, { "docid": "34233", "title": "", "text": "There are bullion dealers who will buy gold no matter its form. You won't get the spot price as it's probably being bought same as junk jewelry or any other gold needing to be melted and recast. If this is your concern, you should buy a fireproof safe, the kind people use to store their important documents, and add the gold value to home insurance policy. Do not get a safe deposit box at the bank, see mbhunter's comment and link." }, { "docid": "516214", "title": "", "text": "\"TL;DR - go with something like Barry Ritholtz's All Century Portfolio: 20 percent total U.S stock market 5 percent U.S. REITs 5 percent U.S. small cap value 15 percent Pacific equities 15 percent European equities 10 percent U.S. TIPs 10 percent U.S. high yield corp bonds 20 percent U.S. total bond UK property market are absurdly high and will be crashing a lot very soon The price to rent ratio is certainly very high in the UK. According to this article, it takes 48 years of rent to pay for the same apartment in London. That sounds like a terrible deal to me. I have no idea about where prices will go in the future, but I wouldn't voluntarily buy in that market. I'm hesitant to invest in stocks for the fear of losing everything A stock index fund is a collection of stocks. For example the S&P 500 index fund is a collection of the largest 500 US public companies (Apple, Google, Shell, Ford, etc.). If you buy the S&P 500 index, the 500 largest US companies would have to go bankrupt for you to \"\"lose everything\"\" - there would have to be a zombie apocalypse. He's trying to get me to invest in Gold and Silver (but mostly silver), but I neither know anything about gold or silver, nor know anyone who takes this approach. This is what Jeremy Siegel said about gold in late 2013: \"\"I’m not enthusiastic about gold because I think gold is priced for either hyperinflation or the end of the world.\"\" Barry Ritholtz also speaks much wisdom about gold. In short, don't buy it and stop listening to your friend. Is buying a property now with the intention of selling it in a couple of years for profit (and repeat until I have substantial amount to invest in something big) a bad idea? If the home price does not appreciate, will this approach save you or lose you money? In other words, would it be profitable to substitute your rent payment for a mortgage payment? If not, you will be speculating, not investing. Here's an articles that discusses the difference between speculating and investing. I don't recommend speculating.\"" }, { "docid": "10813", "title": "", "text": "&gt;But gold does have other uses. It is a metal that's used for jewelry, it has decorative value. Exchanging something for gold is like a caveman giving you a stone ax if you do some cave paintings for him. That's not quite the point. I was addressing a specific problem. I'm aware that it's more complex, hence my disclaimer of simplicity. But to address your point, not everyone is a goldsmith. Imagine if the medium was saltpeter. Of course someone's going to use it to make explosives, but most people are not in that line of work. To most people, gold has no use except as a store of value. Why is an identically designed plastic necklace so much cheaper than a gold one? Because as many uses as it has, plastic doesn't store value (some say intrinsically, I say artificially) the way gold does. &gt;because they lack the manufacturing capacity to do so. Like I said, they can invest in factory expansion or new factory construction. To stick to the metaphor, they need to plant more apple trees. There may not be a million apples available, but if that's what the demand is -and why else would anyone offer a million apples- that's the potential market size (especially if the supply exists in China). So the farmer ought to increase his yield, thereby lowering his average cost to produce an apple. If he knows he can only plant 100 apple trees, he's not going to promise a million apples when asking for a loan to expand his orchard. EDIT: &gt;with their nominal value that people agreed upon. The same phenomenon occurs in bullion currency." }, { "docid": "159822", "title": "", "text": "\"ETFs are well suited to day trading, but you should be mindful of the bid-ask spread. See article: Commission-free ETFs are a great way to save money, but watch the bid-ask spread too. Bid-ask spread is largely a function of liquidity, or the volume of buyers and sellers for an asset during a particular moment in time. ... It may be more difficult to trade certain assets that are less liquid, where bid-ask spreads can be higher. Think some penny stocks. If you have the choice, compare the spreads of the ETF and the target stock. Longer-term \"\"keep & hold\"\" trading on ETFs tracking futures can be somewhat disadvantageous. Futures contracts roll-over every month. Exchange traders have to sell and buy in on the next contract. ETFs don't reflect the price differential between the futures contract. See here for more detail on that: Positioning For An Oil ETF Rebound? Watch For Contango Contango occurs when the price on a futures contract is higher than the expected future spot price, which creates the upward sloping curve on future commodity prices over time. Essentially, the phenomenon reflects a current spot price that is lower than the futures price. ... While this phenomena is a normal occurrence in the futures market, contango can have a negative effect on ETFs.\"" }, { "docid": "339169", "title": "", "text": "It depends on what your goals are, your age, how much debt you have, etc. Assuming -- and we all know what happens when you assume -- that your financial life is otherwise in order, the 5% to 10% range you're talking about isn't overinvesting. You won't have a lot of company; most people don't own any. One comment on this part: I have some gold (GLD), but not much ... Gold and GLD are not the same thing at all. Owning shares of the SPDR Gold Trust is not the same thing as owning gold coins or bars. You're achieving different ends by owning GLD shares as opposed to the physical yellow metal. GLD will follow the spot price of gold pretty closely, but it isn't the same thing as physical ownership." }, { "docid": "449941", "title": "", "text": "\"These are meaningless statistics on multiple levels: 1. These value rises are as of 2016. This does not indicate any sort of significant trend in the rise in value of these bags over time. Did they lose 30% in 2015? Will value stagnate in 2018? 2. Even if a trend were established (it is not), it doesn't suggest any sort of future movements whatsoever, as past price movements don't ensure future movements. 3. The fundamental idea of \"\"investing\"\" in an accessory is questionable at best. While collectors will buy things like cars and art, and some will sit on them as stores of value, the economics of generating future returns on these items is not so logically sound as with stocks or bonds. These collectors items do not generate future value in a way that produces cash flows. An individual has to purely hope that somebody is willing to pay more for it in the future; the item does not fundamentally necessitate higher payment. This is the fundamental problem also with \"\"investing\"\" in commodities, and why a fundamentalist like Buffet would never do it. You bet on a commodity move (hopefully with information that you believe the market to be incorrectly synthesizing); you don't really \"\"invest\"\" in one. What makes a stock or bond (a company) different is that a company can be thought of as a black box that prints more money than it is fed. We feed money into a company as investors; the company uses that money to buy assets (e.g. Machines, inventory) at book value; the assets are made to work in tandem to produce goods/services that have more value than the sum of their parts; those goods/services are sold at the now higher value for a profit, and cash flows are returned to investors for an annual return on your investment (sometimes dividends aren't paid, but are reinvested with the expectation that reinvestment will lead to far larger dividends in the future). As such, the money investors feed into a company is turned into more money at the other end, and thus the company has produced more value than it's inputs alone. It has done so through the combination of resources (assets) in a way that makes their value greater than the sum of their parts. A company fundamentally is a logical investment (barring doubts about management's ability to create this value). It is like a black box that prints more money over time than you feed it. Purses do not; gold does not; oil does not. Don't invest in purses. Collect then if you love them, but don't bank on a payday.\"" }, { "docid": "565926", "title": "", "text": "In a simple world yes, but not in the real world. Option pricing isn't that simplistic in real life. Generally option pricing uses a Monte Carlo simulation of the Black Scholes formula/binomial and then plot them nomally to decide the optimum price of the option. Primarily multiple scenarios are generated and under that specific scenario the option is priced and then a price is derived for the option in real life, using the prices which were predicted in the scenarios. So you don't generate a single price for an option, because you have to look into the future to see how the price of the option would behave, under the real elements of the market. So what you price is an assumption that this is the most likely value under my scenarios, which I predicted into the future. Because of the market, if you price an option higher/lower than another competitor you introduce an option for arbitrage by others. So you try to be as close to the real value of the option, which your competitor also does. The more closer your option value is to the real price the better it is for all. Did you try the book from Hull ? EDIT: While pricing you generally take variables which would affect the price of your option. The more variables you take(more nearer you are to the real situation) the more realistic your price will be and you would converge on the real price faster. So simple formula is an option, but the deviations maybe large from the real value. And you would end up loosing money, most of the time. So the complicated formula is there for getting a more accurate price, not to confuse people. You can use your formula, but there will be odds stacked against you to loose money, from the onset, because you didn't consider the variables which might/would affect the price of your option." }, { "docid": "577201", "title": "", "text": "As Sean pointed out they usually mean LIBOR or the FFR (or for other countries the equivalent risk free rate of interest). I will just like to add on to what everyone has said here and will like to explain how various interest rates you mentioned work out when the risk free rate moves: For brevity, let's denote the risk free rate by Rf, the savings account interest rate as Rs, a mortgage interest rate as Rmort, and a term deposit rate with the bank as Rterm. Savings account interest rate: When a central bank revises the overnight lending rate (or the prime rate, repo rate etc.), in some countries banks are not obliged to increase the savings account interest rate. Usually a downward revision will force them to lower it (because they net they will be paying out = Rf - Rs). On the other hand, if Rf goes up and if one of the banks increases the Rs then other banks may be forced to do so too under competitive pressure. In some countries the central bank has the authority to revise Rs without revising the overnight lending rate. Term deposits with the bank (or certificates of deposit): Usually movements in these rates are more in sync with Rf than Rs is. The chief difference is that savings account offer more liquidity than term deposits and hence banks can offer lower rates and still get deposits under them --consider the higher interest rate offered by the term deposit as a liquidity risk premium. Generally, interest rates paid by instruments of similar risk profile that offer similar liquidity will move in parallel (otherwise there can be arbitrage). Sometimes these rates can move to anticipate a future change in Rf. Mortgage loan rates or other interests that you pay to the bank: If the risk free rate goes up, banks will increase these rates to keep the net interest they earn over risk free (= Δr = Rmort - Rf) the same. If Rf drops and if banks are not obliged to decrease loan rates then they will only do so if one of the banks does it first. P.S:- Wherever I have said they will do so when one of the banks does it first, I am not referring to a recursion but merely to the competitive market theory. Under such a theory, the first one to cut down the profit margin usually has a strong business incentive to do so (e.g., gain market share, or eliminate competition by lowering profit margins etc.). Others are forced to follow the trend." }, { "docid": "327271", "title": "", "text": "\"I do not know anything about retail investing in India, since I am in the US. However, there are a couple of general things to keep in mind about gold that should be largely independent of country. First, gold is not an investment. Aside from a few industrial uses, it has no productive value. It is, at best, a hedge against inflation, since many people feel more comfortable with what they consider \"\"real\"\" money that is not subject to what seems to be arbitrary creation by central banks. Second, buying tiny amounts of gold as coin or bullion from a retail dealer will always involve a fairly significant spread from the commodity spot price. The spot price only applies to large transactions. Retail dealers have costs of doing business that necessitate these fees in order for them to make a profit. You must also consider the costs of storing your gold in a way that mitigates the risk of theft. (The comment by NL7 is on this point. It appeared while I was typing this answer.) You might find this Planet Money piece instructive on the process, costs, and risks of buying gold bullion (in the US). If you feel that you must own gold as an inflation hedge, and it is possible for residents of India, you would be best off with some kind of gold fund that tracks the price of bullion.\"" }, { "docid": "452223", "title": "", "text": "\"nicodiangelo16.blogspot.com — Tired of falling for business opportunities and franchises that don't live up to their promises? Try our revealing reviews - unique forensic analyses that expose the good, the bad and the ugly This site is financed by you, instead of by biz opp ads and commission links You pay us to be unbiased - so we are \"\"It's the only unbiased info on the market that I've come across.\"\"Carl, Business Opportunity Watch member since 2005 Review of SHARON FUSSELL SOLD DISPATCH NOW GOLD Make money selling books on Amazon Canonbury Publishing Sharon Fussell Sold Dispatch Now Gold Review extract from: August 2009 BUSINESS OPPORTUNITY WATCH Issue No. 30 Buy the Sharon Fussell Sold Dispatch Now Gold Review for £3 or Members Only Area - Free Trial - Read All Reviews Extract from review of Sold Dispatch Now Sharon Fussell: Sharon Fussell says that her Sold Dispatch Now Gold business \"\"is as simple as buying books for pennies from easy-to-find sources - and then reselling them on for huge profits\"\". She says you can make £200 to £300 every week with Sold Dispatch Now Gold and \"\"you can set it up in just 10 minutes!\"\", it's not hard work and you don't need computer experience. You don't need a lot of books either - according to Sharon Fussell, a stock of 500-600 books means that you can sell 25 per week and make £6,000 a year. You just buy the books from easy-to-find sources (she tells you how) and list them for sale on Amazon. Sharon Fussell has been following the Sold Dispatch Now Gold system for three years and she now has a turnover of £26,741 a year. She's given up her old day job. The Sold Dispatch Now Gold manual costs £77 and it does come with a CD Rom demonstration of how Sharon Fussell operates her business and it includes her email support and a 28-day no-quibble money back guarantee. Is it really that easy to make £200 to £300 a week? We sent the company a number of questions\"" }, { "docid": "3466", "title": "", "text": "You must consider the different levels of risk associated with each loan. When the bank loans you money, it does so based on a high degree of information about your financial situation (through your credit report + additional information gathered at the time of granting your request). It feels quite confident that you will repay them, and therefore considers you to be low risk. In order to make a profit off of all its low risk clients, the bank only needs to charge a small rate of interest - competitive with the market but enough to cover the losses from clients who will default. When you loan money through a peer-to-peer program, you are at two distinct disadvantages from the bank: (1) Your loan portfolio will not be diversified; that is, you may have only a single person or a small handful of people owing you money. Any catastrophic event in their lives may wipe out their loan to you. Whereas the bank can play the averages with a broader client base. (2) You have less information, and ultimately less (effective) power to reclaim your losses. Would you feel confident walking behind the desk at a bank today, and deciding whether to approve someone's loan based on the information that the bank's back-end has already determined is necessary to make that decision? Now how about when you are doing it on your own? Because of this, you take on more risk from a peer-to-peer loan than a bank takes on from you. That's why the person is willing (or, required due to market availability) to pay a higher rate; they know they are higher risk. That doesn't mean this is a bad idea, just that there is a specific reason that the difference in rates exists, and it implies that you should consider carefully whether the risks outweigh the benefits. Note that the concept of taking a buy/sell position on two theoretically identical assets while earning a net profit at no risk is known as 'arbitrage'. Arbitrage situations rarely exist, and never for long. Whenever you see a position that appears to be arbitrage, consider what might make it not so. ie: you could buy inventory in location A, and sell it at 10% higher margin in location B - but have you considered transportation, carrying costs, and interest for the period that you physically held the inventory? The appearance of arbitrage may (in my opinion) be a sign that you have incomplete information." }, { "docid": "516148", "title": "", "text": "\"I was able to find a fairly decent index that trades very close to 1/10th the actual price of gold by the ounce. The difference may be accounted to the indexes operating cost, as it is very low, about 0.1%. The index is the ETFS Gold Trust index (SGOL). By using the SGOL index, along with a Standard Brokerage investment account, I was able to set up an investment that appropriately tracked my gold \"\"shares\"\" as 10x their weight in ounces, the share cost as 1/10th the value of a gold ounce at the time of purchase, and the original cost at time of purchase as the cost basis. There tends to be a 0.1% loss every time I enter a transaction, I'm assuming due to the index value difference against the actual spot value of the price of gold for any day, probably due to their operating costs. This solution should work pretty well, as this particular index closely follows the gold price, and should reflect an investment in gold over a long term very well. It is not 100% accurate, but it is accurate enough that you don't lose 2-3% every time you enter a new transaction, which would skew long-term results with regular purchases by a fair amount.\"" }, { "docid": "305069", "title": "", "text": "\"To answer this part of the question: \"\"How can you build an index based on shipping routes - what is the significance of that? Indexes are traditionally built based on companies: e.g. S&P Index is a basket of companies whose price varies. But here you need a basket of FFA contracts from different oil firms (Shell, BP), 5 year Shell FFA's, 10 year shell FFA's. Where do routes enter the picture? Let the tanker any route he feels like.\"\" No, you don't get a basket of FFA contracts from given companies (such as Shell and BP). What you get are rates assessed by a panel of brokers for the main tanker routes (especially in the tanker market, there are comparatively few standard routes, because the major oil loading areas are also comparatively few). The panel will assess the spot and future markets on a daily basis, and issue the rates accordingly.\"" }, { "docid": "57564", "title": "", "text": "Just because gold performed that well in the past does not mean it will perform that well in the future. I'm not saying you should or should not buy gold, but the mere fact that it went up a lot recently is not sufficient reason to buy it. Also note that on the house, an investment that accrues continuous interest for 30 years at an annual rate of about 7.7% will multiply by a factor of 10 in 30 years. That rate is pretty high by today's standards, but it might have been more feasible in the past (I don't know historical interest rates very well). Yet again note that the fact that houses went up a lot over the last 30 years does not mean they will continue to do so." }, { "docid": "30584", "title": "", "text": "The point of what you heard is likely that gold is thought by some to hold its value well, when the money market would provide negative interest rates. These negative interest rates are a sign of deflation, where cash money is worth more in the future than it is today. Normally, under inflation, cash money is worth less in the future than it is today. Under 'normal' circumstances where inflation exists, interest paid by the bank on money held there generally keeps up with inflation + a little bit extra. Now, we are seeing many banks offering interest rates in the negatives, which is an acknowledgement of the fact that money will be worth more in the future than it is today. So in that sense, holding physical gold 'fights' deflation [or, negative interest rates], in the same way that holding physical cash does [because if you hold onto a $10k bundle of bills, in 10 years you can walk into a bank and it will be worth $10k in future dollars - which in a deflationary market would be more than it is worth today]. Some view gold as being better at doing this than just holding cash, but that discussion gets into an analysis of the value of paper money as a currency, which is outside the scope of this answer. Suffice to say, I do not personally like the idea of buying gold as an investment, but some do, and partly for this reason." }, { "docid": "528576", "title": "", "text": "I am in complete agreement with you. The place i have found with the sort of charts you are looking for is stockcharts.com. To compare the percentage increase of several stocks over a period of 2 market-open days or more, which is quite useful to follow the changes in various stocks… etc., an example: Here the tickers are AA to EEEEE (OTC) and $GOLD / $SILVER for the spot gold / silver price (that isn't really a ticker). It is set to show the last 6 market days (one week+)...the '6' in '6&O'. You can change it in the URL above or change it on the site for the stocks you want... up to 25 in one chart but it gets really hard to tell them apart! By moving the slider just left of the ‘6’ at the bottom right corner of the chart, you can look at 2 days or more. For a specific time period in days, highlight the ‘6’ and type any number of market-open days you want (21 days = about one month, etc.). By setting a time period in days, and moving the entire slider, you can see how your stocks did in the last bull/bear run, as an example. The site has a full how-to, for this and the other types of charts they offer. The only problem is that many OTC stocks are not charted. Save the comparison charts you use regularly in a folder in your browser bookmarks. Blessings. I see the entire needed link isn't in blue... but you need it all." }, { "docid": "213861", "title": "", "text": "To me, the most important thing for young people to learn about personal finance is the connection between service and income. Most, rightly look for a way to earn money and advance the lifestyle of their home life. How does one do that? Grinding it out in a 9-5 does not seem attractive while living the lifestyles of those on TV would be awesome. The temptation is to try all these tricks to get money, but absent from their plan is how they serve their fellow man in order to receive that money. Stars, like the Kardashians are a marketing machine despite the carefree life displayed on the TV. They have served many budding companies well by selling their products to certain demographics. Most young people do not make that connection. So they try things like trading Forex, gold or whatever the latest thing is. It does not work as there is no service to their fellow man. They get a job at a fast food chain and complain about their pay in accordance with their work. Well sure, but again they are serving such few people that one can only expect a small income. The better and more people one can serve, in general, the higher a person's income." }, { "docid": "362765", "title": "", "text": "\"In general economic theory, there are always two markets created based on a need for a good; a spot market (where people who need something now can go outbid other people who need the same thing), and a futures market (where people who know they will need something later can agree to buy it for a pre-approved price, even if the good in question doesn't exist yet, like a grain crop). Options exist as a natural extension of the futures market. In a traditional future, you're obligated, by buying the contract, to execute it, for good or ill. If it turns out that you could have gotten a lower price when buying, or a higher price when selling, that's tough; you gave up the ability to say no in return for knowing, a month or three months or even a year in advance, the price you'll get to buy or sell this good that you know you need. Futures thus give both sides the ability to plan based on a known price, but that's their only risk-reduction mechanism. Enter the option. You're the Coors Brewing Company, and you want to buy 50 tons of barley grain for delivery in December in order to brew up for the Super Bowl and other assorted sports parties. A co-op bellies up to close the deal. But, since you're Coors, you compete on price with Budweiser and Miller, and if you end up paying more than the grain's really worth, perhaps because of a mild wet fall and a bumper crop that the almanac predicts, then you're going to have a real bad time of it in January. You ask for the right to say \"\"no\"\" when the contract falls due, if the price you negotiate now is too high based on the spot price. The co-op now has a choice; for such a large shipment, if Coors decided to leave them holding the bag on the contract and instead bought it from them anyway on a depressed spot market, they could lose big if they were counting on getting the contract price and bought equipment or facilities on credit against it. To mitigate those losses, the co-op asks for an option price; basically, this is \"\"insurance\"\" on the contract, and the co-op will, in return for this fee (exactly how and when it's paid is also negotiable), agree to eat any future realized losses if Coors were to back out of the contract. Like any insurance premium, the option price is nominally based on an outwardly simple formula: the probability of Coors \"\"exercising\"\" their option, times the losses the co-op would incur if that happened. Long-term, if these two figures are accurate, the co-op will break even by offering this price and Coors either taking the contract or exercising the option. However, coming up with accurate predictions of these two figures, such that the co-op (or anyone offering such a position) would indeed break even at least, is the stuff that keeps actuaries in business (and awake at night).\"" } ]

[ { "docid": "53468", "title": "", "text": "\"The U.S. requires money transfer services to be licensed under 31 USC 5330 in addition to any applicable laws at the state level. According to multiple sources online, including the thread referenced by MD-Tech's answer, OkPay either cannot or will not get a license, so they are out. I dug on this a bit more because I thought it was interesting, and OkPay has other issues with U.S. and other regulators related to its interaction with Bitcoins, which themselves are a hot potato for regulation right now and may explain the licensing problem. It seems to also be facing regulatory pressure in other countries, by the way, so it's not strictly a problem they face in the U.S. Just for whatever reason, the problem is greater here. Some interesting summary points: With mounting pressure on online money exchanges from US regulators, payments processor OKPay has announced that it is suspending processing for all Bitcoin exchanges, including industry leader Mt. Gox. ... Earlier this month, the US Department of Homeland Security seized Mt. Gox's account with mobile payment processor Dwolla, on allegations that the account was in violation of US Code 18 USC § 1960 by operating an \"\"unlicensed money transmitting business.\"\" Just where the Bitcoin market falls under US law is unclear, because the legality of Bitcoin transactions has yet to be tried in court and law enforcement has refused to comment on ongoing investigations, such as the Dwolla case. http://www.theregister.co.uk/2013/05/29/okpay_suspends_bitcoin_processing/ In March, the US Treasury said any firms dealing in the virtual currency would be considered \"\"money services businesses\"\" just like any other, which means they must hand over transaction information to the government and work to prevent money laundering. http://www.theregister.co.uk/2013/05/15/mt_gox_us_court/ In the UK, it apparently has also had trouble with banking partners (quoting a OkPay official regarding changing bank providers): The UK bank that we used before did not make a final decision on whether to handle transactions in favour of crypto-currencies or not. Therefore the compliance department of the bank asked us to restrict such transfers. This apparently allowed them to reverse a policy in the UK: OKPAY's policy shift comes just months after it stipulated that GBP users check a box, verifying that their funds would not be spent on cryptocurrency, a feature that further incited users. http://www.coindesk.com/okpay-gbp-bitcoin-transactions/ I hadn't heard of this company prior to your question, but having done some research, I tend to think that at least the part of this quote about language, attributed to a user, is true: OKPAY are quite paranoid about AML and another problem is that their support people seem to be very bad at English, so their replies are often hard to understand. Their support are also slow [sic]. However in my experience they are an honest company. I found at least one case where rumors that the entire company were going to shut down were traced back to a poorly translated message issued by the company. Again, I know only what I read just now about this company, but it looked like there were a few red flags - the problems with the US probably not being the most important. This type of service is probably part of the future, but I'm not sure that I'd send money through it now in its current state or organization and regulation.\"" } ]

[ { "docid": "512157", "title": "", "text": "##Great grain robbery The great grain robbery was the July 1972 purchase of 10 million tons of United States grain (mainly wheat and corn) by the Soviet Union at subsidized prices, which resulted in higher grain prices in the United States. Grain prices soon reached 125-year highs in Chicago. In a 10-month span, soybeans went from $3.31 to $12.90 a bushel. Food prices around the world rose 50% in 1973. *** ##Strategic grain reserve A strategic grain reserve is a government stockpile of grain for the purpose of meeting future domestic or international needs. In the United States, such programs have included the Farmer-Owned Grain Reserve (1977–1996), Food Security Wheat Reserve (1980–1996), Food Security Commodity Reserve (1996–1998), and most recently the Bill Emerson Humanitarian Trust (1998–). *** ^[ [^PM](https://www.reddit.com/message/compose?to=kittens_from_space) ^| [^Exclude ^me](https://reddit.com/message/compose?to=WikiTextBot&amp;message=Excludeme&amp;subject=Excludeme) ^| [^Exclude ^from ^subreddit](https://np.reddit.com/r/finance/about/banned) ^| [^FAQ ^/ ^Information](https://np.reddit.com/r/WikiTextBot/wiki/index) ^] ^Downvote ^to ^remove" }, { "docid": "588999", "title": "", "text": "**Separation of powers under the United States Constitution** Separation of powers is a political doctrine originating in the writings of Charles de Secondat, Baron de Montesquieu in The Spirit of the Laws, in which he argued for a constitutional government with three separate branches, each of which would have defined abilities to check the powers of the others. This philosophy heavily influenced the writing of the United States Constitution, according to which the Legislative, Executive, and Judicial branches of the United States government are kept distinct in order to prevent abuse of power. This United States form of separation of powers is associated with a system of checks and balances. During the Age of Enlightenment, philosophers such as Montesquieu advocated the principle in their writings, whereas others, such as Thomas Hobbes, strongly opposed it. *** ^[ [^PM](https://www.reddit.com/message/compose?to=kittens_from_space) ^| [^Exclude ^me](https://reddit.com/message/compose?to=WikiTextBot&amp;message=Excludeme&amp;subject=Excludeme) ^| [^Exclude ^from ^subreddit](https://np.reddit.com/r/economy/about/banned) ^| [^FAQ ^/ ^Information](https://np.reddit.com/r/WikiTextBot/wiki/index) ^| [^Source](https://github.com/kittenswolf/WikiTextBot) ^] ^Downvote ^to ^remove ^| ^v0.24" }, { "docid": "233577", "title": "", "text": "The US does have a gold reserve. The main reserves are held at Fort Knox but there is even more gold, mostly owned by other countries, stored in the basement of the New York Federal Reserve Bank (Think Die Hard 3). The United States Bullion Depository, often known as Fort Knox, is a fortified vault building located adjacent to Fort Knox, Kentucky, used to store a large portion of United States official gold reserves and occasionally other precious items belonging or entrusted to the federal government. The United States Bullion Depository holds 4,578 metric tons (5046 tons) of gold bullion (147.2 million oz. troy). This is roughly 2.5% of all the gold ever refined throughout human history. Even so, the depository is second in the United States to the Federal Reserve Bank of New York's underground vault in Manhattan, which holds 7,000 metric tons (7716 tons) of gold bullion (225.1 million oz. troy), some of it in trust for foreign nations, central banks and official international organizations. Source: Wikipedia" }, { "docid": "227197", "title": "", "text": "You can file a revised W-4 with your employer claiming more allowances than you do now. More allowances means less Federal tax and (if applicable and likely with a separate form) less state tax. This doesn't affect social security and Medicare with holding, though. That being said, US taxes are on a pay-as-you-go system. If the IRS determines that you're claiming more allowances than you're eligible for and not paying the proper taxes throughout the year, they will hit you with an underpayment penalty fee, which would likely negate the benefits of keeping that money in the first place. This is why independent contractors and self-employed people pay quarterly or estimated taxes. Depending on the employer, they may require proof of the allowances for adjustment before they accept the revised W-4." }, { "docid": "326290", "title": "", "text": "\"**2017 Shayrat missile strike** The 2017 Shayrat missile strike took place on the morning of 7 April 2017, and involved the launch of 59 Tomahawk cruise missiles by the United States from the Mediterranean Sea into Syria, aimed at the Shayrat Airbase controlled by the Syrian government. The strike was executed under responsibility of U.S. President Donald Trump, as a direct response to the Khan Shaykhun chemical attack that occurred on 4 April. The strike was the first unilateral military action by the United States targeting Ba'athist Syrian government forces during the Syrian Civil War. Trump stated shortly thereafter, \"\"It is in this vital national security interest of the United States to prevent and deter the spread and use of deadly chemical weapons.\"\" The Syrian Air Force launched airstrikes against the rebels from the base only hours after the American attack. *** ^[ [^PM](https://www.reddit.com/message/compose?to=kittens_from_space) ^| [^Exclude ^me](https://reddit.com/message/compose?to=WikiTextBot&amp;message=Excludeme&amp;subject=Excludeme) ^| [^Exclude ^from ^subreddit](https://np.reddit.com/r/finance/about/banned) ^| [^FAQ ^/ ^Information](https://np.reddit.com/r/WikiTextBot/wiki/index) ^| [^Source](https://github.com/kittenswolf/WikiTextBot) ^| [^Donate](https://www.reddit.com/r/WikiTextBot/wiki/donate) ^] ^Downvote ^to ^remove ^| ^v0.28\"" }, { "docid": "401146", "title": "", "text": "\"There are tax free bonds in the United States. They are for things like public housing and other urban projects. They are tax free for everyone but only rich people buy them. Why? The issue is that the tax free nature of the bond is included in its yield. So rather than yielding say a 5% return, they figure that the owner is getting 20% off due to not paying taxes. As a result, they only give a 4% return but are as risky as a 5% return investment. Net result, only rich people invest in tax free bonds. \"\"Rich\"\" is defined here to mean people paying a 20% tax on long term investment returns. Or take the State and Local Tax (SALT) deduction, which has been in the news recently. Again, it is technically open to everyone. But there is also a standard deduction that is open to everyone. For the typical family, state and local taxes might be 5% of income. So for a family making $100k a year, that's $5k. The same family can take a $13k or so standard deduction instead of itemizing. So why would they take the smaller deduction? As a practical matter, two groups take the SALT deduction. People rich enough to pay more than $13k in state and local taxes and people who also take the mortgage interest deduction. So it helps a lot of people who are rich quite a bit. And it helps a few middle class people some. But if you are lower middle class with a $30k mortgage on a tiny house and paying 4% interest, then that's only $1200 a year. Add in property taxes of $3000 and SALT of $2.8k and that's only $7k. Even if the person gives $3k to charity, the $13k deduction is a lot better and requires less paperwork. Contrast that with someone who has $500k mortgage at 3.6% interest. That's $18k in interest alone. Add in a SALT of $7k and property taxes of $50k, and there's $75k of itemized deductions, much better than $13k. Now a $7k donation to charity is entirely deductible. And even after the mortgage interest deduction goes away, the other $64k remains.\"" }, { "docid": "555486", "title": "", "text": "\"1.Why is there no \"\"United States Treasury\"\" endorsement? Why should there be, and what do you think it would look like? Some person at Treasury sitting at a desk all day signing \"\"Uncle Sam\"\"? At most you would expect to see some stamp, because it's clear that no person is going to sign all of these checks. 2.Can I have the check returned for proper endorsement? No, this is none of your business unless you have some serious reason to believe that someone other than the treasury cashed your check. (If that were really your concern, then you'd have a bigger issue than the endorsement.) 3.If I am required to endorse checks made out to me, why isn't the US Treasury? As others have noted, an endorsement is often not required as long as the name on the check matches a name on the account to which it is deposited. Individual banks may have stricter rules, but that's between you and your bank.\"" }, { "docid": "344928", "title": "", "text": "\"Wyoming is a good state for this. It is inexpensive and annual compliance is minimal. Although Delaware has the best advertising campaign, so people know about it, the reality is that there are over 50 states/jurisdictions in the United States with their own competitive incorporation laws to attract investment (as well as their own legislative bodies that change those laws), so you just have to read the laws to find a state that is favorable for you. What I mean is that whatever Delaware does to get in the news about its easy business laws, has been mimicked and done even better by other states by this point in time. And regarding Delaware's Chancery Court, all other states in the union can also lean on Delaware case law, so this perk is not unique to Delaware. Wyoming is cheaper than Delaware for nominal presence in the United States, requires less information then Delaware, and is also tax free. A \"\"registered agent\"\" can get you set up and you can find one to help you with the address dilemma. This should only cost $99 - $200 over the state fees. An LLC does not need to have an address in the United States, but many registered agents will let you use their address, just ask. Many kinds of businesses still require a bank account for domestic and global trade. Many don't require any financial intermediary any more to receive payments. But if you do need this, then opening a bank account in the United States will be more difficult. Again, the registered agent or lawyer can get a Tax Identification Number for you from the IRS, and this will be necessary to open a US bank account. But it is more likely that you will need an employee or nominee director in the United States to go in person to a bank and open an account. This person needs to be mentioned in the Operating Agreement or other official form on the incorporation documents. They will simply walk into a bank with your articles of incorporation and operating agreement showing that they are authorized to act on behalf of the entity and open a bank account. They then resign, and this is a private document between the LLC and the employee. But you will be able to receive and accept payments and access the global financial system now. A lot of multinational entities set up subsidiaries in a number of countries this way.\"" }, { "docid": "322645", "title": "", "text": "There is a measure of protection for investors. It is not the level of protection provided by FDIC or NCUA but it does exist: Securities Investor Protection Corporation What SIPC Protects SIPC protects against the loss of cash and securities – such as stocks and bonds – held by a customer at a financially-troubled SIPC-member brokerage firm. The limit of SIPC protection is $500,000, which includes a $250,000 limit for cash. Most customers of failed brokerage firms when assets are missing from customer accounts are protected. There is no requirement that a customer reside in or be a citizen of the United States. A non-U.S. citizen with an account at a brokerage firm that is a member of SIPC is treated the same as a resident or citizen of the United States with an account at a brokerage firm that is a member of SIPC. SIPC protection is limited. SIPC only protects the custody function of the broker dealer, which means that SIPC works to restore to customers their securities and cash that are in their accounts when the brokerage firm liquidation begins. SIPC does not protect against the decline in value of your securities. SIPC does not protect individuals who are sold worthless stocks and other securities. SIPC does not protect claims against a broker for bad investment advice, or for recommending inappropriate investments. It is important to recognize that SIPC protection is not the same as protection for your cash at a Federal Deposit Insurance Corporation (FDIC) insured banking institution because SIPC does not protect the value of any security. Investments in the stock market are subject to fluctuations in market value. SIPC was not created to protect these risks. That is why SIPC does not bail out investors when the value of their stocks, bonds and other investment falls for any reason. Instead, in a liquidation, SIPC replaces the missing stocks and other securities when it is possible to do so." }, { "docid": "189061", "title": "", "text": "\"Sell 200 at 142. What does that mean? I haven't seen the movie, so I won't try to put anything in story context. \"\"Sell 200 at 142\"\" means to sell 200 units (usually shares, but in this case it would likely be gallons or barrels of orange juice or pounds or tons of frozen juice). In general, this could mean that you have 200 units and want to sell what you have. Or you could borrow 200 units from someone and sell those--this is called a naked short. In this case, it seems that what they are selling is a futures contract. With a futures contract, you are promising to obtain orange juice by some future date and sell it for the agreed price. You could own an orange grove and plan to turn your oranges into juice. Or you could buy a futures contract of oranges to turn into juice. Or you could arbitrage two futures contracts such that one supplies the other, what they're doing here. In general people make profits by buying low and selling high. In this case they did so in reverse order. They took the risk of selling before they had a supply. Then they covered their position by purchasing the supply. They profited because the price at which they bought was lower than the price at which they sold. The reason why this is necessary is that before buying the oranges, the orange juice makers need to know that they can make a profit. So they sell orange juice on the futures market. Then they know how much they can afford to pay for oranges on a different market. And the growers know how much they can get for oranges, so they can pay people to water and pick them. Without the futures markets, growers and orange juice makers would have to take all the risk themselves. This way, they can share risks with each other and financiers. Combined with insurance, this allows for predictable finances. Without it, growers would have to be wealthy to afford the variation in crop yields and prices.\"" }, { "docid": "140170", "title": "", "text": "\"With Hooters the difference is your business is based around the concept of having large breasted woman as your waitresses. Title 29, Chapter 14, Section 623 of the United States Code allows companies and other employers to make particular qualifications a condition of employment, even ones that violate other sections of the anti-discrimination law, in situations: \"\"...bona fide occupational qualification reasonably necessary to the normal operation of the particular business...\"\" In one case your buisness is saying \"\"we have large breasted woman selling bad food\"\" and the other one is just \"\"we sell light bulbs\"\"\"" }, { "docid": "593591", "title": "", "text": "\"This is the best tl;dr I could make, [original](http://www.reuters.com/article/us-trade-nafta-mexico-idUSKCN1B91JQ) reduced by 45%. (I'm a bot) ***** &gt; MEXICO CITY - There is a serious risk that the United States could withdraw from the North American Free Trade Agreement, and Mexico must have a &amp;quot;Plan B&amp;quot; for that eventuality, Economy Minister Ildefonso Guajardo was quoted as saying on Tuesday. &gt; Talks on renegotiating the accord between the United States, Canada and Mexico began earlier this month, and the next round of discussions are due to begin on Friday in Mexico City. &gt; &amp;quot;The best thing Mexico can do given the atypical nature of the negotiation is to have an alternative plan, clear and pragmatic, to face something that is not our objective, but which may be the result of a process that does not move forward,&amp;quot; Guajardo told El Economista. ***** [**Extended Summary**](http://np.reddit.com/r/autotldr/comments/6wt7cw/mexico_minister_sees_risk_of_us_nafta_exit_flags/) | [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ \"\"Version 1.65, ~200668 tl;drs so far.\"\") | [Feedback](http://np.reddit.com/message/compose?to=%23autotldr \"\"PM's and comments are monitored, constructive feedback is welcome.\"\") | *Top* *keywords*: **MEXICO**^#1 **Plan**^#2 **States**^#3 **United**^#4 **Guajardo**^#5\"" }, { "docid": "17008", "title": "", "text": "Why are doctors so overworked? Maybe their AMA cartel restricting new entry is to blame. They also lobby to restrict the number of procedures that nurses can legally perform and limit the number of medical schools. This is a huge factor in the cost of health care in the United States." }, { "docid": "288145", "title": "", "text": "*Disclaimer: I am a tax accountant , but I am not your professional accountant or advocate (unless you have been in my office and signed a contract). This communication is not intended as tax advice, and no tax accountant / client relationship results. *Please consult your own tax accountant for tax advise.** A foreign citizen may form a limited liability company. In contrast, all profit distributions (called dividends) made by a C corporation are subject to double taxation. (Under US tax law, a nonresident alien may own shares in a C corporation, but may not own any shares in an S corporation.) For this reason, many foreign citizens form a limited liability company (LLC) instead of a C corporation A foreign citizen may be a corporate officer and/or director, but may not work/take part in any business decisions in the United States or receive a salary or compensation for services provided in the United States unless the foreign citizen has a work permit (either a green card or a special visa) issued by the United States. Basically, you should be looking at benefiting only from dividends/pass-through income but not salaries or compensations." }, { "docid": "140572", "title": "", "text": "The best strategy? Skip the loan. Find a way to invest for a low starting amount via a retirement account (such as a 401K or IRA in the United States) or non-retirement account. Use this money to buy individual stocks or funds. Every month put money from your regular income into this investment account. Then buy more stocks or sell if the conditions change based on what the market is doing, not to meet a loan payment. This helps you because if the price fluctuates you will buy more shares if the price is down; and you will buy fewer shares when the price is up. It also allows you to skip worrying about how to repay the loan. It also means that you not have to pull more money out of savings to make the final loan payments if it doesn't make as much money as you plan. Regarding your math. This is a better understanding of the money flow than the earlier question." }, { "docid": "282189", "title": "", "text": "\"Blue Sky Laws refer to various state laws requiring disclosure in new security offerings. Here's a summary: A blue sky law is a state law in the United States that regulates the offering and sale of securities to protect the public from fraud. Though the specific provisions of these laws vary among states, they all require the registration of all securities offerings and sales, as well as of stockbrokers and brokerage firms. Each state's blue sky law is administered by its appropriate regulatory agency, and most also provide private causes of action for private investors who have been injured by securities fraud. From the United States Securities and Exchange Commission Every state has its own securities laws—commonly known as \"\"Blue Sky Laws\"\"—that are designed to protect investors against fraudulent sales practices and activities. While these laws can vary from state to state, most states laws typically require companies making small offerings to register their offerings before they can be sold in a particular state. The laws also license brokerage firms, their brokers, and investment adviser representatives.\"" }, { "docid": "470759", "title": "", "text": "A lot of people probably don't agree with him, but Warren Buffett has some great quotes on why he doesn't invest in gold: I will say this about gold. If you took all the gold in the world, it would roughly make a cube 67 feet on a side…Now for that same cube of gold, it would be worth at today’s market prices about $7 trillion dollars – that’s probably about a third of the value of all the stocks in the United States…For $7 trillion dollars…you could have all the farmland in the United States, you could have about seven Exxon Mobils, and you could have a trillion dollars of walking-around money…And if you offered me the choice of looking at some 67 foot cube of gold and looking at it all day, and you know me touching it and fondling it occasionally…Call me crazy, but I’ll take the farmland and the Exxon Mobils. And his classic quote: [Gold] gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head." }, { "docid": "76618", "title": "", "text": "\"Some of the 45,000 might be taxable. The question is how was the stipend determined. Was it based on the days away? The mile driven? The cities you worked in? The IRS has guidelines regarding what is taxable in IRS Pub 15 Per diem or other fixed allowance. You may reimburse your employees by travel days, miles, or some other fixed allowance under the applicable revenue procedure. In these cases, your employee is considered to have accounted to you if your reimbursement doesn't exceed rates established by the Federal Government. The 2015 standard mileage rate for auto expenses was 57.5 cents per mile. The rate for 2016 is 54 cents per mile. The government per diem rates for meals and lodging in the continental United States can be found by visiting the U.S. General Services Administration website at www.GSA.gov and entering \"\"per diem rates\"\" in the search box. Other than the amount of these expenses, your employees' business expenses must be substantiated (for example, the business purpose of the travel or the number of business miles driven). For information on substantiation methods, see Pub. 463. If the per diem or allowance paid exceeds the amounts substantiated, you must report the excess amount as wages. This excess amount is subject to income tax with-holding and payment of social security, Medicare, and FUTA taxes. Show the amount equal to the substantiated amount (for example, the nontaxable portion) in box 12 of Form W-2 using code “L\"\"\"" }, { "docid": "588327", "title": "", "text": "The United States taxes nonresident aliens on two types of income: First, a nonresident alien who is engaged in a trade or business in the United States is taxed on income that is effectively connected with that trade or business. Second, certain types of U.S.-source payments are subject to income tax withholding. The determination of when a nonresident alien is engaged in a U.S. trade or business is highly fact-specific and complex. However, keeping assets in a U.S. bank account should not be treated as a U.S. trade or business. A nonresident alien's interest income is generally subject to U.S. federal income tax withholding at a rate of 30 percent under Section 1441 of the tax code. Interest on bank deposits, however, benefit from an exception under Section 1441(c)(10), so long as that interest is not effectively connected with a U.S. trade or business. Even though no tax needs to be withheld on interest on a bank deposit, the bank should still report that interest each year to the IRS on Form 1042-S. The IRS can then send that information to the tax authority in Brazil. Please keep in mind that state and local tax rules are all different, and whether interest on the bank deposits is subject to state or local tax will depend on which state the bank is in. Also, the United States does tax nonresident aliens on wages paid from a U.S. company, if those wages are treated as U.S.-source income. Generally, wages are U.S.-source income if the employee provides services while physically present in the United States. There are a few exceptions to this rule, but they depend on the amount of wages and other factors that are specific to the employee's situation. This is an area where you should really consult with a U.S. tax advisor before the employment starts. Maybe your company will pay for it?" } ]

[ { "docid": "418352", "title": "", "text": "according to their client services it is a licensing issue: Thread: OKpay didn't Accept USA clients? They do not elaborate but do suggest that they don't plan to fix that issue." } ]

[ { "docid": "158136", "title": "", "text": "\"The current tax regime? Not sure if you are being serious or facetious, but: [US Citizens and Resident Aliens Abroad - Filing Requirements](https://www.irs.gov/individuals/international-taxpayers/us-citizens-and-resident-aliens-abroad-filing-requirements) &gt;If you are a U.S. citizen or resident alien living or traveling outside the United States, **you generally are required to file income tax returns, estate tax returns, and gift tax returns and pay estimated tax in the same way as those residing in the United States.** In contrast, corporations don't pay taxes on profits earned abroad until repatriation [here](http://money.cnn.com/2014/08/14/news/economy/corporate-taxes-inversion/index.html), [here](https://www.nytimes.com/2017/03/09/business/economy/corporate-tax-report.html), [here](https://www.bloomberg.com/graphics/2016-apple-profits/). So guess what they NEVER do? This is why literally every large US multi-national corporate \"\"person\"\" pays next to nothing in taxes. It is quite obvious that this is a violation of the spirit if not the letter of tax law. That simple fix would wipe out massive amounts of government debt and force multi-national corporations and their shareholders to become engaged stake holders in the efficiency of government. But if, unlike W-2 paid human counterparts, you can dodge all taxation, \"\"Who cares if the government is using funds efficiently?\"\" That is incentive to actually game the system to force the government into wasteful spending because the subsequent fallout of increased taxation and/or failure of the state can be dodged without consequence.\"" }, { "docid": "18850", "title": "", "text": "The IRS Guidance pertaining to the subject. In general the best I can say is your business expense may be deductible. But it depends on the circumstances and what it is you want to deduct. Travel Taxpayers who travel away from home on business may deduct related expenses, including the cost of reaching their destination, the cost of lodging and meals and other ordinary and necessary expenses. Taxpayers are considered “traveling away from home” if their duties require them to be away from home substantially longer than an ordinary day’s work and they need to sleep or rest to meet the demands of their work. The actual cost of meals and incidental expenses may be deducted or the taxpayer may use a standard meal allowance and reduced record keeping requirements. Regardless of the method used, meal deductions are generally limited to 50 percent as stated earlier. Only actual costs for lodging may be claimed as an expense and receipts must be kept for documentation. Expenses must be reasonable and appropriate; deductions for extravagant expenses are not allowable. More information is available in Publication 463, Travel, Entertainment, Gift, and Car Expenses. Entertainment Expenses for entertaining clients, customers or employees may be deducted if they are both ordinary and necessary and meet one of the following tests: Directly-related test: The main purpose of the entertainment activity is the conduct of business, business was actually conducted during the activity and the taxpayer had more than a general expectation of getting income or some other specific business benefit at some future time. Associated test: The entertainment was associated with the active conduct of the taxpayer’s trade or business and occurred directly before or after a substantial business discussion. Publication 463 provides more extensive explanation of these tests as well as other limitations and requirements for deducting entertainment expenses. Gifts Taxpayers may deduct some or all of the cost of gifts given in the course of their trade or business. In general, the deduction is limited to $25 for gifts given directly or indirectly to any one person during the tax year. More discussion of the rules and limitations can be found in Publication 463. If your LLC reimburses you for expenses outside of this guidance it should be treated as Income for tax purposes. Edit for Meal Expenses: Amount of standard meal allowance. The standard meal allowance is the federal M&IE rate. For travel in 2010, the rate for most small localities in the United States is $46 a day. Source IRS P463 Alternately you could reimburse at a per diem rate" }, { "docid": "326167", "title": "", "text": "\"In the US: In the UK: You can set up a CAF (Charities Aid foundation) Charity Account. This allows you to donate to charities anonymously, while still allowing the recipient to benefit from Gift Aid (where they can reclaim the income tax you'd paid on the donation). You can even use this account to donate to overseas charities if you're donating at least £250. Or you can use a different intermediary such as BT MyDonate or The Big Give or another intermediary. See the Wikipedia article \"\"Comparison of online charity donation services in the United Kingdom\"\". In Canada: If there's a United Way charity in your country, it may have a donor choice program which may be able to forward a designated donation to any other charity in your country. The United Way probably charges a fee for this service. I'm not sure whether or not the United Way would be willing to keep you anonymous, and I'm not sure whether or not the United Way would add you to its mailing list. More details may be available elsewhere online.\"" }, { "docid": "76618", "title": "", "text": "\"Some of the 45,000 might be taxable. The question is how was the stipend determined. Was it based on the days away? The mile driven? The cities you worked in? The IRS has guidelines regarding what is taxable in IRS Pub 15 Per diem or other fixed allowance. You may reimburse your employees by travel days, miles, or some other fixed allowance under the applicable revenue procedure. In these cases, your employee is considered to have accounted to you if your reimbursement doesn't exceed rates established by the Federal Government. The 2015 standard mileage rate for auto expenses was 57.5 cents per mile. The rate for 2016 is 54 cents per mile. The government per diem rates for meals and lodging in the continental United States can be found by visiting the U.S. General Services Administration website at www.GSA.gov and entering \"\"per diem rates\"\" in the search box. Other than the amount of these expenses, your employees' business expenses must be substantiated (for example, the business purpose of the travel or the number of business miles driven). For information on substantiation methods, see Pub. 463. If the per diem or allowance paid exceeds the amounts substantiated, you must report the excess amount as wages. This excess amount is subject to income tax with-holding and payment of social security, Medicare, and FUTA taxes. Show the amount equal to the substantiated amount (for example, the nontaxable portion) in box 12 of Form W-2 using code “L\"\"\"" }, { "docid": "344928", "title": "", "text": "\"Wyoming is a good state for this. It is inexpensive and annual compliance is minimal. Although Delaware has the best advertising campaign, so people know about it, the reality is that there are over 50 states/jurisdictions in the United States with their own competitive incorporation laws to attract investment (as well as their own legislative bodies that change those laws), so you just have to read the laws to find a state that is favorable for you. What I mean is that whatever Delaware does to get in the news about its easy business laws, has been mimicked and done even better by other states by this point in time. And regarding Delaware's Chancery Court, all other states in the union can also lean on Delaware case law, so this perk is not unique to Delaware. Wyoming is cheaper than Delaware for nominal presence in the United States, requires less information then Delaware, and is also tax free. A \"\"registered agent\"\" can get you set up and you can find one to help you with the address dilemma. This should only cost $99 - $200 over the state fees. An LLC does not need to have an address in the United States, but many registered agents will let you use their address, just ask. Many kinds of businesses still require a bank account for domestic and global trade. Many don't require any financial intermediary any more to receive payments. But if you do need this, then opening a bank account in the United States will be more difficult. Again, the registered agent or lawyer can get a Tax Identification Number for you from the IRS, and this will be necessary to open a US bank account. But it is more likely that you will need an employee or nominee director in the United States to go in person to a bank and open an account. This person needs to be mentioned in the Operating Agreement or other official form on the incorporation documents. They will simply walk into a bank with your articles of incorporation and operating agreement showing that they are authorized to act on behalf of the entity and open a bank account. They then resign, and this is a private document between the LLC and the employee. But you will be able to receive and accept payments and access the global financial system now. A lot of multinational entities set up subsidiaries in a number of countries this way.\"" }, { "docid": "475335", "title": "", "text": "&gt;Unskilled Nigerians make 1,000% more. So at about $2k per year (x10 for the Nigerian bonus listed in the article) x200MM for Nigeria's population, we end up with an approximately $4 trillion annual boost to the US economy by putting all of Nigeria into the United States. Shit! Why haven't we been doing this before? Favorite line from the article: &gt;If something seems too good to be true, it probably is not actually true." }, { "docid": "552251", "title": "", "text": "\"&gt;Unyielding Realism in the Climate Debate! CO2 is a Product of Human Breath, Not A Pollutant! CO2 is A Plant Food! Climate Change Has Been Going On Forever! &gt;Any actions having the intent to aid the Intergovernmental Panel on Climate Change to inflict harm on the US, including alleging that IPCC texts have any authority on the territory of the United States or in respect to the United States, committed by a person owing his or her loyalty to the United States, might constitute **treason**, as defined in 18 U.S. Code § 2381. great source OP. \"\"samizdat\"\" eh?\"" }, { "docid": "113991", "title": "", "text": "\"You absolutely, positively can land in jail in the United States of America for an unpaid, NON-governmental debt: \"\"In 2011, Robin Sanders was driving home when she saw the blue and red lights flashing behind her. She knew she had not fixed her muffler, and believed that was why she was being pulled over. She thought she might get a ticket.Instead, Sanders, who lives in Illinois, was arrested and taken to jail.As she was booked and processed, she learned that she had been jailed because she owed debt — $730 to be precise, related to an unpaid medical bill. Unbeknownst to her, a collection agency had filed a lawsuit against her, and, having never received the notice instructing her to appear, she had missed her date in court.\"\" So, a private company is able to marshal the power of the State to arrest a person for a non-criminal act: being in debt. https://www.themarshallproject.org/2015/02/24/debtors-prisons-then-and-now-faq#.kzmmbtcOZ\"" }, { "docid": "175389", "title": "", "text": "Assuming you're in the United States, then International Equity is an equity from a different country. These stocks or stock funds (which reside in a foreign country) are broken out seperately becuase they are typically influenced by a different set of factors than equities in the United States: foreign currency swings, regional events and politics of various countries." }, { "docid": "233577", "title": "", "text": "The US does have a gold reserve. The main reserves are held at Fort Knox but there is even more gold, mostly owned by other countries, stored in the basement of the New York Federal Reserve Bank (Think Die Hard 3). The United States Bullion Depository, often known as Fort Knox, is a fortified vault building located adjacent to Fort Knox, Kentucky, used to store a large portion of United States official gold reserves and occasionally other precious items belonging or entrusted to the federal government. The United States Bullion Depository holds 4,578 metric tons (5046 tons) of gold bullion (147.2 million oz. troy). This is roughly 2.5% of all the gold ever refined throughout human history. Even so, the depository is second in the United States to the Federal Reserve Bank of New York's underground vault in Manhattan, which holds 7,000 metric tons (7716 tons) of gold bullion (225.1 million oz. troy), some of it in trust for foreign nations, central banks and official international organizations. Source: Wikipedia" }, { "docid": "17008", "title": "", "text": "Why are doctors so overworked? Maybe their AMA cartel restricting new entry is to blame. They also lobby to restrict the number of procedures that nurses can legally perform and limit the number of medical schools. This is a huge factor in the cost of health care in the United States." }, { "docid": "347828", "title": "", "text": "\"&gt; ...and? That's how capitalism works. No, that's how a bastardized form of capitalism works that \"\"free market\"\" dittoheads subscribe to. For example, why do Americans pay such a high price for sugar? Because of the cartels. The sugar barons, like the Fanjul family, can get the president on the phone when they feel threatened by your brand of capitalism. ------------ The Fanjul brothers — Alfonso \"\"Alfy\"\" Fanjul, José \"\"Pepe\"\" Fanjul, Alexander Fanjul, and Andres Fanjul — are owners of Fanjul Corp., a vast sugar and real estate conglomerate in the United States and Dominican Republic, comprising the subsidiaries Domino Sugar, Florida Crystals, C&amp;H Sugar, Redpath Sugar, Tate &amp; Lyle European Sugar as well as the airport and resorts surrounding La Romana in the Dominican Republic http://en.wikipedia.org/wiki/Fanjul_brothers Here are the brief quotes by the thinktanks about the sugar cartel and their subsidies: http://sugarreform.org/why-reform/what-the-experts-are-saying/think-tanks/\"" }, { "docid": "107462", "title": "", "text": "So, why or why should I not invest in the cheaper index fund? They are both same, one is not cheaper than other. You get something that is worth $1000. To give a simple illustration; There is an item for $100, Vanguard creates 10 Units out of this so price per unit is $10. Schwab creates 25 units out of this, so the per unit price is $4. Now if you are looking at investing $20; with Vanguard you would get 2 units, with Schwab you would get 5 units. This does not mean one is cheaper than other. Both are at the same value of $20. The Factors you need to consider are; Related question What differentiates index funds and ETFs?" }, { "docid": "29817", "title": "", "text": "\"You may be considered a resident for tax purposes. To meet the substantial presence test, you must have been physically present in the United States on at least: 31 days during the current year, and 183 days during the 3 year period that includes the current year and the 2 years immediately before. To satisfy the 183 days requirement, count: All of the days you were present in the current year, and One-third of the days you were present in the first year before the current year, and One-sixth of the days you were present in the second year before the current year. If you are exempt, I'd check that ending your residence in Germany doesn't violate terms of the visa, in which case you'd lose your exempt status. If you are certain that you can maintain your exempt status, then the income would definitively not be taxed by the US as it is not effectively connected income: You are considered to be engaged in a trade or business in the United States if you are temporarily present in the United States as a nonimmigrant on an \"\"F,\"\" \"\"J,\"\" \"\"M,\"\" or \"\"Q\"\" visa. The taxable part of any U.S. source scholarship or fellowship grant received by a nonimmigrant in \"\"F,\"\" \"\"J,\"\" \"\"M,\"\" or \"\"Q\"\" status is treated as effectively connected with a trade or business in the United States. and your scholarship is sourced from outside the US: Generally, the source of scholarships, fellowship grants, grants, prizes, and awards is the residence of the payer regardless of who actually disburses the funds. I would look into this from a German perspective. If they have a rule similiar to the US for scholarships, then you will still be counted as a resident there.\"" }, { "docid": "512157", "title": "", "text": "##Great grain robbery The great grain robbery was the July 1972 purchase of 10 million tons of United States grain (mainly wheat and corn) by the Soviet Union at subsidized prices, which resulted in higher grain prices in the United States. Grain prices soon reached 125-year highs in Chicago. In a 10-month span, soybeans went from $3.31 to $12.90 a bushel. Food prices around the world rose 50% in 1973. *** ##Strategic grain reserve A strategic grain reserve is a government stockpile of grain for the purpose of meeting future domestic or international needs. In the United States, such programs have included the Farmer-Owned Grain Reserve (1977–1996), Food Security Wheat Reserve (1980–1996), Food Security Commodity Reserve (1996–1998), and most recently the Bill Emerson Humanitarian Trust (1998–). *** ^[ [^PM](https://www.reddit.com/message/compose?to=kittens_from_space) ^| [^Exclude ^me](https://reddit.com/message/compose?to=WikiTextBot&amp;message=Excludeme&amp;subject=Excludeme) ^| [^Exclude ^from ^subreddit](https://np.reddit.com/r/finance/about/banned) ^| [^FAQ ^/ ^Information](https://np.reddit.com/r/WikiTextBot/wiki/index) ^] ^Downvote ^to ^remove" }, { "docid": "401146", "title": "", "text": "\"There are tax free bonds in the United States. They are for things like public housing and other urban projects. They are tax free for everyone but only rich people buy them. Why? The issue is that the tax free nature of the bond is included in its yield. So rather than yielding say a 5% return, they figure that the owner is getting 20% off due to not paying taxes. As a result, they only give a 4% return but are as risky as a 5% return investment. Net result, only rich people invest in tax free bonds. \"\"Rich\"\" is defined here to mean people paying a 20% tax on long term investment returns. Or take the State and Local Tax (SALT) deduction, which has been in the news recently. Again, it is technically open to everyone. But there is also a standard deduction that is open to everyone. For the typical family, state and local taxes might be 5% of income. So for a family making $100k a year, that's $5k. The same family can take a $13k or so standard deduction instead of itemizing. So why would they take the smaller deduction? As a practical matter, two groups take the SALT deduction. People rich enough to pay more than $13k in state and local taxes and people who also take the mortgage interest deduction. So it helps a lot of people who are rich quite a bit. And it helps a few middle class people some. But if you are lower middle class with a $30k mortgage on a tiny house and paying 4% interest, then that's only $1200 a year. Add in property taxes of $3000 and SALT of $2.8k and that's only $7k. Even if the person gives $3k to charity, the $13k deduction is a lot better and requires less paperwork. Contrast that with someone who has $500k mortgage at 3.6% interest. That's $18k in interest alone. Add in a SALT of $7k and property taxes of $50k, and there's $75k of itemized deductions, much better than $13k. Now a $7k donation to charity is entirely deductible. And even after the mortgage interest deduction goes away, the other $64k remains.\"" }, { "docid": "227241", "title": "", "text": "\"Government is not your nanny. Here are the powers of the Federal Government as granted in the Constitution. -To borrow money on the credit of the United States; -To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes; -To establish an uniform Rule of Naturalization, and uniform Laws on the subject of Bankruptcies throughout the United States; -To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures; -To provide for the Punishment of counterfeiting the Securities and current Coin of the United States; -To establish Post Offices and Post Roads; -To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries; -To constitute Tribunals inferior to the supreme Court; -To define and punish Piracies and Felonies committed on the high Seas, and Offenses against the Law of Nations; -To declare War, grant Letters of Marque and Reprisal, and make Rules concerning Captures on Land and Water; -To raise and support Armies, but no Appropriation of Money to that Use shall be for a longer Term than two Years; -To provide and maintain a Navy; Guess what it does not say? **To give free shit to people who never work.** The US has spent **50 years and 22 Trillion** on the \"\"War on Poverty\"\" it has not budged the poverty rate. http://www.heritage.org/poverty-and-inequality/report/the-war-poverty-after-50-years Giving people free shit does not work. Like a rich kid that sits round the house smoking weed all day and playing video games. Cut em off and watch how productive they get. Hunger is a great motivator.\"" }, { "docid": "397490", "title": "", "text": "&gt; Pensions should be held in an arms length trust independent trust and the company should have no access to it. This is, at least theoretically, the situation in the United States. There are plenty of restrictions as how trust assets are protected from the company itself. &gt; All workers should be paid before executives or creditors see dime one. All employees in the United States, that have benefits on an underfunded pension plan are protected by the PBGC. It is 'pension insurance', and will make up the difference in any participant's pension. It doesn't provide preferential payments to 'executives last', but it does cap payments at a certain amount - it's about $60k/year in 2017. &gt; This is why unions need to get their shit together and break these laws for the rich, by the rich. Unions take money away from workers, too, in the form of dues. They also have the capability of running companies into the ground. GM and Hostess are two examples that got plenty of press. Unions are important, don't get me wrong. But there is no 'rich' here to rob. This company has been going downhill for 30 years, and they are downright terrible. &gt; When one of these execs walks away with millions of worker's earnings in their pockets US perspective: If this happens, it's because they deferred their own salary. They took a pay cut, basically lending their money to the company. These plans aren't protected under bankruptcy, so if the company fails, they lose the vast majority of their pension. There is no protest needed. The laws are just fine in this particular case. &gt; If you let them steal your lunch money without a black eye you'll starve. There really isn't any lunch money stolen here. Just a terrible company with short-sighted management, who missed the boat on technological improvements 25 years ago." }, { "docid": "482332", "title": "", "text": "\"Yes. From their TOS: \"\"By creating a Square Account, you confirm that you are either a legal resident of the United States, a United States citizen, or a business entity...\"\".\"" } ]

[ { "docid": "221015", "title": "", "text": "If you read the link that MD-Tech provided, it actually indicates that the foreign companies (mostly banks) are choosing not to work with the United States in their latest answer, so it looks like it's not OkPay, but the financial companies that they use. On further research, the reason that this is banned is to prevent capital flight in the future. OkPay offers may ways to transfer funds in and out, such as traditional credit cards, like VISA and MasterCard, and other non-traditional ways, such as crypto-coins. Here is another example of how the US government is limiting what US consumers can do with their money. Apparently while no one was looking in 2010, they were able to pass some new restrictions." } ]

[ { "docid": "588327", "title": "", "text": "The United States taxes nonresident aliens on two types of income: First, a nonresident alien who is engaged in a trade or business in the United States is taxed on income that is effectively connected with that trade or business. Second, certain types of U.S.-source payments are subject to income tax withholding. The determination of when a nonresident alien is engaged in a U.S. trade or business is highly fact-specific and complex. However, keeping assets in a U.S. bank account should not be treated as a U.S. trade or business. A nonresident alien's interest income is generally subject to U.S. federal income tax withholding at a rate of 30 percent under Section 1441 of the tax code. Interest on bank deposits, however, benefit from an exception under Section 1441(c)(10), so long as that interest is not effectively connected with a U.S. trade or business. Even though no tax needs to be withheld on interest on a bank deposit, the bank should still report that interest each year to the IRS on Form 1042-S. The IRS can then send that information to the tax authority in Brazil. Please keep in mind that state and local tax rules are all different, and whether interest on the bank deposits is subject to state or local tax will depend on which state the bank is in. Also, the United States does tax nonresident aliens on wages paid from a U.S. company, if those wages are treated as U.S.-source income. Generally, wages are U.S.-source income if the employee provides services while physically present in the United States. There are a few exceptions to this rule, but they depend on the amount of wages and other factors that are specific to the employee's situation. This is an area where you should really consult with a U.S. tax advisor before the employment starts. Maybe your company will pay for it?" }, { "docid": "375423", "title": "", "text": "\"Even though you will meet the physical presence test, you cannot claim the FEIE because your tax home will remain the US. From the IRS: Your tax home is the general area of your main place of business, employment, or post of duty, regardless of where you maintain your family home. Your tax home is the place where you are permanently or indefinitely engaged to work as an employee or self-employed individual. Having a \"\"tax home\"\" in a given location does not necessarily mean that the given location is your residence or domicile for tax purposes. ... You are not considered to have a tax home in a foreign country for any period in which your abode is in the United States. However, your abode is not necessarily in the United States while you are temporarily in the United States. Your abode is also not necessarily in the United States merely because you maintain a dwelling in the United States, whether or not your spouse or dependents use the dwelling. ... The location of your tax home often depends on whether your assignment is temporary or indefinite. If you are temporarily absent from your tax home in the United States on business, you may be able to deduct your away from home expenses (for travel, meals, and lodging) but you would not qualify for the foreign earned income exclusion. If your new work assignment is for an indefinite period, your new place of employment becomes your tax home, and you would not be able to deduct any of the related expenses that you have in the general area of this new work assignment. If your new tax home is in a foreign country and you meet the other requirements, your earnings may qualify for the foreign earned income exclusion. If you expect your employment away from home in a single location to last, and it does last, for 1 year or less, it is temporary unless facts and circumstances indicate otherwise. If you expect it to last for more than 1 year, it is indefinite. If you expect your employment to last for 1 year or less, but at some later date you expect it to last longer than 1 year, it is temporary (in the absence of facts and circumstances indicating otherwise) until your expectation changes. For guidance on how to determine your tax home refer to Revenue Ruling 93-86. Your main place of business is in the US and this will not change, because your business isn't relocating. If you are intending to work remotely while you are abroad, you should get educated on the relevant laws on where you are going. Most countries don't take kindly to unauthorized work being performed by foreign visitors. And yes, even though you aren't generating income or involving anyone in their country, the authorities still well may disapprove of your working. My answer to a very similar question on Expatriates.\"" }, { "docid": "404056", "title": "", "text": "Here is the solution: any money made inside the United States will be taxed under US tax law. You want to do business here, open up a US headquarters that handles all the sales tracking and reporting. No tax dollars, no operations inside the US. The united states carries such bulk buying power that companies will be forced to abide by its rules." }, { "docid": "422182", "title": "", "text": "In the United States there are some specific savings accounts, some of which have rules from the federal government (education) and some that are setup by the bank/credit Union. Some institutions have a Christmas club, where money is set aside each week or each month and then you are given access at the end of the time period. Some institutions have accounts that pay CD rates but allow you to add funds during the period. They will have some flexibility in setting the time period. I have seen accounts that are designed to save up for a big purchase, or for a specific time period (summer vacation) Ask your bank. Or better yet look at a variety of banks websites for their rate sheet. That will explain all the different account types, rates, and rules. My credit Union allows a large number of sub accounts so that you don't have to commingle the funds." }, { "docid": "330212", "title": "", "text": "The U.S. Minimum wage purchasing power peaked in 1968 with $8.68 (in 2016 dollars)... Why are people advocating almost double? From what it sounds like... Nobody has ever been able to rent a 2 bedroom apartment for minimum wage... Anywhere in the United States... EVER..." }, { "docid": "367473", "title": "", "text": "Yep, but only congress can create those debts: Article 1, section 8 states (in part): &gt;The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; [...] &gt;**To borrow Money on the credit of the United States**; [emphasis added] Only the congress can create the debt. The President simply doesn't have the authority to borrow money." }, { "docid": "169613", "title": "", "text": "\"You mean to tell me that everyone doesn't pay his/her fair share?! Please say it isn't so. :) Therein lies the welfare state: Tax the rich more heavily to subsidize the poor, and hobble the rich's ability to do so on their own accord. In any case, though, in the United States, if you make any money whatsoever, that usually counts as income, and can hence be taxed. Here's the IRS' definition of gross income. Pretty all-inclusive, isn't it? Businesses are allowed to deduct expenses to count against their income, but if one has more expenses than income year after year, (a) this is the road to financial ruin, and (b) the IRS puts an end to the tax losses after enough years of failing to show a profit. So, sure, if a businessperson doesn't have any income, then they're technically using the roads, etc., \"\"for free,\"\" but unless the businessperson wants to live off the land and the kindness of strangers, he'd better turn a profit eventually. Then he'll be taxed.\"" }, { "docid": "233577", "title": "", "text": "The US does have a gold reserve. The main reserves are held at Fort Knox but there is even more gold, mostly owned by other countries, stored in the basement of the New York Federal Reserve Bank (Think Die Hard 3). The United States Bullion Depository, often known as Fort Knox, is a fortified vault building located adjacent to Fort Knox, Kentucky, used to store a large portion of United States official gold reserves and occasionally other precious items belonging or entrusted to the federal government. The United States Bullion Depository holds 4,578 metric tons (5046 tons) of gold bullion (147.2 million oz. troy). This is roughly 2.5% of all the gold ever refined throughout human history. Even so, the depository is second in the United States to the Federal Reserve Bank of New York's underground vault in Manhattan, which holds 7,000 metric tons (7716 tons) of gold bullion (225.1 million oz. troy), some of it in trust for foreign nations, central banks and official international organizations. Source: Wikipedia" }, { "docid": "401146", "title": "", "text": "\"There are tax free bonds in the United States. They are for things like public housing and other urban projects. They are tax free for everyone but only rich people buy them. Why? The issue is that the tax free nature of the bond is included in its yield. So rather than yielding say a 5% return, they figure that the owner is getting 20% off due to not paying taxes. As a result, they only give a 4% return but are as risky as a 5% return investment. Net result, only rich people invest in tax free bonds. \"\"Rich\"\" is defined here to mean people paying a 20% tax on long term investment returns. Or take the State and Local Tax (SALT) deduction, which has been in the news recently. Again, it is technically open to everyone. But there is also a standard deduction that is open to everyone. For the typical family, state and local taxes might be 5% of income. So for a family making $100k a year, that's $5k. The same family can take a $13k or so standard deduction instead of itemizing. So why would they take the smaller deduction? As a practical matter, two groups take the SALT deduction. People rich enough to pay more than $13k in state and local taxes and people who also take the mortgage interest deduction. So it helps a lot of people who are rich quite a bit. And it helps a few middle class people some. But if you are lower middle class with a $30k mortgage on a tiny house and paying 4% interest, then that's only $1200 a year. Add in property taxes of $3000 and SALT of $2.8k and that's only $7k. Even if the person gives $3k to charity, the $13k deduction is a lot better and requires less paperwork. Contrast that with someone who has $500k mortgage at 3.6% interest. That's $18k in interest alone. Add in a SALT of $7k and property taxes of $50k, and there's $75k of itemized deductions, much better than $13k. Now a $7k donation to charity is entirely deductible. And even after the mortgage interest deduction goes away, the other $64k remains.\"" }, { "docid": "17008", "title": "", "text": "Why are doctors so overworked? Maybe their AMA cartel restricting new entry is to blame. They also lobby to restrict the number of procedures that nurses can legally perform and limit the number of medical schools. This is a huge factor in the cost of health care in the United States." }, { "docid": "47832", "title": "", "text": "We had this happen to us 2 months ago. There is basically a criminal organization called United telecom they are partnered with. United Telecoms business model is switching your long distance without your permission. We get a bill and each phone line has all these extra charges that add up to about $100. I call to find out what is happening and I find out we have been slammed (long distance switched without our permission). Apparently they call and ask if this is business X and if you say yes they are recording it and use that as evidence that you agreed to have your long distance switched. I spent close to six hours on the phone getting our account back in order. One of the people I spoke with at Centurylink said they got a lot of calls about United Telecom. It sounded like switching long distance services was a standard business practice for them. When I spoke with United Telecom, it was way to easy. The person that answered the phone removed our charged without any questions. I thought that was strangely easy. If this is actually how they make money, why would they back it off so easily? So I called Centurylink back because I figured there had to be something else they left out when I spoke with them earlier. After some digging, bundled up in an other charges section was about $5 for switching our long distance service. It took me almost a whole day to get this straightened out. I spoke with 16 different people at Centurylink. It became hilarious. I had them on speaker phone and we would just start laughing. One minute sir, I will connect you to business services. Here is the direct phone number in case you get disconnected. 20 minutes of being on hold, then, I am sorry sir this is residential I will have to transfer you to business. Same freaking thing, over and over and over. I assume most people just give up or don't have the time to sort this stuff out. TL;DR It seems like Centurylink continues to allow United Telecom to switch long distance services for their clients, because it generates significant revenue for them. [edit] If you don't want this to happen to you, put a lock on your services. It takes two part authentication to change anything after that." }, { "docid": "552251", "title": "", "text": "\"&gt;Unyielding Realism in the Climate Debate! CO2 is a Product of Human Breath, Not A Pollutant! CO2 is A Plant Food! Climate Change Has Been Going On Forever! &gt;Any actions having the intent to aid the Intergovernmental Panel on Climate Change to inflict harm on the US, including alleging that IPCC texts have any authority on the territory of the United States or in respect to the United States, committed by a person owing his or her loyalty to the United States, might constitute **treason**, as defined in 18 U.S. Code § 2381. great source OP. \"\"samizdat\"\" eh?\"" }, { "docid": "284902", "title": "", "text": "\"This is the best tl;dr I could make, [original](https://www.imf.org/external/pubs/ft/fandd/2016/06/ostry.htm) reduced by 95%. (I'm a bot) ***** &gt; Is there really a defensible case for countries like Germany, the United Kingdom, or the United States to pay down the public debt? Two arguments are usually made in support of paying down the debt in countries with ample fiscal space-that is, in countries where there is little real prospect of a fiscal crisis. &gt; For countries with a strong track record, the benefit of debt reduction, in terms of insurance against a future fiscal crisis, turns out to be remarkably small, even at very high levels of debt to GDP. For example, moving from a debt ratio of 120 percent of GDP to 100 percent of GDP over a few years buys the country very little in terms of reduced crisis risk. &gt; Faced with a choice between living with the higher debt-allowing the debt ratio to decline organically through growth-or deliberately running budgetary surpluses to reduce the debt, governments with ample fiscal space will do better by living with the debt. ***** [**Extended Summary**](http://np.reddit.com/r/autotldr/comments/6ulozq/imf_on_neoliberal_economics/) | [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ \"\"Version 1.65, ~194154 tl;drs so far.\"\") | [Feedback](http://np.reddit.com/message/compose?to=%23autotldr \"\"PM's and comments are monitored, constructive feedback is welcome.\"\") | *Top* *keywords*: **debt**^#1 **country**^#2 **fiscal**^#3 **growth**^#4 **capital**^#5\"" }, { "docid": "593591", "title": "", "text": "\"This is the best tl;dr I could make, [original](http://www.reuters.com/article/us-trade-nafta-mexico-idUSKCN1B91JQ) reduced by 45%. (I'm a bot) ***** &gt; MEXICO CITY - There is a serious risk that the United States could withdraw from the North American Free Trade Agreement, and Mexico must have a &amp;quot;Plan B&amp;quot; for that eventuality, Economy Minister Ildefonso Guajardo was quoted as saying on Tuesday. &gt; Talks on renegotiating the accord between the United States, Canada and Mexico began earlier this month, and the next round of discussions are due to begin on Friday in Mexico City. &gt; &amp;quot;The best thing Mexico can do given the atypical nature of the negotiation is to have an alternative plan, clear and pragmatic, to face something that is not our objective, but which may be the result of a process that does not move forward,&amp;quot; Guajardo told El Economista. ***** [**Extended Summary**](http://np.reddit.com/r/autotldr/comments/6wt7cw/mexico_minister_sees_risk_of_us_nafta_exit_flags/) | [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ \"\"Version 1.65, ~200668 tl;drs so far.\"\") | [Feedback](http://np.reddit.com/message/compose?to=%23autotldr \"\"PM's and comments are monitored, constructive feedback is welcome.\"\") | *Top* *keywords*: **MEXICO**^#1 **Plan**^#2 **States**^#3 **United**^#4 **Guajardo**^#5\"" }, { "docid": "445084", "title": "", "text": "As a European we would wholeheartedly welcome a voluntary reduction in US geopolitical influence. The ability of the United States to dictate terms to Europe on strategic and political matters is an anomaly that has been allowed to persist for far too long. Luckily for the rest of the world the US public are at large grossly uninformed in matters of foreign affairs and don't realise the exceptional strategic positioning they were granted in the wake of the second world war. And they're in the process of ceding that power." }, { "docid": "434905", "title": "", "text": "\"This is the best tl;dr I could make, [original](https://www.nytimes.com/2017/09/19/travel/tourism-united-states-international-decline.html) reduced by 81%. (I'm a bot) ***** &gt; Within Europe, the tourism declines were largest in Switzerland at nearly 28 percent, Belgium at 20 percent and Britain at 15.5 percent. &gt; &amp;quot;The international travel market is ultracompetitive, and the U.S. is falling behind,&amp;quot; said Roger Dow, the president and chief executive of the U.S. Travel Association, a nonprofit that promotes travel to and within the United States, in a statement. &gt; The Commerce Department&amp;#039;s National Travel and Tourism Office reported a 2.5 percent increase in spending by international visitors to $83.4 billion in the first four months of the year compared to the same period in 2016.Some of the decline in first quarter results may be because of the shift of the Easter and Passover holidays, when travel usually spikes. ***** [**Extended Summary**](http://np.reddit.com/r/autotldr/comments/715i19/international_tourism_to_the_us_declined_in_early/) | [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ \"\"Version 1.65, ~213088 tl;drs so far.\"\") | [Feedback](http://np.reddit.com/message/compose?to=%23autotldr \"\"PM's and comments are monitored, constructive feedback is welcome.\"\") | *Top* *keywords*: **travel**^#1 **percent**^#2 **States**^#3 **year**^#4 **United**^#5\"" }, { "docid": "126771", "title": "", "text": "\"Tax is often calculated per item. Especially in the days of the internet, some items are taxable and some aren't, depending on the item and your nexus. I would recommend calculating and storing tax with each item, to account for these subtle differences. EDIT: Not sure why this was downvoted, if you don't believe me, you can always check with Amazon: http://www.amazon.com/gp/help/customer/display.html/ref=hp_468512_calculated?nodeId=468512#calculated I think they know what they're talking about. FINAL UPDATE: Now, if someone goes to your site, and buys something from your business (in California) and the shipping address for the product is Nevada, then taxes do not have to be collected. If they have a billing address in California, and a shipping address in Nevada, and the goods are shipping to Nevada, you do not have to declare tax. If you have a mixture of tangible (computer, mouse, keyboard) and intangible assets (warranty) in a cart, and the shipping address is in California, you charge tax on the tangible assets, but NOT on the intangible assets. Yes, you can charge tax on the whole order. Yes for most businesses that's \"\"Good enough\"\", but I'm not trying to provide the \"\"good enough\"\" solution, I'm simply telling you how very large businesses run and operate. As I've mentioned, I've done several tax integrations using software called Sabrix (Google if you've not heard of it), and have done those integrations for companies like the BBC and Corbis (owned and operated by Bill Gates). Take it or leave it, but the correct way to charge taxes, especially given the complex tax laws of the US and internationally, is to charge per item. If you just need the \"\"good enough\"\" approach, feel free to calculate it by total. Some additional reading: http://en.wikipedia.org/wiki/Taxation_of_Digital_Goods Another possible federal limitation on Internet taxation is the United States Supreme Court case, Quill Corp. v. North Dakota, 504 U.S. 298 (1992),[6] which held that under the dormant commerce clause, goods purchased through mail order cannot be subject to a state’s sales tax unless the vendor has a substantial nexus with the state levying the tax. In 1997, the federal government decided to limit taxation of Internet activity for a period of time. The Internet Tax Freedom Act (ITFA) prohibits taxes on Internet access, which is defined as a service that allows users access to content, information, email or other services offered over the Internet and may include access to proprietary content, information, and other services as part of a package offered to customers. The Act has exceptions for taxes levied before the statute was written and for sales taxes on online purchases of physical goods.\"" }, { "docid": "518129", "title": "", "text": "\"This is the best tl;dr I could make, [original](https://www.mercatus.org/publications/build-nafta-further-integrate-north-american-market) reduced by 92%. (I'm a bot) ***** &gt; Since NAFTA&amp;#039;s passage, America&amp;#039;s two-way trade with Canada and Mexico has more than tripled, with trilateral trade flows within NAFTA topping $1 trillion in 2011. &gt; Prior to NAFTA, Mexico imposed a 20 percent duty on US automobile exports compared to the 2.5 percent duty imposed on Mexican automobiles imported to the United States. &gt; NAFTA is a major reason why, despite other challenges, the three major North American economies have generally outperformed those of the European Union and Japan in the past two decades. ***** [**Extended Summary**](http://np.reddit.com/r/autotldr/comments/6hq364/build_on_nafta_to_further_integrate_the_north/) | [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ \"\"Version 1.65, ~146187 tl;drs so far.\"\") | [Feedback](http://np.reddit.com/message/compose?to=%23autotldr \"\"PM's and comments are monitored, constructive feedback is welcome.\"\") | *Top* *keywords*: **NAFTA**^#1 **Mexico**^#2 **States**^#3 **United**^#4 **Trade**^#5\"" }, { "docid": "464337", "title": "", "text": "The expense ratio is stated as an annual figure but is often broken down to be taken out periodically of the fund's assets. In traditional mutual funds, there will be a percent of assets in cash that can be nibbled to cover the expenses of running the fund and most deposits into the fund are done in cash. In an exchange-traded fund, new shares are often created through creation/redemption units which are baskets of securities that make things a bit different. In the case of an ETF, the dividends may be reduced by the expense ratio as the trading price follows the index usually. Expense ratios can vary as in some cases there may be initial waivers on new funds for a time period to allow them to build an asset base. There is also something to be said for economies of scale that allow a fund to have its expense ratio go down over time as it builds a larger asset base. These would be noted in the prospectus and annual reports of the fund to some degree. SPDR Annual Report on page 312 for the Russell 3000 ETF notes its expense ratio over the past 5 years being the following: 0.20% 0.20% 0.22% 0.20% 0.21% Thus, there is an example of some fluctuation if you want a real world example." } ]

[ { "docid": "75568", "title": "", "text": "Here's the real reason OKPay (actually the banks they interface with) won't accept US Citizens. The Foreign Account Tax Compliance Act Congress passed the Foreign Account Tax Compliance Act (FATCA) in 2010 without much fanfare. One reason the act was so quiet was its four-year long ramp up; FATCA did not really take effect until 2014. Never before had a single national government attempted, and so far succeeded in, forcing compliance standards on banks across the world. FATCA requires any non-U.S. bank to report accounts held by American citizens worth over $50,000 or else be subject to 30% withholding penalties and possible exclusion from U.S. markets. By mid-2015, more than 100,000 foreign entities had agreed to share financial information with the IRS. Even Russia and China agreed to FATCA. The only major global economy to fight the Feds is Canada; however it was private citizens, not the Canadian government, who filed suit to block FATCA under the International Governmental Agreement clause making it illegal to turn over private bank account information. Read more: The Tax Implications of Opening a Foreign Bank Account | Investopedia http://www.investopedia.com/articles/personal-finance/102915/tax-implications-opening-foreign-bank-account.asp#ixzz4TzEck9Yo Follow us: Investopedia on Facebook" } ]

[ { "docid": "35414", "title": "", "text": "My favorite part: Any bank with a leverage ratio greater than 10% can elect to be exempt from: &gt;(1) Any Federal law, rule, or regulation addressing capital or liquidity requirements or standards. &gt;(2) Any Federal law, rule, or regulation that permits an appropriate Federal banking agency to object to a capital distribution. &gt;(3) Any consideration by an appropriate Federal banking agency of the following: &gt;(A) Any risk the qualifying banking organization may pose to “the stability of the financial system of the United States”, under section 5(c)(2) of the Bank Holding Company Act of 1956. &gt;(B) The “extent to which a proposed acquisition, merger, or consolidation would result in greater or more concentrated risks to the stability of the United States banking or financial system”, under section 3(c)(7) of the Bank Holding Company Act of 1956, so long as the banking organization, after such proposed acquisition, merger, or consolidation, would maintain a quarterly leverage ratio of at least 10 percent. &gt;(C) Whether the performance of an activity by the banking organization could possibly pose a “risk to the stability of the United States banking or financial system”, under section 4(j)(2)(A) of the Bank Holding Company Act of 1956. &gt;(D) Whether the acquisition of control of shares of a company engaged in an activity described in section 4(j)(1)(A) of the Bank Holding Company Act of 1956 could possibly pose a “risk to the stability of the United States banking or financial system”, under section 4(j)(2)(A) of the Bank Holding Company Act of 1956, so long as the banking organization, after acquiring control of such company, would maintain a quarterly leverage ratio of at least 10 percent. &gt;(E) Whether a merger would pose a “risk to the stability of the United States banking or financial system”, under section 18(c)(5) of the Federal Deposit Insurance Act, so long as the banking organization, after such proposed merger, would maintain a quarterly leverage ratio of at least 10 percent. &gt;(F) Any risk the qualifying banking organization may pose to “the stability of the financial system of the United States”, under section 10(b)(4) of the Home Owners' Loan Act. &gt;(4) Subsections (i)(8) and (k)(6)(B)(ii) of section 4 and section 14 of the Bank Holding Company Act of 1956. &gt;(5) Section 18(c)(13) of the Federal Deposit Insurance Act. &gt;(6) Section 163 of the Financial Stability Act of 2010. &gt;(7) Section 10(e)(2)(E) of the Home Owners’ Loan Act. &gt;(8) Any Federal law, rule, or regulation implementing standards of the type provided for in subsections (b), (c), (d), (e), (g), (h), (i), and (j) of section 165 of the Financial Stability Act of 2010. &gt;(9) Any Federal law, rule, or regulation providing limitations on mergers, consolidations, or acquisitions of assets or control, to the extent such limitations relate to capital or liquidity standards or concentrations of deposits or assets, so long as the banking organization, after such proposed merger, consolidation, or acquisition, would maintain a quarterly leverage ratio of at least 10 percent. yeah, what could go wrong?" }, { "docid": "588327", "title": "", "text": "The United States taxes nonresident aliens on two types of income: First, a nonresident alien who is engaged in a trade or business in the United States is taxed on income that is effectively connected with that trade or business. Second, certain types of U.S.-source payments are subject to income tax withholding. The determination of when a nonresident alien is engaged in a U.S. trade or business is highly fact-specific and complex. However, keeping assets in a U.S. bank account should not be treated as a U.S. trade or business. A nonresident alien's interest income is generally subject to U.S. federal income tax withholding at a rate of 30 percent under Section 1441 of the tax code. Interest on bank deposits, however, benefit from an exception under Section 1441(c)(10), so long as that interest is not effectively connected with a U.S. trade or business. Even though no tax needs to be withheld on interest on a bank deposit, the bank should still report that interest each year to the IRS on Form 1042-S. The IRS can then send that information to the tax authority in Brazil. Please keep in mind that state and local tax rules are all different, and whether interest on the bank deposits is subject to state or local tax will depend on which state the bank is in. Also, the United States does tax nonresident aliens on wages paid from a U.S. company, if those wages are treated as U.S.-source income. Generally, wages are U.S.-source income if the employee provides services while physically present in the United States. There are a few exceptions to this rule, but they depend on the amount of wages and other factors that are specific to the employee's situation. This is an area where you should really consult with a U.S. tax advisor before the employment starts. Maybe your company will pay for it?" }, { "docid": "169613", "title": "", "text": "\"You mean to tell me that everyone doesn't pay his/her fair share?! Please say it isn't so. :) Therein lies the welfare state: Tax the rich more heavily to subsidize the poor, and hobble the rich's ability to do so on their own accord. In any case, though, in the United States, if you make any money whatsoever, that usually counts as income, and can hence be taxed. Here's the IRS' definition of gross income. Pretty all-inclusive, isn't it? Businesses are allowed to deduct expenses to count against their income, but if one has more expenses than income year after year, (a) this is the road to financial ruin, and (b) the IRS puts an end to the tax losses after enough years of failing to show a profit. So, sure, if a businessperson doesn't have any income, then they're technically using the roads, etc., \"\"for free,\"\" but unless the businessperson wants to live off the land and the kindness of strangers, he'd better turn a profit eventually. Then he'll be taxed.\"" }, { "docid": "227197", "title": "", "text": "You can file a revised W-4 with your employer claiming more allowances than you do now. More allowances means less Federal tax and (if applicable and likely with a separate form) less state tax. This doesn't affect social security and Medicare with holding, though. That being said, US taxes are on a pay-as-you-go system. If the IRS determines that you're claiming more allowances than you're eligible for and not paying the proper taxes throughout the year, they will hit you with an underpayment penalty fee, which would likely negate the benefits of keeping that money in the first place. This is why independent contractors and self-employed people pay quarterly or estimated taxes. Depending on the employer, they may require proof of the allowances for adjustment before they accept the revised W-4." }, { "docid": "18850", "title": "", "text": "The IRS Guidance pertaining to the subject. In general the best I can say is your business expense may be deductible. But it depends on the circumstances and what it is you want to deduct. Travel Taxpayers who travel away from home on business may deduct related expenses, including the cost of reaching their destination, the cost of lodging and meals and other ordinary and necessary expenses. Taxpayers are considered “traveling away from home” if their duties require them to be away from home substantially longer than an ordinary day’s work and they need to sleep or rest to meet the demands of their work. The actual cost of meals and incidental expenses may be deducted or the taxpayer may use a standard meal allowance and reduced record keeping requirements. Regardless of the method used, meal deductions are generally limited to 50 percent as stated earlier. Only actual costs for lodging may be claimed as an expense and receipts must be kept for documentation. Expenses must be reasonable and appropriate; deductions for extravagant expenses are not allowable. More information is available in Publication 463, Travel, Entertainment, Gift, and Car Expenses. Entertainment Expenses for entertaining clients, customers or employees may be deducted if they are both ordinary and necessary and meet one of the following tests: Directly-related test: The main purpose of the entertainment activity is the conduct of business, business was actually conducted during the activity and the taxpayer had more than a general expectation of getting income or some other specific business benefit at some future time. Associated test: The entertainment was associated with the active conduct of the taxpayer’s trade or business and occurred directly before or after a substantial business discussion. Publication 463 provides more extensive explanation of these tests as well as other limitations and requirements for deducting entertainment expenses. Gifts Taxpayers may deduct some or all of the cost of gifts given in the course of their trade or business. In general, the deduction is limited to $25 for gifts given directly or indirectly to any one person during the tax year. More discussion of the rules and limitations can be found in Publication 463. If your LLC reimburses you for expenses outside of this guidance it should be treated as Income for tax purposes. Edit for Meal Expenses: Amount of standard meal allowance. The standard meal allowance is the federal M&IE rate. For travel in 2010, the rate for most small localities in the United States is $46 a day. Source IRS P463 Alternately you could reimburse at a per diem rate" }, { "docid": "99730", "title": "", "text": "In the United States you can't, because the average millennial in the United States has no opportunity to save money. Either you get a college education, then you will be burdened with a student loan. The cost of college education skyrocketed in the past decades. It is now practically impossible to enter the workforce without a huge debt, unless you are one of the lucky few who has rich and generous parents. Or you skip college. But college is the only way in the United States to obtain a generally accepted qualification, so you won't get any job which pays enough to save any money. As soon as that student loan is paid off, you need to get another loan for you house which you pay off for several decades. As soon as the house debt is paid off, you will be old and develop some medical problems. The medical bills will come in and you will be in debt again. So when in their life are millennials supposed to save money?" }, { "docid": "401146", "title": "", "text": "\"There are tax free bonds in the United States. They are for things like public housing and other urban projects. They are tax free for everyone but only rich people buy them. Why? The issue is that the tax free nature of the bond is included in its yield. So rather than yielding say a 5% return, they figure that the owner is getting 20% off due to not paying taxes. As a result, they only give a 4% return but are as risky as a 5% return investment. Net result, only rich people invest in tax free bonds. \"\"Rich\"\" is defined here to mean people paying a 20% tax on long term investment returns. Or take the State and Local Tax (SALT) deduction, which has been in the news recently. Again, it is technically open to everyone. But there is also a standard deduction that is open to everyone. For the typical family, state and local taxes might be 5% of income. So for a family making $100k a year, that's $5k. The same family can take a $13k or so standard deduction instead of itemizing. So why would they take the smaller deduction? As a practical matter, two groups take the SALT deduction. People rich enough to pay more than $13k in state and local taxes and people who also take the mortgage interest deduction. So it helps a lot of people who are rich quite a bit. And it helps a few middle class people some. But if you are lower middle class with a $30k mortgage on a tiny house and paying 4% interest, then that's only $1200 a year. Add in property taxes of $3000 and SALT of $2.8k and that's only $7k. Even if the person gives $3k to charity, the $13k deduction is a lot better and requires less paperwork. Contrast that with someone who has $500k mortgage at 3.6% interest. That's $18k in interest alone. Add in a SALT of $7k and property taxes of $50k, and there's $75k of itemized deductions, much better than $13k. Now a $7k donation to charity is entirely deductible. And even after the mortgage interest deduction goes away, the other $64k remains.\"" }, { "docid": "375423", "title": "", "text": "\"Even though you will meet the physical presence test, you cannot claim the FEIE because your tax home will remain the US. From the IRS: Your tax home is the general area of your main place of business, employment, or post of duty, regardless of where you maintain your family home. Your tax home is the place where you are permanently or indefinitely engaged to work as an employee or self-employed individual. Having a \"\"tax home\"\" in a given location does not necessarily mean that the given location is your residence or domicile for tax purposes. ... You are not considered to have a tax home in a foreign country for any period in which your abode is in the United States. However, your abode is not necessarily in the United States while you are temporarily in the United States. Your abode is also not necessarily in the United States merely because you maintain a dwelling in the United States, whether or not your spouse or dependents use the dwelling. ... The location of your tax home often depends on whether your assignment is temporary or indefinite. If you are temporarily absent from your tax home in the United States on business, you may be able to deduct your away from home expenses (for travel, meals, and lodging) but you would not qualify for the foreign earned income exclusion. If your new work assignment is for an indefinite period, your new place of employment becomes your tax home, and you would not be able to deduct any of the related expenses that you have in the general area of this new work assignment. If your new tax home is in a foreign country and you meet the other requirements, your earnings may qualify for the foreign earned income exclusion. If you expect your employment away from home in a single location to last, and it does last, for 1 year or less, it is temporary unless facts and circumstances indicate otherwise. If you expect it to last for more than 1 year, it is indefinite. If you expect your employment to last for 1 year or less, but at some later date you expect it to last longer than 1 year, it is temporary (in the absence of facts and circumstances indicating otherwise) until your expectation changes. For guidance on how to determine your tax home refer to Revenue Ruling 93-86. Your main place of business is in the US and this will not change, because your business isn't relocating. If you are intending to work remotely while you are abroad, you should get educated on the relevant laws on where you are going. Most countries don't take kindly to unauthorized work being performed by foreign visitors. And yes, even though you aren't generating income or involving anyone in their country, the authorities still well may disapprove of your working. My answer to a very similar question on Expatriates.\"" }, { "docid": "482332", "title": "", "text": "\"Yes. From their TOS: \"\"By creating a Square Account, you confirm that you are either a legal resident of the United States, a United States citizen, or a business entity...\"\".\"" }, { "docid": "434905", "title": "", "text": "\"This is the best tl;dr I could make, [original](https://www.nytimes.com/2017/09/19/travel/tourism-united-states-international-decline.html) reduced by 81%. (I'm a bot) ***** &gt; Within Europe, the tourism declines were largest in Switzerland at nearly 28 percent, Belgium at 20 percent and Britain at 15.5 percent. &gt; &amp;quot;The international travel market is ultracompetitive, and the U.S. is falling behind,&amp;quot; said Roger Dow, the president and chief executive of the U.S. Travel Association, a nonprofit that promotes travel to and within the United States, in a statement. &gt; The Commerce Department&amp;#039;s National Travel and Tourism Office reported a 2.5 percent increase in spending by international visitors to $83.4 billion in the first four months of the year compared to the same period in 2016.Some of the decline in first quarter results may be because of the shift of the Easter and Passover holidays, when travel usually spikes. ***** [**Extended Summary**](http://np.reddit.com/r/autotldr/comments/715i19/international_tourism_to_the_us_declined_in_early/) | [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ \"\"Version 1.65, ~213088 tl;drs so far.\"\") | [Feedback](http://np.reddit.com/message/compose?to=%23autotldr \"\"PM's and comments are monitored, constructive feedback is welcome.\"\") | *Top* *keywords*: **travel**^#1 **percent**^#2 **States**^#3 **year**^#4 **United**^#5\"" }, { "docid": "344065", "title": "", "text": "Here's how this works in the United States. There's no law regarding your behavior in this matter and you haven't broken any laws. But your broker-dealer has a law that they must follow. It's documented here: The issue is if you buy stock before your sell has settled (before you've received cash) then you're creating money where before none existed (even though it is just for a day or two). The government fears that this excess will cause undue speculation in the security markets. The SEC calls this practice freeriding, because you're spending money you have not yet received. In summary: your broker is not allowed to loan money to an account than is not set-up for loans; it must be a margin account. People with margin account are able to day-trade because they have the ability to use margin (borrow money). Margin Accounts are subject to Pattern Daytrading Rules. The Rules are set forth by FINRA (The Financial Industry Reporting Authority) and are here:" }, { "docid": "237514", "title": "", "text": "\"There are very few circumstances where forming an out of state entity is beneficial, but a website is within these circumstances in certain instances. Businesses with no physical operations do not need to care what jurisdiction they are registered in: your home state, a better united state or non-united state. The \"\"limited liability\"\" does it's job. If you are storing inventory or purchasing offices to compliment your online business, you need to register in the state those are located in. An online business is an example of a business with no physical presence. All states want you to register your LLC in the state that you live in, but this is where you need to read that state's laws. What are the consequences of not registering? There might be none, there might be many. In New York, for example, there are no consequences for not registering (and registering in new york - especially the city - is likely the most expensive in the USA). If your LLC needs to represent itself in court, New York provides retroactive foreign registrations and business licenses. So basically, despite saying that you need to pay over $1000 to form your LLC \"\"or else\"\", the reality is that you get the local limited liability protection in courts whenever you actually need it. Check your local state laws, but more times than not it is analogous to asking a barber if you need a haircut, the representative is always going to say \"\"yes, you do\"\" while the law, and associated case law, reveals that you don't. The federal government doesn't care what state your form an LLC or partnership in. Banks don't care what state you form an LLC or partnership in. The United States post office doesn't care. Making an app? The Apple iTunes store doesn't care. So that covers all the applicable authorities you need to consider. Now just go with the cheapest. In the US alone there are 50 states and several territories, all with their own fee structures, so you just have to do your research. Despite conflicting with another answer, Wyoming is still relevant, because it is cheap and has a mature system and laws around business entity formation. http://www.incorp.com has agents in every state, but there are registered agents everywhere, you can even call the Secretary of State in each state for a list of registered agents. Get an employer ID number yourself after the business entity is formed, it takes less than 5 minutes. All of this is also contingent on how your LLC or partnership distributes funds. If your LLC is not acting like a pass through entity to you and your partner,but instead holding its own profits like a corporation, then again none of this matters. You need to form it within the state you live and do foreign registrations in states where it has any physical presence, as it has becomes its own tax person in those states. This is relevant because you said you were trying to do something with a friend.\"" }, { "docid": "425597", "title": "", "text": "\"And yet, the same law that these individuals and companies use to lower their taxes applies for every citizen and company of the country. Thus, in principle, every individual and company could make use of these methods. Clearly, they do not. Why? Misconception number 1. How did you conclude they do not? Because NY Times didn't spend time doing an expose' on your plumber? The Panama Papers and the Paradise Papers contain the files from merely three companies that help in this large industry. This is a story about poor IT policies of three companies. A potential reason could be the price charged to set up and maintain these services. This is a significant deterrent. The costs of forming offshore entities are perpetuated by the expensive lawyers, registered agents and incompetent government representatives in these tiny jurisdictions. (For what its worth, even most United States are pretty incompetent at these administrative processes. Really only a few financial centers and a few exceptions have it all streamlined.) These are scale problems primarily. The incompetence of different nation/state's public sectors will make you realize everything you take for granted. The main message emerging from Panama Papers, Paradise Papers, and the like, is that it is the rich, powerful and famous who make use of and benefit from tax havens. But not exclusively for tax purposes. Newspapers, and even the organization leaking this information, is driving clicks to a gullible and impressionable public. I've talked with ICIJ (who release and push the discussion on the Panama/Paradise Papers), they really do believe in their \"\"tax expose'\"\" angle, but lack any consideration of how business work. 'Tax Haven'. These are sovereign nations with due process with democratically elected legislatures who looked at their budget and realized they don't need to fund their government via passive taxes. Their governments offer a good and service that people want, and it provides enough revenues to their governments. Many of these jurisdictions have well evolved corporate laws for fast evolving business models. For example, The Segregated Portfolio Company in the British Virgin Islands is more well defined and supported by clearer case law and is more useful entity than a Series LLC in the few United States that support it. There are at least a dozen reasons why someone would use a \"\"tax haven\"\", where only one of them is \"\"tax\"\".\"" }, { "docid": "596553", "title": "", "text": "\"This is the best tl;dr I could make, [original](https://americanaffairsjournal.org/2017/05/new-class-war/) reduced by 99%. (I'm a bot) ***** &gt; In the United States the majority of American college students come from the minority of families in which one or both parents have college degrees. &gt; The incompatibility of the welfare state and mass immigration was noted by the libertarian economist Milton Friedman: &amp;quot;If you have a welfare state, if you have a state in which every resident is promised a certain minimum level of income, or a minimum level of subsistence, regardless of whether he works or not, produces it or not. Then really is an impossible thing.&amp;quot; His ideological opposite, Paul Krugman, agrees. &gt; It will make no sense for the United States to tolerate similar mercantilist trade policies at the expense of American industries, particularly those relevant to defense, carried out by China-the only &amp;quot;Peer competitor&amp;quot; the United States will face in the foreseeable future in the military realm. ***** [**Extended Summary**](http://np.reddit.com/r/autotldr/comments/6ejbil/the_new_class_war/) | [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ \"\"Version 1.65, ~133514 tl;drs so far.\"\") | [Theory](http://np.reddit.com/r/autotldr/comments/31bfht/theory_autotldr_concept/) | [Feedback](http://np.reddit.com/message/compose?to=%23autotldr \"\"PM's and comments are monitored, constructive feedback is welcome.\"\") | *Top* *keywords*: **State**^#1 **market**^#2 **work**^#3 **managerial**^#4 **new**^#5\"" }, { "docid": "590937", "title": "", "text": "One of my first assignments in my new job was to prepare a presentation on the growing domestic oil and natural gas industry and I couldn't agree more with some of the assertions listed in FT's article. US production has slowed in the past few years, but seems to be poised for a very healthy comeback. Maugeri isn't alone in his predictions. In 2013 and beyond, opportunities in U.S. energy markets look plentiful; Citi and Goldman Sach’s research units are incredibly bullish for U.S. energy output, with Citi projecting the United States to pass Saudi Arabia and Russia in oil and natural gas production by the end of 2013, and Goldman anticipating the same transfer of dominance to occur in 2017. Beyond the United States, Canadian and Mexican output is also booming, leading Citi to call North America “The New Middle East”." }, { "docid": "76618", "title": "", "text": "\"Some of the 45,000 might be taxable. The question is how was the stipend determined. Was it based on the days away? The mile driven? The cities you worked in? The IRS has guidelines regarding what is taxable in IRS Pub 15 Per diem or other fixed allowance. You may reimburse your employees by travel days, miles, or some other fixed allowance under the applicable revenue procedure. In these cases, your employee is considered to have accounted to you if your reimbursement doesn't exceed rates established by the Federal Government. The 2015 standard mileage rate for auto expenses was 57.5 cents per mile. The rate for 2016 is 54 cents per mile. The government per diem rates for meals and lodging in the continental United States can be found by visiting the U.S. General Services Administration website at www.GSA.gov and entering \"\"per diem rates\"\" in the search box. Other than the amount of these expenses, your employees' business expenses must be substantiated (for example, the business purpose of the travel or the number of business miles driven). For information on substantiation methods, see Pub. 463. If the per diem or allowance paid exceeds the amounts substantiated, you must report the excess amount as wages. This excess amount is subject to income tax with-holding and payment of social security, Medicare, and FUTA taxes. Show the amount equal to the substantiated amount (for example, the nontaxable portion) in box 12 of Form W-2 using code “L\"\"\"" }, { "docid": "367473", "title": "", "text": "Yep, but only congress can create those debts: Article 1, section 8 states (in part): &gt;The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; [...] &gt;**To borrow Money on the credit of the United States**; [emphasis added] Only the congress can create the debt. The President simply doesn't have the authority to borrow money." }, { "docid": "222588", "title": "", "text": "\"This is the best tl;dr I could make, [original](http://www.france24.com/en/20170814-canada-looking-add-environmental-protections-nafta) reduced by 82%. (I'm a bot) ***** &gt; Canada wants environmental protections added to a 23-year-old continental trade pact with Mexico and the United States, its top diplomat said Monday, ahead of trilateral talks in two days. &gt; Freeland cited the Canada-EU free trade agreement that comes into effect on September 21 as a template for modernizing the country&amp;#039;s trade ties with the United States and Mexico. &gt; The United States had a slight trade surplus of US$8.1 billion with Canada last year. ***** [**Extended Summary**](http://np.reddit.com/r/autotldr/comments/6tooes/canada_wants_environmental_protections_added_to_a/) | [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ \"\"Version 1.65, ~190701 tl;drs so far.\"\") | [Feedback](http://np.reddit.com/message/compose?to=%23autotldr \"\"PM's and comments are monitored, constructive feedback is welcome.\"\") | *Top* *keywords*: **trade**^#1 **States**^#2 **United**^#3 **Canada**^#4 **Freeland**^#5\"" }, { "docid": "393314", "title": "", "text": "\"It says that you are exempt \"\"as long as such interest income is not effectively connected with a United States trade or business\"\". So the interest is from money earned from doing business with/through AirBnb, a US company. So you will have to report it. Even if your bank doesn't send you a 1099-INT, you have to report it, unless it is under $0.49 because the IRS allows rounding.\"" } ]

[ { "docid": "420529", "title": "", "text": "I assume US as mhoran_psprep edited, although I'm not sure IRS necessarily means US. (It definitely used to also include Britain's Inland Revenue, but they changed.) (US) Stockbrokers do not normally withhold on either dividends/interest/distributions or realized capital gains, especially since gains might be reduced or eliminated by later losses. (They can be required to apply backup withholding to dividends and interest; don't ask how I know :-) You are normally required to pay most of your tax during the year, defined as within 10% or $1000 whichever is more, by withholding and/or estimated payments. Thus if the tax on your income including your recent gain will exceed your withholding by 10% and $1000, you should either adjust your withholding or make an estimated payment or some combination, although even if you have a job the last week of December is too late for you to adjust withholding significantly, or even to make a timely estimated payment if 'earlier in the year' means in an earlier quarter as defined for tax (Jan-Mar, Apr-May, June-Aug, Sept-Dec). See https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes and for details its link to Publication 505. But a 'safe harbor' may apply since you say this is your first time to have capital gains. If you did not owe any income tax for last year (and were a citizen or resident), or (except very high earners) if you did owe tax and your withholding plus estimated payments this year is enough to pay last year's tax, you are exempt from the Form 2210 penalty and you have until the filing deadline (normally April 15 but this year April 18 due to weekend and holiday) to pay. The latter is likely if your job and therefore payroll income and withholding this year was the same or nearly the same as last year and there was no other big change other than the new capital gain. Also note that gains on investments held more than one year are classified as long-term and taxed at lower rates, which reduces the tax you will owe (all else equal) and thus the payments you need to make. But your wording 'bought and sold ... earlier this year' suggests your holding was not long-term, and short-term gains are taxed as 'ordinary' income. Added: if the state you live in has a state income tax similar considerations apply but to smaller amounts. TTBOMK all states tax capital gains (and other investment income, other than interest on exempt bonds), and don't necessarily give the lower rates for long-term gains. And all states I have lived in have 'must have withholding or estimated payments' rules generally similar to the Federal ones, though not identical." } ]

[ { "docid": "590267", "title": "", "text": "Apparently it's based on either the address of the seller or vendor or your shipping address; from the AccurateTax.com blog post Destination and Origin Based Sales Tax: ... a few states have laws that are origin-based, where products that are shipped to the customer are taxed based on the location of the business itself. As of this writing, these states are Most states use destination-based sales tax, which defines the source of the transaction to be the destination at which the product will eventually be used, or the address to which the product is shipped. ... The following states [and districts] operate on a destination-based model at the time of this writing: The page Do I Charge Sales Tax or Not? from about.com seems to (somewhat) clarify that if the business is located in a state (or other jurisdiction) with an origin-based sales tax, then they will charge you the sales tax for their state and, presumably, not the sales tax for the state of the shipping address." }, { "docid": "457059", "title": "", "text": "\"There are different schools of thought. You can ask the IRS - and it would not surprise me if you got different answers on different phone calls. One interpretation is that a put is not \"\"substantially identical\"\" to the disposed stock, therefore no wash is triggered by that sale. However if that put is exercised, then you automatically purchase the security, and that is identical. As to whether the IRS (or your brokerage firm) recognizes the identical security when it falls out of an option, I can't say; but technically they could enforce it because the rule is based on 30 days and a \"\"substantially identical\"\" stock or security. In this interpretation (your investor) would probably at least want to stay out of the money in choosing a strike price, to avoid exercise; however, options are normally either held or sold, rather than be exercised, until at or very close to the expiration date (because time value is left on the table otherwise). So the key driver in this interpretation would be expiration date, which should be at least 31 days out from the stock sale; and it would be prudent to sell an out of the money put as well, in order to avoid the wash sale trigger. However there is also a more unfavorable opinion - see fairmark.com/capgain/wash/wsoption.htm where they hold that a \"\"deep in the money\"\" option is an immediate trigger (regardless of exercise). This article is sage, in that they say that the Treasury (IRS) may interpret an option transaction as a wash if it's ballpark to being exercisable. And, if the IRS throws paper, it always beats each of paper, rock and scissors :( A Schwab article (\"\"A Primer on Wash Sales\"\") says, if the CUSIPs match, bang, wash. This is the one that they may interpret unfavorably on in any case, supporting Schwab's \"\"play it safe\"\" position: \"\"3. Acquire a contract or option to buy substantially identical stock or securities...\"\" . This certainly nails buying a call. As to selling a put, well, it is at least conceivable that an IRS official would call that a contract to buy! SO it's simply not a slam dunk; there are varying opinions that you might describe as ranging from \"\"hell no\"\" to \"\"only if blatant.\"\" If you can get an \"\"official\"\" predetermination, or you like to go aggressive in your tax strategy, there's that; they may act adversely, so Caveat Taxfiler!\"" }, { "docid": "478600", "title": "", "text": "\"The tax comes when you close the position. If the option expires worthless it's as if you bought it back for $0. There's a short-term capital gain for the difference between your short-sale price and your buyback price on the option. I believe the capital gain is always short-term because short sales are treated as short-term even if you hold them open more than one year. If the option is exercised (calling away your stock) then you add the premium to your sale price on the stock and then compute the capital gain. So in this case you can end up treating the premium as a long-term capital gain. See IRS pub 550 http://www.irs.gov/publications/p550/ch04.html#en_US_2010_publink100010619 Search for \"\"Writers of puts and calls\"\"\"" }, { "docid": "420544", "title": "", "text": "If he asked you to invest his money with certain objectives which resulted in you buying specific stocks for him with his money, then sell all the stocks which you bought with his money and the capital and profits to him. You may want to calculate the trading fees that you incurred while buying these specific stocks and taxes from the sale of these stocks, withholding them to over the trading fees that you have already paid and the taxes that you might still need to pay. If you traded with his money no different than yours, then I would think of your investment account as a black box. Calculate the initial money that you both invested at the time you added his capital to the account, calculate how much it all is currently worth, then liquidate and return a percentage equal to that of his initial investment. You can account for trading fees and taxes, subtracting by the same percentage." }, { "docid": "257625", "title": "", "text": "\"This question and your other one indicate you're a bit unclear on how capital gains taxes work, so here's the deal: you buy an asset (like shares of stock or a mutual fund). You later sell it for more than you bought it for. You pay taxes on your profit: the difference between what you sold it for and what you bought it for. What matters is not the amount of money you \"\"withdraw\"\", but the prices at which assets are bought and sold. In fact, often you will be able to choose which individual shares you sell, which means you have some control over the tax you pay. For a simple example, suppose you buy 10 shares of stock for $100 each in January (an investment of $1000); we'll call these the \"\"early\"\" shares. The stock goes up to $200 in July, and you buy 10 more shares (investing an additional $2000); we'll call these the \"\"late\"\" shares. Then the stock drops to $150. Suppose you want $1500 in cash, so you are going to sell 10 shares. The 10 early shares you bought have increased in value, because you bought then for $100 but can now sell them for $150. The 10 late shares have decreased in value, because you bought them for $200 but can now only sell them for $150. If you choose to sell the early shares, you will have a capital gain of $500 ($1500 sale price minus $1000 purchase price), on which you may owe taxes. If you sell the late shares, you will have a capital loss of $500 ($1500 sale price minus $2000 purchase price is -$500), which you can potentially use to reduce your taxes. Or you could sell 5 of each and have no gain or loss (selling five early shares for $150 gives you a gain of $250, but selling five late shares for $150 gives you a loss of $250, and they cancel out). The point of all this is to say that the tax is not determined by the amount of cash you get, but by the difference between the sale price and the price you purchased for (known as the \"\"cost basis\"\"), and this in turn depends on which specific assets you sell. It is not enough to know the total amount you invested and the total gain. You need to know the specific cost basis (i.e., original purchase price) of the specific shares you're selling. (This is also the answer to your question about long-term versus short-term gains. It doesn't matter how much money you make on the sale. What matters is how long you hold the asset before selling it.) That said, many brokers will automatically sell your shares in a certain order unless you tell them otherwise (and some won't let you tell them otherwise). Often they will use the \"\"first in, first out\"\" rule, which means they will always sell the earliest-purchased shares first. To finally get to your specific question about Betterment, they have a page here that says they use a different method. Essentially, they try to sell your shares in a way that minimizes taxes. They do this by first selling shares that have a loss, and only then selling shares that have a gain. This basically means that if you want to cash out $X, and it is possible to do it in a way that incurs no tax liability, they will do that. What gets me very confused is if I continue to invest random amounts of money each month using Betterment, then I need to withdraw some cash, what are the tax implications. As my long answer above should indicate, there is no simple answer to this. The answer is \"\"it depends\"\". It depends on exactly when you bought the shares, exactly how much you paid for them, exactly when and how much the price rose or fell, and exactly how much you sell them for. Betterment is more or less saying \"\"Don't worry about any of this, trust us, we will handle everything so that your tax is minimized.\"\" A final note: if you really do want to track the details of your cost basis, Betterment may not be for you, because it is an automated platform that may do a lot of individual trades that a human wouldn't do, and that can make tracking the cost basis yourself very difficult. Almost the whole point of something like Betterment is that you are supposed to give them your money and forget about these details.\"" }, { "docid": "102287", "title": "", "text": "\"I'm assuming that by saying \"\"I'm a US resident now\"\" you're referring to the residency determination for tax purposes. Should I file a return in the US even though there is no income here ? Yes. US taxes its residents for tax purposes (which is not the same as residents for immigration or other purposes) on worldwide income. If yes, do I get credits for the taxes I paid in India. What form would I need to submit for the same ? I am assuming this form has to be issued by IT Dept in India or the employer in India ? The IRS doesn't require you to submit your Indian tax return with your US tax return, however they may ask for it later if your US tax return comes under examination. Generally, you claim foreign tax credits using form 1116 attached to your tax return. Specifically for India there may also be some clause in the Indo-US tax treaty that might be relevant to you. Treaty claims are made using form 8833 attached to your tax return, and I suggest having a professional (EA/CPA licensed in your State) prepare such a return. Although no stock transactions were done last year, should I still declare the value of total stocks I own ? If so what is an approx. tax rate or the maximum tax rate. Yes, this is done using form 8938 attached to your tax return and also form 114 (FBAR) filed separately with FinCEN. Pay attention: the forms are very similar with regard to the information you provide on them, but they go to different agencies and have different filing requirements and penalties for non-compliance. As to tax rates - that depends on the types of stocks and how you decide to treat them. Generally, the tax rate for PFIC is very high, so that if any of your stocks are classified as PFIC - you'd better talk to a professional tax adviser (EA/CPA licensed in your State) about how to deal with them. Non-PFIC stocks are dealt with the same as if they were in the US, unless you match certain criteria described in the instructions to form 5471 (then a different set of rules apply, talk to a licensed tax adviser). I will be transferring most of my stock to my father this year, will this need to be declared ? Yes, using form 709. Gift tax may be due. Talk to a licensed tax adviser (EA/CPA licensed in your State). I have an apartment in India this year, will this need to be declared or only when I sell the same later on ? If there's no income from it - then no (assuming you own it directly in your own name, for indirect ownership - yes, you do), but when you sell you will have to declare the sale and pay tax on the gains. Again, treaty may come into play, talk to a tax adviser. Also, be aware of Section 121 exclusion which may make it more beneficial for you to sell earlier.\"" }, { "docid": "390864", "title": "", "text": "I sold it at 609.25 and buy again at 608.75 in the same day If you Sold and bought the same day, it would be considered as intra-day trade. Profit will be due and would be taxed at normal tax brackets. Edits Best Consult a CA. This is covered under Indian Accounting Standard AG51 The following examples illustrate the application of the derecognition principles of this Standard. (e) Wash sale transaction. The repurchase of a financial asset shortly after it has been sold is sometimes referred to as a wash sale. Such a repurchase does not preclude derecognition provided that the original transaction met the derecognition requirements. However, if an agreement to sell a financial asset is entered into concurrently with an agreement to repurchase the same asset at a fixed price or the sale price plus a lender's return, then the asset is not derecognised. This is more relevant now for shares/stocks as Long Term Capital Gains are tax free, Long Term Capital Loss cannot be adjusted against anything. Short Term Gains are taxed differentially. Hence the transaction can be interpreted as tax evasion, professional advise is recommended. A simple way to avoid this situation; sell on a given day and buy it next or few days later." }, { "docid": "355972", "title": "", "text": "\"Will the bank be taxed on the $x received through selling the collateral? Why do you care? They will, of course, although their basis will be different. It is of no concern for you. What is your concern is that the write-off of the loan is taxed as ordinary income (as opposed to capital gains when you sell the stocks) for you. So when the bank seizes the stocks, they will also report to the IRS that they gave you the amount of money that you owed them (which they will \"\"give you\"\" and then put it on the account of the loan). So you get taxed on that amount as income. In addition, you will be taxed on the gains on the stocks, as giving them to the bank is considered a sale. So you may actually find yourself in a situation where you'd be paying taxes twice, once capital gains, and once as ordinary income, on the same money. I would strongly advise against this. If it is a real situation and not a hypothetical question - get a professional tax advice. I'm not a professional, talk to a CPA/EA licensed in your state.\"" }, { "docid": "286654", "title": "", "text": "\"In most jurisdictions, both the goods (raw materials) and the service (class) are being \"\"sold\"\" to the customer, who is the end user and thus the sale is subject to sales tax. So, when your friend charges for the class, that $100 is subject to all applicable sales taxes for the jurisdiction and all parent jurisdictions (usually city, county and state). The teacher should not have to pay sales tax when they buy the flowers from the wholesaler; most jurisdictions charge sales tax on end-user purchases only. However, they are required to have some proof of sales tax exemption for the purchase, which normally comes part and parcel with the DBA or other business entity registration paperwork in most cities/states. Wholesalers deal with non-end-user sales (exempt from sales tax) all the time, but your average Michael's or Hobby Lobby may not be able to deal with this and may have to charge your friend the sales tax at POS. Depending on the jurisdiction, if this happens, your friend may be able to reduce the amount the customer is paying that is subject to sales tax by the pre-tax value of the materials the customer has paid for, which your friend already paid the tax on.\"" }, { "docid": "238903", "title": "", "text": "The sale of shares on vesting convolutes matters. In a way similar to how reinvested dividends are taxed but the newly purchased fund shares' basis has to be increased, you need to be sure to have the correct per share cost basis. It's easy to confuse the total RSU purchase with the correct numbers, only what remained. The vesting stock is a taxable event, ordinary income. You then own the stock at that cost basis. A sale after that is long or short term and the profit is the to extent it exceeds that basis. The fact that you got these shares in 2013 means you should have paid the tax then. And this is part two of the process. Of course the partial sale means a bit of math to calculate the basis of what remained." }, { "docid": "274278", "title": "", "text": "\"The only \"\"authoritative document\"\" issued by the IRS to date relating to Cryptocurrencies is Notice 2014-21. It has this to say as the first Q&A: Q-1: How is virtual currency treated for federal tax purposes? A-1: For federal tax purposes, virtual currency is treated as property. General tax principles applicable to property transactions apply to transactions using virtual currency. That is to say, it should be treated as property like any other asset. Basis reporting the same as any other property would apply, as described in IRS documentation like Publication 550, Investment Income and Expenses and Publication 551, Basis of Assets. You should be able to use the same basis tracking method as you would use for any other capital asset like stocks or bonds. Per Publication 550 \"\"How To Figure Gain or Loss\"\", You figure gain or loss on a sale or trade of property by comparing the amount you realize with the adjusted basis of the property. Gain. If the amount you realize from a sale or trade is more than the adjusted basis of the property you transfer, the difference is a gain. Loss. If the adjusted basis of the property you transfer is more than the amount you realize, the difference is a loss. That is, the assumption with property is that you would be using specific identification. There are specific rules for mutual funds to allow for using average cost or defaulting to FIFO, but for general \"\"property\"\", including individual stocks and bonds, there is just Specific Identification or FIFO (and FIFO is just making an assumption about what you're choosing to sell first in the absence of any further information). You don't need to track exactly \"\"which Bitcoin\"\" was sold in terms of exactly how the transactions are on the Bitcoin ledger, it's just that you bought x bitcoins on date d, and when you sell a lot of up to x bitcoins you specify in your own records that the sale was of those specific bitcoins that you bought on date d and report it on your tax forms accordingly and keep track of how much of that lot is remaining. It works just like with stocks, where once you buy a share of XYZ Corp on one date and two shares on another date, you don't need to track the movement of stock certificates and ensure that you sell that exact certificate, you just identify which purchase lot is being sold at the time of sale.\"" }, { "docid": "105046", "title": "", "text": "It is perfectly legitimate to adjust your 1099-B income by broker's fees. Publication 17 (p 116) specifically instructs taxpayers to adjust their Schedule D reporting by broker's fees: Form 1099-B transactions. If you sold property, such as stocks, bonds, or certain commodities, through a broker, you should receive Form 1099-B or substitute statement from the broker. Use the Form 1099-B or the substitute statement to complete Form 8949. If you sold a covered security in 2013, your broker should send you a Form 1099-B (or substitute statement) that shows your basis. This will help you complete Form 8949. Generally, a covered security is a security you acquired after 2010. Report the gross proceeds shown in box 2a of Form 1099-B as the sales price in column (d) of either Part I or Part II of Form 8949, whichever applies. However, if the broker advises you, in box 2a of Form 1099-B, that gross proceeds (sales price) less commissions and option premiums were reported to the IRS, enter that net sales price in column (d) of either Part I or Part II of Form 8949, whichever applies. Include in column (g) any expense of sale, such as broker's fees, commissions, state and local transfer taxes, and option premiums, unless you reported the net sales price in column (d). If you include an expense of sale in column (g), enter “E” in column (f). You can rely on your own records and judgment, if you feel comfortable doing so. Brokers often make incomplete tax reporting. This may have been simpler from their perspective if the broker fees were variable, or integrated, or unknown for a number of clients party to a transaction. If a taxpayer has documentation of the expenses that justify an adjustment, then it's perfectly appropriate to include that in the calculations. It is not necessary to report the discrepancy, and it may increase scrutiny to include a written addendum. The Schedule D, Form 8949, and Form 1099-B will probably together adequately explain the source of the deduction." }, { "docid": "474452", "title": "", "text": "If you are comfortable with the risk etc, then the main thing to worry about is diversity. For some folks, picking stocks is beyond them, or they have no interest in it. But if it's working for you, and you want to keep doing it, more power to you. If you are comfortable with the risk, you could just as well have ALL your equity position in individual stocks. I would offer only two pieces of advice in that respect. 1) no more than 4% of your total in any one stock. That's a good way to force diversity (provided the stocks are not clustered in a very few sectors like say 'financials'), and make yourself take some of the 'winnings off the table' if a stock has done well for you. 2) Pay Strong attention to Taxes! You can't predict most things, but you CAN predict what you'll have to pay in taxes, it's one of the few known quantities. Be smart and trade so you pay as little in taxes as possible 2A)If you live someplace where taxes on Long term gains are lower than short term (like the USA) then try really really hard to hold 'winners' till they are long term. Even if the price falls a little, you might be up in the net compared to paying out an extra 10% or more in taxes on your gains. Obviously there's a balancing act there between when you feel something is 'done' and the time till it's long term.. but if you've held something for 11 months, or 11 months and 2 weeks, odds are you'd be better off to hold till the one year point and then sell it. 2B) Capture Losses when you have them by selling and buying a similar stock for a month or something. (beware the wash sale rule) to use to offset gains." }, { "docid": "511066", "title": "", "text": "\"For restricted stock, I think the vesting date meets the requirements of the second wash sale trigger from IRS Pub 550: Wash Sales: Acquire substantially identical stock or securities in a fully taxable trade I base this on these two quotes from IRS Pub 525: Restricted Property: any income from the property, or the right to use the property, is included in your income as additional compensation in the year you receive the income or have the right to use the property. - Until the property becomes substantially vested, it is owned by the person who makes the transfer to you, usually your employer. So on the vest date: The transfer is taxable Ownership is transferred to you That seems close enough to \"\"a fully taxable trade\"\" for me. Maybe this changes if you pay the tax on the stock on the grant date. See Pub 525: Restricted Property: Choosing to include in income for year of transfer. Obviously, if this is important you should consult your tax advisor. Technicalities aside, I don't think it passes the sniff test. You're getting salable shares when the restricted stock vests. If you're selling other shares at a loss within 30 days of the vesting date, that smells like a wash sale to me.\"" }, { "docid": "257274", "title": "", "text": "\"There are ways to mitigate, but since you're not protected by a tax-deferred/advantaged account, the realized income will be taxed. But you can do any of the followings to reduce the burden: Prefer selling either short positions that are at loss or long positions that are at gain. Do not invest in stocks, but rather in index funds that do the rebalancing for you without (significant) tax impact on you. If you are rebalancing portfolio that includes assets that are not stocks (real-estate, mainly) consider performing 1031 exchanges instead of plain sale and re-purchase. Maximize your IRA contributions, even if non-deductible, and convert them to Roth IRA. Hold your more volatile investments and individual stocks there - you will not be taxed when rebalancing. Maximize your 401K, HSA, SEP-IRA and any other tax-advantaged account you may be eligible for. On some accounts you'll pay taxes when withdrawing, on others - you won't. For example - Roth IRA/401k accounts are not taxed at all when withdrawing qualified distributions, while traditional IRA/401k are taxed as ordinary income. During the \"\"low income\"\" years, consider converting portions of traditional accounts to Roth.\"" }, { "docid": "262672", "title": "", "text": "\"I'm 25, make ~40k/yr, have about 18k in investments right now. all money I've earned mind you. I sold some stock last year for a capital gain of 1800. that's a cap gains tax of $270, if the cap gains tax didn't exist I would have paid 450. that's an extra $180 in taxes that hits me right in my middle class, trying to build a nest egg, guts. would you please stop with all the bullshit about the capital gains taxes being there for the \"\"moneyed elite\"\" you can see how just a small sale could have incurred extra taxes for me, could you imagine someone who may be older and has larger gains to report?\"" }, { "docid": "279606", "title": "", "text": "Reading IRS Regulations section 15a.453-1(c) more closely, I see that this was a contingent payment sale with a stated maximum selling price. Therefore, at the time of filing prior years, there was no way of knowing the final contingent payment would not be reached and thus the prior years were filed correctly and should not be amended. Those regulations go on to give an example of a sale with a stated maximum selling price where the maximum was not reached due to contingency and states that in such cases: When the maximum [payment] amount is subsequently reduced, the gross profit ratio will be recomputed with respect to payments received in or after the taxable year in which an event requiring reduction occurs. However, in this case, that would result in a negative gross profit ratio on line 19 of form 6252 which Turbo Tax reports should be a non-negative number. Looking further in the regulations, I found an example which relates to bankruptcy and a resulting loss in a subsequent year: For 1992 A will report a loss of $5 million attributable to the sale, taken at the time determined to be appropriate under the rules generally applicable to worthless debts. Therefore, I used a gross profit ratio of zero on line 19 and entered a separate stock sale not reported on a 1099-B as a worthless stock on Form 8949 as a capital loss based upon the remaining basis in the stock sold in an installment sale. I also included an explanatory statement with my return to the IRS stating: In 2008, I entered into an installment sale of stock. The sale was a contingent payment sale with a stated maximum selling price. The sales price did not reach the agreed upon maximum sales price due to some contingencies not being met. According to the IRS Regulations section 15a.453-1(c) my basis in the stock remains at $500 in 2012 after the final payment. Rather than using a negative gross profit ratio on line 19 of form 6252, I'm using a zero ratio and treating the remaining basis as a schedule-D loss similar to worthless stock since the sale is now complete and my remaining basis is no longer recoverable." }, { "docid": "416789", "title": "", "text": "Equal sized gains and losses in alternating years would lead to an unjust positive tax. On the contrary. If I can take my gains at the long term rate (15%) in even years, but take losses in odd years, up to $3000, or let them offset short term gains at ordinary rate, I've just gamed the system. What is the purpose of the wash sale rule? Respectfully, we here can do a fine job of explaining how a bit of tax code works. And we can suggest the implication of those code bits. But, I suspect that it's not easy to explain the history of particular rules. For wash sale, the simple intent is to not let someone take a loss without actually selling the stock for a time. You'd be right to say the +/- 30 days is arbitrary. I'd ask you to keep 2 things in mind if you continue to frequent this board -" }, { "docid": "132111", "title": "", "text": "\"Yes- you do not realize gains or losses until you actually sell the stock. After you sell the initial stocks/bonds you have realized the gain. When you buy the new, different stocks you haven't realized anything until you then sell those. There is one exception to this, called the \"\"Wash-Sale Rule\"\". From Investopedia.com: With the wash-sale rule, the IRS disallows a loss deduction from the sale of a security if a ‘substantially identical security' was purchased within 30 days before or after the sale. The wash-sale period is actually 61 days, consisting of the 30 days before and the 30 days after the date of the sale. For example, if you bought 100 shares of IBM on December 1 and then sold 100 shares of IBM on December 15 at a loss, the loss deduction would not be allowed. Similarly, selling IBM on December 15 and then buying it back on January 10 of the following year does not permit a deduction. The wash-sale rule is designed to prevent investors from making trades for the sole purpose of avoiding taxes.\"" } ]

[ { "docid": "273187", "title": "", "text": "why does it make sense financially to buy property and become a landlord? Because then your investment generates cash instead of just sitting idle. All taxes, fees and repairs aside it would take almost 21 years before I start making profits. No - your profit will be the rents that you collect (minus expenses). You still have an asset that is worth roughly what you paid for it (and might go up in value), so you don't need to recoup the entire cost of the property before making a profit. Compared to investing the same 150k in an ETF portfolio with conservative 4% in annual returns I would have made around 140k € after taxes in the same 21 years i.e. almost doubled the money. If you charge 600 € / month (and never miss a month of rental income), after 21 years you have made 151k € in rents plus you still have a property. That property is most likely going to be worth more than you paid for it, so you should have at least 300k € in assets. Having said all that, it does NOT always make sense to invest in rental property. Being a landlord can be a hard job, and there are many risks involved that are different that risks in financial investments." } ]

[ { "docid": "145016", "title": "", "text": "These 'issues' don't exclusively relate to the 'sharing economy', the challenge of uncertainty would exist for any small business / independent contractor. It's not as if people didn't work as independent contractors in these industries before, it's just now the industries are being enhanced and overhead lowered, from technology. For example: Uber driver vs Medallion [Leasing] Taxi Driver AirBNB landlord vs Apartment landlord, vacation rental landlord, or traditional bed &amp; breakfast owner. PostMates messenger vs traditional bike messenger" }, { "docid": "201705", "title": "", "text": "\"...instead of all of us draining our money into a landlord... Instead, you are suggesting that still everyone (except you) will drain their money into a landlord, just that now the landlord is you. I guess what that really means is that you will need to have landlord tenant agreements between you and your roommates. When things break or need replacing you'll have to foot the bill and as your tenants, your \"\"roomies\"\" might not be too forgiving when things need fixing. When the fridge breaks down, you'll have to buy a new one immediately. Yard work is your sole responsibility, unless you offer discounted rent or other perks. What about service bills: energy, water, sewage, internet, television, etc?\"" }, { "docid": "579763", "title": "", "text": "4) Beef up my emergency fund, make sure my 401(k) or IRA was fully funded, put the rest into investments. See many past answers. A house you are living in is not an investment. It is a purchase, just as rental is a purchase. Buying a house to rent out is starting a business. If you want to spend the ongoing time and effort and cash running a business, and if you can buy at the right time in the right place for the righr price, this can be a reasonable investment. If you aren't willing to suffer the pains of being a landlord, it's less attractive; you can hire someone to manage it for you but that cuts the income significantly. Starting a business: Remember that many, perhaps most, small businesses fail. If you really want to run a business it can be a good investment, again assuming you can buy at the right time/price/place and are willing and able to invest the time and effort and money to support the business. Nothing produces quick return with low risk." }, { "docid": "295688", "title": "", "text": "\"There are actually a few questions you are asking here. I will try and address each individually. Down Payment What you put down can't really be quantified in a dollar amount here. $5k-$10k means nothing. If the house costs $20k then you're putting 50% down. What is relevant is the percent of the purchase price you're putting down. That being said, if you go to purchase a property as an investment property (something you wont be moving into) then you are much more likely to be putting a down payment much closer to 20-25% of the purchase price. However, if you are capable of living in the property for a year (usually the limitation on federal loans) then you can pay much less. Around 3.5% has been my experience. The Process Your plan is sound but I would HIGHLY suggest looking into what it means to be a landlord. This is not a decision to be taken lightly. You need to know the tenant landlord laws in your city AND state. You need to call a tax consultant and speak to them about what you will be charging for rent, and how much you should withhold for taxes. You also should talk to them about what write offs are available for rental properties. \"\"Breaking Even\"\" with rent and a mortgage can also mean loss when tax time comes if you don't account for repairs made. Financing Your first rental property is the hardest to get going (if you don't have experience as a landlord). Most lenders will allow you to use the potential income of a property to qualify for a loan once you have established yourself as a landlord. Prior to that though you need to have enough income to afford the mortgage on your own. So, what that means is that qualifying for a loan is highly related to your debt to income ratio. If your properties are self sustaining and you still work 40 hours a week then your ability to qualify in the future shouldn't be all that impacted. If anything it shows that you are a responsible credit manager. Conclusion I can't stress enough to do YOUR OWN research. Don't go off of what your friends are telling you. People exaggerate to make them seem like they are higher on the socioeconomic ladder then they really are. They also might have chicken little syndrome and try to discourage you from making a really great choice. I run into this all the time. People feel like they can't do something or they're to afraid so you shouldn't be able to either. If you need advice go to a professional or read a book. Good luck!\"" }, { "docid": "69058", "title": "", "text": "\"That ain't nothing. It's really easy to get \"\"whipped up\"\" into a sense of entitlement, and forget to be grateful for what you do have. If this house doesn't exist, what would his costs of housing be elsewhere? Realistically. Would landlords rent to him? Would other bankers lend him money to buy a house? Would those costs really be any better? What about the intangible benefits like not having any landlord hassles or having a good relationship with the neighbors? It's entirely possible he has a sweet deal here, and just doesn't make enough money. If your credit rating is poor, your housing options really suck. Banks won't lend you money for a house unless you have a huge ton of upfront cash. Most landlords won't rent to you at all, because they are going to automated scoring systems to avoid accusations of racism. In this day and age, there are lots of ways to make money with a property you own. In fact, I believe very firmly in Robert Allen's doctrine: Never sell. That way you avoid the tens of thousands of dollars of overhead costs you bear with every sale. That's pure profit gone up in smoke. Keep the property forever, keep it working for you. If he doesn't know how, learn. To \"\"get bootstrapped\"\" he can put it up on AirBnB or other services. Or do \"\"housemate shares\"\". When your house is not show-condition, just be very honest and relatable about the condition. Don't oversell it, tell them exactly what they're going to get. People like honesty in the social sharing economy. And here's the important part: Don't booze away the new income, invest it back into the property to make it a better money-maker - better at AirBnB, better at housemate shares, better as a month-to-month renter. So it's too big - Is there a way to subdivide the unit to make it a better renter or AirBnB? Can he carve out an \"\"in-law unit\"\" that would be a good size for him alone? If he can keep turning the money back into the property like that, he could do alright. This is what the new sharing economy is all about. Of course, sister might show up with her hand out, wanting half the revenue since it's half her house. Tell her hell no, this pays the mortgage and you don't! She deserves nothing, yet is getting half the equity from those mortgage payments, and that's enough, doggone it! And if she wants to go to court, get a judge to tell her that. Not that he's going to sell it, but it's a huge deal. He needs to know how much of his payments on the house are turning into real equity that belongs to him. \"\"Owning it on paper\"\" doesn't mean you own it. There's a mortgage on it, which means you don't own all of it. The amount you own is the value of the house minus the mortgage owed. This is called your equity. Of course a sale also MINUS the costs of bringing the house up to mandatory code requirements, MINUS the cost of cosmetically making the house presentable. But when you actually sell, there's also the 6% Realtors' commission and other closing costs. This is where the mortgage is more than the house is worth. This is a dangerous situation. If you keep the house and keep paying the mortgage all right, that is stable, and can be cheaper than the intense disruption and credit-rating shock of a foreclosure or short sale. If sister is half owner, she'll get a credit burn also. That may be why she doesn't want to sell. And that is leverage he has over her. I imagine a \"\"Winter's bone\"\" (great movie) situation where the family is hanging on by a thread and hasn't told the bank the parents died. That could get very complex especially if the brother/sister are not creditworthy, because that means the bank would simply call the loan and force a sale. The upside is this won't result in a credit-rating burn or bankruptcy for the children, because they are not owners of the house and children do not inherit parents' debt.\"" }, { "docid": "585975", "title": "", "text": "\"I used to be the sort of person who would tell you that I've left money for you somewhere and in fact not have done so, and I also used to be the last person you'd expect to do something like that. I've not done this exact thing but I've done similar. Not gonna go into detail but at that time I was in a state of poverty, barely able to buy food and drink, and the money I saved by \"\"conning people\"\" in similar ways was spent on food and warmth. Personally, I think she's going through a very hard patch financially and as such has done exactly that. Me? I'm not a landlord and I'm probably far too generous. I would explain that I think she's lying but let it slide this month. Clearly a property owner is more financially capable of soaking up this expense than a tenant. On the other hand, you don't become a property owner and landlord by letting people get away without paying their rent. All in all, I would probably push for a 50/50 decision. She pays half rent this month which alleviates her finances a bit if she is genuinely in trouble and has lied, and you still get something for your efforts. If you're lucky, when you suggest it she will come clean. I would make it clear if you do or don't believe her, as she may well confess if you express your doubts. If she does, I wouldn't hold her to paying the full amount unless she offers to do so. Also, make it very obvious that this can and will not happen again. Next time, she gives you cash or uses a banking service. Goes without saying I guess. You should note that legally speaking, by accepting anything other than full payment you could be acknowledging that she did attempt to make a payment and any future legal cases will not consider that favorably for you. I would strongly recommend discussing this with a solicitor before agreeing to anything other than full payment.\"" }, { "docid": "277603", "title": "", "text": "This situation is exactly why we have the concept of legal tender. Legal tender is a form of payment that must be accepted to settle a debt. Your friend is entitled to insist on paying the rent in cash — accepting any other form of payment is at the landlord’s discretion." }, { "docid": "118960", "title": "", "text": "Just because your slice of pie gets bigger doesn't necessarily mean someone else's becomes smaller. In a lot of cases it's the entire pie that gets bigger. Why is the pie bigger? More investors (savers turn investors; foreign investments, etc.), more money printed (QE anyone?), Market sentiment changes (stock is priced by perceptions) And it can certainly get smaller." }, { "docid": "100847", "title": "", "text": "The main reason for an UBI is to provide atleast some sort of income since a lot of people are projected to be out of a job due to automation. Hence that source of income, for the large part, will go to the basic needs first, like housing, power, food. Atleast, that's what I suspect. So if a landlord knows people can afford atleast X amount for housing, why would they offer it any cheaper?" }, { "docid": "81652", "title": "", "text": "In summary, you are correct that the goal of investing is to maximize returns, while paying low management fees. Index investing has become very popular because of the low fees. There are many actively traded mutual funds out there with very high management fees of 2.5% and up that do not beat the market. This begs the question of why you are paying high management fees and not just investing in index funds. Consider maxing out your tax sheltered accounts (401(k) and ROTH IRA) to avoid even more fees on your returns. Also consider having a growth component of your portfolio which is generally filled with equity, along with a secure component for assets such as bonds. Bonds may not have the exciting returns of equity, but they help to smooth out the volatility of your portfolio, which may help to keep peace of mind when the market dips." }, { "docid": "42329", "title": "", "text": "\"The perceived risk depends on the entire situation, but often it is considered more risk, especially if you want to occupy yourself. Things you need to consider: It can be very difficult to show a property with tenants occupying it. There are many reasons for this and most homes show / sell better empty. I have found many tenants make it difficult on the seller. Leaving their areas a mess, being unaccommodating and especially in markets that are flooded with options, a lot of buyers just won't bother with the difficulty of scheduling a showing in occupied properties. I've tried to purchase many properties where the renter insists on being there during a showing, but won't open the door and there's no recourse for the landlord because his lease or laws in the area don't allow you to enter without permission. Also, it can be difficult to look past a lot of clutter and other people's decorating and aroma \"\"preferences\"\" to be kind. :) Is the property currently under lease and what is the period of that lease? It could be that the lease is month to month, or it could be years remaining on the lease period. It is likely a legal requirement in most areas that you honor the existing lease. I would never buy a property that has multiple years remaining. While some amateur landlords will allow 2 or even 5 year leases, this is a very bad idea for many reasons! What are laws like in your area for evicting tenants? You should know this regardless of whether or not you intend to occupy or keep it a rental. It can be a very difficult process evicting tenants and this process is vastly different from country to country and state to state here in the USA. Look into the security deposit - assuming there is one. How much is the deposit? Will it cover damage that may not exist yet? Don't think that just because you plan on evicting them soon, it isn't important. People can trash a place on the way out and an expensive lawsuit could be your only recourse. It is far easier to take a deposit than sue. I would absolutely demand that the deposit transfer to you upon sale. View the current renters with a fresh eye. Especially if you are considering leave it a rental, look into all of the typical requirements: Their monthly income, their credit history, their criminal record, their payment history, their references. Are they likely to be good or terrible renters? If you're interested in the property, consider an offer which requires the current landlord to evict within the time-frame of the buy/sell agreement. This isn't an uncommon requirement. I think the first thing to do is go look at the property and see if you can determine for yourself why it hasn't sold yet. Properties all have different reasons for not selling in a reasonable time to the local market. Having renters alone in most markets shouldn't be that big of a factor. I would suspect bad smells, nasty renters, or an unfavorable lease agreement exists.\"" }, { "docid": "525050", "title": "", "text": "&gt; why not lower the minimum wage? Because businesses and landlords won't suddenly lower their prices. They will just take the profits. As a white collar worker earning far above minimum wage who owns middle class investment property, I will probably win if minimum wages rise. My rents will rise more than my maintenance costs + property tax rise. As my interest rate is fixed, the inflationary pressures will effectively lower my debt. I know who won't win, and that's the minimum wage workers who receive the pay rise. Most of their consumption is provided by minimum wage worker intensive areas. Fast Food, supermarkets, gas, utilities. All areas that will rise, and what's left will be eaten up by rent rises. Minimum wage should be fixed to inflation, rising annually by CPI. Then we should stop talking about minimum wages at all, and focus on how we can assist in upward mobility." }, { "docid": "449554", "title": "", "text": "&gt; ive read that consumer spending stimulates an economy more than investment somewhere Investment is necessary for an economy to grow, as is consumer spending. Neither is more important. If you lack one of those, stimulating it will do more than stimulating the other. It's like a racing team saying the driver is more important than the car. In situations where everyone's cars are as good as they'll get, improving the driver is more important. In situations where the quality of cars differs, improving the car becomes more important. &gt;Also, youhave the theory that decreasing the income gap helps society in many other ways There is strong speculation that that is the case. However, it's _100% fact_ that increasing everyone's wealth helps society much more. It's why you'd rather live today than in any more egalitarian point in our past. If tinkering with income inequality gets in the way of overall wealth creation, it will do more harm than good." }, { "docid": "587514", "title": "", "text": "You should be aware that many pubs in the London (indeed, the UK as a whole) are sold as a leasehold with a beer tie. This typically means you pay less rent for the building and premises, but must enter a contract with the Pub Company to buy their beer and day-to-day supplies. You have the legal option to instead pay market rent for some (but not all) Pub Cos, under certain conditions. If you go with leasehold, the landlord can usually close your pub at their will. This is becoming a quite common occurrence in the booming real estate market of London. While your interest will be in running a pub, the Pub Co's interest will be in getting change of use planning permission and selling it to a real estate developer." }, { "docid": "527416", "title": "", "text": "If i look to the future ,i see the general retail revenue growing pretty slowly, but the online retailers growing fast. Why ? First, they grew historically around 20% per year for the last few years. Second there's a lot of big important innovation. Amazon prime, Tablets and phones as great sales tools and comparison tools(and they're becoming common), Ebay investing heavily in logistics to enable small non u.s. companies to sell onshore without big shipping costs, Online apparel shopping improving rapidly and maybe becoming competitive with offline shopping,using social networks for shopping, interesting new models to sell merchandise online like etsy, subscription shopping and the the general rate of internet innovations. Third, people are improving in their e-commerce capability and trust. On the other hand , i don't see any big growth opportunity for brick and mortar retailers.So it means they'll shrink. The problem is that retail is a low margin business. That means that losing 5-15% percent of revenue is enough to close you , because you have a lot of fixed costs(rent, employees, financing the goods)." }, { "docid": "465256", "title": "", "text": "I used to own a few investment properties, so I'm pretty familiar with this. As MrChrister mentions, lenders see investment mortgages as higher risk. People who fall into financial trouble are much more likely to let their investment properties go than their personal residence. Consequently, the interest rates and downpayment requirements are generally higher. Typically a mortgage for an investment property will require 20% down, vs. as low as 3-5% down for a personal residence. With excellent credit and some shopping around, you could probably do 10% down. Interest rates are typically about a half-percent higher as well. You'll also find that the more investment properties you have, the harder it becomes to finance new ones. Banks look at debt-to-income ratios to determine if you are over extended. Typically banks like to see that your housing payments are less than 20% or so of your income. However, with rental properties, housing payments generally account for far more than 20% of your rental income. Other income you have can offset that, but after buying 2-3 houses or so, your DTI generally creeps into the range where lenders are uncomfortable lending to you anymore. This is why you'll find that many rental properties are bought on land contracts with owner financing rather than with mortgages." }, { "docid": "77570", "title": "", "text": "First of all, a person that relies on their ability to tap a line of credit to cover an emergency isn't generally the kind of person that has investments they can cash out to cover the debt. That being said, my personal reasons for having a liquid emergency fund revolve around bank errors and identify theft. I used to work for a company that made bank software. Errors are a common occurrence. You'd be surprised how many transactions are still input by human hands despite our computerized world. All it takes is one typo to wipe out your ability to swipe plastic for a few days. This has actually happened to me. My utility company sent me a bill for $240 and wound up taking $2400 by accident, overdrawing my account and sending me into a fee spiral. They fixed their mistake... several days later. The snowball of fees from other transactions that bounced took another two months to correct. In the meantime, I also had my mortgage payment due. In the US, you can't pay your mortgage with credit, and for those who rent, many landlords won't let you pay with credit either. I have also seen this scenario play out twice with other people I've known who've had their ID stolen. Yes, the bank will cover the fraud after a lengthy process. But the disruption causes fees and overdrafts to quickly snowball out of control. I have a separate savings account at a different bank for this kind of thing, and I have a few hundred dollars cash in my house at all times. Having a liquid emergency fund allows you to quickly stabilize the situation and gives you walking around money for those times where the banking system becomes your enemy for a time." }, { "docid": "222095", "title": "", "text": "Don't over analyze it - check with some local landlords that are willing to share some information and resources Then analyze the Worst Case Scenarios and the likelihood of them happening and if you could deal with it if it did happen Then Dive In - Real Estate is a long term investment so you have plenty of time to learn everything..... Most people fail.... because they fail to take the first leap of faith !!!" }, { "docid": "588612", "title": "", "text": "Disadvantage is that tenant could sue you for something, and in an unfavorable judgement they would have access to your house as property to possess. You could lose the house. Even if you make an LLC to hold the house, they'll either sue you or the LLC and either way you could lose the house. This might be why the landlord is moving to Florida where their house cannot be possessed in a judgement because of the state's strong homestead exemption ;)" } ]

[ { "docid": "141935", "title": "", "text": "\"The value of getting into the landlord business -- or any other business -- depends on circumstances at the time. How much will it cost you to buy the property? How much can you reasonably expect to collect in rent? How easy or difficult is it to find a tenant? Etc. I owned a rental property for about ten years and I lost a bundle of money on it. Things people often don't consider when calculating likely rental income are: There will be times when you have no tenant. Someone moves out and you don't always find a new tenant right away. Maintenance. There's always something that the tenant expects you to fix. Tenants aren't likely to take as good a care of the property as someone who owned it would. And while a homeowner might fix little things himself, like a broken light switch or doorknob, the tenant expects the landlord to fix such things. If you live nearby and have the time and ability to do minor maintenance, this may be no big deal. If you have to call a professional, this can get very expensive very quickly. Like for example, I once had a tenant complain that the water heater wasn't working. I called a plumber. He found that the knob on the water heater was set to \"\"low\"\". So he turned it up. He charged me, I think it was $200. I can't really complain about the charge. He had to drive to the property, figure out that that was all the problem was, turn the knob, and then verify that that really solved the problem. Tenants don't always pay the rent on time, or at all. I had several tenants who apparently saw the rent as something optional, to be paid if they had money left over that they couldn't think of anything better to do with. You may get bad tenants who destroy the place. I had one tenant who did $10,000 worth of damage. That include six inches deep of trash all over the house that had to be cleared out, rotting food all over, excrement smeared on walls, holes in the walls, and many things broken. I thought it was disgusting just to have to go in to clean it up, I can't imagine living like that, but whatever. Depending on the laws in your area, it may be very difficult to kick out a bad tenant. In my case, I had to evict two tenants, and it took about three months each time to go through the legal process. On the slip side, the big advantage to owning real estate is that once you pay it off, you own it and can continue to collect rent. And as most currencies in the world are subject to inflation, the rent you can charge will normally go up while your mortgage payments are constant.\"" } ]

[ { "docid": "325612", "title": "", "text": "I'm going to diverge from most of the opinions expressed here. It is common for financial advisors to assume that your portfolio should become less risky as you get older. Explanations for this involve hand-waving and saying that you can afford to lose money when young because you have time to make up for it later. However, the idea that portfolios should become less risky as you get older is not well-grounded in finance theory. According to finance theory, regardless of your age and wealth, returns are desirable and risk is undesirable. Your risk aversion is the only factor that should decide how much risk you put in your portfolio. Do people become more risk averse as they get older? Sometimes. Not always. In fact, there are theoretical reasons why people might want more aggressive portfolios as they age. For example: As people become wealthier they generally become less risk averse. Young people are not normally very wealthy. When you are young, most of your wealth is tied up in the value of your human capital. This wealth shifts into your portfolio as you age. Depending on your field, human capital can be extremely risky--much riskier than the market. Therefore to maintain anything like a constant risk profile over your life, you may want very safe investments when young. You mention being a hedge fund manager. If we enter a recession, your human capital will take a huge hit because you will have a hard time raising money or getting/keeping a job. No one will value your skills and your future career prospects will fall. You will not want the double whammy of large losses in your portfolio. Hedge fund managers are clear examples of people who will want a very safe personal portfolio during their early working years and may be willing to invest very aggressively in their later working and early retirement years. In short, the received wisdom that portfolios should start out risky and get safer as we age is not always, and perhaps not even usually, true. A better guide to how much risk you should have in your portfolio is how you respond to questions that directly measure your risk aversion. This questions ask things like how much you would pay to avoid the possibility of a 20% loss in your portfolio with a certain probability." }, { "docid": "334391", "title": "", "text": "The idea you present is not uncommon, many have tried it before. It would be a great step to find landlords in your area and talk to them about lessons learned. It might cost you a lunch or cup of coffee but it could be the best investment you make. rent it out for a small profit (hopefully make around 3 - 5k a year in profit) Given the median price of a home is ~220K, and you are investing 44K, you are looking to make between a 6 and 11% profit. I would not classify this as small in the current interest rate environment. One aspect you are overlooking is risk. What happens if a furnace breaks, or someone does not pay their rent? While some may advocate borrowing money to buy rental real estate all reasonable advisers advocate having sufficient reserves to cover emergencies. Keep in mind that 33% of homes in the US do not have a mortgage and some investment experts advocate only buying rentals with cash. Currently owning rental property is a really good deal for the owners for a variety of reasons. Markets are cyclical and I bet things will not be as attractive in 10 years or so. Keep in mind you are borrowing ~220K or whatever you intend to pay. You are on the hook for that. A bank may not lend you the money, and even if they do a couple of false steps could leave you in a deep hole. That should at least give you pause. All that being said, I really like your gumption. I like your desire and perhaps you should set a goal of owning your first rental property for 5 years from now. In the mean time study and become educated in the business. Perhaps get your real estate license. Perhaps go to work for a property management company to learn the ins and outs of their business. I would do this even if I had a better paying full time job." }, { "docid": "503742", "title": "", "text": "\"I have been a landlord in Texas for just over 3 years now. I still feel like a novice, but I will give you the benefit of my experience. If you are relying on rental properties for current income versus a long term return you are going to have to do a good job at shopping for bargains to get monthly cash flow versus equity growth that is locked up in the property until you sell it. If you want to pull a lot of cash out of a property on a regular basis you probably are going to have to get into flipping them, which is decidedly not passive investing. Also, it is easy to underestimate the expenses associated with rental properties. Texas is pretty landlord friendly legally, however it does have higher than usual property taxes, which will eat into your return. Also, you need to factor in maintenance, vacancy, tenant turnover costs, etc. It can add up to a lot more than you would expect. If you are handy and can do a lot of repairs yourself you can increase your return, but that makes it less of a passive investment. The two most common rules I have heard for initially evaluating whether an investment property is likely to be cash flow positive are the 1% and 50% rules. The 1% rule says the expected monthly rent needs to be 1% or greater of the purchase price of the house. So your hypothetical $150K/$10K scenario doesn't pass that test. Some people say this rule is 2% for new landlords, but in my experience you'd have to get lucky in Texas to find a house priced that competitively that didn't need a lot of work to get rents that high. The 50% rule says that the rent needs to be double your mortgage payment to account for expenses. You also have to factor in the hassle of dealing with tenants, the following are not going to happen when you own a mutual fund, but are almost inevitable if you are a landlord long enough: For whatever reason you have to go to court and evict a tenant. A tenant that probably lost their job, or had major medical issues. The nicest tenant you ever met with the cutest kids in the world that you are threatening to make homeless. Every fiber of your being wants to cut them some slack, but you have a mortgage to pay and can't set an expectation that paying the rent on time is a suggestion not a rule. or the tenant, who seemed nice at first, but now considers you \"\"the man\"\" decides to fight the eviction and won't move out. You have to go through a court process, then eventually get the Sheriff to come out and forcibly remove them from the property, which they are treating like crap because they are mad at you. All the while not paying rent or letting you re-let the place. The tenant isn't maintaining the lawn and the HOA is getting on your butt about it. Do you pay someone to mow the grass for them and then try to squeeze the money out of the tenant who \"\"never agreed to pay for that\"\"? You rent to a college kid who has never lived on their own and has adopted you as their new parent figure. \"\"The light in the closet went out, can you come replace the bulb?\"\" Tenants flat out lying to your face. \"\"Of course I don't have any pets that I didn't pay the deposit for!\"\" (Pics all over facebook of their kids playing with a dog in the \"\"pet-free\"\" house)\"" }, { "docid": "469194", "title": "", "text": "To be absolutely sure you should call the agent and check That said I have been renting accommodation through both agencies and directly through landlords for seven years (I live in London) and this is quite a common situation. It normally means that the deposit is being securely held by a third party so that it cannot be taken or depleted without the agreement of both parties. The deposit protection scheme ( https://www.depositprotection.com/ ) is one way that deposits are securely held in this manner. As a third party they will have different account details. It may be the case that the agency is protecting the deposit and you are paying rent to the landlord directly. This means that your deposit goes to the agency's account and the rent goes to the landlord's account. Obviously your landlord and agency have different accounts. A little colour to brighten your day: I am currently paying my rent to the agency who also took the deposit but, because of the way they handle deposits versus rent, the deposit was sent to a different account held by the same agent. In my previous flat I paid the deposit to an agency and the rent directly to the landlord. This resulted in an issue one time where I got the two accounts confused and paid rent to the agency who, after giving me a small slap on the wrist, transferred it to my landlord. In the flat before that I paid rent and the deposit to my landlords' holding company. That is one of the few times that I paid rent and the deposit into the same account. Again check with the agent that one of these situations is the case but this is absolutely normal when renting through an agency." }, { "docid": "277603", "title": "", "text": "This situation is exactly why we have the concept of legal tender. Legal tender is a form of payment that must be accepted to settle a debt. Your friend is entitled to insist on paying the rent in cash — accepting any other form of payment is at the landlord’s discretion." }, { "docid": "271640", "title": "", "text": "\"I would not classify utilities (including electric) as additional fees. In many cases you interact directly with the utility (not the landlord) and pay for what you use. There are exceptions like when renting a room. The renter's insurance also is not part of the landlord's profit, it is simply there to protect you. In the case of loss, the landlord cannot insure your property. You have to provide your own insurance. Its pretty low costs, typically less than 20 per month. The application fee is typical. The move in fee is something that could be negotiated away and sounds pretty sketchy. You can always \"\"let your fingers do the walking\"\" and find out the fees before you look at the place.\"" }, { "docid": "587514", "title": "", "text": "You should be aware that many pubs in the London (indeed, the UK as a whole) are sold as a leasehold with a beer tie. This typically means you pay less rent for the building and premises, but must enter a contract with the Pub Company to buy their beer and day-to-day supplies. You have the legal option to instead pay market rent for some (but not all) Pub Cos, under certain conditions. If you go with leasehold, the landlord can usually close your pub at their will. This is becoming a quite common occurrence in the booming real estate market of London. While your interest will be in running a pub, the Pub Co's interest will be in getting change of use planning permission and selling it to a real estate developer." }, { "docid": "72857", "title": "", "text": "&gt;During WWII the US government socialized many factories to support the war effort. They took statistics nerds and gave them factories to run. After the war the nerds were offered jobs in the census. Some of them went to other countries to help rebuild instead. There are statues to some of them because they helped Japan become a leading economy in relatively short order. China is full of nerds. Their maths olympiad's teams are now all but totally dominant and they are kicking the asses of developed countries in PISA tests. My father was a physics professor - whenever he speaks to colleagues in the states they all tell him their best new talent is from the PRC. &gt;China doesn't have that focus. They succeed out of sheer numbers. Not by refining process. That would require investing in their workforce too much and cheep disposable labor is the way they compete. I guess that's why they send so many of their best and brightest overseas to study, or why spending such a huge amount of money on education domestically?" }, { "docid": "41766", "title": "", "text": "It may become difficult to rent a car or a hotel room. It may affect your ability to get a job. Some employers now check credit reports and disqualify candidates with a poor credit report. It may affect your ability to get a security clearance or professional bonding. It may affect your ability to find housing. Many landlords check credit reports. You may be harassed morning, noon, and night by collection agencies. This can be theoretically solved by declaring bankruptcy, but the bankruptcy court may force the sale of some of your assets to make payments towards your debt." }, { "docid": "478060", "title": "", "text": "\"The primary advantage of HFTs is their speed to act upon opportunities that exist for only fractions of a second. The reason why they are able to do this is because they invest heavily in hardware, custom software, and custom algorithms. Most of the fleeting advantage, as they all manage to top each other's hardware seemingly every other day, is from the hardware investment. To see the extremes that HFTs will go to invest in hardware, one might view this. It is highly likely that the trader with the market making algorithm could have been ignorant of the \"\"hide not slide\"\" order and missed out on many more opportunities while still being successful. Haim Bodek, who is very much against this order type, was not so lucky. If it was truly an investment bank then it was unlikely that they were actually front running, which is very illegal and easily possible with much more low tech means, since companies like Citadel handle most orders now, and they have not been successful in investment banking. The reality of HFT is slowly coming to light, that while HFT can provide extremely consistent returns with enormous sharpe ratios, the capital investment is equally enormous, and the amount of capital that can be employed is also as enormously limited. After all, the richest people on the planet are not HFT owners. Also, when it comes to time periods longer than 500ms, their results become very human.\"" }, { "docid": "41356", "title": "", "text": "Deposit it in a business savings account. The following below show you some options you can choose from. Next you can invest it in the market i.e. shares, bonds etc. If you have a more risky side, can go for peer to peer lending. If you are feeling really lucky and want to invest in the long term, then buy a property as a buy-to-let landlord. There are loads of options, you only need to explore." }, { "docid": "26407", "title": "", "text": "\"I've been down the consolidation route too (of a handful of DC pensions; the DB ones I've not touched, and you would indeed need advice to move those around). What you should be comparing against is: what's the cheapest possible thing you could be doing? Monevators' online platform list will give you an idea of SIPP costs (if your pot is big enough and you're a buy-and-hold person, ATS' flat-fee model means costs can become arbitrarily close to zero percent), and if you're happy to be invested in something like Vanguard Lifestrategy, Target Retirement or vanilla index trackers then charges on those will be something like 0.1%-0.4%. Savings of 0.5-1.0% per year add up over pension saving timescales, but only you can decide whether whatever extra the adviser is offering vs. a more DIY approach is worth it for you. Are you absolutely sure that 0.75% pa fee isn't on top of whatever charges are built into the funds he'll invest you in? For the £1000 fee, advisers claim to have high costs per customer because of \"\"regulatory burdens\"\"; this is why there's talk of an \"\"advice gap\"\" these days: if you only have a small sum to invest, the fixed costs of advice become intolerable. IMHO, nutmeg are still quite expensive for what they offer too (although still probably cheaper than any \"\"advised\"\" route).\"" }, { "docid": "201705", "title": "", "text": "\"...instead of all of us draining our money into a landlord... Instead, you are suggesting that still everyone (except you) will drain their money into a landlord, just that now the landlord is you. I guess what that really means is that you will need to have landlord tenant agreements between you and your roommates. When things break or need replacing you'll have to foot the bill and as your tenants, your \"\"roomies\"\" might not be too forgiving when things need fixing. When the fridge breaks down, you'll have to buy a new one immediately. Yard work is your sole responsibility, unless you offer discounted rent or other perks. What about service bills: energy, water, sewage, internet, television, etc?\"" }, { "docid": "569409", "title": "", "text": "\"Chris, this is an arbitrage question with a twist: you cannot treat the location you want to live objectively. For example, why not SoCal instead of Texas? Yes, SoCal's expensive but what if you account for the weather? This question is very interesting for me personally: something I am going to focus on myself, soon, as well. To the question at hand: it's very hard to get a close estimate of the price from a single source, say, a website. The cost of a house is always negotiable and there's no sticker price, and there begins your problems. However, there are some publicly available information which websites aggregate, see: http://www.city-data.com/ Also, some heuristics might help: Rent is at-least as expensive as the monthly mortgage, (property) taxes, HOA fees, etc. Smart people have told me this, and this also makes sense to me as the landlord is in this business to make some money after all. However, there are also other hidden costs of home ownership that I am not aware of in details (and which I craftily sidestepped in my \"\"etc\"\" above) that could put a rental to be \"\"cheaper\"\". One example that comes to mind is you as a tenant get to complain if the washer-dryer misbehaves and demand the landlord get you a new one (see how you wouldn't make a sound were you to own it however) Such a website to gauge rentals: http://www.rentometer.com/ Houses cost more where the median income is more. Again, you cannot be objective about this because smart people like to live around smart people (and pay for the privilege). Turn again to http://www.city-data.com/ to get this information Better weather is more expensive than not so good weather. In the article you linked, notice the ratio of homes in California. Yes, I know of people who sold off their family ranches in Vancouver and Seattle to buy homes in Orange Country. In short, there is a lot of information you would have to gather from multiple sources, and even then never be sure that you did your best! This also includes arbitrage, as you would like to \"\"come out ahead\"\" and while you are doing your research (and paying your rent), you want to invest your \"\"savings\"\" in instruments where you earn more than what you would have saved in a mortgage, etc. I would very much like to be refuted on every point and my answer be edited and \"\"made better\"\" as I need the same answers as you do :-D Feel free to comment, edit your question etc and I will act on feedback and help both of us (and future readers) out!\"" }, { "docid": "361314", "title": "", "text": "\"I am surprised at the amount of work this contract wants done. I'd question if it's even legal given the high costs. I suspect it's only there to remind abusive tenants of responsibilities they already have in law for extraordinary abuse beyond ordinary wear-and-tear: they are already on the hook to repaint if they trash the paint (think: child writing on walls, happens a lot), and already need to fumigate (and a lot more) if they are a filth-type hoarder who brings in a serious infestation (happens a lot). The landlord can already go after these people for additional money beyond the deposit. But that's not you. So don't freak out about those clauses, until you talk to the landlord and see what he's really after. Almost certainly, he really wants a \"\"fit and ready to rent\"\" unit upon your departure, so he doesn't have to take the unit off the market for months fixing it. As long as that's done, there's no reasonable reason for further work -- a decent landlord wouldn't require that. Nor would a court, IMO. The trouble with living in a place for awhile is you become blind to its deficiencies. What's more, it's rather difficult to \"\"size up\"\" a unit as ready when it's still occupied by your stuff. A unit will look rather different when reduced to a bare room, without furniture and whatnot distracting you. Add to it a dose of vanity and it becomes hard to convince yourself of defects others will easily see. So, tread carefully here. If push comes to shove, first stop is whether it's even legal. Cities and states with heavy tenant populations tend to have much more detailed laws, and as a rule, they favor the tenant. Right off the bat, in most states the tenant is not responsible for ordinary wear-and-tear. In my opinion, 6 years of ordinary, exempt wear would justify a repaint, so that shouldn't be on the tenant at all. As for the fumigation, I'm not in Florida so I don't know the deal, maybe there's some special environmental issue there which somehow makes that reasonable, it sure wouldn't fly in CA. Again that assumes you're a reasonable prudent tenant, not a slob or hoarder. As for the pro carpet cleaning, that's par for the course in any of the tough rent control areas I've seen, so that's gotten a pass from the legislators. Though $600 seems awfully high. Other than that, you can argue the terms are \"\"unconscionable\"\" -- too much of a raw deal to even be fair. However, this will depend on the opinion of a judge. Hit or miss. I'm hoping your landlord will be happy to negotiate based on the good condition of the unit (which he may not know; landlords rarely visit tenant units unless they really need to.) You certainly should make the case that you make here; that the work is not really needed and it's prohibitive. Your best defense against unconscionable deals is don't sign them. Remember, you didn't know the guy when you initially signed... the now-objectionable language should have been a big red flag back then, saying this guy is epic evil, run screaming. (even if that turned out not to be true, you should't have hung around to find out.) You may have gotten lucky this time, but don't make that mistake again. Unless one of the above pans out, though... a deal is a deal. You gave your word. The powerful act here is to keep your word. Forgive me for getting ontological, but successful people say it creates success for them. And here's the thing. You have to read your contracts because you can't keep your word if you don't know what word you gave. It's a common mistake: thinking good business is trust, hope, faith, submission or giving your all. No. In business, you take the time to hammer out mutually beneficial (win-win) agreements, and you set them on paper to eliminate confusion, argument and stress in the future as memories fade and conditions change. That conflict resolution is how business partners remain friends, or at least professional colleagues.\"" }, { "docid": "449554", "title": "", "text": "&gt; ive read that consumer spending stimulates an economy more than investment somewhere Investment is necessary for an economy to grow, as is consumer spending. Neither is more important. If you lack one of those, stimulating it will do more than stimulating the other. It's like a racing team saying the driver is more important than the car. In situations where everyone's cars are as good as they'll get, improving the driver is more important. In situations where the quality of cars differs, improving the car becomes more important. &gt;Also, youhave the theory that decreasing the income gap helps society in many other ways There is strong speculation that that is the case. However, it's _100% fact_ that increasing everyone's wealth helps society much more. It's why you'd rather live today than in any more egalitarian point in our past. If tinkering with income inequality gets in the way of overall wealth creation, it will do more harm than good." }, { "docid": "496050", "title": "", "text": "\"In financial markets, the gains you can expect to make (whether in the form of dividends or capital gains) correspond to the risks you are bearing. There are a variety of REITs but you can expect to make only as much money in them as you bear risk (meaning you can also lose a lot of money in the ones that earn a lot). In that sense they are just like other financial assets like stocks. If you are generically trying to increase your wealth by bearing risk, you can get a better risk/reward ratio in a fully diversified portfolio including stocks and bonds as well and REITs. \"\"Passive income\"\" means making money by bearing risk. REITs alone, without diversifying into other financial assets, do a poor job of generating income for the amount of risk you bear. So why are REITs not very comparable to buying a house and renting it out? Because in the latter case you are being paid not only for bearing the risk of the house depreciating but also you are being compensated for the work you do as a landlord. Moreover, because the house doesn't trade in a liquid market like REITs do, it is possible to actually get a good deal, as opposed to the fair deal you will get on a REIT. TL;DR: The \"\"passive income\"\" generated by REIT investment is more similar to generic equity/bond investment than it is to an investment in a physical home that you rent out. If what you want is to make money without doing anything besides bear risk, you should invest in a fully diversified portfolio of financial assets (equity and bonds being the primary constituents but REITs potentially being a part as well).\"" }, { "docid": "100847", "title": "", "text": "The main reason for an UBI is to provide atleast some sort of income since a lot of people are projected to be out of a job due to automation. Hence that source of income, for the large part, will go to the basic needs first, like housing, power, food. Atleast, that's what I suspect. So if a landlord knows people can afford atleast X amount for housing, why would they offer it any cheaper?" }, { "docid": "401899", "title": "", "text": "\"I don't know much about New Zealand, but here are just some general thoughts on things to consider. The big difference between buying a house and investing in stocks or the like is that it is fairly easy to invest in a diversified array of stocks (via a mutual fund), but if you buy a house, you are investing in a single piece of property, so everything depends on what happens with that specific property. This in itself is a reason many people don't invest in real estate. Shares of a given company or mutual fund are fungible: if you buy into a mutual fund, you know you're getting the same thing everyone else in the fund is getting. But every piece of real estate is unique, so figuring out how much a property is worth is less of an exact science. Also, buying real estate means you have to maintain it and manage it (or pay someone else to do so). It's a lot more work to accurately assess the income potential of a property, and then maintain and manage the property over years, than it is to just buy some stocks and hold them. Another difficulty is, if and when you do decide to sell the property, doing so again involves work. With stocks you can pretty much sell them whenever you want (although you may take a loss). With a house you have to find someone willing to buy it, which can take time. So a big factor to consider is the amount of effort you're prepared to put into your investment. You mention that your parents could manage the property for you, but presumably you will still have to pay for maintenance and do some managing work yourself (at least discussing things with them and making decisions). Also, if you own the property for a long time your parents will eventually become too old to take care of it, at which point you'll have to rethink the management aspect. So that's sort of the psychological side of things. As for the financial, you don't mention selling the house at any point. If you never sell it, the only gain you get from it is the rent it brings in. So the main factor to consider when deciding whether to buy it as a rental is how much you can rent it for. This is going to be largely determined by where it is located. So from the perspective of making an investment the big question --- which you don't address in the info you provided --- is: how much can you rent this house for, and how much will you be able to rent it for in the future? There is no way to know this for sure, and the only way to get even a rough sense of it is to talk with someone who knows the local real estate market well (e.g., a broker, appraiser, or landlord). If the property is in an \"\"up-and-coming\"\" area (i.e., more people are going to move there in the future), rents could skyrocket; if it's in a backwater, rents could remain stagnant indefinitely. Basically, if you're going to buy a piece of real estate as a long-term investment, you need to know a lot about that property in order to make any kind of comparison with another investment vehicle like a mutual fund. If you already live in the area you may know some things already (like how much you might be able to rent it for). Even so, though, you should try to get some advice from trustworthy people who know the local real estate situation.\"" } ]

[ { "docid": "557478", "title": "", "text": "\"with 150K € to invest to \"\"become a landlord\"\" you have several options: Pay for 100% of one property, and you then will make a significant percentage of the monthly rent as profit each month. That profit can be used to invest in other things, or to save to buy additional properties. At the end of the 21 years in your example, you can sell the flat for return of principal minus selling expenses, or even better make a profit because the property went up in value. Pay 20% down on 5 flats, and then make a much a smaller profit per flat each month due to the mortgage payment for each one. At the end of the 21 years sell the flats. Assuming that a significant portion of the mortgage is paid off each flat will sell for more than the mortgage balance. Thus you will have 5 nice large profits when you sell. something in between 1 and 5 flats. Each has different risks and expenses. With 5 rental properties you are more likely to use a management company, which will add to your monthly cost.\"" } ]

[ { "docid": "117509", "title": "", "text": "What kind of financial analysis would make you comfortable about this decision? The HELOC and ARM are the biggest red flags to me in your current situation. While I don't expect interest rates to skyrocket in the near future, they introduce an interest rate risk that is easy to get rid of. Getting rid of the HELOC and converting to a fixed mortgage would be my first priority. If you also want to upgrade to a new home at the same time (meaning buy a new home contingent on the sale of your first, paying off the HELOC and mortgage), that's fine, but make sure that you can comfortably afford the payment on a fixed-rate mortgage with at least 20% down. I would not take additional cash out of your equity just to save it. You're going to pay more in interest that you're going to get in savings. From there things get trickier. While many people would keep the first property on a mortgage and rent it out, I am not willing to be a landlord for a part-time job, especially when the interest on the mortgage gouges my return on the rent. PLus leverage increases the risks as well - all it takes is to go one or two months without rent and you can find yourself unable to make a mortgage payment, wrecking your credit and possibly risking foreclosure. So my options in order of precedence would be: At what point does it make sense to become a landlord? The complicated answer is when the benefits (rent, appreciation) relative to the costs (maintenance, interest, taxes, etc.) and risks (lost rent, bad renters, home value variance) give you a better return that you could find in investments of similar risk. The simple answer is when you can pay cash for it. That takes interest and lost rent out of the equation. Again, some are willing to take those risks and pay 20% down on rental property. Some are able to make it work. Some of those go broke or lose their properties. when calculating the 20% down of a new property, does that need to be liquid funds, or can that be based on the value of the home you are selling You can make the purchase of the new home contingent on the sale of the first if you need to get the equity out of it to make the 20%. Do NOT refinance the first just to pull out the equity to make a down payment. It's not worth the fees of a refinance." }, { "docid": "385881", "title": "", "text": "It's clearly a risk, but is it any different than investing in your own business? Yes, it is different. If you own a business, you determine the path of the business. You determine how much risk the business takes. You can put in extra effort to try to make the business work. You can choose to liquidate to preserve your capital. If you invest without ownership, perhaps the founder retains a 50% plus one share stake, then whomever controls the business controls all those things. So you have all the risks of owning the business (in terms of things going wrong) without the control to make things go right. This makes investing in someone else's business inherently riskier. Another problem that can occur is that you could find out that the business is fraudulent. Or the business can become fraudulent. Neither of those are risks if you are the business owner. You won't defraud yourself. Angel investing, that is to say investing in someone else's startup, is inherently risky. This is why it is difficult to find investors, even though some startups go on to become fabulously wealthy (Google, YouTube, Facebook, Twitter, etc.). Most startups fail. They offer the possibility of great returns because it's really hard to determine which ones will fail and which will succeed. Otherwise the business would just take out the same loan that Jane's getting, and leave Jane out of it." }, { "docid": "222095", "title": "", "text": "Don't over analyze it - check with some local landlords that are willing to share some information and resources Then analyze the Worst Case Scenarios and the likelihood of them happening and if you could deal with it if it did happen Then Dive In - Real Estate is a long term investment so you have plenty of time to learn everything..... Most people fail.... because they fail to take the first leap of faith !!!" }, { "docid": "45835", "title": "", "text": "First off, inflation doesn't necessarily imply that goods and services will rise in price. The amount of goods &amp; services increases over time as well, and this is balanced (partly), by an increase in the money supply. Without inflation you lose the incentive to invest, as your dollar would become more valuable over time. Why invest in a risky venture if I know that my dollar will buy more if I just wait it out. Might as well stick the money under the mattress. (This is bad)" }, { "docid": "395770", "title": "", "text": "\"Unless you can make an agreement with your landlord, your credit is on the bubble in this situation and it may be difficult to get the landlord to void the terms of the original agreement in lieu of a new one. I was burned by a similar situation when I was in college. I rented an apartment with my then \"\"best friend\"\". I sent my half of the rent in on time and he consistently skipped out on his. My credit took a blow to the tune of the shared liability just the same. Seriously seek to work something out with the landlord because it sounds like if things continue as they are, whether you move out or not, your credit will take a hit.\"" }, { "docid": "175019", "title": "", "text": "You are neglecting a few very important things around real estate transactions in Belgium So in the end a 300K building may cost you more than 340K, let's take some unexpected costs into account and use 350K for remainder of calculation. Even worse if it's newly built (which I doubt) the first percentage is 21% (VAT) instead of 10%. All these costs can be checked on the useful site www.hoeveelkostmijnhuis.be Now, aside from that most banks will and actually have to demand you pay part of all this yourself. So you can't do 5*60K (or 5*70K now). Mostly banks will only finance up to about 90% of the value of the building, so 90% of 300K, which is 270K (5*54K), the other 80K (5*16K) you have to pay yourselves. But it could be the bank goes as low as 80%. Another part to complicate the loan is how much you can pay a month. Since the mortgage crisis they're very strict on this. There are lots of banks that will not allow you to make monthly payments of more than 33% of your monthly income when you are going to live there. This is a nuisance even when buying one house, you want to buy 2. Odds seem low they'll accept high monthly payments because you either need an additional loan or need to pay rent, so don't count on a 5y deal. Now this is all based on a single loan, it will probably be a bit different with multiple loans. However, it is unlikely any bank will accept this, even if all loans are with the same bank. You need to consider the basics of a real-estate loan: A bank trusts you can pay it off and if not they can seize the real-estate hoping to regain their initial investment. It's very hard to seize a complete asset if only one out of 5 loan-takers defected. You could maybe do this with another less restrictive/higher risk type of loan but rates will be a lot higher (think 5-6% instead of 1.5%). And don't underestimate the running costs: for that price and 5 rooms in that city you're likely looking at an older building. Expect lots of cost for maintenance and keeping the building according to code. Also expect costs for repairs (you rent to students...). You'll also have to pay quite a bit of money on insurances and of course on real estate taxes (which are average in Ghent). Also factor in that currently there is not a housing shortage for Ghent students so you might not always have a guaranteed occupation. Also take into account responsibility: if a fire breaks out or the house collapses or a gas leak occurs, you might be sued. It doesn't matter if you're at fault, it's costly and a big nuisance. Simply because you didn't think of any of this: don't do this. It's better to invest in real estate funds. But if you still think you can do better then all the landlords Ghent is riddled with, don't do it as a personal investment. Create a BVBA, put some investment in here (like 10-20K each), approach a bank with a serious business plan to get the rest of the money as a loan (towards a single entity - your BVBA) and get things going. When the money comes in you can either give yourselves a salary or pay out profits on the shares. You may be confused about how rich you can become because we as a nation tend to overestimate the profitability of real estate. It's really not that much better than other investments (otherwise everybody would only invest in real estate funds). There are a few things that skew our vision however:" }, { "docid": "256010", "title": "", "text": "Don't let the tax tail wag the investment dog. There is risk in exchanging this (known) property for another (unknown) property. That risk may be more than $9000 worth of risk. Tax considerations are important, but most important is that your investments make money. If you intend to continue as a landlord, you had better be sure you are finding a better deal elsewhere if you are going to trade this property up. I should also mention that you have a 5 year window in which you need to have lived in the home for 2 years. You have time and might be able to sell for a higher price if you wait a little longer." }, { "docid": "520763", "title": "", "text": "I have done something similar to this myself. What you are suggesting is a sound theory and it works. The issues are (which is why it's the reason not everyone does it) : The initial cost is great, many people in their 20s or 30s cannot afford their own home, let alone buy second properties. The time to build up a portfolio is very long term and is best for a pension investment. it's often not best for diversification - you've heard not putting all your eggs in one basket? With property deposits, you need to put a lot of eggs in to make it work and this can leave you vulnerable. there can be lots of work involved. Renovating is a huge pain and cost and you've already mentioned tennants not paying! unlike a bank account or bonds/shares etc. You cannot get to your savings/investments quickly if you need to (or find an opportunity) But after considering these and deciding the plunge is worth it, I would say go for it, be a good landlord, with good quality property and you'll have a great nest egg. If you try just one and see how it goes, with population increase, in a safe (respectable) location, the value of the investment should continue to rise (which it doesn't in a bank) and you can expect a 5%+ rental return (very hard to find in cash account!) Hope it goes well!" }, { "docid": "569409", "title": "", "text": "\"Chris, this is an arbitrage question with a twist: you cannot treat the location you want to live objectively. For example, why not SoCal instead of Texas? Yes, SoCal's expensive but what if you account for the weather? This question is very interesting for me personally: something I am going to focus on myself, soon, as well. To the question at hand: it's very hard to get a close estimate of the price from a single source, say, a website. The cost of a house is always negotiable and there's no sticker price, and there begins your problems. However, there are some publicly available information which websites aggregate, see: http://www.city-data.com/ Also, some heuristics might help: Rent is at-least as expensive as the monthly mortgage, (property) taxes, HOA fees, etc. Smart people have told me this, and this also makes sense to me as the landlord is in this business to make some money after all. However, there are also other hidden costs of home ownership that I am not aware of in details (and which I craftily sidestepped in my \"\"etc\"\" above) that could put a rental to be \"\"cheaper\"\". One example that comes to mind is you as a tenant get to complain if the washer-dryer misbehaves and demand the landlord get you a new one (see how you wouldn't make a sound were you to own it however) Such a website to gauge rentals: http://www.rentometer.com/ Houses cost more where the median income is more. Again, you cannot be objective about this because smart people like to live around smart people (and pay for the privilege). Turn again to http://www.city-data.com/ to get this information Better weather is more expensive than not so good weather. In the article you linked, notice the ratio of homes in California. Yes, I know of people who sold off their family ranches in Vancouver and Seattle to buy homes in Orange Country. In short, there is a lot of information you would have to gather from multiple sources, and even then never be sure that you did your best! This also includes arbitrage, as you would like to \"\"come out ahead\"\" and while you are doing your research (and paying your rent), you want to invest your \"\"savings\"\" in instruments where you earn more than what you would have saved in a mortgage, etc. I would very much like to be refuted on every point and my answer be edited and \"\"made better\"\" as I need the same answers as you do :-D Feel free to comment, edit your question etc and I will act on feedback and help both of us (and future readers) out!\"" }, { "docid": "560195", "title": "", "text": "\"Risk is the capital you have staked in pursuit of profit. The danger is that you lose what you have risked. For some bets (risks), you can get insurance to cover for losses. Now the \"\"game\"\" of Landlord and Tenant requires you to play fully by the rules set forth by your legislators. In your case, that is the legislators of the State of Texas. Without knowing those rules, you could be liable (open to civil prosecution) for violating those rules. Tenants could be savvy to those rules or savvy enough to hire someone, a lawyer, who knows those rules. As well, in the game of Landlord and Tenant, you must ascertain the creditworthiness of your would-be tenant. If the tenant fails to pay rent, that tenant can detain the residence. You will incur additional outlays to gain possession of your property (ownership in your rental). Now the game of Landlord vs Landlord is different. You can't pick up houses easily enough and even if you could, likely the expense of doing so could wipe out any would profits from having the house as a rental. So, in Landlord vs Landlord, you get constrained by where your rental sits. Thus you must forecast what will the neighborhood look like in five, ten, fifteen years.\"" }, { "docid": "181616", "title": "", "text": "Per Md. REAL PROPERTY Code Ann. § 8-203: (d) (1) (i) The landlord shall maintain all security deposits in federally insured financial institutions, as defined in § 1-101 of the Financial Institutions Article, which do business in the State. (ii) Security deposit accounts shall be maintained in branches of the financial institutions which are located within the State and the accounts shall be devoted exclusively to security deposits and bear interest. (iii) A security deposit shall be deposited in an account within 30 days after the landlord receives it. (iv) The aggregate amount of the accounts shall be sufficient in amount to equal all security deposits for which the landlord is liable. (2) (i) In lieu of the accounts described in paragraph (1) of this subsection, the landlord may hold the security deposits in insured certificates of deposit at branches of federally insured financial institutions, as defined in § 1-101 of the Financial Institutions Article, located in the State or in securities issued by the federal government or the State of Maryland. (ii) In the aggregate certificates of deposit or securities shall be sufficient in amount to equal all security deposits for which the landlord is liable. As such, one or more accounts at your preference; it's up to the bank how to treat the account, so it may be a personal account or it may be a 'commercial' account depending on how they treat it (but it must be separate from your personal funds). A CD is perhaps the easiest way to go, as it's not a separate account exactly but it's easily separable from your own funds (and has better interest). You should also note (further down on that page) that you must pay 3% interest, once per six months; so try to get an account that pays as close as possible to that. You likely won't get 3% right now even in a CD, so consider this as an expense (and you'll probably find many people won't take security deposits in many situations as a result)." }, { "docid": "491049", "title": "", "text": "**Why are we collecting emails?** The email is for two purposes. (1) so we can let you know when challenges become available, and (2) so that we can send your payment, and contact the raffle winner. The survey will also ask about: investment experience, portfolio size, and education. This is crucial to interpreting the results scientifically. All data will be stored on a secured server, and **your personal information will never be shared with anyone.** Any data made available during publication will be fully anonymized according to best practices." }, { "docid": "571920", "title": "", "text": "\"No. The full text of the Landlord-Tenant Act (specifically, section 554.614 of Act 348 of the year 1972) makes no mention of this. Searching the law for \"\"interest\"\" doesn't yield anything of interest (pardon the pun). Specifically, section 554.604 of the same law states that: (1) The security deposit shall be deposited in a regulated financial institution. A landlord may use the moneys so deposited for any purposes he desires if he deposits with the secretary of state a cash bond or surety bond written by a surety company licensed to do business in this state and acceptable to the attorney general to secure the entire deposits up to $50,000.00 and 25% of any amount exceeding $50,000.00. The attorney general may find a bond unacceptable based only upon reasonable criteria relating to the sufficiency of the bond, and shall notify the landlord in writing of his reasons for the unacceptability of the bond. (2) The bond shall be for the benefit of persons making security deposits with the landlord. A person for whose benefit the bond is written or his legal representative may bring an action in the district, common pleas or municipal court where the landlord resides or does business for collection on the bond. While it does sound like the landlord is required to deposit the money in a bank or other secured form, e.g. the Secretary of State, he/she isn't required to place it in an account that will earn interest.\"" }, { "docid": "469194", "title": "", "text": "To be absolutely sure you should call the agent and check That said I have been renting accommodation through both agencies and directly through landlords for seven years (I live in London) and this is quite a common situation. It normally means that the deposit is being securely held by a third party so that it cannot be taken or depleted without the agreement of both parties. The deposit protection scheme ( https://www.depositprotection.com/ ) is one way that deposits are securely held in this manner. As a third party they will have different account details. It may be the case that the agency is protecting the deposit and you are paying rent to the landlord directly. This means that your deposit goes to the agency's account and the rent goes to the landlord's account. Obviously your landlord and agency have different accounts. A little colour to brighten your day: I am currently paying my rent to the agency who also took the deposit but, because of the way they handle deposits versus rent, the deposit was sent to a different account held by the same agent. In my previous flat I paid the deposit to an agency and the rent directly to the landlord. This resulted in an issue one time where I got the two accounts confused and paid rent to the agency who, after giving me a small slap on the wrist, transferred it to my landlord. In the flat before that I paid rent and the deposit to my landlords' holding company. That is one of the few times that I paid rent and the deposit into the same account. Again check with the agent that one of these situations is the case but this is absolutely normal when renting through an agency." }, { "docid": "41112", "title": "", "text": "So why is the capital income a problem, I don't get it? It also seems to be confusing the issue with the separate concern of wealth inequality. I say this because the capital income is not money earned from doing nothing - to generate the income one must invest in assets, and if a decent return is desired then even riskier investments must be considered. This creates new products and services, businesses, jobs etc. Also it does beg the question can everyone earn a capital income, or is there always a need for labour income? What happens as employment becomes more difficult to obtain due to automation? It was a neat explanation but it's left me with more questions than answers." }, { "docid": "118960", "title": "", "text": "Just because your slice of pie gets bigger doesn't necessarily mean someone else's becomes smaller. In a lot of cases it's the entire pie that gets bigger. Why is the pie bigger? More investors (savers turn investors; foreign investments, etc.), more money printed (QE anyone?), Market sentiment changes (stock is priced by perceptions) And it can certainly get smaller." }, { "docid": "525050", "title": "", "text": "&gt; why not lower the minimum wage? Because businesses and landlords won't suddenly lower their prices. They will just take the profits. As a white collar worker earning far above minimum wage who owns middle class investment property, I will probably win if minimum wages rise. My rents will rise more than my maintenance costs + property tax rise. As my interest rate is fixed, the inflationary pressures will effectively lower my debt. I know who won't win, and that's the minimum wage workers who receive the pay rise. Most of their consumption is provided by minimum wage worker intensive areas. Fast Food, supermarkets, gas, utilities. All areas that will rise, and what's left will be eaten up by rent rises. Minimum wage should be fixed to inflation, rising annually by CPI. Then we should stop talking about minimum wages at all, and focus on how we can assist in upward mobility." }, { "docid": "334391", "title": "", "text": "The idea you present is not uncommon, many have tried it before. It would be a great step to find landlords in your area and talk to them about lessons learned. It might cost you a lunch or cup of coffee but it could be the best investment you make. rent it out for a small profit (hopefully make around 3 - 5k a year in profit) Given the median price of a home is ~220K, and you are investing 44K, you are looking to make between a 6 and 11% profit. I would not classify this as small in the current interest rate environment. One aspect you are overlooking is risk. What happens if a furnace breaks, or someone does not pay their rent? While some may advocate borrowing money to buy rental real estate all reasonable advisers advocate having sufficient reserves to cover emergencies. Keep in mind that 33% of homes in the US do not have a mortgage and some investment experts advocate only buying rentals with cash. Currently owning rental property is a really good deal for the owners for a variety of reasons. Markets are cyclical and I bet things will not be as attractive in 10 years or so. Keep in mind you are borrowing ~220K or whatever you intend to pay. You are on the hook for that. A bank may not lend you the money, and even if they do a couple of false steps could leave you in a deep hole. That should at least give you pause. All that being said, I really like your gumption. I like your desire and perhaps you should set a goal of owning your first rental property for 5 years from now. In the mean time study and become educated in the business. Perhaps get your real estate license. Perhaps go to work for a property management company to learn the ins and outs of their business. I would do this even if I had a better paying full time job." }, { "docid": "81652", "title": "", "text": "In summary, you are correct that the goal of investing is to maximize returns, while paying low management fees. Index investing has become very popular because of the low fees. There are many actively traded mutual funds out there with very high management fees of 2.5% and up that do not beat the market. This begs the question of why you are paying high management fees and not just investing in index funds. Consider maxing out your tax sheltered accounts (401(k) and ROTH IRA) to avoid even more fees on your returns. Also consider having a growth component of your portfolio which is generally filled with equity, along with a secure component for assets such as bonds. Bonds may not have the exciting returns of equity, but they help to smooth out the volatility of your portfolio, which may help to keep peace of mind when the market dips." } ]

[ { "docid": "174019", "title": "", "text": "There are at least three important aspectss missing from your equation. However they come with some uncertainty as one typically cannot tell the future performance. Appreciation of the rental units value. When comparing to the gain of any alternative investment an increasing value of the flat is a gain too. Increase of rent. Rents are typically adjusted either on a regular basis or at least when changing tennants. Calulation with a flat rent over 20 years is therefore way off. Tax deductions due to capital expenditures (i.e. mortgages), expenses for the upkeep and maintenance of the property, conserving and management, and so on. Obviously those are depending on your local legislation. There are multiple other issues to consider of course, e.g. inadvertant vacancy, which would not act in your favour." } ]

[ { "docid": "395770", "title": "", "text": "\"Unless you can make an agreement with your landlord, your credit is on the bubble in this situation and it may be difficult to get the landlord to void the terms of the original agreement in lieu of a new one. I was burned by a similar situation when I was in college. I rented an apartment with my then \"\"best friend\"\". I sent my half of the rent in on time and he consistently skipped out on his. My credit took a blow to the tune of the shared liability just the same. Seriously seek to work something out with the landlord because it sounds like if things continue as they are, whether you move out or not, your credit will take a hit.\"" }, { "docid": "503734", "title": "", "text": "\"As more actively managed funds are driven out of the market, the pricing of individual stocks should become less rational. I.e. more stocks will become underpriced relative to their peers. As stock prices become less rational, the reward for active investing will increase, since it will become easier to \"\"pick a winner\"\". Eventually, the market will reach a new equilibrium where only active investors who are good enough to turn a profit will remain. Even then, passive investment will still do roughly as well as \"\"the market\"\" since it has low overhead and minimal investment lag. There is no reason to expect the system to collapse, since it is characterized primarily by negative feedback loops rather than positive feedback. The last few decades have seen a shift from active to passive investment because increased market transparency and efficiency have reduced the labor required to keep pricing rational. Basically, as people have gotten better at predicting stock performance, less active investment has been required to keep prices rational.\"" }, { "docid": "82457", "title": "", "text": "I never received any bad treatment as a foreigner. I have dinner with my landlord once a month, and go to the bar with the guy that sold me the plan. Why the fuck would you take out a loan in a foreign country? If you need to so badly, then you obviously don't have the collateral to do so and that's why they are turning you away. Homogenous countries are naturally xenophobic, get over it." }, { "docid": "517218", "title": "", "text": "Bitcoin exhibits the network effect so you would have to expect that it's price will mimic an S-curve. Of course for equity and debt investors it looks like a bubble within their asset classes. The only way you could say if bitcoin is becoming frothy is if you had a very large pool of people answering surveys with why they are buying bitcoin and how much they own and plan to invest." }, { "docid": "585975", "title": "", "text": "\"I used to be the sort of person who would tell you that I've left money for you somewhere and in fact not have done so, and I also used to be the last person you'd expect to do something like that. I've not done this exact thing but I've done similar. Not gonna go into detail but at that time I was in a state of poverty, barely able to buy food and drink, and the money I saved by \"\"conning people\"\" in similar ways was spent on food and warmth. Personally, I think she's going through a very hard patch financially and as such has done exactly that. Me? I'm not a landlord and I'm probably far too generous. I would explain that I think she's lying but let it slide this month. Clearly a property owner is more financially capable of soaking up this expense than a tenant. On the other hand, you don't become a property owner and landlord by letting people get away without paying their rent. All in all, I would probably push for a 50/50 decision. She pays half rent this month which alleviates her finances a bit if she is genuinely in trouble and has lied, and you still get something for your efforts. If you're lucky, when you suggest it she will come clean. I would make it clear if you do or don't believe her, as she may well confess if you express your doubts. If she does, I wouldn't hold her to paying the full amount unless she offers to do so. Also, make it very obvious that this can and will not happen again. Next time, she gives you cash or uses a banking service. Goes without saying I guess. You should note that legally speaking, by accepting anything other than full payment you could be acknowledging that she did attempt to make a payment and any future legal cases will not consider that favorably for you. I would strongly recommend discussing this with a solicitor before agreeing to anything other than full payment.\"" }, { "docid": "34308", "title": "", "text": "\"As others have pointed out, you can't just pick a favorable number and rent for that amount. If you want to rent out your house, you must rent it for a value that a renter would agree to. For example there is a house on my street that has been looking for renters for 3 years. They want $2,500 a month. This covers their mortgage, and a little bit more for taxes and repairs. It has never been rented once. Other homes in my neighborhood rent for around $1,000 a month. There is no value to a renter in renting a house that is $1,500 more then a similar house 2 doors down. Now what you can look at is cost mitigation. So I am using data from my area. Houses in my part of Florida must have A/C running in the wet months to keep the moisture from ruining the house. This can easily be $100 a month (usually more). The city requires you to have water service, even when not occupied, though the cost is very small. Same with waste, which is a flat fee: $20 a month. Yard watering is a must during the dry months (if you want to keep grass). Let's say that comes out to $50 a month, year round. Pest control is a must, especially if your house has wooden parts (like floors or a roof). Even modest pest control is $25 a month. Property taxes around $240 a month. Let's say your mortgage is around $1,000 a month. That means to sit empty your house would cost $1,435. Now if you were to rent the house, a lot of those costs could \"\"go away\"\" by becoming the tenants' responsibility. Your cost of the house sitting full would be $1,240. Let's pad that with 10% for repairs and go with $1,364. Now let's assume you can rent for $1,000 a month. Keep in mind all these rates are about right for my area but will change based on size and amenities. Your choices are let the house sit empty for $1,435 a month or fill it and only \"\"lose\"\" $240 a month. Keep in mind that in both cases you will be gaining equity. So what a lot of people do around here is rent out their houses and pay the $240 as an investment. For every $240 they pay, they get $1,000 in equity (well, interest and fees aside, but you get the point). It's not a money maker for them right now, but as they get older two things happen. That $240 a month \"\"payment\"\" pays off their mortgage, so they end up owning the house outright. Then that $240 a month payment turns to extra income. And at some point, their rental can be sold for (let's guess) $400,000. SO they paid $86,400 and got back $400,000. All the while they are building equity in their rental and in the home they are living in. The important take away from this, is that it's not a source of income for the landlord as much as it is an investment. You will likely not be able to rent a house for more then a mortgage + costs + taxes, but it does make a good investment vehicle.\"" }, { "docid": "449554", "title": "", "text": "&gt; ive read that consumer spending stimulates an economy more than investment somewhere Investment is necessary for an economy to grow, as is consumer spending. Neither is more important. If you lack one of those, stimulating it will do more than stimulating the other. It's like a racing team saying the driver is more important than the car. In situations where everyone's cars are as good as they'll get, improving the driver is more important. In situations where the quality of cars differs, improving the car becomes more important. &gt;Also, youhave the theory that decreasing the income gap helps society in many other ways There is strong speculation that that is the case. However, it's _100% fact_ that increasing everyone's wealth helps society much more. It's why you'd rather live today than in any more egalitarian point in our past. If tinkering with income inequality gets in the way of overall wealth creation, it will do more harm than good." }, { "docid": "77570", "title": "", "text": "First of all, a person that relies on their ability to tap a line of credit to cover an emergency isn't generally the kind of person that has investments they can cash out to cover the debt. That being said, my personal reasons for having a liquid emergency fund revolve around bank errors and identify theft. I used to work for a company that made bank software. Errors are a common occurrence. You'd be surprised how many transactions are still input by human hands despite our computerized world. All it takes is one typo to wipe out your ability to swipe plastic for a few days. This has actually happened to me. My utility company sent me a bill for $240 and wound up taking $2400 by accident, overdrawing my account and sending me into a fee spiral. They fixed their mistake... several days later. The snowball of fees from other transactions that bounced took another two months to correct. In the meantime, I also had my mortgage payment due. In the US, you can't pay your mortgage with credit, and for those who rent, many landlords won't let you pay with credit either. I have also seen this scenario play out twice with other people I've known who've had their ID stolen. Yes, the bank will cover the fraud after a lengthy process. But the disruption causes fees and overdrafts to quickly snowball out of control. I have a separate savings account at a different bank for this kind of thing, and I have a few hundred dollars cash in my house at all times. Having a liquid emergency fund allows you to quickly stabilize the situation and gives you walking around money for those times where the banking system becomes your enemy for a time." }, { "docid": "496050", "title": "", "text": "\"In financial markets, the gains you can expect to make (whether in the form of dividends or capital gains) correspond to the risks you are bearing. There are a variety of REITs but you can expect to make only as much money in them as you bear risk (meaning you can also lose a lot of money in the ones that earn a lot). In that sense they are just like other financial assets like stocks. If you are generically trying to increase your wealth by bearing risk, you can get a better risk/reward ratio in a fully diversified portfolio including stocks and bonds as well and REITs. \"\"Passive income\"\" means making money by bearing risk. REITs alone, without diversifying into other financial assets, do a poor job of generating income for the amount of risk you bear. So why are REITs not very comparable to buying a house and renting it out? Because in the latter case you are being paid not only for bearing the risk of the house depreciating but also you are being compensated for the work you do as a landlord. Moreover, because the house doesn't trade in a liquid market like REITs do, it is possible to actually get a good deal, as opposed to the fair deal you will get on a REIT. TL;DR: The \"\"passive income\"\" generated by REIT investment is more similar to generic equity/bond investment than it is to an investment in a physical home that you rent out. If what you want is to make money without doing anything besides bear risk, you should invest in a fully diversified portfolio of financial assets (equity and bonds being the primary constituents but REITs potentially being a part as well).\"" }, { "docid": "563959", "title": "", "text": "It's doable, but there's a fair amount of risk involved. The biggest issue is that your roommates could move out. It's possible that they could have a falling out, get a job in a different city, or just move on. How difficult would it be to find another roommate? How many roommates can you lose and still afford to pay the mortgage, insurance, taxes, and all the rest of your living expenses? Even if you you retain all of your roommates until the mortgage is paid off, there's still some risk involved. If you were to lose your job, could you continue to make mortgage payments? Worst case scenario is that you could become unemployed for a time while home values in your State/City/neighborhood are crashing. Last, the position on landlord has the potential to be lucrative, but also comes with a fair amount of responsibility. It will be a drain on your time to maintain the house and to make sure you always have tenants. I know you said that your roommates are good about paying on time, but are you willing to evict a friend because they won't/can't pay rent? It's easier to ask the landlord for an extension on rent when you're friends. All that being said, I think that this idea is worth considering. My recommendation is that you consider every aspect of it, and proceed cautiously if you choose to do so." }, { "docid": "350399", "title": "", "text": "In no particular order - to help you on deciding whether to invest or not: Building Wealth One House at a Time Buy & Rent Foreclosures: 3 Million Net Worth, 22,000 Net Per Month, In 7 Years...You can too! Landlording on Auto-Pilot: A Simple, No-Brainer System for Higher Profits and Fewer Headaches and for when/if you actually decide to start: Investing in Real Estate I've read all the books above and they all have a little bit of information here and there to take out - although they have some redudency it is the good type you need to learn/know anyway. Hope this helps." }, { "docid": "411470", "title": "", "text": "Why shouldn't I bring it up? Freight is one thing but if there's an interest in increased commuter rail or other passenger rail, areas where businesses would use freight rail if it was extended to them or anything like electrifying the system, then it's far more likely that the government will have to be shelling out the money instead of private organizations. It takes huge capital investments and years to extend something like commuter rail and businesses probably don't want to wait potentially decades to real the rewards of a risky venture, so it will be left to public investment to extend systems into some areas that may become hotspots of activity after rail reaches them. It's not all about the freight lines." }, { "docid": "222095", "title": "", "text": "Don't over analyze it - check with some local landlords that are willing to share some information and resources Then analyze the Worst Case Scenarios and the likelihood of them happening and if you could deal with it if it did happen Then Dive In - Real Estate is a long term investment so you have plenty of time to learn everything..... Most people fail.... because they fail to take the first leap of faith !!!" }, { "docid": "491049", "title": "", "text": "**Why are we collecting emails?** The email is for two purposes. (1) so we can let you know when challenges become available, and (2) so that we can send your payment, and contact the raffle winner. The survey will also ask about: investment experience, portfolio size, and education. This is crucial to interpreting the results scientifically. All data will be stored on a secured server, and **your personal information will never be shared with anyone.** Any data made available during publication will be fully anonymized according to best practices." }, { "docid": "100847", "title": "", "text": "The main reason for an UBI is to provide atleast some sort of income since a lot of people are projected to be out of a job due to automation. Hence that source of income, for the large part, will go to the basic needs first, like housing, power, food. Atleast, that's what I suspect. So if a landlord knows people can afford atleast X amount for housing, why would they offer it any cheaper?" }, { "docid": "175019", "title": "", "text": "You are neglecting a few very important things around real estate transactions in Belgium So in the end a 300K building may cost you more than 340K, let's take some unexpected costs into account and use 350K for remainder of calculation. Even worse if it's newly built (which I doubt) the first percentage is 21% (VAT) instead of 10%. All these costs can be checked on the useful site www.hoeveelkostmijnhuis.be Now, aside from that most banks will and actually have to demand you pay part of all this yourself. So you can't do 5*60K (or 5*70K now). Mostly banks will only finance up to about 90% of the value of the building, so 90% of 300K, which is 270K (5*54K), the other 80K (5*16K) you have to pay yourselves. But it could be the bank goes as low as 80%. Another part to complicate the loan is how much you can pay a month. Since the mortgage crisis they're very strict on this. There are lots of banks that will not allow you to make monthly payments of more than 33% of your monthly income when you are going to live there. This is a nuisance even when buying one house, you want to buy 2. Odds seem low they'll accept high monthly payments because you either need an additional loan or need to pay rent, so don't count on a 5y deal. Now this is all based on a single loan, it will probably be a bit different with multiple loans. However, it is unlikely any bank will accept this, even if all loans are with the same bank. You need to consider the basics of a real-estate loan: A bank trusts you can pay it off and if not they can seize the real-estate hoping to regain their initial investment. It's very hard to seize a complete asset if only one out of 5 loan-takers defected. You could maybe do this with another less restrictive/higher risk type of loan but rates will be a lot higher (think 5-6% instead of 1.5%). And don't underestimate the running costs: for that price and 5 rooms in that city you're likely looking at an older building. Expect lots of cost for maintenance and keeping the building according to code. Also expect costs for repairs (you rent to students...). You'll also have to pay quite a bit of money on insurances and of course on real estate taxes (which are average in Ghent). Also factor in that currently there is not a housing shortage for Ghent students so you might not always have a guaranteed occupation. Also take into account responsibility: if a fire breaks out or the house collapses or a gas leak occurs, you might be sued. It doesn't matter if you're at fault, it's costly and a big nuisance. Simply because you didn't think of any of this: don't do this. It's better to invest in real estate funds. But if you still think you can do better then all the landlords Ghent is riddled with, don't do it as a personal investment. Create a BVBA, put some investment in here (like 10-20K each), approach a bank with a serious business plan to get the rest of the money as a loan (towards a single entity - your BVBA) and get things going. When the money comes in you can either give yourselves a salary or pay out profits on the shares. You may be confused about how rich you can become because we as a nation tend to overestimate the profitability of real estate. It's really not that much better than other investments (otherwise everybody would only invest in real estate funds). There are a few things that skew our vision however:" }, { "docid": "45835", "title": "", "text": "First off, inflation doesn't necessarily imply that goods and services will rise in price. The amount of goods &amp; services increases over time as well, and this is balanced (partly), by an increase in the money supply. Without inflation you lose the incentive to invest, as your dollar would become more valuable over time. Why invest in a risky venture if I know that my dollar will buy more if I just wait it out. Might as well stick the money under the mattress. (This is bad)" }, { "docid": "527416", "title": "", "text": "If i look to the future ,i see the general retail revenue growing pretty slowly, but the online retailers growing fast. Why ? First, they grew historically around 20% per year for the last few years. Second there's a lot of big important innovation. Amazon prime, Tablets and phones as great sales tools and comparison tools(and they're becoming common), Ebay investing heavily in logistics to enable small non u.s. companies to sell onshore without big shipping costs, Online apparel shopping improving rapidly and maybe becoming competitive with offline shopping,using social networks for shopping, interesting new models to sell merchandise online like etsy, subscription shopping and the the general rate of internet innovations. Third, people are improving in their e-commerce capability and trust. On the other hand , i don't see any big growth opportunity for brick and mortar retailers.So it means they'll shrink. The problem is that retail is a low margin business. That means that losing 5-15% percent of revenue is enough to close you , because you have a lot of fixed costs(rent, employees, financing the goods)." }, { "docid": "42329", "title": "", "text": "\"The perceived risk depends on the entire situation, but often it is considered more risk, especially if you want to occupy yourself. Things you need to consider: It can be very difficult to show a property with tenants occupying it. There are many reasons for this and most homes show / sell better empty. I have found many tenants make it difficult on the seller. Leaving their areas a mess, being unaccommodating and especially in markets that are flooded with options, a lot of buyers just won't bother with the difficulty of scheduling a showing in occupied properties. I've tried to purchase many properties where the renter insists on being there during a showing, but won't open the door and there's no recourse for the landlord because his lease or laws in the area don't allow you to enter without permission. Also, it can be difficult to look past a lot of clutter and other people's decorating and aroma \"\"preferences\"\" to be kind. :) Is the property currently under lease and what is the period of that lease? It could be that the lease is month to month, or it could be years remaining on the lease period. It is likely a legal requirement in most areas that you honor the existing lease. I would never buy a property that has multiple years remaining. While some amateur landlords will allow 2 or even 5 year leases, this is a very bad idea for many reasons! What are laws like in your area for evicting tenants? You should know this regardless of whether or not you intend to occupy or keep it a rental. It can be a very difficult process evicting tenants and this process is vastly different from country to country and state to state here in the USA. Look into the security deposit - assuming there is one. How much is the deposit? Will it cover damage that may not exist yet? Don't think that just because you plan on evicting them soon, it isn't important. People can trash a place on the way out and an expensive lawsuit could be your only recourse. It is far easier to take a deposit than sue. I would absolutely demand that the deposit transfer to you upon sale. View the current renters with a fresh eye. Especially if you are considering leave it a rental, look into all of the typical requirements: Their monthly income, their credit history, their criminal record, their payment history, their references. Are they likely to be good or terrible renters? If you're interested in the property, consider an offer which requires the current landlord to evict within the time-frame of the buy/sell agreement. This isn't an uncommon requirement. I think the first thing to do is go look at the property and see if you can determine for yourself why it hasn't sold yet. Properties all have different reasons for not selling in a reasonable time to the local market. Having renters alone in most markets shouldn't be that big of a factor. I would suspect bad smells, nasty renters, or an unfavorable lease agreement exists.\"" } ]

[ { "docid": "71424", "title": "", "text": "Let me add a few thoughts that have not been mentioned so far in the other answers. Note that for the decision of buying vs. renting a home i.e. for personal use, not for renting out there's a rule of thumb that if the price for buying is more than 20 year's (cold) rents it is considered rather expensive. I don't know how localized this rule of thumb is, but I know it for Germany which is apparently the OP's country, too. There are obviously differences between buying a house/flat for yourself and in order to rent it out. As others have said, maintenance is a major factor for house owners - and here a lot depends on how much of that you do yourself (i.e. do you have the possibility to trade working hours for costs - which is closely related to financial risk exposure, e.g. increasing income by cutting costs as you do maintenance work yourself if you loose your day-time job?). This plays a crucial role for landlords I know (they're all small-scale landlords, and most of them do put in substantial work themselves): I know quite a number of people who rent out flats in the house where they actually live. Some of the houses were built with flats and the owner lives in one of the flats, another rather typical setup is that people built their house in the way that a smaller flat can easily be separated and let once the kids moved out (note also that the legal situation for the landlord is easier in that special case). I also know someone who owns a house several 100 km away from where they live and they say they intentionally ask a rent somewhat below the market price for that (nice) kind of flat so that they have lots of applicants at the same time and tenants don't move out as finding a new tenant is lots of work and costly because of the distance. My personal conclusion from those points is that as an investment (i.e. not for immediate or future personal use) I'd say that the exact circumstances are very important: if you are (stably) based in a region where the buying-to-rental-price ratio is favorable, you have the necessary time and are able to do maintenance work yourself and there is a chance to buy a suitable house closeby then why not. If this is not the case, some other form of investing in real estate may be better. On the other hand, investing in further real estate closeby where you live in your own house means increased lump risk - you miss diversification into regions where the value of real estate may develop very differently. There is one important psychological point that may play a role with the observed relation between being rich and being landlord. First of all, remember that the median wealth (without pensions) for Germany is about 51 k€, and someone owning a morgage-free 150 k€ flat and nothing else is somewhere in the 7th decile of wealth. To put it the other way round: the question whether to invest 150 k€ into becoming a landlord is of practical relevance only for rich (in terms of wealth) people. Also, asking this question is typically only relevant for people who already own the home they live in as buying for personal use will typically have a better return than buying in order to rent. But already people who buy for personal use are on average wealthier (or at least on the track to become more wealthy in case of fresh home owners) than people who rent. This is attributed to personal characteristics and the fact that the downpayment of the mortgage enforces saving behaviour (which is typically kept up once the house is paid, and is anyways found to be more pronounced than for non-house-owners). In contrast, many people who decide never to buy a home fall short of their initial savings/investment plans (e.g. putting the 150 k€ into an ETF for the next 21 years) and in the end spend considerably more money - and this group of people rarely invests into directly becoming a landlord. Assuming that you can read German, here's a relevant newspaper article and a related press release." } ]

[ { "docid": "29761", "title": "", "text": "\"There has been almost no inflation during 2014-2015. do you mean rental price inflation or overall inflation? Housing price and by extension rental price inflation is usually much higher than the \"\"basket of goods\"\" CPI or RPI numbers. The low levels of these two indicators are mostly caused by technology, oil and food price deflation (at least in the US, UK, and Europe) outweighing other inflation. My slightly biased (I've just moved to a new rental property) and entirely London-centric empirical evidence suggests that 5% is quite a low figure for house price inflation and therefore also rental inflation. Your landlord will also try to get as much for the property as he can so look around for similar properties and work out what a market rate might be (within tolerances of course) and negotiate based on that. For the new asked price I could get a similar apartment in similar condos with gym and pool (this one doesn't have anything) or in a way better area (closer to supermarkets, restaurants, etc). suggests that you have already started on this and that the landlord is trying to artificially inflate rents. If you can afford the extra 5% and these similar but better appointed places are at that price why not move? It sounds like the reason that you are looking to stay on in this apartment is either familiarity or loyalty to the landlord so it may be time to benefit from a move.\"" }, { "docid": "121108", "title": "", "text": "Tax won't be an issue. You have a personal tax free allowance of £7475 this coming year, so your first £7475 will be tax free. 1.09% is pretty abysmal (sorry - but we've wrecked the economy for you young fullas), so you'll only earn about £84 a month. Not as awesome as you were expecting I think. Would recommend getting advice on other means of generating an income with your 100k. Because if you bought a cheap flat (cheap enough to own without a mortgage), you could probably earn between £300-£400 a month fairly comfortably. (I'm not suggesting you become a landlord, just that interest rates currently suck)" }, { "docid": "587514", "title": "", "text": "You should be aware that many pubs in the London (indeed, the UK as a whole) are sold as a leasehold with a beer tie. This typically means you pay less rent for the building and premises, but must enter a contract with the Pub Company to buy their beer and day-to-day supplies. You have the legal option to instead pay market rent for some (but not all) Pub Cos, under certain conditions. If you go with leasehold, the landlord can usually close your pub at their will. This is becoming a quite common occurrence in the booming real estate market of London. While your interest will be in running a pub, the Pub Co's interest will be in getting change of use planning permission and selling it to a real estate developer." }, { "docid": "273247", "title": "", "text": "\"This is the best tl;dr I could make, [original](https://medium.com/society-matters/wall-street-landlords-are-chasing-the-american-dream-heres-what-it-means-for-families-8e753e9d99fe) reduced by 92%. (I'm a bot) ***** &gt; Though house prices have recovered in many regions of the US, many of the people living in these homes are now renting - and their landlords are some of the biggest investment firms on Wall Street. &gt; Another Wall Street backed firm, American Homes 4 Rent, owns a further 49,000 homes across 22 states. &gt; Destination unknownScaling up portfolios consisting of thousands or tens of thousands of rental homes has made it possible for Wall Street firms to roll out financial instruments suited to &amp;quot;a rentership society&amp;quot;. ***** [**Extended Summary**](http://np.reddit.com/r/autotldr/comments/6zejn5/wall_street_landlords_are_chasing_the_american/) | [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ \"\"Version 1.65, ~207867 tl;drs so far.\"\") | [Feedback](http://np.reddit.com/message/compose?to=%23autotldr \"\"PM's and comments are monitored, constructive feedback is welcome.\"\") | *Top* *keywords*: **home**^#1 **rent**^#2 **rental**^#3 **single-family**^#4 **house**^#5\"" }, { "docid": "334391", "title": "", "text": "The idea you present is not uncommon, many have tried it before. It would be a great step to find landlords in your area and talk to them about lessons learned. It might cost you a lunch or cup of coffee but it could be the best investment you make. rent it out for a small profit (hopefully make around 3 - 5k a year in profit) Given the median price of a home is ~220K, and you are investing 44K, you are looking to make between a 6 and 11% profit. I would not classify this as small in the current interest rate environment. One aspect you are overlooking is risk. What happens if a furnace breaks, or someone does not pay their rent? While some may advocate borrowing money to buy rental real estate all reasonable advisers advocate having sufficient reserves to cover emergencies. Keep in mind that 33% of homes in the US do not have a mortgage and some investment experts advocate only buying rentals with cash. Currently owning rental property is a really good deal for the owners for a variety of reasons. Markets are cyclical and I bet things will not be as attractive in 10 years or so. Keep in mind you are borrowing ~220K or whatever you intend to pay. You are on the hook for that. A bank may not lend you the money, and even if they do a couple of false steps could leave you in a deep hole. That should at least give you pause. All that being said, I really like your gumption. I like your desire and perhaps you should set a goal of owning your first rental property for 5 years from now. In the mean time study and become educated in the business. Perhaps get your real estate license. Perhaps go to work for a property management company to learn the ins and outs of their business. I would do this even if I had a better paying full time job." }, { "docid": "44058", "title": "", "text": "__________ _________ ____________ Therefore, I get the outcome I want. The human brain must think: it can't stop. If you don't believe me, try meditating. The mental process of putting stuff in those blanks is called rationalization. This is a bored mind who wants something. If that mind is not particularly well disciplined, those things will get pretty unrealistic. That is what has happened to your friend. Landlords do not like drama. They do like money. Generally a landlord will be happy to take your money any reasonable way that they can achieve. It sounds like either your landlord lost the ability to do credit cards, or he got sick of paying the 3% overhead, or some other overhead costs that may be higher because he does not have the right credit card merchant service. For instance PayPal Here charges 2.70% flat, but a traditional swiper can cost up to $2000 a year in trumped up fees and charges. As soon as the landlord calls the rent a debt, he has to take cash. But in most places, rental is at-will, and the landlord can evict for any reason or no reason at all (except race, creed, color, national origin, family, running a daycare center and a few other protected reasons)... and there's not a whole lot you can do about it. Even for a lease he can trump up a reason. Your friend would be wise to have a meeting of the minds with the landlord about how he'd like to pay. Business is done by mutual consent, not non-consensual legal tricks. I agree, I wouldn't do ACH either. One problem with ACH (or credit) is the landlord can charge anything he pleases, and that's when they start sneaking in devious surcharges for things. Once he's pulled the money out, you're really at a disadvantage to argue, since he already has the money. And it's really difficult to do a chargeback on part of a payment, so you end up having to chargeback the entire rent check, and now he can evict you." }, { "docid": "395770", "title": "", "text": "\"Unless you can make an agreement with your landlord, your credit is on the bubble in this situation and it may be difficult to get the landlord to void the terms of the original agreement in lieu of a new one. I was burned by a similar situation when I was in college. I rented an apartment with my then \"\"best friend\"\". I sent my half of the rent in on time and he consistently skipped out on his. My credit took a blow to the tune of the shared liability just the same. Seriously seek to work something out with the landlord because it sounds like if things continue as they are, whether you move out or not, your credit will take a hit.\"" }, { "docid": "201705", "title": "", "text": "\"...instead of all of us draining our money into a landlord... Instead, you are suggesting that still everyone (except you) will drain their money into a landlord, just that now the landlord is you. I guess what that really means is that you will need to have landlord tenant agreements between you and your roommates. When things break or need replacing you'll have to foot the bill and as your tenants, your \"\"roomies\"\" might not be too forgiving when things need fixing. When the fridge breaks down, you'll have to buy a new one immediately. Yard work is your sole responsibility, unless you offer discounted rent or other perks. What about service bills: energy, water, sewage, internet, television, etc?\"" }, { "docid": "517218", "title": "", "text": "Bitcoin exhibits the network effect so you would have to expect that it's price will mimic an S-curve. Of course for equity and debt investors it looks like a bubble within their asset classes. The only way you could say if bitcoin is becoming frothy is if you had a very large pool of people answering surveys with why they are buying bitcoin and how much they own and plan to invest." }, { "docid": "181616", "title": "", "text": "Per Md. REAL PROPERTY Code Ann. § 8-203: (d) (1) (i) The landlord shall maintain all security deposits in federally insured financial institutions, as defined in § 1-101 of the Financial Institutions Article, which do business in the State. (ii) Security deposit accounts shall be maintained in branches of the financial institutions which are located within the State and the accounts shall be devoted exclusively to security deposits and bear interest. (iii) A security deposit shall be deposited in an account within 30 days after the landlord receives it. (iv) The aggregate amount of the accounts shall be sufficient in amount to equal all security deposits for which the landlord is liable. (2) (i) In lieu of the accounts described in paragraph (1) of this subsection, the landlord may hold the security deposits in insured certificates of deposit at branches of federally insured financial institutions, as defined in § 1-101 of the Financial Institutions Article, located in the State or in securities issued by the federal government or the State of Maryland. (ii) In the aggregate certificates of deposit or securities shall be sufficient in amount to equal all security deposits for which the landlord is liable. As such, one or more accounts at your preference; it's up to the bank how to treat the account, so it may be a personal account or it may be a 'commercial' account depending on how they treat it (but it must be separate from your personal funds). A CD is perhaps the easiest way to go, as it's not a separate account exactly but it's easily separable from your own funds (and has better interest). You should also note (further down on that page) that you must pay 3% interest, once per six months; so try to get an account that pays as close as possible to that. You likely won't get 3% right now even in a CD, so consider this as an expense (and you'll probably find many people won't take security deposits in many situations as a result)." }, { "docid": "271640", "title": "", "text": "\"I would not classify utilities (including electric) as additional fees. In many cases you interact directly with the utility (not the landlord) and pay for what you use. There are exceptions like when renting a room. The renter's insurance also is not part of the landlord's profit, it is simply there to protect you. In the case of loss, the landlord cannot insure your property. You have to provide your own insurance. Its pretty low costs, typically less than 20 per month. The application fee is typical. The move in fee is something that could be negotiated away and sounds pretty sketchy. You can always \"\"let your fingers do the walking\"\" and find out the fees before you look at the place.\"" }, { "docid": "42329", "title": "", "text": "\"The perceived risk depends on the entire situation, but often it is considered more risk, especially if you want to occupy yourself. Things you need to consider: It can be very difficult to show a property with tenants occupying it. There are many reasons for this and most homes show / sell better empty. I have found many tenants make it difficult on the seller. Leaving their areas a mess, being unaccommodating and especially in markets that are flooded with options, a lot of buyers just won't bother with the difficulty of scheduling a showing in occupied properties. I've tried to purchase many properties where the renter insists on being there during a showing, but won't open the door and there's no recourse for the landlord because his lease or laws in the area don't allow you to enter without permission. Also, it can be difficult to look past a lot of clutter and other people's decorating and aroma \"\"preferences\"\" to be kind. :) Is the property currently under lease and what is the period of that lease? It could be that the lease is month to month, or it could be years remaining on the lease period. It is likely a legal requirement in most areas that you honor the existing lease. I would never buy a property that has multiple years remaining. While some amateur landlords will allow 2 or even 5 year leases, this is a very bad idea for many reasons! What are laws like in your area for evicting tenants? You should know this regardless of whether or not you intend to occupy or keep it a rental. It can be a very difficult process evicting tenants and this process is vastly different from country to country and state to state here in the USA. Look into the security deposit - assuming there is one. How much is the deposit? Will it cover damage that may not exist yet? Don't think that just because you plan on evicting them soon, it isn't important. People can trash a place on the way out and an expensive lawsuit could be your only recourse. It is far easier to take a deposit than sue. I would absolutely demand that the deposit transfer to you upon sale. View the current renters with a fresh eye. Especially if you are considering leave it a rental, look into all of the typical requirements: Their monthly income, their credit history, their criminal record, their payment history, their references. Are they likely to be good or terrible renters? If you're interested in the property, consider an offer which requires the current landlord to evict within the time-frame of the buy/sell agreement. This isn't an uncommon requirement. I think the first thing to do is go look at the property and see if you can determine for yourself why it hasn't sold yet. Properties all have different reasons for not selling in a reasonable time to the local market. Having renters alone in most markets shouldn't be that big of a factor. I would suspect bad smells, nasty renters, or an unfavorable lease agreement exists.\"" }, { "docid": "536759", "title": "", "text": "How you can pay your rent is really up to your landlord. They are, however, unlikely to take a credit card, for at least two reasons. Firstly they are unlikely to have the means to take electronic payment Second, and more importantly, merchants get charged a percentage of the transaction. These fees can be quite high to them for premium cards like travel and gold cards; three, four or even five percent of the value of the transaction. This is sometimes why you see cash discounted pricing." }, { "docid": "563959", "title": "", "text": "It's doable, but there's a fair amount of risk involved. The biggest issue is that your roommates could move out. It's possible that they could have a falling out, get a job in a different city, or just move on. How difficult would it be to find another roommate? How many roommates can you lose and still afford to pay the mortgage, insurance, taxes, and all the rest of your living expenses? Even if you you retain all of your roommates until the mortgage is paid off, there's still some risk involved. If you were to lose your job, could you continue to make mortgage payments? Worst case scenario is that you could become unemployed for a time while home values in your State/City/neighborhood are crashing. Last, the position on landlord has the potential to be lucrative, but also comes with a fair amount of responsibility. It will be a drain on your time to maintain the house and to make sure you always have tenants. I know you said that your roommates are good about paying on time, but are you willing to evict a friend because they won't/can't pay rent? It's easier to ask the landlord for an extension on rent when you're friends. All that being said, I think that this idea is worth considering. My recommendation is that you consider every aspect of it, and proceed cautiously if you choose to do so." }, { "docid": "168453", "title": "", "text": "i would recommend that you establish a landlord/tenant relationship instead of joint ownership (ie 100% ownership stake for one of you vs 0% for the other). it is much cleaner and simpler. basically, one of you can propose a monthly rent amount and the other one can chose to be either renter or landlord. alternatively, you can both write down a secret rental price offer assuming you are the landlord, then pick the landlord who wrote down the smaller rental price. if neither of you can afford the down payment, then you can consider the renter's contribution an unsecured loan (at an agreed interest rate and payment schedule). if you must have both names on the financing, then i would recommend you sell the property (or refinance under a single name) as quickly as possible when the relationship ends (if not before), pay the renter back any remaining balance on the loan and leave the landlord with the resulting equity (or debt). in any case, if you expect the unsecured loan to outlive your relationship, then you are either buying a house you can't afford, or partnering on it with someone you shouldn't." }, { "docid": "222095", "title": "", "text": "Don't over analyze it - check with some local landlords that are willing to share some information and resources Then analyze the Worst Case Scenarios and the likelihood of them happening and if you could deal with it if it did happen Then Dive In - Real Estate is a long term investment so you have plenty of time to learn everything..... Most people fail.... because they fail to take the first leap of faith !!!" }, { "docid": "588612", "title": "", "text": "Disadvantage is that tenant could sue you for something, and in an unfavorable judgement they would have access to your house as property to possess. You could lose the house. Even if you make an LLC to hold the house, they'll either sue you or the LLC and either way you could lose the house. This might be why the landlord is moving to Florida where their house cannot be possessed in a judgement because of the state's strong homestead exemption ;)" }, { "docid": "560195", "title": "", "text": "\"Risk is the capital you have staked in pursuit of profit. The danger is that you lose what you have risked. For some bets (risks), you can get insurance to cover for losses. Now the \"\"game\"\" of Landlord and Tenant requires you to play fully by the rules set forth by your legislators. In your case, that is the legislators of the State of Texas. Without knowing those rules, you could be liable (open to civil prosecution) for violating those rules. Tenants could be savvy to those rules or savvy enough to hire someone, a lawyer, who knows those rules. As well, in the game of Landlord and Tenant, you must ascertain the creditworthiness of your would-be tenant. If the tenant fails to pay rent, that tenant can detain the residence. You will incur additional outlays to gain possession of your property (ownership in your rental). Now the game of Landlord vs Landlord is different. You can't pick up houses easily enough and even if you could, likely the expense of doing so could wipe out any would profits from having the house as a rental. So, in Landlord vs Landlord, you get constrained by where your rental sits. Thus you must forecast what will the neighborhood look like in five, ten, fifteen years.\"" }, { "docid": "487094", "title": "", "text": "\"The biggest question is do you want to be a landlord? There are a lot of ups and down to managing property from bad tenants to having to fix a water heater or replace a fridge. If you aren't interested in being a landlord, it is definitely a bad idea. If you do want to be a landlord, then the question is how close do you want to be to your tenants? What if they are up late making noise, etc.? What if they watch TV all night and you hear it through the walls? What is your plan? You ask if people have trouble \"\"sharing\"\" a house. If you are the landlord and the other party the tenant, then you aren't \"\"Sharing\"\", you are leasing. It's a different relationship with different strains.\"" } ]

[ { "docid": "565409", "title": "", "text": "As a landlord for 14 years with 10 properties, I can give a few pointers: be able and skilled enough to perform the majority of maintenance because this is your biggest expense otherwise. it will shock you how much maintenance rental units require. don't invest in real estate where the locality/state favors the tenant (e.g., New York City) in disputes. A great state is Florida where you can have someone evicted very quickly. require a minimum credit score of 620 for all tenants over 21. This seems to be the magic number that keeps most of the nightmare tenants out makes sure they have a job nearby that pays at least three times their annual rent every renewal, adjust your tenant's rent to be approximately 5% less than going rates in your area. Use Zillow as a guide. Keeping just below market rates keeps tenants from moving to cheaper options. do not rent to anyone under 30 and single. Trust me trust me trust me. you can't legally do this officially, but do it while offering another acceptable reason for rejection; there's always something you could say that's legitimate (bad credit, or chose another tenant, etc.) charge a 5% late fee starting 10 days after the rent is due. 20 days late, file for eviction to let the tenant know you mean business. Don't sink yourself too much in debt, put enough money down so that you start profitable. I made the mistake of burying myself and I haven't barely been able to breathe for the entire 14 years. It's just now finally coming into profitability. Don't get adjustable rate or balloon loans under any circumstances. Fixed 30 only. You can pay it down in 20 years and get the same benefits as if you got a fixed 20, but you will want the option of paying less some months so get the 30 and treat it like a 20. don't even try to find your own tenants. Use a realtor and take the 10% cost hit. They actually save you money because they can show your place to a lot more prospective tenants and it will be rented much sooner. Empty place = empty wallet. Also, block out the part of the realtor's agreement-to-lease where it states they keep getting the 10% every year thereafter. Most realtors will go along with this just to get the first year, but if they don't, find another realtor. buy all in the same community if you can, then you can use the same vendor list, the same lease agreement, the same realtor, the same documentation, spreadsheets, etc. Much much easier to have everything a clone. They say don't put all your eggs in one basket, but the reality is, running a bunch of properties is a lot of work, and the more similar they are, the more you can duplicate your work for free. That's worth a lot more day-to-day than the remote chance your entire community goes up in flames" } ]

[ { "docid": "587514", "title": "", "text": "You should be aware that many pubs in the London (indeed, the UK as a whole) are sold as a leasehold with a beer tie. This typically means you pay less rent for the building and premises, but must enter a contract with the Pub Company to buy their beer and day-to-day supplies. You have the legal option to instead pay market rent for some (but not all) Pub Cos, under certain conditions. If you go with leasehold, the landlord can usually close your pub at their will. This is becoming a quite common occurrence in the booming real estate market of London. While your interest will be in running a pub, the Pub Co's interest will be in getting change of use planning permission and selling it to a real estate developer." }, { "docid": "277603", "title": "", "text": "This situation is exactly why we have the concept of legal tender. Legal tender is a form of payment that must be accepted to settle a debt. Your friend is entitled to insist on paying the rent in cash — accepting any other form of payment is at the landlord’s discretion." }, { "docid": "361314", "title": "", "text": "\"I am surprised at the amount of work this contract wants done. I'd question if it's even legal given the high costs. I suspect it's only there to remind abusive tenants of responsibilities they already have in law for extraordinary abuse beyond ordinary wear-and-tear: they are already on the hook to repaint if they trash the paint (think: child writing on walls, happens a lot), and already need to fumigate (and a lot more) if they are a filth-type hoarder who brings in a serious infestation (happens a lot). The landlord can already go after these people for additional money beyond the deposit. But that's not you. So don't freak out about those clauses, until you talk to the landlord and see what he's really after. Almost certainly, he really wants a \"\"fit and ready to rent\"\" unit upon your departure, so he doesn't have to take the unit off the market for months fixing it. As long as that's done, there's no reasonable reason for further work -- a decent landlord wouldn't require that. Nor would a court, IMO. The trouble with living in a place for awhile is you become blind to its deficiencies. What's more, it's rather difficult to \"\"size up\"\" a unit as ready when it's still occupied by your stuff. A unit will look rather different when reduced to a bare room, without furniture and whatnot distracting you. Add to it a dose of vanity and it becomes hard to convince yourself of defects others will easily see. So, tread carefully here. If push comes to shove, first stop is whether it's even legal. Cities and states with heavy tenant populations tend to have much more detailed laws, and as a rule, they favor the tenant. Right off the bat, in most states the tenant is not responsible for ordinary wear-and-tear. In my opinion, 6 years of ordinary, exempt wear would justify a repaint, so that shouldn't be on the tenant at all. As for the fumigation, I'm not in Florida so I don't know the deal, maybe there's some special environmental issue there which somehow makes that reasonable, it sure wouldn't fly in CA. Again that assumes you're a reasonable prudent tenant, not a slob or hoarder. As for the pro carpet cleaning, that's par for the course in any of the tough rent control areas I've seen, so that's gotten a pass from the legislators. Though $600 seems awfully high. Other than that, you can argue the terms are \"\"unconscionable\"\" -- too much of a raw deal to even be fair. However, this will depend on the opinion of a judge. Hit or miss. I'm hoping your landlord will be happy to negotiate based on the good condition of the unit (which he may not know; landlords rarely visit tenant units unless they really need to.) You certainly should make the case that you make here; that the work is not really needed and it's prohibitive. Your best defense against unconscionable deals is don't sign them. Remember, you didn't know the guy when you initially signed... the now-objectionable language should have been a big red flag back then, saying this guy is epic evil, run screaming. (even if that turned out not to be true, you should't have hung around to find out.) You may have gotten lucky this time, but don't make that mistake again. Unless one of the above pans out, though... a deal is a deal. You gave your word. The powerful act here is to keep your word. Forgive me for getting ontological, but successful people say it creates success for them. And here's the thing. You have to read your contracts because you can't keep your word if you don't know what word you gave. It's a common mistake: thinking good business is trust, hope, faith, submission or giving your all. No. In business, you take the time to hammer out mutually beneficial (win-win) agreements, and you set them on paper to eliminate confusion, argument and stress in the future as memories fade and conditions change. That conflict resolution is how business partners remain friends, or at least professional colleagues.\"" }, { "docid": "478060", "title": "", "text": "\"The primary advantage of HFTs is their speed to act upon opportunities that exist for only fractions of a second. The reason why they are able to do this is because they invest heavily in hardware, custom software, and custom algorithms. Most of the fleeting advantage, as they all manage to top each other's hardware seemingly every other day, is from the hardware investment. To see the extremes that HFTs will go to invest in hardware, one might view this. It is highly likely that the trader with the market making algorithm could have been ignorant of the \"\"hide not slide\"\" order and missed out on many more opportunities while still being successful. Haim Bodek, who is very much against this order type, was not so lucky. If it was truly an investment bank then it was unlikely that they were actually front running, which is very illegal and easily possible with much more low tech means, since companies like Citadel handle most orders now, and they have not been successful in investment banking. The reality of HFT is slowly coming to light, that while HFT can provide extremely consistent returns with enormous sharpe ratios, the capital investment is equally enormous, and the amount of capital that can be employed is also as enormously limited. After all, the richest people on the planet are not HFT owners. Also, when it comes to time periods longer than 500ms, their results become very human.\"" }, { "docid": "569409", "title": "", "text": "\"Chris, this is an arbitrage question with a twist: you cannot treat the location you want to live objectively. For example, why not SoCal instead of Texas? Yes, SoCal's expensive but what if you account for the weather? This question is very interesting for me personally: something I am going to focus on myself, soon, as well. To the question at hand: it's very hard to get a close estimate of the price from a single source, say, a website. The cost of a house is always negotiable and there's no sticker price, and there begins your problems. However, there are some publicly available information which websites aggregate, see: http://www.city-data.com/ Also, some heuristics might help: Rent is at-least as expensive as the monthly mortgage, (property) taxes, HOA fees, etc. Smart people have told me this, and this also makes sense to me as the landlord is in this business to make some money after all. However, there are also other hidden costs of home ownership that I am not aware of in details (and which I craftily sidestepped in my \"\"etc\"\" above) that could put a rental to be \"\"cheaper\"\". One example that comes to mind is you as a tenant get to complain if the washer-dryer misbehaves and demand the landlord get you a new one (see how you wouldn't make a sound were you to own it however) Such a website to gauge rentals: http://www.rentometer.com/ Houses cost more where the median income is more. Again, you cannot be objective about this because smart people like to live around smart people (and pay for the privilege). Turn again to http://www.city-data.com/ to get this information Better weather is more expensive than not so good weather. In the article you linked, notice the ratio of homes in California. Yes, I know of people who sold off their family ranches in Vancouver and Seattle to buy homes in Orange Country. In short, there is a lot of information you would have to gather from multiple sources, and even then never be sure that you did your best! This also includes arbitrage, as you would like to \"\"come out ahead\"\" and while you are doing your research (and paying your rent), you want to invest your \"\"savings\"\" in instruments where you earn more than what you would have saved in a mortgage, etc. I would very much like to be refuted on every point and my answer be edited and \"\"made better\"\" as I need the same answers as you do :-D Feel free to comment, edit your question etc and I will act on feedback and help both of us (and future readers) out!\"" }, { "docid": "41356", "title": "", "text": "Deposit it in a business savings account. The following below show you some options you can choose from. Next you can invest it in the market i.e. shares, bonds etc. If you have a more risky side, can go for peer to peer lending. If you are feeling really lucky and want to invest in the long term, then buy a property as a buy-to-let landlord. There are loads of options, you only need to explore." }, { "docid": "181616", "title": "", "text": "Per Md. REAL PROPERTY Code Ann. § 8-203: (d) (1) (i) The landlord shall maintain all security deposits in federally insured financial institutions, as defined in § 1-101 of the Financial Institutions Article, which do business in the State. (ii) Security deposit accounts shall be maintained in branches of the financial institutions which are located within the State and the accounts shall be devoted exclusively to security deposits and bear interest. (iii) A security deposit shall be deposited in an account within 30 days after the landlord receives it. (iv) The aggregate amount of the accounts shall be sufficient in amount to equal all security deposits for which the landlord is liable. (2) (i) In lieu of the accounts described in paragraph (1) of this subsection, the landlord may hold the security deposits in insured certificates of deposit at branches of federally insured financial institutions, as defined in § 1-101 of the Financial Institutions Article, located in the State or in securities issued by the federal government or the State of Maryland. (ii) In the aggregate certificates of deposit or securities shall be sufficient in amount to equal all security deposits for which the landlord is liable. As such, one or more accounts at your preference; it's up to the bank how to treat the account, so it may be a personal account or it may be a 'commercial' account depending on how they treat it (but it must be separate from your personal funds). A CD is perhaps the easiest way to go, as it's not a separate account exactly but it's easily separable from your own funds (and has better interest). You should also note (further down on that page) that you must pay 3% interest, once per six months; so try to get an account that pays as close as possible to that. You likely won't get 3% right now even in a CD, so consider this as an expense (and you'll probably find many people won't take security deposits in many situations as a result)." }, { "docid": "401899", "title": "", "text": "\"I don't know much about New Zealand, but here are just some general thoughts on things to consider. The big difference between buying a house and investing in stocks or the like is that it is fairly easy to invest in a diversified array of stocks (via a mutual fund), but if you buy a house, you are investing in a single piece of property, so everything depends on what happens with that specific property. This in itself is a reason many people don't invest in real estate. Shares of a given company or mutual fund are fungible: if you buy into a mutual fund, you know you're getting the same thing everyone else in the fund is getting. But every piece of real estate is unique, so figuring out how much a property is worth is less of an exact science. Also, buying real estate means you have to maintain it and manage it (or pay someone else to do so). It's a lot more work to accurately assess the income potential of a property, and then maintain and manage the property over years, than it is to just buy some stocks and hold them. Another difficulty is, if and when you do decide to sell the property, doing so again involves work. With stocks you can pretty much sell them whenever you want (although you may take a loss). With a house you have to find someone willing to buy it, which can take time. So a big factor to consider is the amount of effort you're prepared to put into your investment. You mention that your parents could manage the property for you, but presumably you will still have to pay for maintenance and do some managing work yourself (at least discussing things with them and making decisions). Also, if you own the property for a long time your parents will eventually become too old to take care of it, at which point you'll have to rethink the management aspect. So that's sort of the psychological side of things. As for the financial, you don't mention selling the house at any point. If you never sell it, the only gain you get from it is the rent it brings in. So the main factor to consider when deciding whether to buy it as a rental is how much you can rent it for. This is going to be largely determined by where it is located. So from the perspective of making an investment the big question --- which you don't address in the info you provided --- is: how much can you rent this house for, and how much will you be able to rent it for in the future? There is no way to know this for sure, and the only way to get even a rough sense of it is to talk with someone who knows the local real estate market well (e.g., a broker, appraiser, or landlord). If the property is in an \"\"up-and-coming\"\" area (i.e., more people are going to move there in the future), rents could skyrocket; if it's in a backwater, rents could remain stagnant indefinitely. Basically, if you're going to buy a piece of real estate as a long-term investment, you need to know a lot about that property in order to make any kind of comparison with another investment vehicle like a mutual fund. If you already live in the area you may know some things already (like how much you might be able to rent it for). Even so, though, you should try to get some advice from trustworthy people who know the local real estate situation.\"" }, { "docid": "402757", "title": "", "text": "&gt;In the economic sense, investments really has nothing to do with capital or business investments then does it? Congratulations, you just figured out why monetarists and Keynesians are wrong. What actually matters is the quality of the investments that the money is making. An excess of currency won't create growth if the currency is invested in a derivative contract, since this is a zero-growth investment. A shortfall in currency won't always kill the economy, if rational investments are made (2nd half of the 19th century in the United States). On the other hand, [infrastructure](https://www.fhwa.dot.gov/policy/otps/060320a/forum.cfm) generally offers a much higher return on invested capital than the private market. So you see China's economy growing quickly for several decades due to investing in the right class of assets. This is the same thing the United States did to become an economic superpower: https://www.quora.com/What-is-the-American-school-of-economics https://en.wikipedia.org/wiki/American_School_(economics) https://en.wikipedia.org/wiki/American_System_(economic_plan)" }, { "docid": "137736", "title": "", "text": "\"A great deal of analysis on this question relies on misunderstandings of the market or noticing trends that happened at the same time but were not caused by each other. Without knowing your view, I'll just give the basic idea. The amount of active management is self-correcting. The reason people have moved out of actively managed funds is that the funds have not been performing well. Their objective is to beat their benchmarks by profiting as they correct mispricing. They are performing poorly because there is too much money chasing too few mispricings. That is why the actively managed industry is shrinking. If it gets small enough, presumably those opportunities will become more abundant and mispricing correction will become more profitable. Then money will flow back into active funds. Relevant active management may not be what a lay person is thinking of. At the retail level, we are observing a shift to passive funds, but there is still plenty of money in other places. For example, pension and endowment funds normally have an objective of beating a market benchmark like the Russell 3000. As a result they are constantly trying to find opportunities to invest in active management that really can outperform. They represent a great deal of money and are nothing like the \"\"buy and forget\"\" stereotype we sometimes imagine. Moreover, hedge funds and propreitary trading shops explicitly and solely try to correct mispricings. They represent a very, very large bucket of money that is not shrinking. Active retail mutual funds and individual investors are not as relevant for pricing as we might think. More trading volume is not necessarily a good thing, nor is it the measure of market quality. One argument against passive funds is that passive funds don't trade much. Yet the volume of trading in the markets has risen dramatically over time as a result of technological improvements (algorithmic traders, mostly). They have out-competed certain market makers who used to make money on inefficiencies of the market. Is this a good thing or a bad thing? Well, prices are more efficient now and it appears that these computers are more responsive to price-relevant information than people used to be. So even if trading volume does decrease, I see no reason to worry that prices will become less efficient. That's not the direction things have gone, even as passive investing has boomed. Overall, worries about passive investing rely on an assumption that there is not enough interest in and resources for making arbitrage profits to keep prices efficient. This is highly counterfactual and always will be. As long as people and institutions want money and have access to the markets, there will be plenty of resources allocated to price correction.\"" }, { "docid": "465256", "title": "", "text": "I used to own a few investment properties, so I'm pretty familiar with this. As MrChrister mentions, lenders see investment mortgages as higher risk. People who fall into financial trouble are much more likely to let their investment properties go than their personal residence. Consequently, the interest rates and downpayment requirements are generally higher. Typically a mortgage for an investment property will require 20% down, vs. as low as 3-5% down for a personal residence. With excellent credit and some shopping around, you could probably do 10% down. Interest rates are typically about a half-percent higher as well. You'll also find that the more investment properties you have, the harder it becomes to finance new ones. Banks look at debt-to-income ratios to determine if you are over extended. Typically banks like to see that your housing payments are less than 20% or so of your income. However, with rental properties, housing payments generally account for far more than 20% of your rental income. Other income you have can offset that, but after buying 2-3 houses or so, your DTI generally creeps into the range where lenders are uncomfortable lending to you anymore. This is why you'll find that many rental properties are bought on land contracts with owner financing rather than with mortgages." }, { "docid": "100867", "title": "", "text": "\"No. One of the key ideas behind a corporation is that an investor's liability is limited to the amount he invests, i.e. the amount of stock he buys. This is the primary reason why small businesses become corporations, even though one person owns 100% of the stock. Then if the business goes broke, he won't lose his house, retiretment fund, etc. He'll lose everything he had in the business, but at least there's a limit to it. (In some countries there are other ways to achieve the same results, like creating a \"\"limited liabililty company\"\", but that's another story.)\"" }, { "docid": "387700", "title": "", "text": "\"You are a \"\"strategic\"\" investor, which is to say that you are in the best position to evaluate the deal because you already live there. Others don't have this advantage going in, which is why they might not be inclined to do what you're doing. Your biggest advantage is that you know at least one tenant. In essence, you are your own \"\"tenant\"\" for the top floor You also presumably have a pretty good idea of the neighborhood. These are arguments for owning your own home, although it does get a bit trickier with a second tenant, whom you may not know. Do check credit and references, etc. You might ask the landlord why he wants to sell. Presumably it's because he wants to retire or move, and not a problem with the property. But it does no harm to ask.\"" }, { "docid": "26407", "title": "", "text": "\"I've been down the consolidation route too (of a handful of DC pensions; the DB ones I've not touched, and you would indeed need advice to move those around). What you should be comparing against is: what's the cheapest possible thing you could be doing? Monevators' online platform list will give you an idea of SIPP costs (if your pot is big enough and you're a buy-and-hold person, ATS' flat-fee model means costs can become arbitrarily close to zero percent), and if you're happy to be invested in something like Vanguard Lifestrategy, Target Retirement or vanilla index trackers then charges on those will be something like 0.1%-0.4%. Savings of 0.5-1.0% per year add up over pension saving timescales, but only you can decide whether whatever extra the adviser is offering vs. a more DIY approach is worth it for you. Are you absolutely sure that 0.75% pa fee isn't on top of whatever charges are built into the funds he'll invest you in? For the £1000 fee, advisers claim to have high costs per customer because of \"\"regulatory burdens\"\"; this is why there's talk of an \"\"advice gap\"\" these days: if you only have a small sum to invest, the fixed costs of advice become intolerable. IMHO, nutmeg are still quite expensive for what they offer too (although still probably cheaper than any \"\"advised\"\" route).\"" }, { "docid": "563959", "title": "", "text": "It's doable, but there's a fair amount of risk involved. The biggest issue is that your roommates could move out. It's possible that they could have a falling out, get a job in a different city, or just move on. How difficult would it be to find another roommate? How many roommates can you lose and still afford to pay the mortgage, insurance, taxes, and all the rest of your living expenses? Even if you you retain all of your roommates until the mortgage is paid off, there's still some risk involved. If you were to lose your job, could you continue to make mortgage payments? Worst case scenario is that you could become unemployed for a time while home values in your State/City/neighborhood are crashing. Last, the position on landlord has the potential to be lucrative, but also comes with a fair amount of responsibility. It will be a drain on your time to maintain the house and to make sure you always have tenants. I know you said that your roommates are good about paying on time, but are you willing to evict a friend because they won't/can't pay rent? It's easier to ask the landlord for an extension on rent when you're friends. All that being said, I think that this idea is worth considering. My recommendation is that you consider every aspect of it, and proceed cautiously if you choose to do so." }, { "docid": "131005", "title": "", "text": "NO. The legislation requires the landlord to deposit it in a bank. Check out pages 7-10 of the linked document. There is no mention of interest. The second clause, I believe, is probably for large landlords who hold hundreds of thousands of dollars of security. http://www.legislature.mi.gov/documents/publications/tenantlandlord.pdf Q4 Once collected, what must the landlord do with the security deposit? The landlord must either: a) Deposit the money with a regulated financial institution (e.g., bank), OR b) Deposit a cash bond or surety bond, to secure the entire deposit, with the Secretary of State. ( Note: If the landlord does this, he or she may use the money at any time, for any purpose.) The bond ensures that there is money available to repay the tenant’s security deposit" }, { "docid": "560195", "title": "", "text": "\"Risk is the capital you have staked in pursuit of profit. The danger is that you lose what you have risked. For some bets (risks), you can get insurance to cover for losses. Now the \"\"game\"\" of Landlord and Tenant requires you to play fully by the rules set forth by your legislators. In your case, that is the legislators of the State of Texas. Without knowing those rules, you could be liable (open to civil prosecution) for violating those rules. Tenants could be savvy to those rules or savvy enough to hire someone, a lawyer, who knows those rules. As well, in the game of Landlord and Tenant, you must ascertain the creditworthiness of your would-be tenant. If the tenant fails to pay rent, that tenant can detain the residence. You will incur additional outlays to gain possession of your property (ownership in your rental). Now the game of Landlord vs Landlord is different. You can't pick up houses easily enough and even if you could, likely the expense of doing so could wipe out any would profits from having the house as a rental. So, in Landlord vs Landlord, you get constrained by where your rental sits. Thus you must forecast what will the neighborhood look like in five, ten, fifteen years.\"" }, { "docid": "503742", "title": "", "text": "\"I have been a landlord in Texas for just over 3 years now. I still feel like a novice, but I will give you the benefit of my experience. If you are relying on rental properties for current income versus a long term return you are going to have to do a good job at shopping for bargains to get monthly cash flow versus equity growth that is locked up in the property until you sell it. If you want to pull a lot of cash out of a property on a regular basis you probably are going to have to get into flipping them, which is decidedly not passive investing. Also, it is easy to underestimate the expenses associated with rental properties. Texas is pretty landlord friendly legally, however it does have higher than usual property taxes, which will eat into your return. Also, you need to factor in maintenance, vacancy, tenant turnover costs, etc. It can add up to a lot more than you would expect. If you are handy and can do a lot of repairs yourself you can increase your return, but that makes it less of a passive investment. The two most common rules I have heard for initially evaluating whether an investment property is likely to be cash flow positive are the 1% and 50% rules. The 1% rule says the expected monthly rent needs to be 1% or greater of the purchase price of the house. So your hypothetical $150K/$10K scenario doesn't pass that test. Some people say this rule is 2% for new landlords, but in my experience you'd have to get lucky in Texas to find a house priced that competitively that didn't need a lot of work to get rents that high. The 50% rule says that the rent needs to be double your mortgage payment to account for expenses. You also have to factor in the hassle of dealing with tenants, the following are not going to happen when you own a mutual fund, but are almost inevitable if you are a landlord long enough: For whatever reason you have to go to court and evict a tenant. A tenant that probably lost their job, or had major medical issues. The nicest tenant you ever met with the cutest kids in the world that you are threatening to make homeless. Every fiber of your being wants to cut them some slack, but you have a mortgage to pay and can't set an expectation that paying the rent on time is a suggestion not a rule. or the tenant, who seemed nice at first, but now considers you \"\"the man\"\" decides to fight the eviction and won't move out. You have to go through a court process, then eventually get the Sheriff to come out and forcibly remove them from the property, which they are treating like crap because they are mad at you. All the while not paying rent or letting you re-let the place. The tenant isn't maintaining the lawn and the HOA is getting on your butt about it. Do you pay someone to mow the grass for them and then try to squeeze the money out of the tenant who \"\"never agreed to pay for that\"\"? You rent to a college kid who has never lived on their own and has adopted you as their new parent figure. \"\"The light in the closet went out, can you come replace the bulb?\"\" Tenants flat out lying to your face. \"\"Of course I don't have any pets that I didn't pay the deposit for!\"\" (Pics all over facebook of their kids playing with a dog in the \"\"pet-free\"\" house)\"" }, { "docid": "491049", "title": "", "text": "**Why are we collecting emails?** The email is for two purposes. (1) so we can let you know when challenges become available, and (2) so that we can send your payment, and contact the raffle winner. The survey will also ask about: investment experience, portfolio size, and education. This is crucial to interpreting the results scientifically. All data will be stored on a secured server, and **your personal information will never be shared with anyone.** Any data made available during publication will be fully anonymized according to best practices." } ]

[ { "docid": "345294", "title": "", "text": "There are two obvious cases in which your return is lower with a heavily leveraged investment. If a $100,000 investment of your own cash yields $1000 that's a 1% return. If you put in $50,000 of your own money and borrow $50,000 at 2%, you get a 0% return (After factoring in the interest as above.) If you buy an investment for $100,000 and it loses $1000, that's a -1% return. If you borrow $100,000 and buy two investments, and they both lose $1000, that's a -2% return." } ]

[ { "docid": "380753", "title": "", "text": "The below assessment is for primary residences as opposed to income properties. The truth is that with the exception of a housing bubble, the value of a house might outpace inflation by one or two percent. According to the US Census, the price of a new home per square foot only went up 4.42% between 1963 and 2008, where as inflation was 4.4%. Since home sizes increased, the price of a new home overall outpaced inflation by 1% at 5.4% (source). According to Case-Shiller, inflation adjusted prices increased a measly .4% from 1890-2004 (see graph here). On the other hand your down payment money and the interest towards owning that home might be in a mutual fund earning you north of eight percent. If you don't put down enough of a down payment to avoid PMI, you'll be literally throwing away money to get yourself in a home that could also be making money. Upgrades to your home that increase its value - unless you have crazy do-it-yourself skills and get good deals on the materials - usually don't return 100% on an investment. The best tend to be around 80%. On top of the fact that your money is going towards an asset that isn't giving you much of a return, a house has costs that a rental simply doesn't have (or rather, it does have them, but they are wrapped into your rent) - closing costs as a buyer, realtor fees and closing costs as a seller, maintenance costs, and constantly escalating property taxes are examples of things that renters deal with only in an indirect sense. NYT columnist David Leonhart says all this more eloquently than I ever could in: There's an interactive calculator at the NYT that helps you apply Leonhart's criteria to your own area. None of this is to say that home ownership is a bad decision for all people at all times. I'm looking to buy myself, but I'm not buying as an investment. For example, I would never think that it was OK to stop funding my retirement because my house will eventually fund it for me. Instead I'm buying because home ownership brings other values than money that a rental apartment would never give me and a rental home would cost more than the same home purchase (given 10 years)." }, { "docid": "570131", "title": "", "text": "\"Off the top of my head, I don't know of any publicly-traded companies that routinely earmark distributions as return of capital, but theoretically, it's certainly applicable to any publicly-traded company. The Wikipedia article gives one situation in which a publicly-traded company may use return of capital: Public business may return capital as a means to increase the debt/equity ratio and increase their leverage (risk profile). Since return of capital is a distribution, it shrinks the firm's equity, thus increasing its leverage. Investopedia also has an article, Dividend Facts You May Not Know, that gives an example of when return of capital might be used: Sometimes, especially in the case of a special, large dividend, part of the dividend is actually declared by the company to be a return of capital. In this case, instead of being taxed at the time of distribution, the return of capital is used to reduce the basis of the stock, making for a larger capital gain down the road, assuming the selling price is higher than the basis. For instance, if you buy shares with a basis of $10 each and you get a $1 special dividend, 55 cents of which is return of capital, the taxable dividend is 45 cents, the new basis is $9.45 and you will pay capital gains tax on that 55 cents when you sell your shares sometime in the future. A company may choose to earmark some or all of its distribution as return of capital in order to provide shareholders with a more beneficial tax treatment. The IRS describes this different tax treatment: Distributions that qualify as a return of capital are not dividends. A return of capital is a return of some or all of your investment in the stock of the company. A return of capital reduces the basis of your stock. These distributions don't necessarily count as taxable income, except in some instances: Once the basis of your stock has been reduced to zero, any further non-dividend distribution is capital gain. The IRS also states: A distribution generally qualifies as a return of capital if the corporation making the distribution does not have any accumulated or current year earnings and profits. In this case, the firm is lowering its equity because it's paying distributions out of that equity instead of accumulated earnings/profits. A company may use return of capital to maintain a distribution even in times of financial difficulty. In the context of closed-end funds, however, return of capital can be much more complicated and can affect the fund's performance and reputation in numerous ways. Also, JB King is correct in cautioning you that \"\"return of capital\"\" is not the same thing as \"\"return on capital*. The latter is a method for valuing a company and determining \"\"how efficient a company is where it comes to using its resources.\"\" (to quote JB King's comment again).\"" }, { "docid": "522619", "title": "", "text": "\"The Trustee has allowed me to act as his \"\"agent\"\", continuing to pay bills, and take care of much of the administrative affairs for my mother's estate since I did all of it for years before she passed away. I was not paid for any of this work. ... The expenses were more than $30K last year, and there is still a punch list to go this year. The trust should reimburse your expenses and deduct them on the trust tax return. Since the Trust owned the property in 2015, and I will receive ownership this month, can last year's expenses incurred for the Trust be deducted again future income for my property this year? Not exactly. The trust will file its own tax return and will report the income/loss attributed to the beneficiaries per the trust rules. What is attributed to you will flow to your Schedule E. From there you own it and if it is a passive activity where the loss is limited - you can carry it forward and offset with future gain. The trustee will have to deal with all the paperwork. Do 1099-misc forms need to be filed for the contractors who worked to get it ready for rental? It is my understanding that since 2010 (and before 2010) landlords who are not in real-estate trade or business are not required to send out 1099. But it won't hurt if you do, also. In any case - for all of these issues you should talk to a tax adviser (EA/CPA licensed in your State).\"" }, { "docid": "85229", "title": "", "text": "Insurance - get estimate from an insurance agent who works with policies for commercial real estate. See comments below regarding incorporation. Taxes - if this was basic income for a simple LLC, estimating 25-40% and adjusting over time might work. Rental property is a whole different prospect. Financial experts who specialize in rental properties would be a good source of advice, and worth the cost. See below regarding incorporating. Real estate appreciation - not something you can count on for developed property. Appreciation used to be almost guaranteed to at least keep up with inflation. Now property values are not even guaranteed to go up. Never have been but the general rule was improved real estate in good repair appreciated in price. Even if property values increase over time, rental properties depreciate. In fact, for rental properties, you can claim a certain rate of depreciation over time as an expense on taxes. This depreciation could mean selling for less than you paid for the property after a number of years, and owing capital gains taxes, since you would owe the difference between the depreciated value and the sale price. Related to taxes are local codes. Some areas require you to have a property management license to handle buildings with more than a certain number of units. If you are going to own rental properties, you should protect your private financial life by incorporating. Form a company. The company will own the property and hire any maintenance people or property managers or security staff or any similar employment activities. The company takes out the insurance and pays taxes. The company can pay you a salary. So, bottom line, you can have the company pay all the expenses and take all the risks. Then, assuming there's any money left after expenses, the company can pay you a manager's salary. That way if the worst happens and a tenant breaks their hip in the shower and sues you for ONE MILLION DOLLARS and wins, the company folds and you walk away. You might even consider two companies. One to own the property and lease it to a property management company. The property management company can then go bankrupt in case of some sort of liability issue, in which case you still keep the property, form a new management company, repaint and rename the property and move on. TL;DR: Get insurance advice from insurance agent before you buy. Same for taxes from an accountant. Get trained as a property manager if your local codes require it (might be a good idea anyway). Incorporate and have the company take all the risks." }, { "docid": "578597", "title": "", "text": "You apparently assume that pouring money into a landlord's pocket is a bad thing. Not necessarily. Whether it makes sense to purchase your own home or to live in a rental property varies based on the market prices and rents of properties. In the long term, real estate prices closely follow inflation. However, in some areas it may be possible that real estate prices have increased by more than inflation in the past, say, 10 years. This may mean that some (stupid) people assume that real estate prices continue to appreciate at this rate in the future. The price of real estates when compared to rents may become unrealistically high so that the rental yield becomes low, and the only reasonable way of obtaining money from real estate investments is price appreciation continuing. No, it will not continue forever. Furthermore, an individual real estate is a very poorly diversified investment. And a very risky investment, too: a mold problem can destroy the entire value of your investment, if you invest in only one property. Real estates are commonly said to be less risky than stocks, but this applies only to large real estate portfolios when compared with large stock portfolios. It is easier to build a large stock portfolio with a small amount of money to invest when compared to building a large real estate portfolio. Thus, I would consider this: how much return are you going to get (by not needing to pay rent, but needing to pay some minor maintenance costs) when purchasing your own home? How much does the home cost? What is the annual return on the investment? Is it larger than smaller when compared to investing the same amount of money in the stock market? As I said, an individual house is a more risky investment than a well-diversified stock portfolio. Thus, if a well-diversified stock portfolio yields 8% annually, I would demand 10% return from an individual house before considering to move my money from stocks to a house." }, { "docid": "584304", "title": "", "text": "\"You don't state a long term goal for your finances in your message, but I'm going to assume you want to retire early, and retire well. :-) any other ideas I'm missing out on? A fairly common way to reach financial independence is to build one or more passive income streams. The money returned by stock investing (capital gains and dividends) is just one such type of stream. Some others include owning rental properties, being a passive owner of a business, and producing goods that earn long-term royalties instead of just an immediate exchange of time & effort for cash. Of these, rental property is probably one of the most well-known and easiest to learn about, so I'd suggest you start with that as a second type of investment if you feel you need to diversify from stock ownership. Especially given your association with the military, it is likely there is a nearby supply of private housing that isn't too expensive (so easier to get started with) and has a high rental demand (so less risk in many ways.) Also, with our continued current low rate environment, now is the time to lock-in long term mortgage rates. Doing so will reap huge benefits as rates and rents will presumably rise from here (though that isn't guaranteed.) Regarding the idea of being a passive business owner, keep in mind that this doesn't necessarily mean starting a business yourself. Instead, you might look to become a partner by investing money with an existing or startup business, or even buying an existing business or franchise. Sometimes, perfectly good business can be transferred for surprisingly little down with the right deal structure. If you're creative in any way, producing goods to earn long-term royalties might be a useful path to go down. Writing books, articles, etc. is just one example of this. There are other opportunities depending on your interests and skill, but remember, the focus ought to be on passive royalties rather than trading time and effort for immediate money. You only have so many hours in a year. Would you rather spend 100 hours to earn $100 every year for 20 years, or have to spend 100 hours per year for 20 years to earn that same $100 every year? .... All that being said, while you're way ahead of the game for the average person of your age ($30k cash, $20k stocks, unknown TSP balance, low expenses,) I'm not sure I'd recommend trying to diversify quite yet. For one thing, I think you need to keep some amount of your $30k as cash to cover emergency situations. Typically people would say 6 months living expenses for covering employment gaps, but as you are in the military I don't think it's as likely you'll lose your job! So instead, I'd approach it as \"\"How much of this cash do I need over the next 5 years?\"\" That is, sum up $X for the car, $Y for fun & travel, $Z for emergencies, etc. Keep that amount as cash for now. Beyond that, I'd put the balance in your brokerage and get it working hard for you now. (I don't think an average of a 3% div yield is too hard to achieve even when picking a safe, conservative portfolio. Though you do run the risk of capital losses if invested.) Once your total portfolio (TSP + brokerage) is $100k* or more, then consider pulling the trigger on a second passive income stream by splitting off some of your brokerage balance. Until then, keep learning what you can about stock investing and also start the learning process on additional streams. Always keep an eye out for any opportunistic ways to kick additional streams off early if you can find a low cost entry. (*) The $100k number is admittedly a rough guess pulled from the air. I just think splitting your efforts and money prior to this will limit your opportunities to get a good start on any additional streams. Yes, you could do it earlier, but probably only with increased risk (lower capital means less opportunities to pick from, lower knowledge levels -- both stock investing and property rental) also increase risk of making bad choices.\"" }, { "docid": "573301", "title": "", "text": "\"The buy-to-rent investment bubble created (in some markets) a large number of new housing starts often exceeding the available demand. Since people were investing in the capital gain, they didn't mind whether a place was rented or not. Many places stood empty at the prices investors wished to charge. In the UK where building restrictions are so dire that few new houses can be built, new house production is less than market demand which keeps up rental prices. There just isn't any stock. In the US, where construction is more liberal, rental prices can fall as new stock enters the market. A driver will be where the sales market dries up and owners must rent to cover at least some of their mortgage losses. Or, as Joel points out, if a major employer which dominates a small town, leaves. Many old industrial towns feature both low rentals and plenty of empty, low-priced property. Liverpool, in the UK, features entire empty neighbourhoods all boarded up. If you're looking to track metrics on this simply look at migration patterns. Where large numbers of people are moving \"\"towards\"\" prices (and rentals) will rise. Where people are moving \"\"away\"\" all prices fall.\"" }, { "docid": "320442", "title": "", "text": "\"The way to resolve your dilemma is to consult the price-to-rent ratio of the property. According to smartasset.com: The price-to-rent ratio is a measure of the relative affordability of renting and buying in a given housing market. It is calculated as the ratio of home prices to annual rental rates. So, for example, in a real estate market where, on average, a home worth $200,000 could rent for $1000 a month, the price-rent ratio is 16.67. That’s determined using the formula: $200,000 ÷ (12 x $1,000). Smartasset.com also goes on to give a table comparing different cities' price-to-rent ratio and then claim that the average price-to-rent ratio is currently 19.21. If your price-to-rent ratio is lower than 19.21, then, yes, your rents are more expensive than the average house. Smartasset.com claims that a high price-to-rent ratio is an argument in favor of tenants \"\"renting\"\" properties while a low price-to-rent ratio favors people \"\"buying\"\" (either to live in the property or to just rent it out to other people). So let's apply the price-to-rent ratio formula towards the properties you just quoted. There's a specific house I could buy for 190 (perhaps even less) that rents for exactly 2000 / month. 190K/(2000 * 12) = 7.92 There's a house for sale asking 400 (been on the market 2 yrs! could probably get for 350) which rents for 2800 /month. (400K)/(2800*12) = 11.90 (350K)/(2800*12) = 10.42 One can quite easily today buy a house for 180k-270k that would rent out for 1700-2100 / month. Lower Bound: (180K)/(1700*12) = 8.82 Upper Bound: (270K)/(2100*12) = 10.71 Even so, the rental returns here seem \"\"ridiculously high\"\" to me based on other markets I've noticed. Considering how the average price-to-rent ratio is 19.21, and your price-to-rent ratio ranges from 7.92 to 11.90, you are indeed correct. They are indeed \"\"ridiculously high\"\". Qualification: I was involved in real estate, and used the price-to-rent ratio to determine how long it would take to \"\"recover\"\" a person's investment in the property. Keep in mind that it's not the only thing I care about, and obviously the price-to-rent ratio tends to downplay expenses involved in actually owning properties and trying to deal with periods of vacancy. There's also the problem of taking into account demand as well. According to smartasset.com, Detroit, MI has the lowest price-to-rent ratio (with 6.27), which should suggest that people should buy properties immediately in this city. But that's probably more of a sign of people not wanting to move to Detroit and bid up the prices of properties. EDIT: I should also say that just because the properties are \"\"ridiculously expensive\"\" right now doesn't mean you should expect your rents to decrease. Rather, if rents keep staying at their current level, I'd predict that the property values will slowly increase in the future, thereby raising the price-to-rent ratio to 'non-ridiculous' mode.\"" }, { "docid": "248448", "title": "", "text": "\"You are suggesting that a 1% return per month is huge. There are those who suggest that one should assume (a rule of thumb here) that you should assume expenses of half the rent. 6% per year in this case. With a mortgage cost of 4.5% on a rental, you have a forecast profit of 1.5%/yr. that's $4500 on a $300K house. If you buy 20 of these, you'll have a decent income, and a frequently ringing phone. There's no free lunch, rental property can be a full time business. And very lucrative, but it's rarely a slam dunk. In response to OP's comment - First, while I do claim to know finance fairly well, I don't consider myself at 'expert' level when it comes to real estate. In the US, the ratio varies quite a bit from area to area. The 1% (rent) you observe may turn out to be great. Actual repair costs low, long term tenants, rising home prices, etc. Improve the 1.5%/yr to 2% on the 20% down, and you have a 10% return, ignoring appreciation and principal paydown. And this example of leverage is how investors seem to get such high returns. The flip side is bad luck with tenants. An eviction can mean no rent for a few months, and damage that needs fixing. A house has a number of long term replacement costs that good numbers often ignore. Roof, exterior painting, all appliances, heat, AC, etc. That's how that \"\"50% of rent to costs\"\" rule comes into play.\"" }, { "docid": "509197", "title": "", "text": "\"There are five main drivers to real estate returns: Income (cash flow from rental payments); Depreciation (as an expense that can be used to reduce taxes); Equity (the gradual paydown of the mortgage the increases underlying equity in the property); Appreciation (any increase in the overall value of the property); Leverage (the impact of debt financing on the deal, increasing the effective \"\"cash-on-cash\"\" return). (Asset Rover has a detailed walk-through of the components, and a useful comparison to stocks) So interest rates are certainly a component (as they increase the expenses), but they are just one factor. Depending on a particular market's conditions, appreciation or rent increases could offset or (exceed) any increase in the interest expense. My own experience is mostly with non-listed REITs (including Reg A+ investments like the ones from Fundrise) and commercial syndicates, and for right now in both cases there's plenty of capital chasing yield to go around (and in fact competition among new funding sources like Reg D and Reg A+ platforms seems to be driving down borrowing rates as platforms compete both for borrowers and for investors). Personally I pay more attention to where each local market (and the broader national market) is along the ~18-year real estate cycle (spoiler: the last trough was 2008...). Dividend Capital puts out a quarterly report that's super useful.\"" }, { "docid": "69058", "title": "", "text": "\"That ain't nothing. It's really easy to get \"\"whipped up\"\" into a sense of entitlement, and forget to be grateful for what you do have. If this house doesn't exist, what would his costs of housing be elsewhere? Realistically. Would landlords rent to him? Would other bankers lend him money to buy a house? Would those costs really be any better? What about the intangible benefits like not having any landlord hassles or having a good relationship with the neighbors? It's entirely possible he has a sweet deal here, and just doesn't make enough money. If your credit rating is poor, your housing options really suck. Banks won't lend you money for a house unless you have a huge ton of upfront cash. Most landlords won't rent to you at all, because they are going to automated scoring systems to avoid accusations of racism. In this day and age, there are lots of ways to make money with a property you own. In fact, I believe very firmly in Robert Allen's doctrine: Never sell. That way you avoid the tens of thousands of dollars of overhead costs you bear with every sale. That's pure profit gone up in smoke. Keep the property forever, keep it working for you. If he doesn't know how, learn. To \"\"get bootstrapped\"\" he can put it up on AirBnB or other services. Or do \"\"housemate shares\"\". When your house is not show-condition, just be very honest and relatable about the condition. Don't oversell it, tell them exactly what they're going to get. People like honesty in the social sharing economy. And here's the important part: Don't booze away the new income, invest it back into the property to make it a better money-maker - better at AirBnB, better at housemate shares, better as a month-to-month renter. So it's too big - Is there a way to subdivide the unit to make it a better renter or AirBnB? Can he carve out an \"\"in-law unit\"\" that would be a good size for him alone? If he can keep turning the money back into the property like that, he could do alright. This is what the new sharing economy is all about. Of course, sister might show up with her hand out, wanting half the revenue since it's half her house. Tell her hell no, this pays the mortgage and you don't! She deserves nothing, yet is getting half the equity from those mortgage payments, and that's enough, doggone it! And if she wants to go to court, get a judge to tell her that. Not that he's going to sell it, but it's a huge deal. He needs to know how much of his payments on the house are turning into real equity that belongs to him. \"\"Owning it on paper\"\" doesn't mean you own it. There's a mortgage on it, which means you don't own all of it. The amount you own is the value of the house minus the mortgage owed. This is called your equity. Of course a sale also MINUS the costs of bringing the house up to mandatory code requirements, MINUS the cost of cosmetically making the house presentable. But when you actually sell, there's also the 6% Realtors' commission and other closing costs. This is where the mortgage is more than the house is worth. This is a dangerous situation. If you keep the house and keep paying the mortgage all right, that is stable, and can be cheaper than the intense disruption and credit-rating shock of a foreclosure or short sale. If sister is half owner, she'll get a credit burn also. That may be why she doesn't want to sell. And that is leverage he has over her. I imagine a \"\"Winter's bone\"\" (great movie) situation where the family is hanging on by a thread and hasn't told the bank the parents died. That could get very complex especially if the brother/sister are not creditworthy, because that means the bank would simply call the loan and force a sale. The upside is this won't result in a credit-rating burn or bankruptcy for the children, because they are not owners of the house and children do not inherit parents' debt.\"" }, { "docid": "207815", "title": "", "text": "You will find Joe.E, that rents have increased considerably over the last 4 to 5 years in Australia. You can probably achieve rental yields of above 5% more than 20km from major Cities, however closer to cities you might get closer to 5% or under. In Western Sydney, we have been able to achieve rental yields close to 7%. We bought mainly in 2007 and 2008 when no one was buying and we were getting properties for 15% to 20% below market rates. As we bought cheap and rents were on the increase we were able to achieve higher rental yields. An example of one particular deal where we bought for $225K and rented for $300/wk giving us a yield of 6.9%. The rent is now $350/wk giving us a current yield of 8%, and with our interest rate at 6.3% and possibly heading down further, this property is positively geared and pays for itself plus provides us with some additional income. All our properties are yielding between 7.5% to 8.5% and are all positively geared. The capital gains might not be as high as with properties closer to the city, but even if we stopped working we wouldn't have to sell as they all provide us income after paying all expenses on associated with the properties. So in answer to your question I would be aiming for a property with a yield above 5% and preferably above 6%, as this will enable your property/ies to be positively geared at least after a couple of years if not straight away." }, { "docid": "286017", "title": "", "text": "You don't start out buying a shopping mall, you have to work up to it. You can start with any amount and work up to a larger amount. For me, I saved 30% of my salary(net), investing in stocks for 8 years. It was tough to live on less, but I had a goal to buy passive income. I put down this money to buy 3 houses, putting 35% down and maintaining enough cash to make 5 years of payments. I rented out the houses making a cap of 15%. The cap is the net payment per year / cost of the property, where the net accounts for taxes and repairs. I did not spend any of the profits, but I did start saving less salary. After 5 years of appreciation, mortgage payments and rental profit, I sold one house to get a loan for a convenience store. Buildings go on the market all the time, it takes 14 years to directly recoup an investment at a 7% cap, which is the average for a commercial property sale. Many people cash out for this reason, it's slow, but steady growth, though the earnings on property appreciation is a nice bonus. Owning real estate is a long term game, after a long time of earning, you can reinvest, but it comes with the risk of bad or no tenants. You can start both slower and smaller, just make sure you're picking up assets, not liabilities. Like investing in cars is generally bad unless you are sure it will appreciate." }, { "docid": "117509", "title": "", "text": "What kind of financial analysis would make you comfortable about this decision? The HELOC and ARM are the biggest red flags to me in your current situation. While I don't expect interest rates to skyrocket in the near future, they introduce an interest rate risk that is easy to get rid of. Getting rid of the HELOC and converting to a fixed mortgage would be my first priority. If you also want to upgrade to a new home at the same time (meaning buy a new home contingent on the sale of your first, paying off the HELOC and mortgage), that's fine, but make sure that you can comfortably afford the payment on a fixed-rate mortgage with at least 20% down. I would not take additional cash out of your equity just to save it. You're going to pay more in interest that you're going to get in savings. From there things get trickier. While many people would keep the first property on a mortgage and rent it out, I am not willing to be a landlord for a part-time job, especially when the interest on the mortgage gouges my return on the rent. PLus leverage increases the risks as well - all it takes is to go one or two months without rent and you can find yourself unable to make a mortgage payment, wrecking your credit and possibly risking foreclosure. So my options in order of precedence would be: At what point does it make sense to become a landlord? The complicated answer is when the benefits (rent, appreciation) relative to the costs (maintenance, interest, taxes, etc.) and risks (lost rent, bad renters, home value variance) give you a better return that you could find in investments of similar risk. The simple answer is when you can pay cash for it. That takes interest and lost rent out of the equation. Again, some are willing to take those risks and pay 20% down on rental property. Some are able to make it work. Some of those go broke or lose their properties. when calculating the 20% down of a new property, does that need to be liquid funds, or can that be based on the value of the home you are selling You can make the purchase of the new home contingent on the sale of the first if you need to get the equity out of it to make the 20%. Do NOT refinance the first just to pull out the equity to make a down payment. It's not worth the fees of a refinance." }, { "docid": "201272", "title": "", "text": "Log-returns are very commonly used in financial maths, especially quantitative finance. The important property is that they're symmetrical around 0 with respect to addition. This property makes it possible to talk about an average return. For instance, if a stock goes down 20% over a period of time, it has to gain 25% to be back where you started. For the log-return on the other hand the numbers are 0.223 down over a period of time, and 0.223 up to get you back to square 1. In this sense, you can simply take an arithmetic average and it makes sense. You can freely add up or subtract values on the log-return scale, like log-interest rates or log-inflation rates. Whereas the arithmetic mean of (non-log) returns is simply meaningless: A stock with returns -3% and +3% would have 0% on average, when in fact the stock has declined in price? The correct approach on direct price-returns would be to take a different mean (e.g. geometric) to get a decent average. And yet it will be hard to incorporate other information, like subtracting the risk-free rate or the inflation rate to get rate-adjusted average returns. In short: Log-returns are easier to handle computationally, esp. in bulk, but non-log-returns are easier to comprehend/imagine as a number of their own." }, { "docid": "331925", "title": "", "text": "\"There are many people who have deductions far above the standard deduction, but still don't itemize. That's their option even though it comes at a cost. It may be foolish, but it's not illegal. If @littleadv citation is correct, the 'under penalty of perjury' type issue, what of those filers who file a Schedule A but purposely leave off their donations? I've seen many people discuss charity, and write that they do not want to benefit in any way from their donation, yet, still Schedule A their mortgage and property tax. Their returns are therefore fraudulent. I am curious to find a situation in which the taxpayer benefits from such a purposeful oversight, or, better still, a cited case where they were charged with doing so. I've offered advice on filings return that wasn't \"\"truthful\"\". When you own a stock and cannot find cost basis, there are times that you might realize the basis is so low that just entering zero will cost you less than $100 in extra tax. You are not truthful, of course, but this kind of false statement isn't going to lead to any issue. If it gets noticed within an audit, no agent is going to give it more than a moment of time and perhaps suggest, \"\"you didn't even know the year it was bought?\"\" but there would be no consequence. My answer is for personal returns, I'm sure for business, accuracy to the dollar is actually important.\"" }, { "docid": "486243", "title": "", "text": "To me this sounds like a transaction, where E already owns a company worth 400k and can therefore pocket the money from D and give D 25% of the profits every year. There is nothing objective (like a piece of paper) that states the company is worth 400K. It is all about perceived value. Some investors may think it is worth something because of some knowledge they may have. Heck, the company could be worth nothing but the investor could have some sentimental value associated to it. So is it actually the case that E's company is worth 400k only AFTER the transaction? It is worth what someone pays for it when they pay for it. I repeat- the 400K valuation is subjective. In return the investor is getting 25% ownership of the product or company. The idea is that when someone has ownership, they have a vested interest in it being successful. In that case, the investor will do whatever he/she can to improve the chances of success (in addition to supplying the 100K capital). For instance, the investor will leverage their network or perhaps put more money into it in the future. Is the 100k added to the balance sheet as cash? Perhaps. It is an asset that may later be used to fund inventory (for instance). ... and would the other 300k be listed as an IP asset? No. See what I said about the valuation just being perception. Note that the above analysis doesn't apply to all Dragons Den deals. It only applies to situations where capital is exchanged for ownership in the form of equity." }, { "docid": "246624", "title": "", "text": "\"First of all, the annual returns are an average, there are probably some years where their return was several thousand percent, this can make a decade of 2% a year become an average of 20% . Second of all, accredited investors are allowed to do many things that the majority of the population cannot do. Although this is mostly tied to net worth, less than 3% of the US population is registered as accredited investors. Accredited Investors are allowed to participate in private offerings of securities that do not have to be registered with the SEC, although theoretically riskier, these can have greater returns. Indeed a lot of companies that go public these days only do so after the majority of the growth potential is done. For example, a company like Facebook in the 90s would have gone public when it was a million dollar company, instead Facebook went public when it was already a 100 billion dollar company. The people that were privileged enough to be ALLOWED to invest in Facebook while it was private, experienced 10000% returns, public stock market investors from Facebook's IPO have experienced a nearly 100% return, in comparison. Third, there are even more rules that are simply different between the \"\"underclass\"\" and the \"\"upperclass\"\". Especially when it comes to leverage, the rules on margin in the stock market and options markets are simply different between classes of investors. The more capital you have, the less you actually have to use to open a trade. Imagine a situation where a retail investor can invest in a stock by only putting down 25% of the value of the stock's shares. Someone with the net worth of an accredited investor could put down 5% of the value of the shares. So if the stock goes up, the person that already has money would earn a greater percentage than the peon thats actually investing to earn money at all. Fourth, Warren Buffett's fund and George Soros' funds aren't just in stocks. George Soros' claim to fame was taking big bets in the foreign exchange market. The leverage in that market is much greater than one can experience in the stock market. Fifth, Options. Anyone can open an options contract, but getting someone else to be on the other side of it is harder. Someone with clout can negotiate a 10 year options contract for pretty cheap and gain greatly if their stock or other asset appreciates in value much greater. There are cultural limitations that prompt some people to make a distinction between investing and gambling, but others are not bound by those limitations and can take any kind of bet they like.\"" }, { "docid": "580292", "title": "", "text": "No. This logic is dangerous. The apples to apples comparison between renting and buying should be between similar living arrangements. One can't (legitimately) compare living in a 600 sq ft studio to a 3500 sq ft house. With the proposal you offer, one should get the largest mortgage they qualify for, but that can result in a house far too big for their needs. Borrowing to buy just what you need makes sense. Borrowing to buy a house with rooms you may never visit, not a great idea. By the way, do the numbers. The 30 year rate is 4%. You'd need a $250,000 mortgage to get $10,000 in interest the first year, that's a $312,000 house given an 80% loan. On a median income, do you think it makes sense to buy a house twice the US median? Last, a portion of the tax savings is 'lost' to the fact that you have a standard deduction of nearly $6,000 in 2012. So that huge mortgage gets you an extra $4000 in write-off, and $600 back in taxes. Don't ever let the Tax Tail wag the Investing Dog, or in this case the House Dog. Edit - the investment return on real estate is a hot topic. I think it's fair to say that long term one must include the rental value of the house in calculating returns. In the case of buying of way-too-big house, you are not getting the return, it's the same as renting a four bedroom, but leaving three empty. If I can go on a bit - I own a rental, it's worth $200K and after condo fee and property tax, I get $10K/yr. A 5% return, plus whatever appreciation. Now, if I lived there, I'd correctly claim that part of my return is the rental value, the rent I don't pay elsewhere, so the return to me is the potential growth as well as saved rent. But if the condo rents for $1200, and I'd otherwise live in a $600 apartment with less space, the return to me is lost. In my personal case, in fact, I bought a too big house. Not too big for our paycheck, the cost and therefore the mortgage were well below what the bank qualified us for. Too big for the need. I paid for two rooms we really don't use." } ]

[ { "docid": "297764", "title": "", "text": "\"Leverage means you can make more investments with the same amount of money. In the case of rental properties, it means you can own more properties and generate more rents. You exchange a higher cost of doing business (higher interest fees) and a higher risk of total failure, for a larger number of rents and thus higher potential earnings. As with any investment advice, whenever someone tells you \"\"Do X and you are guaranteed to make more money\"\", unless you are a printer of money that is not entirely true. In this case, taking more leverage exposes you to more risk, while giving you more potential gain. That risk is not only on the selling front; in fact, for most small property owners, the risk is primarily that you will have periods of time of higher expense or lower income. These can come in several ways: If you weather these and similar problems, then you will stand to make more money using higher leverage, assuming you make more money from each property than your additional interest costs. As long as you're making any money on your properties this is likely (as interest rates are very low right now), but making any money at all (above and beyond the sale value) may be challenging early on. These sorts of risks are magnified for your first few years, until you've built up a significant reserve to keep your business afloat in downturns. And of course, any money in a reserve is money you're not leveraging for new property acquisition - the very same trade-off. And while you may be able to sell one or more properties if you did end up in a temporarily bad situation, you also may run into 2008 again and be unable to do so.\"" } ]

[ { "docid": "75132", "title": "", "text": "Many Web sites and articles warn against buying former rental cars, because people renting these cars often mistreat them. Rental cars are typically driven by people over 25, these are typically people with some financial means (air travel, credit card). Additionally, rental cars are subject to frequent inspection and likely to be on tighter maintenance schedules than many owners would keep. So while some people may drive a rental harder than they would their own car, it's not typical, and not likely to result in some hidden damage that makes a rental less desirable (all else being equal) on the used-car market. Does the fact that they sell the car mean during this time suggest that they know the car's cost of further maintenance or other costs will be higher? Or is there another reason they sell at this time which, has a calculated advantage to them, but which is less than idea statistically for me, the purchaser? Rental companies buy at incredible volumes, as such, some manufacturers have programs where they will buy back used cars from the rental company at a set price and/or time. Other incentives are guaranteed depreciation, wherein the manufacturer will make up the difference if the used vehicle doesn't sell for a set percentage of it's purchase price after a set amount of time. Outside of these incentive programs, rental companies also get substantial volume discounts, and they typically are buying base models which hold value better than their higher-trim counterparts (according to KBB market analyst). So the conventional wisdom about depreciation doesn't really apply. The timing of their sales is primarily based on their purchasing arrangements and their desire to keep an up to date fleet, not on projected maintenance/repair costs. The best you can do with any used-car purchase is to test-drive, get a pre-purchase inspection, and review whatever history is available." }, { "docid": "140653", "title": "", "text": "There are certain situations where you could legally pay yourself rent, but it'd be in the context of multiple business entities interacting, never in the context of an individual renting their own property. Even if you could, any rent paid to yourself would count as rental income, so there'd be no benefit. Edit: I was hunting for examples where it might be acceptable, and didn't, but I found a good explanation as to why it is not acceptable from Brandon Hall on a BiggerPockets post: To get technical, you will be going up against the Economic Substance Doctrine which states that a transaction has economic substance if: (1) the transaction changes in a meaningful way (apart from Federal income tax effects) the taxpayer’s economic position; and (2) the taxpayer has a substantial purpose (apart from Federal income tax effects) for entering into such transaction. By transferring your primary residence into a LLC, you would not be changing your economic position. Further, you do not have a substantial purpose for entering into such transaction other than to simply avoid paying federal income taxes. So it might make sense if multiple people owned the LLC that owned the property you wanted to rent, and there are instances where company X owns holding company Y that owns an office building that company X rents space in. But if you're the sole player in the LLC's then it sounds like a no-go." }, { "docid": "485898", "title": "", "text": "Getting the first year right for any rental property is key. It is even more complex when you rent a room, or rent via a service like AirBnB. Get professional tax advice. For you the IRS rules are covered in Tax Topic 415 Renting Residential and Vacation Property and IRS pub 527 Residential Rental Property There is a special rule if you use a dwelling unit as a personal residence and rent it for fewer than 15 days. In this case, do not report any of the rental income and do not deduct any expenses as rental expenses. If you reach that reporting threshold the IRS will now expect you to to have to report the income, and address the items such as depreciation. When you go to sell the house you will again have to address depreciation. All of this adds complexity to your tax situation. The best advice is to make sure that in a tax year you don't cross that threshold. When you have a house that is part personal residence, and part rental property some parts of the tax code become complex. You will have to divide all the expenses (mortgage, property tax, insurance) and split it between the two uses. You will also have to take that rental portion of the property and depreciation it. You will need to determine the value of the property before the split and then determine the value of the rental portion at the time of the split. From then on, you will follow the IRS regulations for depreciation of the rental portion until you either convert it back to non-rental or sell the property. When the property is sold the portion of the sales price will be associated with the rental property, and you will need to determine if the rental property is sold for a profit or a loss. You will also have to recapture the depreciation. It is possible that one portion of the property could show a loss, and the other part of the property a gain depending on house prices over the decades. You can expect that AirBnB will collect tax info and send it to the IRS As a US company, we’re required by US law to collect taxpayer information from hosts who appear to have US-sourced income. Virginia will piggyback onto the IRS rules. Local law must be researched because they may limit what type of rentals are allowed. Local law could be state, or county/city/town. Even zoning regulations could apply. Also check any documents from your Home Owners Association, they may address running a business or renting a property. You may need to adjust your insurance policy regarding having tenants. You may also want to look at insurance to protect you if a renter is injured." }, { "docid": "150893", "title": "", "text": "\"I would strongly consider renting; as homes are often viewed by people as \"\"investments\"\" but in reality they are costs, just like renting. The time-frame for return is so long, the interest rate structure in terms of your mortgage payments; if you buy, you must be prepared to and willing to stay at minimum 7-10 years; because anything can happen. Hot markets turn cold. Or stale, and just the closing costs will cause it be less advantageous to renting. Before buying a property, ask yourself does it meet these 5 criteria: IDEAL I - Income; the property will provide positive cash flow through renters. D - Depreciation; tax savings. E - Equity; building equity in the property- the best way is through interest only loans. There is NO reason to pay any principle on any property purchase. You do 5 year interest only loans; keep your payments low; and build equity over time as the property price rises. Look how much \"\"principle\"\" you actually pay down over the first 7 years on a 30 year mortgage. Virtually Nil. A - Appreciation - The property will over time go up in value. Period. There is no need to pay any principle. Your Equity will come from this... time. L - Leverage; As the property becomes more valuable; you will have equity stake, enabling you to get higher credit lines, lines of equity credit, to purchase more properties that are IDEA. When you are RICH, MARRIED, and getting ready for a FAMILY, then buy your home and build it. Until then, rent, it will keep your options open. It will keep your costs low. It will protect you from market downturns as leases are typically only 1 year at most. You will have freedom. You will not have to deal with repairs. A new Water Heater, AC unit, the list goes on and on. Focus on making money, and when you want to buy your first house. Buy a duplex; rent it out to two tenants, and make sure it's IDEAL.\"" }, { "docid": "351954", "title": "", "text": "\"With permanent contract in Germany you shouldn't have any problem getting a loan. It's even more important than how much do you earn. Generally, you should ask for a house mortgage (Baufinanzierungsdarlehen) with annuity as a type of credit to save on interest. Besides, you usually get a better conditions with a saving bank (Sparkasse) or a popular bank (Volksbank) situated in the area where your house is situated. You also shouldn't combine your credit with extra products (the simpler is the product, the better is for you), maybe I'll write later an extra piece on the common pitfalls in this regard. Probably, you could find a bank that would give you such a loan, but it would be very expensive. You should save at least 40%, because then the bank can refinance your loan cheaply and in return offer you a low interest. Taxes depend heavily on the place where you buy a house. When you buy it, you pay a tax between 3.5% and 6% (look up here). Then you pay a property tax (Grundsteuer), it depends on community how much do you pay, the leverage is called Hebesatz (here's example). Notary would cost ca. 1.5% of the house price. All and all, you should calculate with 10% A country-independent advice: if you want to save on interest in the long run, you should take an annuity loan with the shortest maturity. Pay attention to effective interest rate. Now to Germany specifics. Don't forget to ask about \"\"Sondertilgung\"\" (extra amortization) - an option to amortize additionaly. Usually, banks offer 5% Sondertilgung p.a. The interest-rate is usually fixed for 8 years (however, ask about it), this period is called Zinsbindung. It sound ridiculous, but in southern lands (Bayern, Baden-Württemberg) you usually get better conditions as in Berlin or Bremen. The gap could be as big as 0.5% p.a. of effective interest rate! In Germany they often use so-called \"\"anfängliche Tilgung\"\" (initial rate of amortizazion) as a parameter.\"" }, { "docid": "324386", "title": "", "text": "\"Living in one unit of a multi-family while renting out the others, although not without its risks, can be a viable (if gradual) way to build wealth. It's been rebranded recently as \"\"house hacking\"\", but the underlying mechanics have been around for many years (many cities in the Northeast in particular remain chock full of neighborhoods of 3-family homes built and used for exactly that purpose for decades, though now frequently sub-divided into condos). It's true you'd need to borrow money, but there are a number of reasons why it's certainly at least worth exploring (which is what you seem to be asking -- should you bother doing the homework -- tl;dr: yes): And yes, you would be relying on tenants to meet your monthly expenses, including a mortgage bill that will arrive whether the other units are vacant or not. But in most markets, rental prices are far less volatile than home prices (from the San Francisco Federal Reserve): The main result from this decomposition is that the behavior of the price-rent ratio for housing mirrors that of the price-dividend ratio for stocks. The majority of the movement of the price-rent ratio comes from future returns, not rental growth rates. (Emphasis added) It's also important to remember that rental income must do more than just cover your mortgage -- there's lots of other expenses associated with a rental property, including insurance, taxes, maintenance, vacancy (an allowance for the periods when the property will be empty in between tenants), reserves for capital improvements, and more. As with any investment, it's all about whether the numbers work. (You mentioned not being interested in the \"\"upkeep work\"\", so that's another 8-10% off the top to pay for a property manager.) If you can find a property at an attractive price, secure financing on attractive terms, and can be reasonably confident that it will rent in the ballpark of 1.5-2% of the purchase price, then it might be a fine choice for you, assuming you are willing and able to handle the work of being a landlord -- something worth at least as much of your research time as the investment itself. It sounds like you're still a ways away from having enough for even an FHA down payment, which gives you a great opportunity to find and talk with some local folks who already manage rental properties in your area (for example, you might look for a local chapter of the national Real Estate Investment Association), to get a sense of what's really involved.\"" }, { "docid": "573301", "title": "", "text": "\"The buy-to-rent investment bubble created (in some markets) a large number of new housing starts often exceeding the available demand. Since people were investing in the capital gain, they didn't mind whether a place was rented or not. Many places stood empty at the prices investors wished to charge. In the UK where building restrictions are so dire that few new houses can be built, new house production is less than market demand which keeps up rental prices. There just isn't any stock. In the US, where construction is more liberal, rental prices can fall as new stock enters the market. A driver will be where the sales market dries up and owners must rent to cover at least some of their mortgage losses. Or, as Joel points out, if a major employer which dominates a small town, leaves. Many old industrial towns feature both low rentals and plenty of empty, low-priced property. Liverpool, in the UK, features entire empty neighbourhoods all boarded up. If you're looking to track metrics on this simply look at migration patterns. Where large numbers of people are moving \"\"towards\"\" prices (and rentals) will rise. Where people are moving \"\"away\"\" all prices fall.\"" }, { "docid": "174313", "title": "", "text": "I'll mirror what the others have said in that your expectations for returns are wildly out of line with reality. If you could achieve that with only moderate risk hopefully you can see that you could ladder those returns by re-investing them and become a billionaire in short order. You may have noticed that there are a lot of really financially savvy people who are not billionaires. So the math for your plan falls apart somewhere, obviously. However, in the spirit of being helpful, and with the caveat that super high returns involve super high risk I'll try and point you in the direction where this is theoretically possible, even if the odds would be better buying lottery tickets. One way to get more leverage from your money than just buying stocks is to buy options. With an options strategy your return/loss will be magnified greatly compared to buying stocks. That is, you can lose or gain a much higher multiplier of your original investment. That said, I don't advise doing that with any money that you can't afford to lose every penny of, because you likely will." }, { "docid": "175649", "title": "", "text": "\"You are assuming 100% occupancy and 100% rent collection. This is unrealistic. You could get lucky and find that long term tenant with great credit that always pays their bills... but in reality that person usually buys a home they do not rent long term. So you will need to be prepared for periods of no renters and periods of non payment. The expenses here I would expect could wipe out more than you can make in \"\"profit\"\" based on your numbers. Have you checked to find out what the insurance on a rental property is? I am guessing it will go up probably 200-500 a year possibly more depending on coverage. You will need a different type of insurance for rental property. Have you checked with your mortgage provider to make sure that you can convert to a rental property? Some mortgages (mine is one) restrict the use of the home from being a rental property. You may be required to refinance your home which could cost you more, in addition if you are under water it will be hard to find a new financier willing to write that mortgage with anything like reasonable terms. You are correct you would be taking on a new expense in rental. It is non deductible, and the IRS knows this well. As Littleadv's answer stated you can deduct some expenses from your rental property. I am not sure that you will have a net wash or loss when you add those expenses. If you do then you have a problem since you have a business losing money. This does not even address the headaches that come with being a landlord. By my quick calculations if you want to break even your rental property should be about 2175/Month. This accounts for 80% occupancy and 80% rental payment. If you get better than that you should make a bit of a profit... dont worry im sure the house will find a way to reclaim it.\"" }, { "docid": "158887", "title": "", "text": "\"Another factor is, how far is your prospective rental property from where you live? vs. how comprehensive is your property management service? If you need to visit much or would simply like to keep an eye on it, a couple of hours drive could be a deal breaker. One more thought; would you be able to upgrade the property at a profit when it comes time to sell? If you have a realtor you trust he or she should be able to tell you if, say a $20k kitchen reno would reliably return more than $20k. It has a lot to do with the property's relative price position in the neighborhood. A cheaper home has more \"\"upsell\"\" room.\"" }, { "docid": "228657", "title": "", "text": "You've already hit on the big difference. If you buy a property, you've made a big commitment, for better or worse. If you bought wisely, you'll be very happy. If not, you could go bankrupt. An REIT spreads out the risk, but the reward isn't as great. There's less barrier to entry in buying shares of an REIT than there is in buying an investment property: money, time, maintenance. The answer for you depends on what level of effort you want to put into your investment. If you are all ready to pick up an investment property, make the down payment, get appraisal and inspection, clean up the house, and fill it with tenants, then go for it. Otherwise, research some REITs and buy some shares. (Disclaimer: I have a rental property that's doing pretty well now.)" }, { "docid": "584304", "title": "", "text": "\"You don't state a long term goal for your finances in your message, but I'm going to assume you want to retire early, and retire well. :-) any other ideas I'm missing out on? A fairly common way to reach financial independence is to build one or more passive income streams. The money returned by stock investing (capital gains and dividends) is just one such type of stream. Some others include owning rental properties, being a passive owner of a business, and producing goods that earn long-term royalties instead of just an immediate exchange of time & effort for cash. Of these, rental property is probably one of the most well-known and easiest to learn about, so I'd suggest you start with that as a second type of investment if you feel you need to diversify from stock ownership. Especially given your association with the military, it is likely there is a nearby supply of private housing that isn't too expensive (so easier to get started with) and has a high rental demand (so less risk in many ways.) Also, with our continued current low rate environment, now is the time to lock-in long term mortgage rates. Doing so will reap huge benefits as rates and rents will presumably rise from here (though that isn't guaranteed.) Regarding the idea of being a passive business owner, keep in mind that this doesn't necessarily mean starting a business yourself. Instead, you might look to become a partner by investing money with an existing or startup business, or even buying an existing business or franchise. Sometimes, perfectly good business can be transferred for surprisingly little down with the right deal structure. If you're creative in any way, producing goods to earn long-term royalties might be a useful path to go down. Writing books, articles, etc. is just one example of this. There are other opportunities depending on your interests and skill, but remember, the focus ought to be on passive royalties rather than trading time and effort for immediate money. You only have so many hours in a year. Would you rather spend 100 hours to earn $100 every year for 20 years, or have to spend 100 hours per year for 20 years to earn that same $100 every year? .... All that being said, while you're way ahead of the game for the average person of your age ($30k cash, $20k stocks, unknown TSP balance, low expenses,) I'm not sure I'd recommend trying to diversify quite yet. For one thing, I think you need to keep some amount of your $30k as cash to cover emergency situations. Typically people would say 6 months living expenses for covering employment gaps, but as you are in the military I don't think it's as likely you'll lose your job! So instead, I'd approach it as \"\"How much of this cash do I need over the next 5 years?\"\" That is, sum up $X for the car, $Y for fun & travel, $Z for emergencies, etc. Keep that amount as cash for now. Beyond that, I'd put the balance in your brokerage and get it working hard for you now. (I don't think an average of a 3% div yield is too hard to achieve even when picking a safe, conservative portfolio. Though you do run the risk of capital losses if invested.) Once your total portfolio (TSP + brokerage) is $100k* or more, then consider pulling the trigger on a second passive income stream by splitting off some of your brokerage balance. Until then, keep learning what you can about stock investing and also start the learning process on additional streams. Always keep an eye out for any opportunistic ways to kick additional streams off early if you can find a low cost entry. (*) The $100k number is admittedly a rough guess pulled from the air. I just think splitting your efforts and money prior to this will limit your opportunities to get a good start on any additional streams. Yes, you could do it earlier, but probably only with increased risk (lower capital means less opportunities to pick from, lower knowledge levels -- both stock investing and property rental) also increase risk of making bad choices.\"" }, { "docid": "408029", "title": "", "text": "\"While JoeTaxpayer gave a very insightful answer, and clearly the best answer, let me break it down really simple for you. Talk with a good to great property management company. Given that you will be out of state, you will need one anyway. A good one is worth their cost, a great one even better. They will tell you what the \"\"market will bear\"\" on renting your place and the expected costs. From there you can make an intelligent decision. Have you had any experience in running rental properties? I am going to assume not, and as such you should have professionals as part of your team. More than likely you will have to put money in to sustain this property as a rental. It is just how the numbers tend to work out.\"" }, { "docid": "423438", "title": "", "text": "Your post seems to read as if you want to invest only in real estate rental properties as a start because they will be a reliable investment guaranteed to generate profits that you will be plowing back into buying even more rental properties, but you are willing to consider (possibly in later years) other forms of investment (in real estate) that will not require active participation in the management of the rental properties. While many participants here do own rental real estate and even manage it entirely, for most people, that is only a small part of their investment portfolio, and I suspect that hardly any will recommend real estate as the only investment the way you seem to want to do. Also, you might want to look more closely at the realities of rental real estate operations before jumping in. Things are not necessarily as rosy as they appear to you now. Not all your units will be rented all the time, and the rental income might not always be enough to cover the mortgage payments and the property taxes and the insurance payments and the repairs and maintenance and ... Depreciation of the property is another matter that you might not have thought about. That being said, you can invest in real estate through real estate investment trusts (REITs) or through limited partnerships where you have only a passive role. There are even mutual funds that invest in REITs or in REIT indexes." }, { "docid": "39108", "title": "", "text": "Where do you live? I have not seen a single instance where renting is cheaper per month then purchasing a home. You are obviously doing well, so I'm not questioning the logistics just curious. $200,000 home or less is roughly $1,300 - $1,500 a month with everything included (property taxes, etc), based on when I was looking at homes to purchase. To rent the same size home would have been about the same (or more) depending on the area. Texas and California being my main two areas of interest. The property I purchased now was being rented out for $1,100 but a 30-year fixed mortage w/ property taxes is only about $630 a month." }, { "docid": "498417", "title": "", "text": "\"I very much agree with what @Grade 'Eh' Bacon said about townhouses, but wanted to add a bit about HOA's, renting after moving on, and appreciation: HOA's HOA's can be restrictive, but they can also help protect property values, not all HOA's are created equal, some mean you have zero exterior maintenance, some don't. You'll be able to review the HOA financials to see where the money goes (and if they have healthy reserves). You'll see how much they spend on administration, I think ~10% is typical, and administration can be offset by the savings associated with doing everything in bulk. A well-run HOA should actually save you money over paying for all the things separately, but many people are happy to do some things themselves rather than pay for it, and would come out ahead if they didn't have an HOA. And of course, not all HOA's are well-run. Just do your best to get informed Transitioning to Rental If you are interested in trying your hand being a landlord after living there for a while, a townhouse typically exposes you to less rental risk than a single-family home, because the cost is typically lower and if the HOA maintains everything outside the house then you don't have to worry as much about tenants keeping a lawn in good shape, for example. Appreciation Appreciation varies wildly by market, some research by Trulia suggests in general condo's have outperformed single-family houses over the last 5 years by 10.5%. The same article notes that others disagree with Trulia's assessment and put condo's below single-family houses by 1.3% annually. My first townhouse has appreciated 41% over the last 3 years, while houses in the area are closer to 30% over the same period, but I believe that's a function of my local market more than a nationwide trend. I wouldn't plan around any appreciation forecasts. Source: Condos may be appreciating faster than single-family houses My adviceYou have to do your research on each potential property regardless of whether it's a condo/townhouse/single-family to find out what restrictions there are and what services are provided by the HOA (if any), your agent should be provided with most of the pertinent info, and you may not get to see HOA financials until you're under contract. Most importantly in my view, I wouldn't buy anywhere near the top of your budget. Being \"\"house-poor\"\" is no fun and will limit your options, don't count on appreciation or better income in the future to justify stretching yourself thin in the short-term.\"" }, { "docid": "93828", "title": "", "text": "You can make a start to learn how to make better investing decisions by learning and understanding what your current super funds are invested in. Does the super fund give you choices of where you can invest your funds, and how often does it allow you to change your investment choices each year? If you are interested in one area of investing over others, eg property or shares, then you should learn more on this subject, as you can also start investing outside of superannuation. Your funds in superannuation are taxed less but you are unable to touch them for another 30 to 35 years. You also need to consider investing outside super to help meet your more medium term goals and grow your wealth outside of super as well. If you are interested in shares then I believe you should learn about both fundamental and technical analysis, they can help you to make wiser decisions about what to invest in and when to invest. Above is a chart of the ASX200 over the last 20 years until January 2015. It shows the Rate Of Change (ROC) indicator below the chart. This can be used to make medium to long term decisions in the stock market by investing when the ROC is above zero and getting out of the market when the ROC is below zero. Regarding your aggressiveness in your investments, most would say that yes because you are still young you should be aggressive because you have time on your side, so if there is a downturn in your investments then you still have plenty of time for them to recover. I have a different view, and I will use the stock market as an example. Refer back to the chart above, I would be more aggressive when the ROC is above zero and less aggressive when the ROC is below zero. How can you relate this to your super fund? If it does provide you to change your investment choices, then I would be invested in more aggressive investments like shares when the ROC crosses above zero, and then when the ROC moves below zero take a less aggressive approach by moving your investments in the super fund to a more balanced or capital guaranteed strategy where less of your funds are invested in shares and more are invested in bonds and cash. You can also have a similar approach with property. Learn about the property cycles (remember super funds usually invest in commercial and industrial property rather than houses, so you would need to learn about the commercial and industrial property cycles which would be different to the residential property cycle). Regarding your question about SMSFs, if you can increase your knowledge and skills in investing, then yes switching to a SMSF will give you more control and possibly better returns. However, I would avoid switching your funds to a SMSF right now. Two reasons, firstly you would want to increase your knowledge as mentioned above, and secondly you would want to have at least $300,000 in funds before switching to a SMSF or else the setup and compliance costs would be too high as a percentage of your funds at the moment ($70,000). You do have time on your side, so whilst you are increasing your funds you can use that time to educate yourself in your areas of interest. And remember a SMSF is not only an investment vehicle whilst you are building your funds during your working life, but it is also an investment vehicle when you are retired and it becomes totally tax free during this phase, where any investment returns are tax free and any income you take out is also tax free." }, { "docid": "448759", "title": "", "text": "\"This can be done, and there have been many good suggestions on things to do and watch out for. But to my shock I don't see anyone offering any words of caution about property managers! Whatever you do, don't assume they have your best interests at heart. Do not assume that \"\"no news is good news\"\" and that if you aren't hearing of problems and are just collecting rent checks, everything must be fine. You can easily end up with tenants you would never have allowed yourself, or tenants with pets that you would not have allowed, etc. Especially if the manager doesn't want you to have a vacancy and potentially lose you as a client, they may very well lower their standards just to get the place occupied. And a year or two or three later, you may find yourself looking at a very large repair bill and wonder how on earth it could have happened when you supposedly had someone looking out for your property! There are quality, ethical property managers out there. They are not all bad to be certain. But whatever you do, check up on them. And with multiple properties - especially if in multiple areas/states etc. - this can be nearly a full time job in itself. As the saying goes, \"\"Trust, but verify\"\". I have never found this to apply more than with rental properties and property management. Don't leave anything significant to them 100%. You can't even assume that a rule like \"\"all expenses over $50 must be cleared by me first\"\", as that can simply mean that they don't bother to come to you for certain kinds of repairs that would cost more than that, or that they just get them \"\"taken care of\"\" by their own person (done poorly, illegally, etc.) and never tell you. Never trust their choice of tenants blindly. Visit the place yourself at least every few months - a quick driveby at a minimum or better if you can, arrange a reason to walk through the house personally. Check the back yard, never assume that the front yard is indicative of anything else. Never assume that a \"\"no pets\"\" rule will be followed, or that tenants wouldn't lie to the management about having pets. Never assume that the tenants won't move additional people into the property as well. Always expect a bare minimum of 1 month vacancy every year, and an additional minimum of 1 month's rental revenue in unexpected maintenance/repairs every year. This is at a minimum! You might do much better than this, and have a high quality tenant in place for years who costs next to nothing in extra maintenance. But do not count on it. Rental real estate investing looks so simple on paper, where it's just numbers. But reality has a very rude habit of surprising you when you least expect it. After all, no one expects the Spanish Inquisition! Good luck!\"" }, { "docid": "486243", "title": "", "text": "To me this sounds like a transaction, where E already owns a company worth 400k and can therefore pocket the money from D and give D 25% of the profits every year. There is nothing objective (like a piece of paper) that states the company is worth 400K. It is all about perceived value. Some investors may think it is worth something because of some knowledge they may have. Heck, the company could be worth nothing but the investor could have some sentimental value associated to it. So is it actually the case that E's company is worth 400k only AFTER the transaction? It is worth what someone pays for it when they pay for it. I repeat- the 400K valuation is subjective. In return the investor is getting 25% ownership of the product or company. The idea is that when someone has ownership, they have a vested interest in it being successful. In that case, the investor will do whatever he/she can to improve the chances of success (in addition to supplying the 100K capital). For instance, the investor will leverage their network or perhaps put more money into it in the future. Is the 100k added to the balance sheet as cash? Perhaps. It is an asset that may later be used to fund inventory (for instance). ... and would the other 300k be listed as an IP asset? No. See what I said about the valuation just being perception. Note that the above analysis doesn't apply to all Dragons Den deals. It only applies to situations where capital is exchanged for ownership in the form of equity." } ]

[ { "docid": "63091", "title": "", "text": "More leverage means more risk. There is more upside. There is also more downside. If property prices and/or rents fall then your losses are amplified. If you leverage at 90% then a 5% fall means you've lost half your money." } ]

[ { "docid": "568454", "title": "", "text": "I would recommend not paying it off early for 2 key reasons: If you are a resident of the U.S. you get tax deductibility of mortgage interest, which as pointed out in previous posts, reduces the effective interest rate on your mortgage, never in your life will you ever be allowed to obtain such high leverage at such a low rates. You can probably get higher returns with not much risk. @JoeTaxpayer mentioned various statistics regarding returns when investing in equities. Even though they are a decent bet over the long term, you can get an even better risk reward tradeoff by considering municipal bonds. If you are in the U.S. and invest in the municipal bonds of your state, the interest income will be both federal and state tax-free. In other words, if you were making 3.5% investing in equities, your after tax returns would be significantly less depending on your tax bracket whereas investment-grade municipal bond ETFs will yield probably the same or higher and have no tax. They are also significantly less volatile. Even though they have default risk, the risk is small since most of these bonds are backed by future tax obligations, or other income streams derived from hard assets such as tolls or property. Furthermore, an ETF will have a portfolio of these bonds which will also dampen the impact of any individual defaults. In essence, you are getting paid this spread for simply having access to credit, take advantage of it while you can." }, { "docid": "300297", "title": "", "text": "\"To expand on what @fishinear and some others are saying: The only way to look at it is that the parents have invested, because the parents get a % of the property in the end, rather than the original loan amount plus interest. It is investment; it is not a loan of any kind. One way to understand this is to imagine that after 20 years, the property triples in value (or halves in value). The parents participate as if they had invested in 75% ownership of the property and the OP as if 25% ownership of the property. Note that with a loan, there is a (potentially changing) outstanding loan balance, that could be paid to end the loan (to pay off the loan), and there is an agreed upon an interest rate that is computed on the outstanding balance — none of those apply to this situation; further with a loan there is no % of the property: though the property may be used to secure the loan, that isn't ownership. Basically, since the situation bears none of the qualities of a loan, and yet does bear the qualities of investment, the parents have bought a % ownership of the property. The parents have invested in 75% of the real estate, and the OP is renting that 75% from them for: The total rent the OP is paying the parents for their 75% of the property is then (at least) $1012.50/mo, A rental rate of $1012.50/mo for 75% of the property equates to a rental price of $1350/mo for the whole property. This arrangement is only fair to both parties when the fair-market rental value of the whole property is $1350/mo; it is unfair to the OP when the fair-market rental value of property is less, and unfair to the parents when the fair-market rental value of property is more. Of course, the fair-market rental value of the property is variable over time, so the overall fairness would need to understand rental values over time. I feel like this isn't actually a loan if I can never build more equity in the condo. Am I missing something? No, it isn't a loan. You and your parents are co-investing in real estate. Further, you are renting their portion of the investment from them. For comparison, with a loan you have 100% ownership in the property from the start, so you, the owner, would see all the upside/downside as the property valuation changes over time whether the loan is paid off or not. The borrower owes the loan balance (and interest) not some % of the property. A loan may be secured by the property (using a lien) but that is quite different from ownership. Typically, a loan has a payment schedule setup to reduce the loan balance (steadily) over time so that you eventually pay it off. With a loan you gain equity % — the amount you own outright, free & clear — in two ways, (1) by gradually paying off the loan over time so the unencumbered portion of the property grows, and (2) if the valuation of the property increases over time that gain in equity % is yours (not the lenders). However note that the legal ownership is all 100% yours from the start. Are my parents ripping me off with this deal that doesn't allow me to build my equity in my home? You can evaluate whether you are being ripped off by comparing the $1350/mo rate to the potential rental rate for the property over time (which will be a range or curve, and there are real estate websites (like zillow.com or redfin.com, others) to help estimate what fair-market rent might be). Are there similar deals like this...? A straight-forward loan would have the borrower with 100% legal ownership from the start, just that the property secures the loan. Whereas with co-investment there is a division of ownership % that is fixed from the start. It is unusual to have both investment and loan at the same time where they are setup for gradual change between them. (Investment and loan can certainly be done together but would usually be done as completely separate contracts, one loan, one investment with no adjustment between the two over time.) To do both investment and loan would be unusual but certainly be possible, I would imagine; however that is not the case here as being described. I am not familiar with contracts that do both so as to take over the equity/ownership/investment over time while also reducing loan balance. Perhaps some forms of rent-to-own work that way, something to look into — still, usually rent-to-own means that until the renter owns it 100%, the landlord owns 100%, rather than a gradual % transfer over time (gradual transfer would imply co-ownership for a long time, something that most landlords would be reluctant to do). Transfer of any particular % of real estate ownership typically requires filing documents with the county and may incur fees. I am not aware of counties that allow gradual % transfer with one single filing. Still, the courts may honor a contract that does such gradual transfer outside of county filings. If so, what should I do? Explain the situation to your parents, and, in particular, however far out of balance the rental rate may be. Decide for yourself if you want to rent vs. buy, and where (that property or some other). If your parents are fair people, they should be open to negotiation. If not, you might need a lawyer. I suspect that a lawyer would be able to find several issues with which to challenge the contract. The other terms are important as well, namely gross vs. net proceeds (as others point out) because selling a property costs a % to real estate agents and possibly some taxes as well. And as the others have pointed out, if the property ultimately looses value, that could be factored in as well. It is immaterial to judging the fairness of this particular situation whether getting a bank loan would be preferable to renting 75% from the parents. Further, loan interest rates don't factor into the fairness of this rental situation (but of course interest rates do factor into identifying the better of various methods of investment and methods of securing a place to live, e.g. rent vs. buy). Contributed by @Scott: If your parents view this as an investment arrangement as described, then you need to clarify with them if the payments being made to them are considered a \"\"buy out\"\" of their share. This would allow you to gain the equity you seek from the arrangement. @Scott: Terms would have to be (or have been) declared to that effect; this would involve specifying some schedule and/or rates. It would have to be negotiated; this it is not something that could go assumed or unstated. -- Erik\"" }, { "docid": "331925", "title": "", "text": "\"There are many people who have deductions far above the standard deduction, but still don't itemize. That's their option even though it comes at a cost. It may be foolish, but it's not illegal. If @littleadv citation is correct, the 'under penalty of perjury' type issue, what of those filers who file a Schedule A but purposely leave off their donations? I've seen many people discuss charity, and write that they do not want to benefit in any way from their donation, yet, still Schedule A their mortgage and property tax. Their returns are therefore fraudulent. I am curious to find a situation in which the taxpayer benefits from such a purposeful oversight, or, better still, a cited case where they were charged with doing so. I've offered advice on filings return that wasn't \"\"truthful\"\". When you own a stock and cannot find cost basis, there are times that you might realize the basis is so low that just entering zero will cost you less than $100 in extra tax. You are not truthful, of course, but this kind of false statement isn't going to lead to any issue. If it gets noticed within an audit, no agent is going to give it more than a moment of time and perhaps suggest, \"\"you didn't even know the year it was bought?\"\" but there would be no consequence. My answer is for personal returns, I'm sure for business, accuracy to the dollar is actually important.\"" }, { "docid": "29761", "title": "", "text": "\"There has been almost no inflation during 2014-2015. do you mean rental price inflation or overall inflation? Housing price and by extension rental price inflation is usually much higher than the \"\"basket of goods\"\" CPI or RPI numbers. The low levels of these two indicators are mostly caused by technology, oil and food price deflation (at least in the US, UK, and Europe) outweighing other inflation. My slightly biased (I've just moved to a new rental property) and entirely London-centric empirical evidence suggests that 5% is quite a low figure for house price inflation and therefore also rental inflation. Your landlord will also try to get as much for the property as he can so look around for similar properties and work out what a market rate might be (within tolerances of course) and negotiate based on that. For the new asked price I could get a similar apartment in similar condos with gym and pool (this one doesn't have anything) or in a way better area (closer to supermarkets, restaurants, etc). suggests that you have already started on this and that the landlord is trying to artificially inflate rents. If you can afford the extra 5% and these similar but better appointed places are at that price why not move? It sounds like the reason that you are looking to stay on in this apartment is either familiarity or loyalty to the landlord so it may be time to benefit from a move.\"" }, { "docid": "547196", "title": "", "text": "Hmm, if your financially savvy enough to have saved up half a million dollars, I'd think you would be savvy enough to spend it wisely. :-) I think I'd spend the cash before running down stocks and bonds, as cash almost surely has a lower rate of return. I'd look into what rate of return you're getting on the rental property versus what you're getting from other investments. If the rental property has a lower return, I'd sell that before selling off stocks. (I own a rental property on which I am losing money every month. I'm still paying a mortgage on it, but even without that, the ROI would be about 4% under current market conditions.) Besides that, your plan looks good to me. Might need to add, 8. Beg on the streets, and 9. Burglary." }, { "docid": "351954", "title": "", "text": "\"With permanent contract in Germany you shouldn't have any problem getting a loan. It's even more important than how much do you earn. Generally, you should ask for a house mortgage (Baufinanzierungsdarlehen) with annuity as a type of credit to save on interest. Besides, you usually get a better conditions with a saving bank (Sparkasse) or a popular bank (Volksbank) situated in the area where your house is situated. You also shouldn't combine your credit with extra products (the simpler is the product, the better is for you), maybe I'll write later an extra piece on the common pitfalls in this regard. Probably, you could find a bank that would give you such a loan, but it would be very expensive. You should save at least 40%, because then the bank can refinance your loan cheaply and in return offer you a low interest. Taxes depend heavily on the place where you buy a house. When you buy it, you pay a tax between 3.5% and 6% (look up here). Then you pay a property tax (Grundsteuer), it depends on community how much do you pay, the leverage is called Hebesatz (here's example). Notary would cost ca. 1.5% of the house price. All and all, you should calculate with 10% A country-independent advice: if you want to save on interest in the long run, you should take an annuity loan with the shortest maturity. Pay attention to effective interest rate. Now to Germany specifics. Don't forget to ask about \"\"Sondertilgung\"\" (extra amortization) - an option to amortize additionaly. Usually, banks offer 5% Sondertilgung p.a. The interest-rate is usually fixed for 8 years (however, ask about it), this period is called Zinsbindung. It sound ridiculous, but in southern lands (Bayern, Baden-Württemberg) you usually get better conditions as in Berlin or Bremen. The gap could be as big as 0.5% p.a. of effective interest rate! In Germany they often use so-called \"\"anfängliche Tilgung\"\" (initial rate of amortizazion) as a parameter.\"" }, { "docid": "456389", "title": "", "text": "\"Scenario 1: Assume that you plan to keep the parking space for the rest of your life and collect the income from the rental. You say these spaces rent for $250 per month and there are fees of $1400 per year. Are there any other costs? Like would you be responsible for the cost of repaving at some point? But assuming that's covered in the $1400, the net profit is 250 x 12 - 1400 = $1600 per year. So now the question becomes, what other things could you invest your money in, and what sort of returns do those give? If, say, you have investments in the stock market that are generating a 10% annual return and you expect that rate of return to continue indefinitely, than if you pay a price that gives you a return of less than 10%, i.e. if you pay more than $16,000, then you would be better off to put the money in the stock market. That is, you should calculate the fair price \"\"backwards\"\": What return on investment is acceptable, and then what price would I have to pay to get that ROI? Oh, you should also consider what the \"\"occupancy rate\"\" on such parking spaces is. Is there enough demand that you can realistically expect to have it rented out 100% of the time? When one renter leaves, how long does it take to find another? And do you have any information on how often renters fail to pay the rent? I own a house that I rent out and I had two tenants in a row who failed to pay the rent, and the legal process to get them evicted takes months. I don't know what it takes to \"\"evict\"\" someone from a parking space. Scenario 2: You expect to collect rent on this space for some period of time, and then someday sell it. In that case, there's an additional piece of information you need: How much can you expect to get for this property when you sell it? This is almost surely highly speculative. But you could certainly look at past pricing trends. If you see that the value of a parking space in your area has been going up by, whatever, say 4% per year for the past 20 years, it's reasonable to plan on the assumption that this trend will continue. If it's been up and down and all over the place, you could be taking a real gamble. If you pay $30,000 for it today and when the time comes to sell the best you can get is $15,000, that's not so good. But if there is some reasonable consistent average rate of growth in value, you can add this to the expected rents. Like if you can expect it to grow in value by $1000 per year, then the return on your investment is the $1600 in rent plus $1000 in capital growth equals $2600. Then again do an ROI calculation based on potential returns from other investments.\"" }, { "docid": "562336", "title": "", "text": "\"BEFORE you invest in a house, make sure you account for all the returns, risks and costs, and compare them to returns, risks and costs of other investments. If you invest 20% of a house's value in another investment, you would also expect a return. You also probably will not have the cost interest for the balance (80% of ???). I have heard people say \"\"If I have a rental property, I'm just throwing away money - I'll have nothing at the end\"\" - if you get an interest-only loan, the same will apply, if you pay off your mortgage, you're paying a lot more - you could save/invest the extra, and then you WILL have something at the end (+interest). If you want to compare renting and owning, count the interest against the rental incoming against lost revenue (for however much actual money you've invested so far) + interest. I've done the sums here (renting vs. owning, which IS slightly different - e.g. my house will never be empty, I pay extra if I want a different house/location). Not counting for the up-front costs (real estate, mortgage establishment etc), and not accounting for house price fluctuations, I get about the same \"\"return\"\" on buying as investing at the bank. Houses do, of course, fluctuate, both up and down (risk!), usually up in the long term. On the other hand, many people do lose out big time - some friends of mine invested when the market was high (everyone was investing in houses), they paid off as much as they could, then the price dropped, and they panicked and sold for even less than they bought for. The same applies if, in your example, house prices drop too much, so you owe more than the house is worth - the bank may force you to sell (or offer your own house as collateral). Don't forget about the hidden costs - lawn mowing and snow shoveling were mentioned, insurance, maintenance, etc - and risks like fluctuating rental prices, bad tenants, tenants moving on (loss of incoming, cleaning expenses, tidying up the place etc)....\"" }, { "docid": "120852", "title": "", "text": "\"I debated whether to put this in an answer or a comment, because I'm not sure that this can be answered usefully without a lot more information, which actually would then probably make it a candidate for closing as \"\"too localized\"\". At the very least we would need to know where (which jurisdiction) she is located in. So, speaking in a generic way, the options available as I see them are: Contact the mortgage companies and explain she can't continue to make payments. They will likely foreclose on the properties and if she still ends up owing money after that (if you are in the US this also depends on whether you are in a \"\"non-recourse\"\" state) then she could be declared bankrupt. This is rather the \"\"nuclear option\"\" and definitely not something to be undertaken lightly, but would at least wipe the slate clean and give her some degree of certainty about her situation. Look very carefully at the portfolio of properties and get some proper valuations done on them (depending on where she is located this may be free). Also do a careful analysis of the property sales and rental markets, to see whether property prices / rental rates are going up or down. Then decide on an individual basis whether each property is better kept or sold. You may be able to get discounts on fees if you sell multiple properties in one transaction. This option would require some cold hard analysis and decision making without letting yourselves get emotionally invested in the situation (difficult, I know). Depending on how long she has had the properties for and how she came to own them, it MIGHT be an option to pursue action against whoever advised her to acquire them. Clearly a large portfolio of decaying rental properties is not a suitable investment for a relatively elderly lady and if she only came by them relatively recently, on advice from an investment consultant or similar, you might have some redress there. Another option: could she live in one of the properties herself to reduce costs? If she owns her own home as well then she could sell that, live in the one of the rentals and use the money saved to finance the sale of the other rentals. Aside from these thoughts, one final piece of advice: don't get your own finances tangled up in hers (so don't take out a mortgage against your own property, for example). Obviously if you have the leeway to help her out of your budget then that is great, but I would restrict that to doing things like paying for grocery shopping or whatever. If she is heading for bankruptcy or other financial difficulties, it won't help if you are entangled too.\"" }, { "docid": "93828", "title": "", "text": "You can make a start to learn how to make better investing decisions by learning and understanding what your current super funds are invested in. Does the super fund give you choices of where you can invest your funds, and how often does it allow you to change your investment choices each year? If you are interested in one area of investing over others, eg property or shares, then you should learn more on this subject, as you can also start investing outside of superannuation. Your funds in superannuation are taxed less but you are unable to touch them for another 30 to 35 years. You also need to consider investing outside super to help meet your more medium term goals and grow your wealth outside of super as well. If you are interested in shares then I believe you should learn about both fundamental and technical analysis, they can help you to make wiser decisions about what to invest in and when to invest. Above is a chart of the ASX200 over the last 20 years until January 2015. It shows the Rate Of Change (ROC) indicator below the chart. This can be used to make medium to long term decisions in the stock market by investing when the ROC is above zero and getting out of the market when the ROC is below zero. Regarding your aggressiveness in your investments, most would say that yes because you are still young you should be aggressive because you have time on your side, so if there is a downturn in your investments then you still have plenty of time for them to recover. I have a different view, and I will use the stock market as an example. Refer back to the chart above, I would be more aggressive when the ROC is above zero and less aggressive when the ROC is below zero. How can you relate this to your super fund? If it does provide you to change your investment choices, then I would be invested in more aggressive investments like shares when the ROC crosses above zero, and then when the ROC moves below zero take a less aggressive approach by moving your investments in the super fund to a more balanced or capital guaranteed strategy where less of your funds are invested in shares and more are invested in bonds and cash. You can also have a similar approach with property. Learn about the property cycles (remember super funds usually invest in commercial and industrial property rather than houses, so you would need to learn about the commercial and industrial property cycles which would be different to the residential property cycle). Regarding your question about SMSFs, if you can increase your knowledge and skills in investing, then yes switching to a SMSF will give you more control and possibly better returns. However, I would avoid switching your funds to a SMSF right now. Two reasons, firstly you would want to increase your knowledge as mentioned above, and secondly you would want to have at least $300,000 in funds before switching to a SMSF or else the setup and compliance costs would be too high as a percentage of your funds at the moment ($70,000). You do have time on your side, so whilst you are increasing your funds you can use that time to educate yourself in your areas of interest. And remember a SMSF is not only an investment vehicle whilst you are building your funds during your working life, but it is also an investment vehicle when you are retired and it becomes totally tax free during this phase, where any investment returns are tax free and any income you take out is also tax free." }, { "docid": "423438", "title": "", "text": "Your post seems to read as if you want to invest only in real estate rental properties as a start because they will be a reliable investment guaranteed to generate profits that you will be plowing back into buying even more rental properties, but you are willing to consider (possibly in later years) other forms of investment (in real estate) that will not require active participation in the management of the rental properties. While many participants here do own rental real estate and even manage it entirely, for most people, that is only a small part of their investment portfolio, and I suspect that hardly any will recommend real estate as the only investment the way you seem to want to do. Also, you might want to look more closely at the realities of rental real estate operations before jumping in. Things are not necessarily as rosy as they appear to you now. Not all your units will be rented all the time, and the rental income might not always be enough to cover the mortgage payments and the property taxes and the insurance payments and the repairs and maintenance and ... Depreciation of the property is another matter that you might not have thought about. That being said, you can invest in real estate through real estate investment trusts (REITs) or through limited partnerships where you have only a passive role. There are even mutual funds that invest in REITs or in REIT indexes." }, { "docid": "485898", "title": "", "text": "Getting the first year right for any rental property is key. It is even more complex when you rent a room, or rent via a service like AirBnB. Get professional tax advice. For you the IRS rules are covered in Tax Topic 415 Renting Residential and Vacation Property and IRS pub 527 Residential Rental Property There is a special rule if you use a dwelling unit as a personal residence and rent it for fewer than 15 days. In this case, do not report any of the rental income and do not deduct any expenses as rental expenses. If you reach that reporting threshold the IRS will now expect you to to have to report the income, and address the items such as depreciation. When you go to sell the house you will again have to address depreciation. All of this adds complexity to your tax situation. The best advice is to make sure that in a tax year you don't cross that threshold. When you have a house that is part personal residence, and part rental property some parts of the tax code become complex. You will have to divide all the expenses (mortgage, property tax, insurance) and split it between the two uses. You will also have to take that rental portion of the property and depreciation it. You will need to determine the value of the property before the split and then determine the value of the rental portion at the time of the split. From then on, you will follow the IRS regulations for depreciation of the rental portion until you either convert it back to non-rental or sell the property. When the property is sold the portion of the sales price will be associated with the rental property, and you will need to determine if the rental property is sold for a profit or a loss. You will also have to recapture the depreciation. It is possible that one portion of the property could show a loss, and the other part of the property a gain depending on house prices over the decades. You can expect that AirBnB will collect tax info and send it to the IRS As a US company, we’re required by US law to collect taxpayer information from hosts who appear to have US-sourced income. Virginia will piggyback onto the IRS rules. Local law must be researched because they may limit what type of rentals are allowed. Local law could be state, or county/city/town. Even zoning regulations could apply. Also check any documents from your Home Owners Association, they may address running a business or renting a property. You may need to adjust your insurance policy regarding having tenants. You may also want to look at insurance to protect you if a renter is injured." }, { "docid": "380753", "title": "", "text": "The below assessment is for primary residences as opposed to income properties. The truth is that with the exception of a housing bubble, the value of a house might outpace inflation by one or two percent. According to the US Census, the price of a new home per square foot only went up 4.42% between 1963 and 2008, where as inflation was 4.4%. Since home sizes increased, the price of a new home overall outpaced inflation by 1% at 5.4% (source). According to Case-Shiller, inflation adjusted prices increased a measly .4% from 1890-2004 (see graph here). On the other hand your down payment money and the interest towards owning that home might be in a mutual fund earning you north of eight percent. If you don't put down enough of a down payment to avoid PMI, you'll be literally throwing away money to get yourself in a home that could also be making money. Upgrades to your home that increase its value - unless you have crazy do-it-yourself skills and get good deals on the materials - usually don't return 100% on an investment. The best tend to be around 80%. On top of the fact that your money is going towards an asset that isn't giving you much of a return, a house has costs that a rental simply doesn't have (or rather, it does have them, but they are wrapped into your rent) - closing costs as a buyer, realtor fees and closing costs as a seller, maintenance costs, and constantly escalating property taxes are examples of things that renters deal with only in an indirect sense. NYT columnist David Leonhart says all this more eloquently than I ever could in: There's an interactive calculator at the NYT that helps you apply Leonhart's criteria to your own area. None of this is to say that home ownership is a bad decision for all people at all times. I'm looking to buy myself, but I'm not buying as an investment. For example, I would never think that it was OK to stop funding my retirement because my house will eventually fund it for me. Instead I'm buying because home ownership brings other values than money that a rental apartment would never give me and a rental home would cost more than the same home purchase (given 10 years)." }, { "docid": "339115", "title": "", "text": "\"It certainly seems like you are focusing on the emotional factors. That's your blind spot, and it's the surest path to a situation where your husband gets to say \"\"I told you so\"\". I recommend you steer straight into that blind spot, and focus your studies on the business aspects of buying and owning homes. You should be able to do spreadsheets 6 ways from Sunday, be able to recite every tax deduction you'll get as a homeowner, know the resale impacts of 1 bathroom vs 2, tell a dirty house from a broken house, etc. Everybody's got their favorites, mine are a bit dated but I like Robert Irwin and Robert Allen's books. For instance: a philosophy of Allen's that I really like: never sell. This avoids several problems, like the considerable costs of money, time and nerves of actually selling a house, stress about house prices, mistaking your house's equity for an ATM machine, and byzantine rules for capital gains tax mainly if you rent out the house, which vary dramatically by nation. In fact the whole area of taxes needs careful study. There's another side to the business of home ownership, and that's renting to others. There's a whole set of economics there - and that is a factor in what you buy. Now AirBNB adds a new wrinkle because there's some real money there. Come to understand that market well enough to gauge whether a duplex or triplex will be a money maker. Many regular folk like you have retired early and live off the rental income from their properties. JoeTaxpayer has an interesting way of looking at the finances of housing: if a house doesn't make sense as a a rental unit, maybe it doesn't make sense as a live-in either. So learn how to identify those fundamentals - the numbers. And get in the habit of evaluating houses. Work it regularly until it's second nature. Then, yes, you'll see houses you fall in love with, partly because the numbers work. It also helps to be handy. It really, really changes the economics if you can do your own quality work, because you don't need to spend any money on labor to convert a dirty house into a clean house. And lots of people do, and there's a whole SE just for that. There is a huge difference between going down to the local building supply and getting the water pipe you need, vs. having to call a plumber. And please deal with local businesses, please don't go to the Big Box stores, their service is abominable, they will cheerfully sell you a gadget salad of junk that doesn't work together, and I can't imagine a colder and less inviting scene to come up as a handy person.\"" }, { "docid": "75132", "title": "", "text": "Many Web sites and articles warn against buying former rental cars, because people renting these cars often mistreat them. Rental cars are typically driven by people over 25, these are typically people with some financial means (air travel, credit card). Additionally, rental cars are subject to frequent inspection and likely to be on tighter maintenance schedules than many owners would keep. So while some people may drive a rental harder than they would their own car, it's not typical, and not likely to result in some hidden damage that makes a rental less desirable (all else being equal) on the used-car market. Does the fact that they sell the car mean during this time suggest that they know the car's cost of further maintenance or other costs will be higher? Or is there another reason they sell at this time which, has a calculated advantage to them, but which is less than idea statistically for me, the purchaser? Rental companies buy at incredible volumes, as such, some manufacturers have programs where they will buy back used cars from the rental company at a set price and/or time. Other incentives are guaranteed depreciation, wherein the manufacturer will make up the difference if the used vehicle doesn't sell for a set percentage of it's purchase price after a set amount of time. Outside of these incentive programs, rental companies also get substantial volume discounts, and they typically are buying base models which hold value better than their higher-trim counterparts (according to KBB market analyst). So the conventional wisdom about depreciation doesn't really apply. The timing of their sales is primarily based on their purchasing arrangements and their desire to keep an up to date fleet, not on projected maintenance/repair costs. The best you can do with any used-car purchase is to test-drive, get a pre-purchase inspection, and review whatever history is available." }, { "docid": "245810", "title": "", "text": "Because it appears you have in the neighborhood of 30 years remianing on your mortgage for the first house, If you can sell it you will likely be better off in the end. While renting has the potential for greater income it is a business. And like any business there are risks, expenses, and work required to make it successful. There will be times where you can not find a renter immediately and will be responsible for making both payments, maintaining both houses, the insurance(which for an owner is higher for a rental property than a domicile), and paying the applicable taxes. You need to look at your best and worst case numbers. If your best case numbers leave you in the hole 300/month then that is not the sort of business you want to run. Your investment should build your savings and retirement funds not deplete them. Further you are more likely to fall between your best and worst case scenerios. So you need to be able to thrive at that level. If something in the middle is going to take you into bankruptcy then sell the property. If you are not willing to put the time into your business that it will need (My rental home took about 10-30 hours a month despite renters being responsible for basic upkeep and maintenance. Finally your plan B: A home with 800k value will have higher costs and higer expenses and maintenance. If the 800k home is the home you and your family needs then by all means go for it. But if it can do just as well in the 450k Home then go there. Pay the home off early by making the payments you would be making for the 800k home. In this way you pay less in total cost of the home and set your self up for the greatest chance of success. Once that home is paid off the break even point for renting goes way down as well. So the rental option could be in the future. I would just aviod it now if possible." }, { "docid": "513991", "title": "", "text": "\"Forget the math's specifics for a moment: here's some principles. Additional housing for a renter gives you returns in the form of money. Additional housing for yourself pays its returns in the form of \"\"here is a nice house, live in it\"\". Which do you need more of? If you don't need the money, get a nicer house for yourself. If you need (or want) the money, get a modest house for yourself and either use the other house as a rental property, or invest the proceeds of its sale in the stock market. But under normal circumstances (++) don't expect that buying more house for yourself is a good way to increase how much money you have. It's not. (++ the exception being during situations where land/housing value rises quickly, and when that rise is not part of a housing bubble which later collapses. Generally long-term housing values tend to be relatively stable; the real returns are from the rent, or what economists call imputed rent when you're occupying it yourself.)\"" }, { "docid": "69058", "title": "", "text": "\"That ain't nothing. It's really easy to get \"\"whipped up\"\" into a sense of entitlement, and forget to be grateful for what you do have. If this house doesn't exist, what would his costs of housing be elsewhere? Realistically. Would landlords rent to him? Would other bankers lend him money to buy a house? Would those costs really be any better? What about the intangible benefits like not having any landlord hassles or having a good relationship with the neighbors? It's entirely possible he has a sweet deal here, and just doesn't make enough money. If your credit rating is poor, your housing options really suck. Banks won't lend you money for a house unless you have a huge ton of upfront cash. Most landlords won't rent to you at all, because they are going to automated scoring systems to avoid accusations of racism. In this day and age, there are lots of ways to make money with a property you own. In fact, I believe very firmly in Robert Allen's doctrine: Never sell. That way you avoid the tens of thousands of dollars of overhead costs you bear with every sale. That's pure profit gone up in smoke. Keep the property forever, keep it working for you. If he doesn't know how, learn. To \"\"get bootstrapped\"\" he can put it up on AirBnB or other services. Or do \"\"housemate shares\"\". When your house is not show-condition, just be very honest and relatable about the condition. Don't oversell it, tell them exactly what they're going to get. People like honesty in the social sharing economy. And here's the important part: Don't booze away the new income, invest it back into the property to make it a better money-maker - better at AirBnB, better at housemate shares, better as a month-to-month renter. So it's too big - Is there a way to subdivide the unit to make it a better renter or AirBnB? Can he carve out an \"\"in-law unit\"\" that would be a good size for him alone? If he can keep turning the money back into the property like that, he could do alright. This is what the new sharing economy is all about. Of course, sister might show up with her hand out, wanting half the revenue since it's half her house. Tell her hell no, this pays the mortgage and you don't! She deserves nothing, yet is getting half the equity from those mortgage payments, and that's enough, doggone it! And if she wants to go to court, get a judge to tell her that. Not that he's going to sell it, but it's a huge deal. He needs to know how much of his payments on the house are turning into real equity that belongs to him. \"\"Owning it on paper\"\" doesn't mean you own it. There's a mortgage on it, which means you don't own all of it. The amount you own is the value of the house minus the mortgage owed. This is called your equity. Of course a sale also MINUS the costs of bringing the house up to mandatory code requirements, MINUS the cost of cosmetically making the house presentable. But when you actually sell, there's also the 6% Realtors' commission and other closing costs. This is where the mortgage is more than the house is worth. This is a dangerous situation. If you keep the house and keep paying the mortgage all right, that is stable, and can be cheaper than the intense disruption and credit-rating shock of a foreclosure or short sale. If sister is half owner, she'll get a credit burn also. That may be why she doesn't want to sell. And that is leverage he has over her. I imagine a \"\"Winter's bone\"\" (great movie) situation where the family is hanging on by a thread and hasn't told the bank the parents died. That could get very complex especially if the brother/sister are not creditworthy, because that means the bank would simply call the loan and force a sale. The upside is this won't result in a credit-rating burn or bankruptcy for the children, because they are not owners of the house and children do not inherit parents' debt.\"" }, { "docid": "584304", "title": "", "text": "\"You don't state a long term goal for your finances in your message, but I'm going to assume you want to retire early, and retire well. :-) any other ideas I'm missing out on? A fairly common way to reach financial independence is to build one or more passive income streams. The money returned by stock investing (capital gains and dividends) is just one such type of stream. Some others include owning rental properties, being a passive owner of a business, and producing goods that earn long-term royalties instead of just an immediate exchange of time & effort for cash. Of these, rental property is probably one of the most well-known and easiest to learn about, so I'd suggest you start with that as a second type of investment if you feel you need to diversify from stock ownership. Especially given your association with the military, it is likely there is a nearby supply of private housing that isn't too expensive (so easier to get started with) and has a high rental demand (so less risk in many ways.) Also, with our continued current low rate environment, now is the time to lock-in long term mortgage rates. Doing so will reap huge benefits as rates and rents will presumably rise from here (though that isn't guaranteed.) Regarding the idea of being a passive business owner, keep in mind that this doesn't necessarily mean starting a business yourself. Instead, you might look to become a partner by investing money with an existing or startup business, or even buying an existing business or franchise. Sometimes, perfectly good business can be transferred for surprisingly little down with the right deal structure. If you're creative in any way, producing goods to earn long-term royalties might be a useful path to go down. Writing books, articles, etc. is just one example of this. There are other opportunities depending on your interests and skill, but remember, the focus ought to be on passive royalties rather than trading time and effort for immediate money. You only have so many hours in a year. Would you rather spend 100 hours to earn $100 every year for 20 years, or have to spend 100 hours per year for 20 years to earn that same $100 every year? .... All that being said, while you're way ahead of the game for the average person of your age ($30k cash, $20k stocks, unknown TSP balance, low expenses,) I'm not sure I'd recommend trying to diversify quite yet. For one thing, I think you need to keep some amount of your $30k as cash to cover emergency situations. Typically people would say 6 months living expenses for covering employment gaps, but as you are in the military I don't think it's as likely you'll lose your job! So instead, I'd approach it as \"\"How much of this cash do I need over the next 5 years?\"\" That is, sum up $X for the car, $Y for fun & travel, $Z for emergencies, etc. Keep that amount as cash for now. Beyond that, I'd put the balance in your brokerage and get it working hard for you now. (I don't think an average of a 3% div yield is too hard to achieve even when picking a safe, conservative portfolio. Though you do run the risk of capital losses if invested.) Once your total portfolio (TSP + brokerage) is $100k* or more, then consider pulling the trigger on a second passive income stream by splitting off some of your brokerage balance. Until then, keep learning what you can about stock investing and also start the learning process on additional streams. Always keep an eye out for any opportunistic ways to kick additional streams off early if you can find a low cost entry. (*) The $100k number is admittedly a rough guess pulled from the air. I just think splitting your efforts and money prior to this will limit your opportunities to get a good start on any additional streams. Yes, you could do it earlier, but probably only with increased risk (lower capital means less opportunities to pick from, lower knowledge levels -- both stock investing and property rental) also increase risk of making bad choices.\"" } ]

[ { "docid": "177563", "title": "", "text": "\"I would say that you should keep in mind one simple idea. Leverage was the principal reason for the 2008 financial meltdown. For a great explanation on this, I would HIGHLY recommend Michael Lewis' book, \"\"The Big Short,\"\" which does an excellent job in spelling out the case against being highly leveraged. As Dale M. pointed out, losses are greatly magnified by your degree of leverage. That being said, there's nothing wrong with being highly leveraged as a short-term strategy, and I want to emphasize the \"\"short-term\"\" part. If, for instance, an opportunity arises where you aren't presently liquid enough to cover then you could use leverage to at least stay in the game until your cash situation improves enough to de-leverage the investment. This can be a common strategy in equities, where you simply substitute the term \"\"leverage\"\" for the term \"\"margin\"\". Margin positions can be scary, because a rapid downturn in the market can cause margin calls that you're unable to cover, and that's disastrous. Interestingly, it was the 2008 financial crisis which lead to the undoing of Bernie Madoff. Many of his clients were highly leveraged in the markets, and when everything began to unravel, they turned to him to cash out what they thought they had with him to cover their margin calls, only to then discover there was no money. Not being able to meet the redemptions of his clients forced Madoff to come clean about his scheme, and the rest is history. The banks themselves were over-leveraged, sometimes at a rate of 50-1, and any little hiccup in the payment stream from borrowers caused massive losses in the portfolios which were magnified by this leveraging. This is why you should view leverage with great caution. It is very, very tempting, but also fraught with extreme peril if you don't know what you're getting into or don't have the wherewithal to manage it if anything should go wrong. In real estate, I could use the leverage of my present cash reserves to buy a bigger property with the intent of de-leveraging once something else I have on the market sells. But that's only a wise play if I am certain I can unwind the leveraged position reasonably soon. Seriously, know what you're doing before you try anything like this! Too many people have been shipwrecked by not understanding the pitfalls of leverage, simply because they're too enamored by the profits they think they can make. Be careful, my friend.\"" } ]

[ { "docid": "269770", "title": "", "text": "Lets consider what would happen if you invested $1500/mo plus $10k down in a property, or did the same in a low-cost index fund over the 30 year term that most mortgages take. The returns of either scenarios cannot be guaranteed, but there are long term analyses that shows the stock market can be expected to return about 7%, compounded yearly. This doesn't mean each year will return 7%, some years will be negative, and some will be much higher, but that over a long span, the average will reach 7%. Using a Time-Value-of-Money calculator, that down payment, monthly additions of $1,500, and a 7% annual return would be worth about $1.8M in 30 years. If 1.8M were invested, you could safely withdraw $6000/mo for the rest of your life. Do consider 30years of inflation makes this less than today's dollar. There are long term analyses that show real estate more-or-less keeps track with inflation at 2-4% annual returns. This doesn't consider real estate taxes, maintenance, insurance and the very individual and localized issues with your market and your particular house. Is land limited where you are, increasing your price? Will new development drive down your price? In 30 years, you'll own the house outright. You'll still need to pay property tax and insurance on it, and you'll be getting rental income. Over those 30 years, you can expect to replace a roof, 2-3 hot water heaters, concrete work, several trees, decades of snow shoveling, mowing grass and weeding, your HVAC system, windows and doors, and probably a kitchen and bathroom overhauls. You will have paid about 1.5x the initial price of the mortgage in interest along the way. So you'll have whatever the rental price for your house, monthly (probably almost impossible to predict for a single-family home) plus the market price of your house. (again, very difficult to predict, but could safely say it keeps pace with inflation) minus your expenses. There are scenarios where you could beat the stock market. There are ways to reduce the lifestyle burden of being a landlord. Along the way, should you want to purchase a house for yourself to live in, you'll have to prove the rental income is steady, to qualify for a loan. Having equity in a mortgage gives you something to borrow against, in a HELOC. Of course, you could easily end up owing more than your house is worth in that situation. Personally, I'd stick to investing that money in low-fee index funds." }, { "docid": "584304", "title": "", "text": "\"You don't state a long term goal for your finances in your message, but I'm going to assume you want to retire early, and retire well. :-) any other ideas I'm missing out on? A fairly common way to reach financial independence is to build one or more passive income streams. The money returned by stock investing (capital gains and dividends) is just one such type of stream. Some others include owning rental properties, being a passive owner of a business, and producing goods that earn long-term royalties instead of just an immediate exchange of time & effort for cash. Of these, rental property is probably one of the most well-known and easiest to learn about, so I'd suggest you start with that as a second type of investment if you feel you need to diversify from stock ownership. Especially given your association with the military, it is likely there is a nearby supply of private housing that isn't too expensive (so easier to get started with) and has a high rental demand (so less risk in many ways.) Also, with our continued current low rate environment, now is the time to lock-in long term mortgage rates. Doing so will reap huge benefits as rates and rents will presumably rise from here (though that isn't guaranteed.) Regarding the idea of being a passive business owner, keep in mind that this doesn't necessarily mean starting a business yourself. Instead, you might look to become a partner by investing money with an existing or startup business, or even buying an existing business or franchise. Sometimes, perfectly good business can be transferred for surprisingly little down with the right deal structure. If you're creative in any way, producing goods to earn long-term royalties might be a useful path to go down. Writing books, articles, etc. is just one example of this. There are other opportunities depending on your interests and skill, but remember, the focus ought to be on passive royalties rather than trading time and effort for immediate money. You only have so many hours in a year. Would you rather spend 100 hours to earn $100 every year for 20 years, or have to spend 100 hours per year for 20 years to earn that same $100 every year? .... All that being said, while you're way ahead of the game for the average person of your age ($30k cash, $20k stocks, unknown TSP balance, low expenses,) I'm not sure I'd recommend trying to diversify quite yet. For one thing, I think you need to keep some amount of your $30k as cash to cover emergency situations. Typically people would say 6 months living expenses for covering employment gaps, but as you are in the military I don't think it's as likely you'll lose your job! So instead, I'd approach it as \"\"How much of this cash do I need over the next 5 years?\"\" That is, sum up $X for the car, $Y for fun & travel, $Z for emergencies, etc. Keep that amount as cash for now. Beyond that, I'd put the balance in your brokerage and get it working hard for you now. (I don't think an average of a 3% div yield is too hard to achieve even when picking a safe, conservative portfolio. Though you do run the risk of capital losses if invested.) Once your total portfolio (TSP + brokerage) is $100k* or more, then consider pulling the trigger on a second passive income stream by splitting off some of your brokerage balance. Until then, keep learning what you can about stock investing and also start the learning process on additional streams. Always keep an eye out for any opportunistic ways to kick additional streams off early if you can find a low cost entry. (*) The $100k number is admittedly a rough guess pulled from the air. I just think splitting your efforts and money prior to this will limit your opportunities to get a good start on any additional streams. Yes, you could do it earlier, but probably only with increased risk (lower capital means less opportunities to pick from, lower knowledge levels -- both stock investing and property rental) also increase risk of making bad choices.\"" }, { "docid": "482077", "title": "", "text": "\"leverage amplifies gains and losses, when returns are positive leverage makes them more positive, but when returns are negative leverage makes them more negative. since most investments have a positive return in \"\"the long run\"\", leverage is generally considered a good idea for long term illiquid investments like real estate. that said, to quote keynes: in the long run we are all dead. in the case of real estate specifically, negative returns generally happen when house prices drop. assuming you have no intention of ever selling the properties, you can still end up with negative returns if rents fall, mortgage rates increase or tax rates rise (all of which tend to correlate with falling property values). also, if cash flow becomes negative, you may be forced to sell during a down market, thereby amplifying the loss. besides loss scenarios, leverage can turn a small gain into a loss because leverage has a price (interest) that is subtracted from any amplified gains (and added to any amplified losses). to give a specific example: if you realize a 0.1% gain on x$ when unleveraged, you could end up with a 17% loss if leveraged 90% at 2% interest. (gains-interest)/investment=(0.001*x-0.02*0.9*x)/(x/10)=-0.017*10=-0.17=17% loss one reason leveraged investments are popular (particularly with real estate), is that the investor can file bankruptcy to \"\"erase\"\" a large negative net worth. this means the down side of a leveraged investment is limited for the highly leveraged investor. this leads to a \"\"get rich or start over\"\" mentality common among the self-made millionaire (and failed entrepreneurs). unfortunately, this dynamic also leads to serious problems for the banking sector in the event of a large nation-wide devaluation of real estate prices.\"" }, { "docid": "393629", "title": "", "text": "Should I treat this house as a second home or a rental property on my 2015 taxes? If it was not rented out or available for rent then you could treat it as your second home. But if it was available for rent (i.e.: you started advertising, you hired a property manager, or made any other step towards renting it out), but you just didn't happen to find a tenant yet - then you cannot. So it depends on the facts and circumstances. I've read that if I treat this house as a rental property, then the renovation cost is a capital expenditure that I can claim on my taxes by depreciating it over 28 years. That is correct. 27.5 years, to be exact. I've also read that if I treat this house as a personal second home, then I cannot do that because the renovation costs are considered non-deductible personal expenses. That is not correct. In fact, in both cases the treatment is the same. Renovation costs are added to your basis. In case of rental, you get to depreciate the house. Since renovations are considered part of the house, you get to depreciate them too. In case of a personal use property, you cannot depreciate. But the renovation costs still get added to the basis. These are not expenses. But does mortgage interest get deducted against my total income or only my rental income? If it is a personal use second home - you get to deduct the mortgage interest up to a limit on your Schedule A. Depending on your other deductions, you may or may not have a tax benefit. If it is a rental - the interest is deducted from the rental income only on your Schedule E. However, there's no limit (although some may be deferred if the deduction is more than the income) if you're renting at fair market value. Any guidance would be much appreciated! Here's the guidance: if it is a rental - treat it as a rental. Otherwise - don't." }, { "docid": "320442", "title": "", "text": "\"The way to resolve your dilemma is to consult the price-to-rent ratio of the property. According to smartasset.com: The price-to-rent ratio is a measure of the relative affordability of renting and buying in a given housing market. It is calculated as the ratio of home prices to annual rental rates. So, for example, in a real estate market where, on average, a home worth $200,000 could rent for $1000 a month, the price-rent ratio is 16.67. That’s determined using the formula: $200,000 ÷ (12 x $1,000). Smartasset.com also goes on to give a table comparing different cities' price-to-rent ratio and then claim that the average price-to-rent ratio is currently 19.21. If your price-to-rent ratio is lower than 19.21, then, yes, your rents are more expensive than the average house. Smartasset.com claims that a high price-to-rent ratio is an argument in favor of tenants \"\"renting\"\" properties while a low price-to-rent ratio favors people \"\"buying\"\" (either to live in the property or to just rent it out to other people). So let's apply the price-to-rent ratio formula towards the properties you just quoted. There's a specific house I could buy for 190 (perhaps even less) that rents for exactly 2000 / month. 190K/(2000 * 12) = 7.92 There's a house for sale asking 400 (been on the market 2 yrs! could probably get for 350) which rents for 2800 /month. (400K)/(2800*12) = 11.90 (350K)/(2800*12) = 10.42 One can quite easily today buy a house for 180k-270k that would rent out for 1700-2100 / month. Lower Bound: (180K)/(1700*12) = 8.82 Upper Bound: (270K)/(2100*12) = 10.71 Even so, the rental returns here seem \"\"ridiculously high\"\" to me based on other markets I've noticed. Considering how the average price-to-rent ratio is 19.21, and your price-to-rent ratio ranges from 7.92 to 11.90, you are indeed correct. They are indeed \"\"ridiculously high\"\". Qualification: I was involved in real estate, and used the price-to-rent ratio to determine how long it would take to \"\"recover\"\" a person's investment in the property. Keep in mind that it's not the only thing I care about, and obviously the price-to-rent ratio tends to downplay expenses involved in actually owning properties and trying to deal with periods of vacancy. There's also the problem of taking into account demand as well. According to smartasset.com, Detroit, MI has the lowest price-to-rent ratio (with 6.27), which should suggest that people should buy properties immediately in this city. But that's probably more of a sign of people not wanting to move to Detroit and bid up the prices of properties. EDIT: I should also say that just because the properties are \"\"ridiculously expensive\"\" right now doesn't mean you should expect your rents to decrease. Rather, if rents keep staying at their current level, I'd predict that the property values will slowly increase in the future, thereby raising the price-to-rent ratio to 'non-ridiculous' mode.\"" }, { "docid": "207815", "title": "", "text": "You will find Joe.E, that rents have increased considerably over the last 4 to 5 years in Australia. You can probably achieve rental yields of above 5% more than 20km from major Cities, however closer to cities you might get closer to 5% or under. In Western Sydney, we have been able to achieve rental yields close to 7%. We bought mainly in 2007 and 2008 when no one was buying and we were getting properties for 15% to 20% below market rates. As we bought cheap and rents were on the increase we were able to achieve higher rental yields. An example of one particular deal where we bought for $225K and rented for $300/wk giving us a yield of 6.9%. The rent is now $350/wk giving us a current yield of 8%, and with our interest rate at 6.3% and possibly heading down further, this property is positively geared and pays for itself plus provides us with some additional income. All our properties are yielding between 7.5% to 8.5% and are all positively geared. The capital gains might not be as high as with properties closer to the city, but even if we stopped working we wouldn't have to sell as they all provide us income after paying all expenses on associated with the properties. So in answer to your question I would be aiming for a property with a yield above 5% and preferably above 6%, as this will enable your property/ies to be positively geared at least after a couple of years if not straight away." }, { "docid": "580292", "title": "", "text": "No. This logic is dangerous. The apples to apples comparison between renting and buying should be between similar living arrangements. One can't (legitimately) compare living in a 600 sq ft studio to a 3500 sq ft house. With the proposal you offer, one should get the largest mortgage they qualify for, but that can result in a house far too big for their needs. Borrowing to buy just what you need makes sense. Borrowing to buy a house with rooms you may never visit, not a great idea. By the way, do the numbers. The 30 year rate is 4%. You'd need a $250,000 mortgage to get $10,000 in interest the first year, that's a $312,000 house given an 80% loan. On a median income, do you think it makes sense to buy a house twice the US median? Last, a portion of the tax savings is 'lost' to the fact that you have a standard deduction of nearly $6,000 in 2012. So that huge mortgage gets you an extra $4000 in write-off, and $600 back in taxes. Don't ever let the Tax Tail wag the Investing Dog, or in this case the House Dog. Edit - the investment return on real estate is a hot topic. I think it's fair to say that long term one must include the rental value of the house in calculating returns. In the case of buying of way-too-big house, you are not getting the return, it's the same as renting a four bedroom, but leaving three empty. If I can go on a bit - I own a rental, it's worth $200K and after condo fee and property tax, I get $10K/yr. A 5% return, plus whatever appreciation. Now, if I lived there, I'd correctly claim that part of my return is the rental value, the rent I don't pay elsewhere, so the return to me is the potential growth as well as saved rent. But if the condo rents for $1200, and I'd otherwise live in a $600 apartment with less space, the return to me is lost. In my personal case, in fact, I bought a too big house. Not too big for our paycheck, the cost and therefore the mortgage were well below what the bank qualified us for. Too big for the need. I paid for two rooms we really don't use." }, { "docid": "117509", "title": "", "text": "What kind of financial analysis would make you comfortable about this decision? The HELOC and ARM are the biggest red flags to me in your current situation. While I don't expect interest rates to skyrocket in the near future, they introduce an interest rate risk that is easy to get rid of. Getting rid of the HELOC and converting to a fixed mortgage would be my first priority. If you also want to upgrade to a new home at the same time (meaning buy a new home contingent on the sale of your first, paying off the HELOC and mortgage), that's fine, but make sure that you can comfortably afford the payment on a fixed-rate mortgage with at least 20% down. I would not take additional cash out of your equity just to save it. You're going to pay more in interest that you're going to get in savings. From there things get trickier. While many people would keep the first property on a mortgage and rent it out, I am not willing to be a landlord for a part-time job, especially when the interest on the mortgage gouges my return on the rent. PLus leverage increases the risks as well - all it takes is to go one or two months without rent and you can find yourself unable to make a mortgage payment, wrecking your credit and possibly risking foreclosure. So my options in order of precedence would be: At what point does it make sense to become a landlord? The complicated answer is when the benefits (rent, appreciation) relative to the costs (maintenance, interest, taxes, etc.) and risks (lost rent, bad renters, home value variance) give you a better return that you could find in investments of similar risk. The simple answer is when you can pay cash for it. That takes interest and lost rent out of the equation. Again, some are willing to take those risks and pay 20% down on rental property. Some are able to make it work. Some of those go broke or lose their properties. when calculating the 20% down of a new property, does that need to be liquid funds, or can that be based on the value of the home you are selling You can make the purchase of the new home contingent on the sale of the first if you need to get the equity out of it to make the 20%. Do NOT refinance the first just to pull out the equity to make a down payment. It's not worth the fees of a refinance." }, { "docid": "286017", "title": "", "text": "You don't start out buying a shopping mall, you have to work up to it. You can start with any amount and work up to a larger amount. For me, I saved 30% of my salary(net), investing in stocks for 8 years. It was tough to live on less, but I had a goal to buy passive income. I put down this money to buy 3 houses, putting 35% down and maintaining enough cash to make 5 years of payments. I rented out the houses making a cap of 15%. The cap is the net payment per year / cost of the property, where the net accounts for taxes and repairs. I did not spend any of the profits, but I did start saving less salary. After 5 years of appreciation, mortgage payments and rental profit, I sold one house to get a loan for a convenience store. Buildings go on the market all the time, it takes 14 years to directly recoup an investment at a 7% cap, which is the average for a commercial property sale. Many people cash out for this reason, it's slow, but steady growth, though the earnings on property appreciation is a nice bonus. Owning real estate is a long term game, after a long time of earning, you can reinvest, but it comes with the risk of bad or no tenants. You can start both slower and smaller, just make sure you're picking up assets, not liabilities. Like investing in cars is generally bad unless you are sure it will appreciate." }, { "docid": "570131", "title": "", "text": "\"Off the top of my head, I don't know of any publicly-traded companies that routinely earmark distributions as return of capital, but theoretically, it's certainly applicable to any publicly-traded company. The Wikipedia article gives one situation in which a publicly-traded company may use return of capital: Public business may return capital as a means to increase the debt/equity ratio and increase their leverage (risk profile). Since return of capital is a distribution, it shrinks the firm's equity, thus increasing its leverage. Investopedia also has an article, Dividend Facts You May Not Know, that gives an example of when return of capital might be used: Sometimes, especially in the case of a special, large dividend, part of the dividend is actually declared by the company to be a return of capital. In this case, instead of being taxed at the time of distribution, the return of capital is used to reduce the basis of the stock, making for a larger capital gain down the road, assuming the selling price is higher than the basis. For instance, if you buy shares with a basis of $10 each and you get a $1 special dividend, 55 cents of which is return of capital, the taxable dividend is 45 cents, the new basis is $9.45 and you will pay capital gains tax on that 55 cents when you sell your shares sometime in the future. A company may choose to earmark some or all of its distribution as return of capital in order to provide shareholders with a more beneficial tax treatment. The IRS describes this different tax treatment: Distributions that qualify as a return of capital are not dividends. A return of capital is a return of some or all of your investment in the stock of the company. A return of capital reduces the basis of your stock. These distributions don't necessarily count as taxable income, except in some instances: Once the basis of your stock has been reduced to zero, any further non-dividend distribution is capital gain. The IRS also states: A distribution generally qualifies as a return of capital if the corporation making the distribution does not have any accumulated or current year earnings and profits. In this case, the firm is lowering its equity because it's paying distributions out of that equity instead of accumulated earnings/profits. A company may use return of capital to maintain a distribution even in times of financial difficulty. In the context of closed-end funds, however, return of capital can be much more complicated and can affect the fund's performance and reputation in numerous ways. Also, JB King is correct in cautioning you that \"\"return of capital\"\" is not the same thing as \"\"return on capital*. The latter is a method for valuing a company and determining \"\"how efficient a company is where it comes to using its resources.\"\" (to quote JB King's comment again).\"" }, { "docid": "87324", "title": "", "text": "In general you do not want to show a taxable gain on rental properties if you can avoid it. One of the more beneficial advantages of owning cash flowing rental properties, is that the income is tax deferred because of the depreciation. I say deferred, because depreciation affects the cost basis of your property. Also since you are considering financing, it sounds like you don't need the cash flow currently. You usually can get better returns by financing and buying more rental properties, especially with investment mortgages at historical lows (Win via inflation over time)" }, { "docid": "201272", "title": "", "text": "Log-returns are very commonly used in financial maths, especially quantitative finance. The important property is that they're symmetrical around 0 with respect to addition. This property makes it possible to talk about an average return. For instance, if a stock goes down 20% over a period of time, it has to gain 25% to be back where you started. For the log-return on the other hand the numbers are 0.223 down over a period of time, and 0.223 up to get you back to square 1. In this sense, you can simply take an arithmetic average and it makes sense. You can freely add up or subtract values on the log-return scale, like log-interest rates or log-inflation rates. Whereas the arithmetic mean of (non-log) returns is simply meaningless: A stock with returns -3% and +3% would have 0% on average, when in fact the stock has declined in price? The correct approach on direct price-returns would be to take a different mean (e.g. geometric) to get a decent average. And yet it will be hard to incorporate other information, like subtracting the risk-free rate or the inflation rate to get rate-adjusted average returns. In short: Log-returns are easier to handle computationally, esp. in bulk, but non-log-returns are easier to comprehend/imagine as a number of their own." }, { "docid": "565868", "title": "", "text": "My question is... how is this new value determined? Does it go off of the tax appraised value? The tax assessors values are based on broad averages and are not very useful in determining actual home value. The most defensible valuation outside of a sale is a professional appraisal, real-estate agents may or may not give you reasonable estimates, but their opinions are less valuable than that of a professional appraiser. Additionally, agents hoping to land you as a client (even if you tell them you're not trying to sell) could be motivated to over-estimate. In many instances a few opinions from agents will be good enough, but if there is any contention a professional appraisal will be better. Should you, prior to your death, get an independent appraiser to appraise the value of the property and include that assessment of the properties value with the will or something? The real-estate market fluctuates too much to make having an appraisal done prior to your death a practical approach in most circumstances. You could make arrangements so that an appraisal would be scheduled after your death. Here's a good resource on the topic: Estimating the Value of Inherited Real Estate" }, { "docid": "138849", "title": "", "text": "I assume having real estate in a good popular city is much more secure way of keeping money than having it in a bank account Not at all! Many things can go wrong with rental property. Renters can be late on rent, they can cause damage to property, you can have unexpected repairs. I'm not saying that you should just let it sit, but rental property is not risk-free my any means. Are you prepared to be a landlord as a part time job (for 500/mo?). Rental property is not passive income - it takes work to maintain. You can outsource this to a property manager, but that eats into the 500/mo that you are estimating). I want to stay flexible and have a possibility to change my location whenever I want. That's a perfectly reasonable reason not to buy a home, but what will you do with the rental when you move? It will still need maintenance, you'll still need to interact with renters, etc. I'm not saying you shouldn't do this, but I get the feeling that you are not fully aware of the risks involved in rental properties." }, { "docid": "503742", "title": "", "text": "\"I have been a landlord in Texas for just over 3 years now. I still feel like a novice, but I will give you the benefit of my experience. If you are relying on rental properties for current income versus a long term return you are going to have to do a good job at shopping for bargains to get monthly cash flow versus equity growth that is locked up in the property until you sell it. If you want to pull a lot of cash out of a property on a regular basis you probably are going to have to get into flipping them, which is decidedly not passive investing. Also, it is easy to underestimate the expenses associated with rental properties. Texas is pretty landlord friendly legally, however it does have higher than usual property taxes, which will eat into your return. Also, you need to factor in maintenance, vacancy, tenant turnover costs, etc. It can add up to a lot more than you would expect. If you are handy and can do a lot of repairs yourself you can increase your return, but that makes it less of a passive investment. The two most common rules I have heard for initially evaluating whether an investment property is likely to be cash flow positive are the 1% and 50% rules. The 1% rule says the expected monthly rent needs to be 1% or greater of the purchase price of the house. So your hypothetical $150K/$10K scenario doesn't pass that test. Some people say this rule is 2% for new landlords, but in my experience you'd have to get lucky in Texas to find a house priced that competitively that didn't need a lot of work to get rents that high. The 50% rule says that the rent needs to be double your mortgage payment to account for expenses. You also have to factor in the hassle of dealing with tenants, the following are not going to happen when you own a mutual fund, but are almost inevitable if you are a landlord long enough: For whatever reason you have to go to court and evict a tenant. A tenant that probably lost their job, or had major medical issues. The nicest tenant you ever met with the cutest kids in the world that you are threatening to make homeless. Every fiber of your being wants to cut them some slack, but you have a mortgage to pay and can't set an expectation that paying the rent on time is a suggestion not a rule. or the tenant, who seemed nice at first, but now considers you \"\"the man\"\" decides to fight the eviction and won't move out. You have to go through a court process, then eventually get the Sheriff to come out and forcibly remove them from the property, which they are treating like crap because they are mad at you. All the while not paying rent or letting you re-let the place. The tenant isn't maintaining the lawn and the HOA is getting on your butt about it. Do you pay someone to mow the grass for them and then try to squeeze the money out of the tenant who \"\"never agreed to pay for that\"\"? You rent to a college kid who has never lived on their own and has adopted you as their new parent figure. \"\"The light in the closet went out, can you come replace the bulb?\"\" Tenants flat out lying to your face. \"\"Of course I don't have any pets that I didn't pay the deposit for!\"\" (Pics all over facebook of their kids playing with a dog in the \"\"pet-free\"\" house)\"" }, { "docid": "513991", "title": "", "text": "\"Forget the math's specifics for a moment: here's some principles. Additional housing for a renter gives you returns in the form of money. Additional housing for yourself pays its returns in the form of \"\"here is a nice house, live in it\"\". Which do you need more of? If you don't need the money, get a nicer house for yourself. If you need (or want) the money, get a modest house for yourself and either use the other house as a rental property, or invest the proceeds of its sale in the stock market. But under normal circumstances (++) don't expect that buying more house for yourself is a good way to increase how much money you have. It's not. (++ the exception being during situations where land/housing value rises quickly, and when that rise is not part of a housing bubble which later collapses. Generally long-term housing values tend to be relatively stable; the real returns are from the rent, or what economists call imputed rent when you're occupying it yourself.)\"" }, { "docid": "448759", "title": "", "text": "\"This can be done, and there have been many good suggestions on things to do and watch out for. But to my shock I don't see anyone offering any words of caution about property managers! Whatever you do, don't assume they have your best interests at heart. Do not assume that \"\"no news is good news\"\" and that if you aren't hearing of problems and are just collecting rent checks, everything must be fine. You can easily end up with tenants you would never have allowed yourself, or tenants with pets that you would not have allowed, etc. Especially if the manager doesn't want you to have a vacancy and potentially lose you as a client, they may very well lower their standards just to get the place occupied. And a year or two or three later, you may find yourself looking at a very large repair bill and wonder how on earth it could have happened when you supposedly had someone looking out for your property! There are quality, ethical property managers out there. They are not all bad to be certain. But whatever you do, check up on them. And with multiple properties - especially if in multiple areas/states etc. - this can be nearly a full time job in itself. As the saying goes, \"\"Trust, but verify\"\". I have never found this to apply more than with rental properties and property management. Don't leave anything significant to them 100%. You can't even assume that a rule like \"\"all expenses over $50 must be cleared by me first\"\", as that can simply mean that they don't bother to come to you for certain kinds of repairs that would cost more than that, or that they just get them \"\"taken care of\"\" by their own person (done poorly, illegally, etc.) and never tell you. Never trust their choice of tenants blindly. Visit the place yourself at least every few months - a quick driveby at a minimum or better if you can, arrange a reason to walk through the house personally. Check the back yard, never assume that the front yard is indicative of anything else. Never assume that a \"\"no pets\"\" rule will be followed, or that tenants wouldn't lie to the management about having pets. Never assume that the tenants won't move additional people into the property as well. Always expect a bare minimum of 1 month vacancy every year, and an additional minimum of 1 month's rental revenue in unexpected maintenance/repairs every year. This is at a minimum! You might do much better than this, and have a high quality tenant in place for years who costs next to nothing in extra maintenance. But do not count on it. Rental real estate investing looks so simple on paper, where it's just numbers. But reality has a very rude habit of surprising you when you least expect it. After all, no one expects the Spanish Inquisition! Good luck!\"" }, { "docid": "389179", "title": "", "text": "When you buy a property the house or the building goes down in value every year (it gets depreciated) similar to when you drive a new car out of the lot. However, it is the land that increases in value over time. As land becomes scarcer the value of land in that area will increase in value, as does land in sought after areas. If more people want to live in a particular suburb the land value will keep on increasing year after year. Sometimes established areas with houses built in the 1980s or even earlier can be worth much more than newly built areas. It comes down to the supply and demand of land and houses in a particular area. You might even get a situation where a run-down dilapidated house in a very sought after suburb sells for more than a brand new house in a less sought-after suburb nearby. Properties can be a very good investment and they can be a very poor investment. It can largely depend on the decisions you make in buying your investment property. The first thing you need to make a decision on is the location of the property. If you buy a property in a good area that is well sought after you can make good capital and rental returns over the long run. If you buy poorly in an area no one wants to live in then you might have problems renting it out or only be able to rent it out to bad tenants who cause damage, and you may not get any capital gains over many years. The second thing you need to decide on is when in the property cycle you buy the property. If you buy at the right time you can get higher rents and make some quick capital gains over a relatively short time. I can provide a personal example of this situation. I had bought a house (in Australia) in 2007 for $240,000 at a time when interests where at their highest (9%), no one was buying property and rents were on the increase (with low vacancy rates). Today, eight years after, we are getting $410 per week rent and the house next door (in worse condition than ours) has been put on the market asking for between $500,000 to $550,000 (most houses in the area had been selling during this year for over $500,000). So you can say that our house has more than doubled in 8 years. However, up to a few months ago houses were selling within 2 weeks of being listed. The house next door however, has been listed for over a month and has not had very much interest. So from this you can conclude that in 2007 we had bought near the bottom of the market, whilst now we are near the top of the market. What you also need to remember is that different areas of a country can have different cycles, so there is not just one property cycle but many property cycles in the same country." }, { "docid": "112271", "title": "", "text": "I would go with the 2nd option (put down as little as possible) with a small caveat: avoid the mortgage insurance if you can and put down 20%. Holding your rental property(ies)'s mortgage has some benefits: You can write off the mortgage interest. In Canada you cannot write off the mortgage interest from your primary residence. You can write off stuff renovations and new appliances. You can use this to your advantage if you have both a primary residence and a rental property. Get my drift? P.S. I do not think it's a good time right now to buy a property and rent it out simply because the housing prices are over-priced. The rate of return of your investment is too low. P.S.2. I get the feeling from your question that you would like to purchase several properties in the long-term future. I would like to say that the key to good and low risk investing is diversification. Don't put all of your money into one basket. This includes real estate. Like any other investment, real estate goes down too. In the last 50 or so years real estate has only apprepriated around 2.5% per year. While, real estate is a good long term investment, don't make it 80% of your investment portfolio." } ]

[ { "docid": "482077", "title": "", "text": "\"leverage amplifies gains and losses, when returns are positive leverage makes them more positive, but when returns are negative leverage makes them more negative. since most investments have a positive return in \"\"the long run\"\", leverage is generally considered a good idea for long term illiquid investments like real estate. that said, to quote keynes: in the long run we are all dead. in the case of real estate specifically, negative returns generally happen when house prices drop. assuming you have no intention of ever selling the properties, you can still end up with negative returns if rents fall, mortgage rates increase or tax rates rise (all of which tend to correlate with falling property values). also, if cash flow becomes negative, you may be forced to sell during a down market, thereby amplifying the loss. besides loss scenarios, leverage can turn a small gain into a loss because leverage has a price (interest) that is subtracted from any amplified gains (and added to any amplified losses). to give a specific example: if you realize a 0.1% gain on x$ when unleveraged, you could end up with a 17% loss if leveraged 90% at 2% interest. (gains-interest)/investment=(0.001*x-0.02*0.9*x)/(x/10)=-0.017*10=-0.17=17% loss one reason leveraged investments are popular (particularly with real estate), is that the investor can file bankruptcy to \"\"erase\"\" a large negative net worth. this means the down side of a leveraged investment is limited for the highly leveraged investor. this leads to a \"\"get rich or start over\"\" mentality common among the self-made millionaire (and failed entrepreneurs). unfortunately, this dynamic also leads to serious problems for the banking sector in the event of a large nation-wide devaluation of real estate prices.\"" } ]

[ { "docid": "353415", "title": "", "text": "\"Another option you might consider is rolling over some of that 401K balance into a self-directed IRA or Solo 401K, specifically one with \"\"checkbook privileges\"\". That would permit you to invest directly in a property via your IRA/401K money without it being a loan, and preserving the tax benefits. (You may not be able to roll over from your current employer's 401K while still employed.) That said, regarding your argument that your loan is \"\"paying interest to yourself\"\", while that is technically true, that neglects the opportunity cost -- that money could potentially be earning a much higher (and tax-free) return if it remains in the 401K account than if you take it out and slowly repay it at a modest interest rate. Real Estate can be a great way to diversify, build wealth, and generate income, but a company match and tax-free growth via an employee sponsored retirement account can be a pretty sweet deal too (I actually recently wrote about comparing returns from having a tenant pay your mortgage on a rental property vs. saving in a retirement account on my blog -- in short, tax-free stock-market level returns are pretty compelling, even when someone else is paying your mortage). Before taking rather big steps like borrowing from a 401K or buying a rental property, you might also explore other ways to gain some experience with real estate investing, such as the new crop of REITs open to all investors under SEC Reg A+, some with minimums of $500 or less. In my own experience, there are two main camps of real estate investors: (1) those that love the diversification and income, but have zero interest in active management, and (2) those that really enjoy real estate as a lifestyle and avocation, happy to deal with tenant screening and contractors, etc. You'll want to be careful to be sure which camp you're in before signing on to active investment in a specific property.\"" }, { "docid": "175649", "title": "", "text": "\"You are assuming 100% occupancy and 100% rent collection. This is unrealistic. You could get lucky and find that long term tenant with great credit that always pays their bills... but in reality that person usually buys a home they do not rent long term. So you will need to be prepared for periods of no renters and periods of non payment. The expenses here I would expect could wipe out more than you can make in \"\"profit\"\" based on your numbers. Have you checked to find out what the insurance on a rental property is? I am guessing it will go up probably 200-500 a year possibly more depending on coverage. You will need a different type of insurance for rental property. Have you checked with your mortgage provider to make sure that you can convert to a rental property? Some mortgages (mine is one) restrict the use of the home from being a rental property. You may be required to refinance your home which could cost you more, in addition if you are under water it will be hard to find a new financier willing to write that mortgage with anything like reasonable terms. You are correct you would be taking on a new expense in rental. It is non deductible, and the IRS knows this well. As Littleadv's answer stated you can deduct some expenses from your rental property. I am not sure that you will have a net wash or loss when you add those expenses. If you do then you have a problem since you have a business losing money. This does not even address the headaches that come with being a landlord. By my quick calculations if you want to break even your rental property should be about 2175/Month. This accounts for 80% occupancy and 80% rental payment. If you get better than that you should make a bit of a profit... dont worry im sure the house will find a way to reclaim it.\"" }, { "docid": "117509", "title": "", "text": "What kind of financial analysis would make you comfortable about this decision? The HELOC and ARM are the biggest red flags to me in your current situation. While I don't expect interest rates to skyrocket in the near future, they introduce an interest rate risk that is easy to get rid of. Getting rid of the HELOC and converting to a fixed mortgage would be my first priority. If you also want to upgrade to a new home at the same time (meaning buy a new home contingent on the sale of your first, paying off the HELOC and mortgage), that's fine, but make sure that you can comfortably afford the payment on a fixed-rate mortgage with at least 20% down. I would not take additional cash out of your equity just to save it. You're going to pay more in interest that you're going to get in savings. From there things get trickier. While many people would keep the first property on a mortgage and rent it out, I am not willing to be a landlord for a part-time job, especially when the interest on the mortgage gouges my return on the rent. PLus leverage increases the risks as well - all it takes is to go one or two months without rent and you can find yourself unable to make a mortgage payment, wrecking your credit and possibly risking foreclosure. So my options in order of precedence would be: At what point does it make sense to become a landlord? The complicated answer is when the benefits (rent, appreciation) relative to the costs (maintenance, interest, taxes, etc.) and risks (lost rent, bad renters, home value variance) give you a better return that you could find in investments of similar risk. The simple answer is when you can pay cash for it. That takes interest and lost rent out of the equation. Again, some are willing to take those risks and pay 20% down on rental property. Some are able to make it work. Some of those go broke or lose their properties. when calculating the 20% down of a new property, does that need to be liquid funds, or can that be based on the value of the home you are selling You can make the purchase of the new home contingent on the sale of the first if you need to get the equity out of it to make the 20%. Do NOT refinance the first just to pull out the equity to make a down payment. It's not worth the fees of a refinance." }, { "docid": "120852", "title": "", "text": "\"I debated whether to put this in an answer or a comment, because I'm not sure that this can be answered usefully without a lot more information, which actually would then probably make it a candidate for closing as \"\"too localized\"\". At the very least we would need to know where (which jurisdiction) she is located in. So, speaking in a generic way, the options available as I see them are: Contact the mortgage companies and explain she can't continue to make payments. They will likely foreclose on the properties and if she still ends up owing money after that (if you are in the US this also depends on whether you are in a \"\"non-recourse\"\" state) then she could be declared bankrupt. This is rather the \"\"nuclear option\"\" and definitely not something to be undertaken lightly, but would at least wipe the slate clean and give her some degree of certainty about her situation. Look very carefully at the portfolio of properties and get some proper valuations done on them (depending on where she is located this may be free). Also do a careful analysis of the property sales and rental markets, to see whether property prices / rental rates are going up or down. Then decide on an individual basis whether each property is better kept or sold. You may be able to get discounts on fees if you sell multiple properties in one transaction. This option would require some cold hard analysis and decision making without letting yourselves get emotionally invested in the situation (difficult, I know). Depending on how long she has had the properties for and how she came to own them, it MIGHT be an option to pursue action against whoever advised her to acquire them. Clearly a large portfolio of decaying rental properties is not a suitable investment for a relatively elderly lady and if she only came by them relatively recently, on advice from an investment consultant or similar, you might have some redress there. Another option: could she live in one of the properties herself to reduce costs? If she owns her own home as well then she could sell that, live in the one of the rentals and use the money saved to finance the sale of the other rentals. Aside from these thoughts, one final piece of advice: don't get your own finances tangled up in hers (so don't take out a mortgage against your own property, for example). Obviously if you have the leeway to help her out of your budget then that is great, but I would restrict that to doing things like paying for grocery shopping or whatever. If she is heading for bankruptcy or other financial difficulties, it won't help if you are entangled too.\"" }, { "docid": "584304", "title": "", "text": "\"You don't state a long term goal for your finances in your message, but I'm going to assume you want to retire early, and retire well. :-) any other ideas I'm missing out on? A fairly common way to reach financial independence is to build one or more passive income streams. The money returned by stock investing (capital gains and dividends) is just one such type of stream. Some others include owning rental properties, being a passive owner of a business, and producing goods that earn long-term royalties instead of just an immediate exchange of time & effort for cash. Of these, rental property is probably one of the most well-known and easiest to learn about, so I'd suggest you start with that as a second type of investment if you feel you need to diversify from stock ownership. Especially given your association with the military, it is likely there is a nearby supply of private housing that isn't too expensive (so easier to get started with) and has a high rental demand (so less risk in many ways.) Also, with our continued current low rate environment, now is the time to lock-in long term mortgage rates. Doing so will reap huge benefits as rates and rents will presumably rise from here (though that isn't guaranteed.) Regarding the idea of being a passive business owner, keep in mind that this doesn't necessarily mean starting a business yourself. Instead, you might look to become a partner by investing money with an existing or startup business, or even buying an existing business or franchise. Sometimes, perfectly good business can be transferred for surprisingly little down with the right deal structure. If you're creative in any way, producing goods to earn long-term royalties might be a useful path to go down. Writing books, articles, etc. is just one example of this. There are other opportunities depending on your interests and skill, but remember, the focus ought to be on passive royalties rather than trading time and effort for immediate money. You only have so many hours in a year. Would you rather spend 100 hours to earn $100 every year for 20 years, or have to spend 100 hours per year for 20 years to earn that same $100 every year? .... All that being said, while you're way ahead of the game for the average person of your age ($30k cash, $20k stocks, unknown TSP balance, low expenses,) I'm not sure I'd recommend trying to diversify quite yet. For one thing, I think you need to keep some amount of your $30k as cash to cover emergency situations. Typically people would say 6 months living expenses for covering employment gaps, but as you are in the military I don't think it's as likely you'll lose your job! So instead, I'd approach it as \"\"How much of this cash do I need over the next 5 years?\"\" That is, sum up $X for the car, $Y for fun & travel, $Z for emergencies, etc. Keep that amount as cash for now. Beyond that, I'd put the balance in your brokerage and get it working hard for you now. (I don't think an average of a 3% div yield is too hard to achieve even when picking a safe, conservative portfolio. Though you do run the risk of capital losses if invested.) Once your total portfolio (TSP + brokerage) is $100k* or more, then consider pulling the trigger on a second passive income stream by splitting off some of your brokerage balance. Until then, keep learning what you can about stock investing and also start the learning process on additional streams. Always keep an eye out for any opportunistic ways to kick additional streams off early if you can find a low cost entry. (*) The $100k number is admittedly a rough guess pulled from the air. I just think splitting your efforts and money prior to this will limit your opportunities to get a good start on any additional streams. Yes, you could do it earlier, but probably only with increased risk (lower capital means less opportunities to pick from, lower knowledge levels -- both stock investing and property rental) also increase risk of making bad choices.\"" }, { "docid": "85229", "title": "", "text": "Insurance - get estimate from an insurance agent who works with policies for commercial real estate. See comments below regarding incorporation. Taxes - if this was basic income for a simple LLC, estimating 25-40% and adjusting over time might work. Rental property is a whole different prospect. Financial experts who specialize in rental properties would be a good source of advice, and worth the cost. See below regarding incorporating. Real estate appreciation - not something you can count on for developed property. Appreciation used to be almost guaranteed to at least keep up with inflation. Now property values are not even guaranteed to go up. Never have been but the general rule was improved real estate in good repair appreciated in price. Even if property values increase over time, rental properties depreciate. In fact, for rental properties, you can claim a certain rate of depreciation over time as an expense on taxes. This depreciation could mean selling for less than you paid for the property after a number of years, and owing capital gains taxes, since you would owe the difference between the depreciated value and the sale price. Related to taxes are local codes. Some areas require you to have a property management license to handle buildings with more than a certain number of units. If you are going to own rental properties, you should protect your private financial life by incorporating. Form a company. The company will own the property and hire any maintenance people or property managers or security staff or any similar employment activities. The company takes out the insurance and pays taxes. The company can pay you a salary. So, bottom line, you can have the company pay all the expenses and take all the risks. Then, assuming there's any money left after expenses, the company can pay you a manager's salary. That way if the worst happens and a tenant breaks their hip in the shower and sues you for ONE MILLION DOLLARS and wins, the company folds and you walk away. You might even consider two companies. One to own the property and lease it to a property management company. The property management company can then go bankrupt in case of some sort of liability issue, in which case you still keep the property, form a new management company, repaint and rename the property and move on. TL;DR: Get insurance advice from insurance agent before you buy. Same for taxes from an accountant. Get trained as a property manager if your local codes require it (might be a good idea anyway). Incorporate and have the company take all the risks." }, { "docid": "351954", "title": "", "text": "\"With permanent contract in Germany you shouldn't have any problem getting a loan. It's even more important than how much do you earn. Generally, you should ask for a house mortgage (Baufinanzierungsdarlehen) with annuity as a type of credit to save on interest. Besides, you usually get a better conditions with a saving bank (Sparkasse) or a popular bank (Volksbank) situated in the area where your house is situated. You also shouldn't combine your credit with extra products (the simpler is the product, the better is for you), maybe I'll write later an extra piece on the common pitfalls in this regard. Probably, you could find a bank that would give you such a loan, but it would be very expensive. You should save at least 40%, because then the bank can refinance your loan cheaply and in return offer you a low interest. Taxes depend heavily on the place where you buy a house. When you buy it, you pay a tax between 3.5% and 6% (look up here). Then you pay a property tax (Grundsteuer), it depends on community how much do you pay, the leverage is called Hebesatz (here's example). Notary would cost ca. 1.5% of the house price. All and all, you should calculate with 10% A country-independent advice: if you want to save on interest in the long run, you should take an annuity loan with the shortest maturity. Pay attention to effective interest rate. Now to Germany specifics. Don't forget to ask about \"\"Sondertilgung\"\" (extra amortization) - an option to amortize additionaly. Usually, banks offer 5% Sondertilgung p.a. The interest-rate is usually fixed for 8 years (however, ask about it), this period is called Zinsbindung. It sound ridiculous, but in southern lands (Bayern, Baden-Württemberg) you usually get better conditions as in Berlin or Bremen. The gap could be as big as 0.5% p.a. of effective interest rate! In Germany they often use so-called \"\"anfängliche Tilgung\"\" (initial rate of amortizazion) as a parameter.\"" }, { "docid": "93828", "title": "", "text": "You can make a start to learn how to make better investing decisions by learning and understanding what your current super funds are invested in. Does the super fund give you choices of where you can invest your funds, and how often does it allow you to change your investment choices each year? If you are interested in one area of investing over others, eg property or shares, then you should learn more on this subject, as you can also start investing outside of superannuation. Your funds in superannuation are taxed less but you are unable to touch them for another 30 to 35 years. You also need to consider investing outside super to help meet your more medium term goals and grow your wealth outside of super as well. If you are interested in shares then I believe you should learn about both fundamental and technical analysis, they can help you to make wiser decisions about what to invest in and when to invest. Above is a chart of the ASX200 over the last 20 years until January 2015. It shows the Rate Of Change (ROC) indicator below the chart. This can be used to make medium to long term decisions in the stock market by investing when the ROC is above zero and getting out of the market when the ROC is below zero. Regarding your aggressiveness in your investments, most would say that yes because you are still young you should be aggressive because you have time on your side, so if there is a downturn in your investments then you still have plenty of time for them to recover. I have a different view, and I will use the stock market as an example. Refer back to the chart above, I would be more aggressive when the ROC is above zero and less aggressive when the ROC is below zero. How can you relate this to your super fund? If it does provide you to change your investment choices, then I would be invested in more aggressive investments like shares when the ROC crosses above zero, and then when the ROC moves below zero take a less aggressive approach by moving your investments in the super fund to a more balanced or capital guaranteed strategy where less of your funds are invested in shares and more are invested in bonds and cash. You can also have a similar approach with property. Learn about the property cycles (remember super funds usually invest in commercial and industrial property rather than houses, so you would need to learn about the commercial and industrial property cycles which would be different to the residential property cycle). Regarding your question about SMSFs, if you can increase your knowledge and skills in investing, then yes switching to a SMSF will give you more control and possibly better returns. However, I would avoid switching your funds to a SMSF right now. Two reasons, firstly you would want to increase your knowledge as mentioned above, and secondly you would want to have at least $300,000 in funds before switching to a SMSF or else the setup and compliance costs would be too high as a percentage of your funds at the moment ($70,000). You do have time on your side, so whilst you are increasing your funds you can use that time to educate yourself in your areas of interest. And remember a SMSF is not only an investment vehicle whilst you are building your funds during your working life, but it is also an investment vehicle when you are retired and it becomes totally tax free during this phase, where any investment returns are tax free and any income you take out is also tax free." }, { "docid": "486243", "title": "", "text": "To me this sounds like a transaction, where E already owns a company worth 400k and can therefore pocket the money from D and give D 25% of the profits every year. There is nothing objective (like a piece of paper) that states the company is worth 400K. It is all about perceived value. Some investors may think it is worth something because of some knowledge they may have. Heck, the company could be worth nothing but the investor could have some sentimental value associated to it. So is it actually the case that E's company is worth 400k only AFTER the transaction? It is worth what someone pays for it when they pay for it. I repeat- the 400K valuation is subjective. In return the investor is getting 25% ownership of the product or company. The idea is that when someone has ownership, they have a vested interest in it being successful. In that case, the investor will do whatever he/she can to improve the chances of success (in addition to supplying the 100K capital). For instance, the investor will leverage their network or perhaps put more money into it in the future. Is the 100k added to the balance sheet as cash? Perhaps. It is an asset that may later be used to fund inventory (for instance). ... and would the other 300k be listed as an IP asset? No. See what I said about the valuation just being perception. Note that the above analysis doesn't apply to all Dragons Den deals. It only applies to situations where capital is exchanged for ownership in the form of equity." }, { "docid": "547196", "title": "", "text": "Hmm, if your financially savvy enough to have saved up half a million dollars, I'd think you would be savvy enough to spend it wisely. :-) I think I'd spend the cash before running down stocks and bonds, as cash almost surely has a lower rate of return. I'd look into what rate of return you're getting on the rental property versus what you're getting from other investments. If the rental property has a lower return, I'd sell that before selling off stocks. (I own a rental property on which I am losing money every month. I'm still paying a mortgage on it, but even without that, the ROI would be about 4% under current market conditions.) Besides that, your plan looks good to me. Might need to add, 8. Beg on the streets, and 9. Burglary." }, { "docid": "509197", "title": "", "text": "\"There are five main drivers to real estate returns: Income (cash flow from rental payments); Depreciation (as an expense that can be used to reduce taxes); Equity (the gradual paydown of the mortgage the increases underlying equity in the property); Appreciation (any increase in the overall value of the property); Leverage (the impact of debt financing on the deal, increasing the effective \"\"cash-on-cash\"\" return). (Asset Rover has a detailed walk-through of the components, and a useful comparison to stocks) So interest rates are certainly a component (as they increase the expenses), but they are just one factor. Depending on a particular market's conditions, appreciation or rent increases could offset or (exceed) any increase in the interest expense. My own experience is mostly with non-listed REITs (including Reg A+ investments like the ones from Fundrise) and commercial syndicates, and for right now in both cases there's plenty of capital chasing yield to go around (and in fact competition among new funding sources like Reg D and Reg A+ platforms seems to be driving down borrowing rates as platforms compete both for borrowers and for investors). Personally I pay more attention to where each local market (and the broader national market) is along the ~18-year real estate cycle (spoiler: the last trough was 2008...). Dividend Capital puts out a quarterly report that's super useful.\"" }, { "docid": "286017", "title": "", "text": "You don't start out buying a shopping mall, you have to work up to it. You can start with any amount and work up to a larger amount. For me, I saved 30% of my salary(net), investing in stocks for 8 years. It was tough to live on less, but I had a goal to buy passive income. I put down this money to buy 3 houses, putting 35% down and maintaining enough cash to make 5 years of payments. I rented out the houses making a cap of 15%. The cap is the net payment per year / cost of the property, where the net accounts for taxes and repairs. I did not spend any of the profits, but I did start saving less salary. After 5 years of appreciation, mortgage payments and rental profit, I sold one house to get a loan for a convenience store. Buildings go on the market all the time, it takes 14 years to directly recoup an investment at a 7% cap, which is the average for a commercial property sale. Many people cash out for this reason, it's slow, but steady growth, though the earnings on property appreciation is a nice bonus. Owning real estate is a long term game, after a long time of earning, you can reinvest, but it comes with the risk of bad or no tenants. You can start both slower and smaller, just make sure you're picking up assets, not liabilities. Like investing in cars is generally bad unless you are sure it will appreciate." }, { "docid": "177563", "title": "", "text": "\"I would say that you should keep in mind one simple idea. Leverage was the principal reason for the 2008 financial meltdown. For a great explanation on this, I would HIGHLY recommend Michael Lewis' book, \"\"The Big Short,\"\" which does an excellent job in spelling out the case against being highly leveraged. As Dale M. pointed out, losses are greatly magnified by your degree of leverage. That being said, there's nothing wrong with being highly leveraged as a short-term strategy, and I want to emphasize the \"\"short-term\"\" part. If, for instance, an opportunity arises where you aren't presently liquid enough to cover then you could use leverage to at least stay in the game until your cash situation improves enough to de-leverage the investment. This can be a common strategy in equities, where you simply substitute the term \"\"leverage\"\" for the term \"\"margin\"\". Margin positions can be scary, because a rapid downturn in the market can cause margin calls that you're unable to cover, and that's disastrous. Interestingly, it was the 2008 financial crisis which lead to the undoing of Bernie Madoff. Many of his clients were highly leveraged in the markets, and when everything began to unravel, they turned to him to cash out what they thought they had with him to cover their margin calls, only to then discover there was no money. Not being able to meet the redemptions of his clients forced Madoff to come clean about his scheme, and the rest is history. The banks themselves were over-leveraged, sometimes at a rate of 50-1, and any little hiccup in the payment stream from borrowers caused massive losses in the portfolios which were magnified by this leveraging. This is why you should view leverage with great caution. It is very, very tempting, but also fraught with extreme peril if you don't know what you're getting into or don't have the wherewithal to manage it if anything should go wrong. In real estate, I could use the leverage of my present cash reserves to buy a bigger property with the intent of de-leveraging once something else I have on the market sells. But that's only a wise play if I am certain I can unwind the leveraged position reasonably soon. Seriously, know what you're doing before you try anything like this! Too many people have been shipwrecked by not understanding the pitfalls of leverage, simply because they're too enamored by the profits they think they can make. Be careful, my friend.\"" }, { "docid": "115454", "title": "", "text": "I don't know enough about taxes and real-state in the Netherlands to be super helpful in determining whether or not a rental property is a good investment. One thing for certain is that there's some risk in spending everything on a rental property. It's wise to have some buffer, an emergency fund of 3-6 months expenses. If things got dire, you'd still need to live somewhere until your tenant was gone, and you'd want to be able to handle any major repairs that crop up. So, even if it is a good idea to buy a rental property, you should probably wait until doing so doesn't leave you without a healthy buffer. As for owning a rental, you described a scenario where you'd get 6% income on your investment each year if there were zero expenses associated with owning the property. Are there property taxes? Is there a monthly cost to maintain the building the apartment is in? Are rental incomes taxed more heavily than other investment income? Just be aware of the full financial picture before deciding if it's a worthwhile investment." }, { "docid": "498417", "title": "", "text": "\"I very much agree with what @Grade 'Eh' Bacon said about townhouses, but wanted to add a bit about HOA's, renting after moving on, and appreciation: HOA's HOA's can be restrictive, but they can also help protect property values, not all HOA's are created equal, some mean you have zero exterior maintenance, some don't. You'll be able to review the HOA financials to see where the money goes (and if they have healthy reserves). You'll see how much they spend on administration, I think ~10% is typical, and administration can be offset by the savings associated with doing everything in bulk. A well-run HOA should actually save you money over paying for all the things separately, but many people are happy to do some things themselves rather than pay for it, and would come out ahead if they didn't have an HOA. And of course, not all HOA's are well-run. Just do your best to get informed Transitioning to Rental If you are interested in trying your hand being a landlord after living there for a while, a townhouse typically exposes you to less rental risk than a single-family home, because the cost is typically lower and if the HOA maintains everything outside the house then you don't have to worry as much about tenants keeping a lawn in good shape, for example. Appreciation Appreciation varies wildly by market, some research by Trulia suggests in general condo's have outperformed single-family houses over the last 5 years by 10.5%. The same article notes that others disagree with Trulia's assessment and put condo's below single-family houses by 1.3% annually. My first townhouse has appreciated 41% over the last 3 years, while houses in the area are closer to 30% over the same period, but I believe that's a function of my local market more than a nationwide trend. I wouldn't plan around any appreciation forecasts. Source: Condos may be appreciating faster than single-family houses My adviceYou have to do your research on each potential property regardless of whether it's a condo/townhouse/single-family to find out what restrictions there are and what services are provided by the HOA (if any), your agent should be provided with most of the pertinent info, and you may not get to see HOA financials until you're under contract. Most importantly in my view, I wouldn't buy anywhere near the top of your budget. Being \"\"house-poor\"\" is no fun and will limit your options, don't count on appreciation or better income in the future to justify stretching yourself thin in the short-term.\"" }, { "docid": "246624", "title": "", "text": "\"First of all, the annual returns are an average, there are probably some years where their return was several thousand percent, this can make a decade of 2% a year become an average of 20% . Second of all, accredited investors are allowed to do many things that the majority of the population cannot do. Although this is mostly tied to net worth, less than 3% of the US population is registered as accredited investors. Accredited Investors are allowed to participate in private offerings of securities that do not have to be registered with the SEC, although theoretically riskier, these can have greater returns. Indeed a lot of companies that go public these days only do so after the majority of the growth potential is done. For example, a company like Facebook in the 90s would have gone public when it was a million dollar company, instead Facebook went public when it was already a 100 billion dollar company. The people that were privileged enough to be ALLOWED to invest in Facebook while it was private, experienced 10000% returns, public stock market investors from Facebook's IPO have experienced a nearly 100% return, in comparison. Third, there are even more rules that are simply different between the \"\"underclass\"\" and the \"\"upperclass\"\". Especially when it comes to leverage, the rules on margin in the stock market and options markets are simply different between classes of investors. The more capital you have, the less you actually have to use to open a trade. Imagine a situation where a retail investor can invest in a stock by only putting down 25% of the value of the stock's shares. Someone with the net worth of an accredited investor could put down 5% of the value of the shares. So if the stock goes up, the person that already has money would earn a greater percentage than the peon thats actually investing to earn money at all. Fourth, Warren Buffett's fund and George Soros' funds aren't just in stocks. George Soros' claim to fame was taking big bets in the foreign exchange market. The leverage in that market is much greater than one can experience in the stock market. Fifth, Options. Anyone can open an options contract, but getting someone else to be on the other side of it is harder. Someone with clout can negotiate a 10 year options contract for pretty cheap and gain greatly if their stock or other asset appreciates in value much greater. There are cultural limitations that prompt some people to make a distinction between investing and gambling, but others are not bound by those limitations and can take any kind of bet they like.\"" }, { "docid": "192540", "title": "", "text": "\"My suggestion would be to do the math. That is the best advice you can get when considering any investment. There are other factors you haven't considered, too... like the fact that interest rates are at extremely low levels right now, so borrowing money is relatively cheap. If you're outside the US though, that may be less of a consideration as the mortgage lending institutions in Europe only tend to give 5-year locks on loan rates without requiring a premium. You may be somewhere else in the world. You will probably struggle to do the actual math about the probability of the market going down or up, but what you can do is this: Figure out what it would cost you to cash out the investments. You say your balance is $53,000 in various items. (Congrats! That's a nice chunk of money.) But with commissions and taxes and etc., it may reduce the value of your investments by 10% - 25% when you try to cash out those investments. Paying $3,000 to get that money out of the investments is one thing... but if you're sending $10,000 to the tax man when you sell this all off, that changes the economics of your investments a LOT. In that case you might be better off seeing what happens if the markets correct by 10%... you'd still have more than if you sold out and paid major taxes. Once you know your down payment, calculate the amount of property you could afford. You know your down payment could be somewhere around $50,000 after taxes and other items... At an 80:20 loan-to-value ratio that's about $250,000 of a property that you can qualify for, assuming you could obtain the loan for $200,000. What could you buy for that? Do some shopping and figure out what your options are... Once you have two or three potential properties, figure out the answer to \"\"What would the property give you?\"\" Is it going to be rented out? Are you going to live there? Both? If you're living in it, then you come out ahead if the costs for the mortgage debt and the ongoing maintenance and repairs are less than what you currently pay in rent. Figure out what you pay right now to put a roof over your head. Will the place you could buy need repairs? Will you pay more on a mortgage for $200,000 USD (in your local currency) than what you currently do for housing? Don't even factor in the possible appreciation of a house you inhabit when you're making this kind of investment decision... it could just as easily burn down as go up in value. If you would rent it, what kind of rental would that be? Long-term rental? Expect to pay for other people to break your stuff. Short-term rental? You can collect more money per tenant per day, but you'll end up with higher vacancy rates. And people still break your stuff. But do the math and see if you could collect enough in rent from a tenant (person or business or whatever the properties are you could buy) to cover the amount you are paying in debt, plus what you would pay in taxes (rent is income), plus what you would need for maintenance, plus insurance. IF the numbers make sense, then real estate can be a phenomenally lucrative investment. I own some investment properties myself. It is a great hedge against inflation (you can raise rents when contracts lapse... usually) and it is an excellent way to own a tangible item. But if you don't know the numbers and exactly how it would make you better off than sitting and hoping that the markets go up, because they generally do over time, then don't take the jump.\"" }, { "docid": "140653", "title": "", "text": "There are certain situations where you could legally pay yourself rent, but it'd be in the context of multiple business entities interacting, never in the context of an individual renting their own property. Even if you could, any rent paid to yourself would count as rental income, so there'd be no benefit. Edit: I was hunting for examples where it might be acceptable, and didn't, but I found a good explanation as to why it is not acceptable from Brandon Hall on a BiggerPockets post: To get technical, you will be going up against the Economic Substance Doctrine which states that a transaction has economic substance if: (1) the transaction changes in a meaningful way (apart from Federal income tax effects) the taxpayer’s economic position; and (2) the taxpayer has a substantial purpose (apart from Federal income tax effects) for entering into such transaction. By transferring your primary residence into a LLC, you would not be changing your economic position. Further, you do not have a substantial purpose for entering into such transaction other than to simply avoid paying federal income taxes. So it might make sense if multiple people owned the LLC that owned the property you wanted to rent, and there are instances where company X owns holding company Y that owns an office building that company X rents space in. But if you're the sole player in the LLC's then it sounds like a no-go." }, { "docid": "542024", "title": "", "text": "Will buying a flat which generates $250 rent per month be a good decision? Whether investing in real estate is a good decision or not depends on many things, including the current and future supply/demand for rental units in your particular area. There are many questions on this site about this topic, and another answer to this question which already addresses many risks associated with owning property (though there are also benefits to consider). I just want to focus on this point you raised: I personally think yes, because rent adjusts with inflation and the rise in the price of the property is another benefit. Could this help me become financially independent in the long run since inflation is getting adjusted in it? In my opinion, the fact that rental income general adjusts with 'inflation' is a hedge against some types of economic risk, not an absolute increase in value. First, consider buying a house to live in, instead of to rent: If you pay off your mortgage before your retire, then you have reduced your cost of accommodations to only utilities, property taxes, and repairs. This gives you a (relatively) known, fixed requirement of cash outflows. If the value of property goes up by the time you retire - it doesn't cost you anything extra, because you already own your house. If the value of property goes down by the time you retire, then you don't save anything, because you already own your house. If you instead rent your whole life, and save money each month (instead of paying off a mortgage), then when you retire, you will have a larger amount of savings which you can use to pay your monthly rental costs each month. By the time you retire, your cost of accommodations will be the market price for rent at that time. If the value of property goes up by the time you retire - you will have to pay more on rent. If the value of property goes down by the time you retire, you will save money on rent. You will have larger savings, but your cash outflow will be a little bit less certain, because you don't know what the market price for rent will be. You can see that, because you need to put a roof over your own head, just by existing you bear risk of the cost of property rising. So, buying your own home can be a hedge against that risk. This is called a 'natural hedge', where two competing risks can mitigate each-other just by existing. This doesn't mean buying a house is always the right thing to do, it is just one piece of the puzzle to comparing the two alternatives [see many other threads on buying vs renting on this site, or on google]. Now, consider buying a house to rent out to other people: In the extreme scenario, assume that you do everything you can to buy as much property as possible. Maybe by the time you retire, you own a small apartment building with 11 units, where you live in one of them (as an example), and you have no other savings. Before, owning your own home was, among other pros and cons, a natural hedge against the risk of your own personal cost of accommodations going up. But now, the risk of your many rental units is far greater than the risk of your own personal accommodations. That is, if rent goes up by $100 after you retire, your rental income goes up by $1,000, and your personal cost of accommodations only goes up by $100. If rent goes down by $50 after you retire, your rental income goes down by $500, and your personal cost of accommodations only goes down by $50. You can see that only investing in rental properties puts you at great risk of fluctuations in the rental market. This risk is larger than if you simply bought your own home, because at least in that case, you are guaranteeing your cost of accommodations, which you know you will need to pay one way or another. This is why most investment advice suggests that you diversify your investment portfolio. That means buying some stocks, some bonds, etc.. If you invest to heavily in a single thing, then you bear huge risks for that particular market. In the case of property, each investment is so large that you are often 'undiversified' if you invest heavily in it (you can't just buy a house $100 at a time, like you could a stock or bond). Of course, my above examples are very simplified. I am only trying to suggest the underlying principle, not the full complexities of the real estate market. Note also that there are many types of investments which typically adjust with inflation / cost of living; real estate is only one of them." } ]

[ { "docid": "360621", "title": "", "text": "\"QUICK ANSWER When it comes to fixed income assets, whether rental real estate or government bonds, it's unusual for highly-leveraged assets to yield less than the same asset unleveraged or lowly-leveraged. This is especially so in countries where interest costs are tax deductible. If we exclude capital losses (i.e. the property sells in future at a price less than it was purchased) or net rental income that doesn't keep up with maintenance, regulatory, taxation, inflation and / or other costs, there is one primary scenario where higher leverage results in lower yields compared to lower leverage, even if rental income keeps up with non-funding costs. This occurs when variable rate financing is used and rates substantially increase. EXPLANATION Borrowers and lenders in different countries have different mortgage rate customs. Some are more likely to have long-term fixed rates; some prefer variable rates; and others are a hybrid, i.e. fixed for a few years and then become variable. If variable rates are used for a mortgage and the reference rates increase substantially, as they did in the US during the 1970s, the borrower can easily become \"\"upside-down,\"\" i.e. owe more on the mortgage than the property is then worth, and have mortgage service costs that exceed the net rental income. Some of those costs aren't easy to pass along to renters, even when there are periodic lease renewals or base rent increases referencing inflation rates. Central banks set policies for what would be the lowest short-term rates in a country that has such a bank. Private sector rates are established broadly by supply and demand for credit and can thus diverge markedly from central bank rates. Over time, the higher finance-carrying-cost-to-net-rental-income ratio should abate as (1) rental market prices change to reflect the costs and (2) the landlord can reinvest his net rental income at a higher rate. In the short-term though, this can result in the landlord having to \"\"eat\"\" the costs making his yield on his leveraged fixed income asset less than what he would have without leverage, even if the property was later sold at same price regardless of financing method. ========== Interestingly, and on the flip side, this is one of the quirks in finance where an accounting liability can become, at least in part, an economic asset. If a landlord borrows at a high loan-to-value ratio for a fixed interest rate for the life of the mortgage and rates, variable and fixed, were to increase substantially, the difference between his original rate and the present rates accrues to him. If he's able to sell the property with the loan attached (which is not uncommon for commercial, industrial and sometimes municipal real estate), the buyer will be assuming a liability with a lower carrying cost than his present alternatives and will hence pay a higher price for the property than if it were unleveraged. With long-term rates in many economically advanced countries at historic lows, if a borrower today were to take a long-term fixed rate loan and rates shortly after increased substantially, he may have an instant profit in this scenario even if his property hasn't increased in value.\"" } ]

[ { "docid": "65835", "title": "", "text": "\"Consider property taxes (school, municipal, county, etc.) summing to 10% of the property value. So each year, another .02N is removed. Assume the property value rises with inflation. Allow for a 5% after inflation return on a 70/30 stock bond mix for N. After inflation return. Let's assume a 20% rate. And let's bump the .05N after inflation to .07N before inflation. Inflation is still taxable. Result Drop in value of investment funds due to purchase. Return after inflation. After-inflation return minus property taxes. Taxes are on the return including inflation, so we'll assume .06N and a 20% rate (may be lower than that, but better safe than sorry). Amount left. If no property, you would have .036N to live on after taxes. But with the property, that drops to .008N. Given the constraints of the problem, .008N could be anywhere from $8k to $80k. So if we ignore housing, can you live on $8k a year? If so, then no problem. If not, then you need to constrain N more or make do with less house. On the bright side, you don't have to pay rent out of the .008N. You still need housing out of the .036N without the house. These formulas should be considered examples. I don't know how much your property taxes might be. Nor do I know how much you'll pay in taxes. Heck, I don't know that you'll average a 5% return after inflation. You may have to put some of the money into cash equivalents with negligible return. But this should allow you to research more what your situation really is. If we set returns to 3.5% after inflation and 2.4% after inflation and taxes, that changes the numbers slightly but importantly. The \"\"no house\"\" number becomes .024N. The \"\"with house\"\" number becomes So that's $24,000 (which needs to include rent) versus -$800 (no rent needed). There is not enough money in that plan to have any remainder to live on in the \"\"with house\"\" option. Given the constraints for N and these assumptions about returns, you would be $800 to $8000 short every year. This continues to assume that property taxes are 10% of the property value annually. Lower property taxes would of course make this better. Higher property taxes would be even less feasible. When comparing to people with homes, remember the option of selling the home. If you sell your .2N home for .2N and buy a .08N condo instead, that's not just .12N more that is invested. You'll also have less tied up with property taxes. It's a lot easier to live on $20k than $8k. Or do a reverse mortgage where the lender pays the property taxes. You'll get some more savings up front, have a place to live while you're alive, and save money annually. There are options with a house that you don't have without one.\"" }, { "docid": "297764", "title": "", "text": "\"Leverage means you can make more investments with the same amount of money. In the case of rental properties, it means you can own more properties and generate more rents. You exchange a higher cost of doing business (higher interest fees) and a higher risk of total failure, for a larger number of rents and thus higher potential earnings. As with any investment advice, whenever someone tells you \"\"Do X and you are guaranteed to make more money\"\", unless you are a printer of money that is not entirely true. In this case, taking more leverage exposes you to more risk, while giving you more potential gain. That risk is not only on the selling front; in fact, for most small property owners, the risk is primarily that you will have periods of time of higher expense or lower income. These can come in several ways: If you weather these and similar problems, then you will stand to make more money using higher leverage, assuming you make more money from each property than your additional interest costs. As long as you're making any money on your properties this is likely (as interest rates are very low right now), but making any money at all (above and beyond the sale value) may be challenging early on. These sorts of risks are magnified for your first few years, until you've built up a significant reserve to keep your business afloat in downturns. And of course, any money in a reserve is money you're not leveraging for new property acquisition - the very same trade-off. And while you may be able to sell one or more properties if you did end up in a temporarily bad situation, you also may run into 2008 again and be unable to do so.\"" }, { "docid": "580292", "title": "", "text": "No. This logic is dangerous. The apples to apples comparison between renting and buying should be between similar living arrangements. One can't (legitimately) compare living in a 600 sq ft studio to a 3500 sq ft house. With the proposal you offer, one should get the largest mortgage they qualify for, but that can result in a house far too big for their needs. Borrowing to buy just what you need makes sense. Borrowing to buy a house with rooms you may never visit, not a great idea. By the way, do the numbers. The 30 year rate is 4%. You'd need a $250,000 mortgage to get $10,000 in interest the first year, that's a $312,000 house given an 80% loan. On a median income, do you think it makes sense to buy a house twice the US median? Last, a portion of the tax savings is 'lost' to the fact that you have a standard deduction of nearly $6,000 in 2012. So that huge mortgage gets you an extra $4000 in write-off, and $600 back in taxes. Don't ever let the Tax Tail wag the Investing Dog, or in this case the House Dog. Edit - the investment return on real estate is a hot topic. I think it's fair to say that long term one must include the rental value of the house in calculating returns. In the case of buying of way-too-big house, you are not getting the return, it's the same as renting a four bedroom, but leaving three empty. If I can go on a bit - I own a rental, it's worth $200K and after condo fee and property tax, I get $10K/yr. A 5% return, plus whatever appreciation. Now, if I lived there, I'd correctly claim that part of my return is the rental value, the rent I don't pay elsewhere, so the return to me is the potential growth as well as saved rent. But if the condo rents for $1200, and I'd otherwise live in a $600 apartment with less space, the return to me is lost. In my personal case, in fact, I bought a too big house. Not too big for our paycheck, the cost and therefore the mortgage were well below what the bank qualified us for. Too big for the need. I paid for two rooms we really don't use." }, { "docid": "245810", "title": "", "text": "Because it appears you have in the neighborhood of 30 years remianing on your mortgage for the first house, If you can sell it you will likely be better off in the end. While renting has the potential for greater income it is a business. And like any business there are risks, expenses, and work required to make it successful. There will be times where you can not find a renter immediately and will be responsible for making both payments, maintaining both houses, the insurance(which for an owner is higher for a rental property than a domicile), and paying the applicable taxes. You need to look at your best and worst case numbers. If your best case numbers leave you in the hole 300/month then that is not the sort of business you want to run. Your investment should build your savings and retirement funds not deplete them. Further you are more likely to fall between your best and worst case scenerios. So you need to be able to thrive at that level. If something in the middle is going to take you into bankruptcy then sell the property. If you are not willing to put the time into your business that it will need (My rental home took about 10-30 hours a month despite renters being responsible for basic upkeep and maintenance. Finally your plan B: A home with 800k value will have higher costs and higer expenses and maintenance. If the 800k home is the home you and your family needs then by all means go for it. But if it can do just as well in the 450k Home then go there. Pay the home off early by making the payments you would be making for the 800k home. In this way you pay less in total cost of the home and set your self up for the greatest chance of success. Once that home is paid off the break even point for renting goes way down as well. So the rental option could be in the future. I would just aviod it now if possible." }, { "docid": "300297", "title": "", "text": "\"To expand on what @fishinear and some others are saying: The only way to look at it is that the parents have invested, because the parents get a % of the property in the end, rather than the original loan amount plus interest. It is investment; it is not a loan of any kind. One way to understand this is to imagine that after 20 years, the property triples in value (or halves in value). The parents participate as if they had invested in 75% ownership of the property and the OP as if 25% ownership of the property. Note that with a loan, there is a (potentially changing) outstanding loan balance, that could be paid to end the loan (to pay off the loan), and there is an agreed upon an interest rate that is computed on the outstanding balance — none of those apply to this situation; further with a loan there is no % of the property: though the property may be used to secure the loan, that isn't ownership. Basically, since the situation bears none of the qualities of a loan, and yet does bear the qualities of investment, the parents have bought a % ownership of the property. The parents have invested in 75% of the real estate, and the OP is renting that 75% from them for: The total rent the OP is paying the parents for their 75% of the property is then (at least) $1012.50/mo, A rental rate of $1012.50/mo for 75% of the property equates to a rental price of $1350/mo for the whole property. This arrangement is only fair to both parties when the fair-market rental value of the whole property is $1350/mo; it is unfair to the OP when the fair-market rental value of property is less, and unfair to the parents when the fair-market rental value of property is more. Of course, the fair-market rental value of the property is variable over time, so the overall fairness would need to understand rental values over time. I feel like this isn't actually a loan if I can never build more equity in the condo. Am I missing something? No, it isn't a loan. You and your parents are co-investing in real estate. Further, you are renting their portion of the investment from them. For comparison, with a loan you have 100% ownership in the property from the start, so you, the owner, would see all the upside/downside as the property valuation changes over time whether the loan is paid off or not. The borrower owes the loan balance (and interest) not some % of the property. A loan may be secured by the property (using a lien) but that is quite different from ownership. Typically, a loan has a payment schedule setup to reduce the loan balance (steadily) over time so that you eventually pay it off. With a loan you gain equity % — the amount you own outright, free & clear — in two ways, (1) by gradually paying off the loan over time so the unencumbered portion of the property grows, and (2) if the valuation of the property increases over time that gain in equity % is yours (not the lenders). However note that the legal ownership is all 100% yours from the start. Are my parents ripping me off with this deal that doesn't allow me to build my equity in my home? You can evaluate whether you are being ripped off by comparing the $1350/mo rate to the potential rental rate for the property over time (which will be a range or curve, and there are real estate websites (like zillow.com or redfin.com, others) to help estimate what fair-market rent might be). Are there similar deals like this...? A straight-forward loan would have the borrower with 100% legal ownership from the start, just that the property secures the loan. Whereas with co-investment there is a division of ownership % that is fixed from the start. It is unusual to have both investment and loan at the same time where they are setup for gradual change between them. (Investment and loan can certainly be done together but would usually be done as completely separate contracts, one loan, one investment with no adjustment between the two over time.) To do both investment and loan would be unusual but certainly be possible, I would imagine; however that is not the case here as being described. I am not familiar with contracts that do both so as to take over the equity/ownership/investment over time while also reducing loan balance. Perhaps some forms of rent-to-own work that way, something to look into — still, usually rent-to-own means that until the renter owns it 100%, the landlord owns 100%, rather than a gradual % transfer over time (gradual transfer would imply co-ownership for a long time, something that most landlords would be reluctant to do). Transfer of any particular % of real estate ownership typically requires filing documents with the county and may incur fees. I am not aware of counties that allow gradual % transfer with one single filing. Still, the courts may honor a contract that does such gradual transfer outside of county filings. If so, what should I do? Explain the situation to your parents, and, in particular, however far out of balance the rental rate may be. Decide for yourself if you want to rent vs. buy, and where (that property or some other). If your parents are fair people, they should be open to negotiation. If not, you might need a lawyer. I suspect that a lawyer would be able to find several issues with which to challenge the contract. The other terms are important as well, namely gross vs. net proceeds (as others point out) because selling a property costs a % to real estate agents and possibly some taxes as well. And as the others have pointed out, if the property ultimately looses value, that could be factored in as well. It is immaterial to judging the fairness of this particular situation whether getting a bank loan would be preferable to renting 75% from the parents. Further, loan interest rates don't factor into the fairness of this rental situation (but of course interest rates do factor into identifying the better of various methods of investment and methods of securing a place to live, e.g. rent vs. buy). Contributed by @Scott: If your parents view this as an investment arrangement as described, then you need to clarify with them if the payments being made to them are considered a \"\"buy out\"\" of their share. This would allow you to gain the equity you seek from the arrangement. @Scott: Terms would have to be (or have been) declared to that effect; this would involve specifying some schedule and/or rates. It would have to be negotiated; this it is not something that could go assumed or unstated. -- Erik\"" }, { "docid": "389179", "title": "", "text": "When you buy a property the house or the building goes down in value every year (it gets depreciated) similar to when you drive a new car out of the lot. However, it is the land that increases in value over time. As land becomes scarcer the value of land in that area will increase in value, as does land in sought after areas. If more people want to live in a particular suburb the land value will keep on increasing year after year. Sometimes established areas with houses built in the 1980s or even earlier can be worth much more than newly built areas. It comes down to the supply and demand of land and houses in a particular area. You might even get a situation where a run-down dilapidated house in a very sought after suburb sells for more than a brand new house in a less sought-after suburb nearby. Properties can be a very good investment and they can be a very poor investment. It can largely depend on the decisions you make in buying your investment property. The first thing you need to make a decision on is the location of the property. If you buy a property in a good area that is well sought after you can make good capital and rental returns over the long run. If you buy poorly in an area no one wants to live in then you might have problems renting it out or only be able to rent it out to bad tenants who cause damage, and you may not get any capital gains over many years. The second thing you need to decide on is when in the property cycle you buy the property. If you buy at the right time you can get higher rents and make some quick capital gains over a relatively short time. I can provide a personal example of this situation. I had bought a house (in Australia) in 2007 for $240,000 at a time when interests where at their highest (9%), no one was buying property and rents were on the increase (with low vacancy rates). Today, eight years after, we are getting $410 per week rent and the house next door (in worse condition than ours) has been put on the market asking for between $500,000 to $550,000 (most houses in the area had been selling during this year for over $500,000). So you can say that our house has more than doubled in 8 years. However, up to a few months ago houses were selling within 2 weeks of being listed. The house next door however, has been listed for over a month and has not had very much interest. So from this you can conclude that in 2007 we had bought near the bottom of the market, whilst now we are near the top of the market. What you also need to remember is that different areas of a country can have different cycles, so there is not just one property cycle but many property cycles in the same country." }, { "docid": "175649", "title": "", "text": "\"You are assuming 100% occupancy and 100% rent collection. This is unrealistic. You could get lucky and find that long term tenant with great credit that always pays their bills... but in reality that person usually buys a home they do not rent long term. So you will need to be prepared for periods of no renters and periods of non payment. The expenses here I would expect could wipe out more than you can make in \"\"profit\"\" based on your numbers. Have you checked to find out what the insurance on a rental property is? I am guessing it will go up probably 200-500 a year possibly more depending on coverage. You will need a different type of insurance for rental property. Have you checked with your mortgage provider to make sure that you can convert to a rental property? Some mortgages (mine is one) restrict the use of the home from being a rental property. You may be required to refinance your home which could cost you more, in addition if you are under water it will be hard to find a new financier willing to write that mortgage with anything like reasonable terms. You are correct you would be taking on a new expense in rental. It is non deductible, and the IRS knows this well. As Littleadv's answer stated you can deduct some expenses from your rental property. I am not sure that you will have a net wash or loss when you add those expenses. If you do then you have a problem since you have a business losing money. This does not even address the headaches that come with being a landlord. By my quick calculations if you want to break even your rental property should be about 2175/Month. This accounts for 80% occupancy and 80% rental payment. If you get better than that you should make a bit of a profit... dont worry im sure the house will find a way to reclaim it.\"" }, { "docid": "465256", "title": "", "text": "I used to own a few investment properties, so I'm pretty familiar with this. As MrChrister mentions, lenders see investment mortgages as higher risk. People who fall into financial trouble are much more likely to let their investment properties go than their personal residence. Consequently, the interest rates and downpayment requirements are generally higher. Typically a mortgage for an investment property will require 20% down, vs. as low as 3-5% down for a personal residence. With excellent credit and some shopping around, you could probably do 10% down. Interest rates are typically about a half-percent higher as well. You'll also find that the more investment properties you have, the harder it becomes to finance new ones. Banks look at debt-to-income ratios to determine if you are over extended. Typically banks like to see that your housing payments are less than 20% or so of your income. However, with rental properties, housing payments generally account for far more than 20% of your rental income. Other income you have can offset that, but after buying 2-3 houses or so, your DTI generally creeps into the range where lenders are uncomfortable lending to you anymore. This is why you'll find that many rental properties are bought on land contracts with owner financing rather than with mortgages." }, { "docid": "509197", "title": "", "text": "\"There are five main drivers to real estate returns: Income (cash flow from rental payments); Depreciation (as an expense that can be used to reduce taxes); Equity (the gradual paydown of the mortgage the increases underlying equity in the property); Appreciation (any increase in the overall value of the property); Leverage (the impact of debt financing on the deal, increasing the effective \"\"cash-on-cash\"\" return). (Asset Rover has a detailed walk-through of the components, and a useful comparison to stocks) So interest rates are certainly a component (as they increase the expenses), but they are just one factor. Depending on a particular market's conditions, appreciation or rent increases could offset or (exceed) any increase in the interest expense. My own experience is mostly with non-listed REITs (including Reg A+ investments like the ones from Fundrise) and commercial syndicates, and for right now in both cases there's plenty of capital chasing yield to go around (and in fact competition among new funding sources like Reg D and Reg A+ platforms seems to be driving down borrowing rates as platforms compete both for borrowers and for investors). Personally I pay more attention to where each local market (and the broader national market) is along the ~18-year real estate cycle (spoiler: the last trough was 2008...). Dividend Capital puts out a quarterly report that's super useful.\"" }, { "docid": "568454", "title": "", "text": "I would recommend not paying it off early for 2 key reasons: If you are a resident of the U.S. you get tax deductibility of mortgage interest, which as pointed out in previous posts, reduces the effective interest rate on your mortgage, never in your life will you ever be allowed to obtain such high leverage at such a low rates. You can probably get higher returns with not much risk. @JoeTaxpayer mentioned various statistics regarding returns when investing in equities. Even though they are a decent bet over the long term, you can get an even better risk reward tradeoff by considering municipal bonds. If you are in the U.S. and invest in the municipal bonds of your state, the interest income will be both federal and state tax-free. In other words, if you were making 3.5% investing in equities, your after tax returns would be significantly less depending on your tax bracket whereas investment-grade municipal bond ETFs will yield probably the same or higher and have no tax. They are also significantly less volatile. Even though they have default risk, the risk is small since most of these bonds are backed by future tax obligations, or other income streams derived from hard assets such as tolls or property. Furthermore, an ETF will have a portfolio of these bonds which will also dampen the impact of any individual defaults. In essence, you are getting paid this spread for simply having access to credit, take advantage of it while you can." }, { "docid": "207815", "title": "", "text": "You will find Joe.E, that rents have increased considerably over the last 4 to 5 years in Australia. You can probably achieve rental yields of above 5% more than 20km from major Cities, however closer to cities you might get closer to 5% or under. In Western Sydney, we have been able to achieve rental yields close to 7%. We bought mainly in 2007 and 2008 when no one was buying and we were getting properties for 15% to 20% below market rates. As we bought cheap and rents were on the increase we were able to achieve higher rental yields. An example of one particular deal where we bought for $225K and rented for $300/wk giving us a yield of 6.9%. The rent is now $350/wk giving us a current yield of 8%, and with our interest rate at 6.3% and possibly heading down further, this property is positively geared and pays for itself plus provides us with some additional income. All our properties are yielding between 7.5% to 8.5% and are all positively geared. The capital gains might not be as high as with properties closer to the city, but even if we stopped working we wouldn't have to sell as they all provide us income after paying all expenses on associated with the properties. So in answer to your question I would be aiming for a property with a yield above 5% and preferably above 6%, as this will enable your property/ies to be positively geared at least after a couple of years if not straight away." }, { "docid": "522619", "title": "", "text": "\"The Trustee has allowed me to act as his \"\"agent\"\", continuing to pay bills, and take care of much of the administrative affairs for my mother's estate since I did all of it for years before she passed away. I was not paid for any of this work. ... The expenses were more than $30K last year, and there is still a punch list to go this year. The trust should reimburse your expenses and deduct them on the trust tax return. Since the Trust owned the property in 2015, and I will receive ownership this month, can last year's expenses incurred for the Trust be deducted again future income for my property this year? Not exactly. The trust will file its own tax return and will report the income/loss attributed to the beneficiaries per the trust rules. What is attributed to you will flow to your Schedule E. From there you own it and if it is a passive activity where the loss is limited - you can carry it forward and offset with future gain. The trustee will have to deal with all the paperwork. Do 1099-misc forms need to be filed for the contractors who worked to get it ready for rental? It is my understanding that since 2010 (and before 2010) landlords who are not in real-estate trade or business are not required to send out 1099. But it won't hurt if you do, also. In any case - for all of these issues you should talk to a tax adviser (EA/CPA licensed in your State).\"" }, { "docid": "503742", "title": "", "text": "\"I have been a landlord in Texas for just over 3 years now. I still feel like a novice, but I will give you the benefit of my experience. If you are relying on rental properties for current income versus a long term return you are going to have to do a good job at shopping for bargains to get monthly cash flow versus equity growth that is locked up in the property until you sell it. If you want to pull a lot of cash out of a property on a regular basis you probably are going to have to get into flipping them, which is decidedly not passive investing. Also, it is easy to underestimate the expenses associated with rental properties. Texas is pretty landlord friendly legally, however it does have higher than usual property taxes, which will eat into your return. Also, you need to factor in maintenance, vacancy, tenant turnover costs, etc. It can add up to a lot more than you would expect. If you are handy and can do a lot of repairs yourself you can increase your return, but that makes it less of a passive investment. The two most common rules I have heard for initially evaluating whether an investment property is likely to be cash flow positive are the 1% and 50% rules. The 1% rule says the expected monthly rent needs to be 1% or greater of the purchase price of the house. So your hypothetical $150K/$10K scenario doesn't pass that test. Some people say this rule is 2% for new landlords, but in my experience you'd have to get lucky in Texas to find a house priced that competitively that didn't need a lot of work to get rents that high. The 50% rule says that the rent needs to be double your mortgage payment to account for expenses. You also have to factor in the hassle of dealing with tenants, the following are not going to happen when you own a mutual fund, but are almost inevitable if you are a landlord long enough: For whatever reason you have to go to court and evict a tenant. A tenant that probably lost their job, or had major medical issues. The nicest tenant you ever met with the cutest kids in the world that you are threatening to make homeless. Every fiber of your being wants to cut them some slack, but you have a mortgage to pay and can't set an expectation that paying the rent on time is a suggestion not a rule. or the tenant, who seemed nice at first, but now considers you \"\"the man\"\" decides to fight the eviction and won't move out. You have to go through a court process, then eventually get the Sheriff to come out and forcibly remove them from the property, which they are treating like crap because they are mad at you. All the while not paying rent or letting you re-let the place. The tenant isn't maintaining the lawn and the HOA is getting on your butt about it. Do you pay someone to mow the grass for them and then try to squeeze the money out of the tenant who \"\"never agreed to pay for that\"\"? You rent to a college kid who has never lived on their own and has adopted you as their new parent figure. \"\"The light in the closet went out, can you come replace the bulb?\"\" Tenants flat out lying to your face. \"\"Of course I don't have any pets that I didn't pay the deposit for!\"\" (Pics all over facebook of their kids playing with a dog in the \"\"pet-free\"\" house)\"" }, { "docid": "158887", "title": "", "text": "\"Another factor is, how far is your prospective rental property from where you live? vs. how comprehensive is your property management service? If you need to visit much or would simply like to keep an eye on it, a couple of hours drive could be a deal breaker. One more thought; would you be able to upgrade the property at a profit when it comes time to sell? If you have a realtor you trust he or she should be able to tell you if, say a $20k kitchen reno would reliably return more than $20k. It has a lot to do with the property's relative price position in the neighborhood. A cheaper home has more \"\"upsell\"\" room.\"" }, { "docid": "117509", "title": "", "text": "What kind of financial analysis would make you comfortable about this decision? The HELOC and ARM are the biggest red flags to me in your current situation. While I don't expect interest rates to skyrocket in the near future, they introduce an interest rate risk that is easy to get rid of. Getting rid of the HELOC and converting to a fixed mortgage would be my first priority. If you also want to upgrade to a new home at the same time (meaning buy a new home contingent on the sale of your first, paying off the HELOC and mortgage), that's fine, but make sure that you can comfortably afford the payment on a fixed-rate mortgage with at least 20% down. I would not take additional cash out of your equity just to save it. You're going to pay more in interest that you're going to get in savings. From there things get trickier. While many people would keep the first property on a mortgage and rent it out, I am not willing to be a landlord for a part-time job, especially when the interest on the mortgage gouges my return on the rent. PLus leverage increases the risks as well - all it takes is to go one or two months without rent and you can find yourself unable to make a mortgage payment, wrecking your credit and possibly risking foreclosure. So my options in order of precedence would be: At what point does it make sense to become a landlord? The complicated answer is when the benefits (rent, appreciation) relative to the costs (maintenance, interest, taxes, etc.) and risks (lost rent, bad renters, home value variance) give you a better return that you could find in investments of similar risk. The simple answer is when you can pay cash for it. That takes interest and lost rent out of the equation. Again, some are willing to take those risks and pay 20% down on rental property. Some are able to make it work. Some of those go broke or lose their properties. when calculating the 20% down of a new property, does that need to be liquid funds, or can that be based on the value of the home you are selling You can make the purchase of the new home contingent on the sale of the first if you need to get the equity out of it to make the 20%. Do NOT refinance the first just to pull out the equity to make a down payment. It's not worth the fees of a refinance." }, { "docid": "150893", "title": "", "text": "\"I would strongly consider renting; as homes are often viewed by people as \"\"investments\"\" but in reality they are costs, just like renting. The time-frame for return is so long, the interest rate structure in terms of your mortgage payments; if you buy, you must be prepared to and willing to stay at minimum 7-10 years; because anything can happen. Hot markets turn cold. Or stale, and just the closing costs will cause it be less advantageous to renting. Before buying a property, ask yourself does it meet these 5 criteria: IDEAL I - Income; the property will provide positive cash flow through renters. D - Depreciation; tax savings. E - Equity; building equity in the property- the best way is through interest only loans. There is NO reason to pay any principle on any property purchase. You do 5 year interest only loans; keep your payments low; and build equity over time as the property price rises. Look how much \"\"principle\"\" you actually pay down over the first 7 years on a 30 year mortgage. Virtually Nil. A - Appreciation - The property will over time go up in value. Period. There is no need to pay any principle. Your Equity will come from this... time. L - Leverage; As the property becomes more valuable; you will have equity stake, enabling you to get higher credit lines, lines of equity credit, to purchase more properties that are IDEA. When you are RICH, MARRIED, and getting ready for a FAMILY, then buy your home and build it. Until then, rent, it will keep your options open. It will keep your costs low. It will protect you from market downturns as leases are typically only 1 year at most. You will have freedom. You will not have to deal with repairs. A new Water Heater, AC unit, the list goes on and on. Focus on making money, and when you want to buy your first house. Buy a duplex; rent it out to two tenants, and make sure it's IDEAL.\"" }, { "docid": "85229", "title": "", "text": "Insurance - get estimate from an insurance agent who works with policies for commercial real estate. See comments below regarding incorporation. Taxes - if this was basic income for a simple LLC, estimating 25-40% and adjusting over time might work. Rental property is a whole different prospect. Financial experts who specialize in rental properties would be a good source of advice, and worth the cost. See below regarding incorporating. Real estate appreciation - not something you can count on for developed property. Appreciation used to be almost guaranteed to at least keep up with inflation. Now property values are not even guaranteed to go up. Never have been but the general rule was improved real estate in good repair appreciated in price. Even if property values increase over time, rental properties depreciate. In fact, for rental properties, you can claim a certain rate of depreciation over time as an expense on taxes. This depreciation could mean selling for less than you paid for the property after a number of years, and owing capital gains taxes, since you would owe the difference between the depreciated value and the sale price. Related to taxes are local codes. Some areas require you to have a property management license to handle buildings with more than a certain number of units. If you are going to own rental properties, you should protect your private financial life by incorporating. Form a company. The company will own the property and hire any maintenance people or property managers or security staff or any similar employment activities. The company takes out the insurance and pays taxes. The company can pay you a salary. So, bottom line, you can have the company pay all the expenses and take all the risks. Then, assuming there's any money left after expenses, the company can pay you a manager's salary. That way if the worst happens and a tenant breaks their hip in the shower and sues you for ONE MILLION DOLLARS and wins, the company folds and you walk away. You might even consider two companies. One to own the property and lease it to a property management company. The property management company can then go bankrupt in case of some sort of liability issue, in which case you still keep the property, form a new management company, repaint and rename the property and move on. TL;DR: Get insurance advice from insurance agent before you buy. Same for taxes from an accountant. Get trained as a property manager if your local codes require it (might be a good idea anyway). Incorporate and have the company take all the risks." }, { "docid": "339115", "title": "", "text": "\"It certainly seems like you are focusing on the emotional factors. That's your blind spot, and it's the surest path to a situation where your husband gets to say \"\"I told you so\"\". I recommend you steer straight into that blind spot, and focus your studies on the business aspects of buying and owning homes. You should be able to do spreadsheets 6 ways from Sunday, be able to recite every tax deduction you'll get as a homeowner, know the resale impacts of 1 bathroom vs 2, tell a dirty house from a broken house, etc. Everybody's got their favorites, mine are a bit dated but I like Robert Irwin and Robert Allen's books. For instance: a philosophy of Allen's that I really like: never sell. This avoids several problems, like the considerable costs of money, time and nerves of actually selling a house, stress about house prices, mistaking your house's equity for an ATM machine, and byzantine rules for capital gains tax mainly if you rent out the house, which vary dramatically by nation. In fact the whole area of taxes needs careful study. There's another side to the business of home ownership, and that's renting to others. There's a whole set of economics there - and that is a factor in what you buy. Now AirBNB adds a new wrinkle because there's some real money there. Come to understand that market well enough to gauge whether a duplex or triplex will be a money maker. Many regular folk like you have retired early and live off the rental income from their properties. JoeTaxpayer has an interesting way of looking at the finances of housing: if a house doesn't make sense as a a rental unit, maybe it doesn't make sense as a live-in either. So learn how to identify those fundamentals - the numbers. And get in the habit of evaluating houses. Work it regularly until it's second nature. Then, yes, you'll see houses you fall in love with, partly because the numbers work. It also helps to be handy. It really, really changes the economics if you can do your own quality work, because you don't need to spend any money on labor to convert a dirty house into a clean house. And lots of people do, and there's a whole SE just for that. There is a huge difference between going down to the local building supply and getting the water pipe you need, vs. having to call a plumber. And please deal with local businesses, please don't go to the Big Box stores, their service is abominable, they will cheerfully sell you a gadget salad of junk that doesn't work together, and I can't imagine a colder and less inviting scene to come up as a handy person.\"" }, { "docid": "174313", "title": "", "text": "I'll mirror what the others have said in that your expectations for returns are wildly out of line with reality. If you could achieve that with only moderate risk hopefully you can see that you could ladder those returns by re-investing them and become a billionaire in short order. You may have noticed that there are a lot of really financially savvy people who are not billionaires. So the math for your plan falls apart somewhere, obviously. However, in the spirit of being helpful, and with the caveat that super high returns involve super high risk I'll try and point you in the direction where this is theoretically possible, even if the odds would be better buying lottery tickets. One way to get more leverage from your money than just buying stocks is to buy options. With an options strategy your return/loss will be magnified greatly compared to buying stocks. That is, you can lose or gain a much higher multiplier of your original investment. That said, I don't advise doing that with any money that you can't afford to lose every penny of, because you likely will." } ]

[ { "docid": "89509", "title": "", "text": "If you are calculating simple ROI, the answer is straightforward math. See This Answer for some examples, but yes, with more leverage you will always see better ROI on a property IF you can maintain a positive cash flow. The most complete answer is to factor in your total risk. That high ROI of a leveraged property is far more volatile and sensitive to any unexpected expenses. Additionally, a loss of equity in the property (or an upside-down mortgage) will further impact your long term position. To put this more simply (as noted in the comments below), your losses will be amplified. You cannot say a leveraged property will always give you a better ROI because you cannot predict your losses." } ]

[ { "docid": "411375", "title": "", "text": "\"Because the returns are not good. One of the big drivers in Australia is \"\"negative gearing\"\": if your investment loses money you can offset losses against your tax on other income. Institutional investors and corporations are in the business of making money: not losing it. Housing market investors are betting that these year to year revenue losses will ultimately be made up in a big capital gain: for which individuals get a huge tax break that is also not available to corporations. Capital gains are not guaranteed. Australia has benefited from 25+ years of economic, employment and wages growth: a result of good government planning, strong corporate governance and a fair slice of luck. If this were to end housing prices would plateau at best and crash at worst. A person who has negative cash flow investments has to sell them urgently if they lose their job. A glut of mortgagee sales and property prices could easily come off 20-30%. Rental yields on residential property in Sydney are about 4% with a capital gain of currently 10% but this has been flat or negative within the last 5 years and no doubt will be again within the next 5. Rental yields for residential property are constrained by mortgage rates: if it significantly cheaper to buy then to rent, why would anyone rent? In contrast, industrial and commercial property gets a yield of about 7% and gets exactly the same capital gain. This is because land is land and if the price of industrial land doesn't grow at the same rate as the residential land next door eventually one will be converted into the other. Retail rentals are even higher. In addition commercial tenants are responsible for more outgoings and have fewer legal rights than residential tenants. Further, individual residential properties are horribly illiquid and have large transaction costs. While it is possible to bundle them up into property trusts so that units can be sold on the stock exchange it is far more common to do this with office and retail buildings. This is what companies like Westfield and AMP Capital do. Notwithstanding, heavily geared property trusts can get into deep water because of the illiquid nature of property as the failure of Centro illustrates. That said, there are plenty of companies that develop residential houses and units for sale to owner occupiers or investors because that's where the money is.\"" }, { "docid": "503742", "title": "", "text": "\"I have been a landlord in Texas for just over 3 years now. I still feel like a novice, but I will give you the benefit of my experience. If you are relying on rental properties for current income versus a long term return you are going to have to do a good job at shopping for bargains to get monthly cash flow versus equity growth that is locked up in the property until you sell it. If you want to pull a lot of cash out of a property on a regular basis you probably are going to have to get into flipping them, which is decidedly not passive investing. Also, it is easy to underestimate the expenses associated with rental properties. Texas is pretty landlord friendly legally, however it does have higher than usual property taxes, which will eat into your return. Also, you need to factor in maintenance, vacancy, tenant turnover costs, etc. It can add up to a lot more than you would expect. If you are handy and can do a lot of repairs yourself you can increase your return, but that makes it less of a passive investment. The two most common rules I have heard for initially evaluating whether an investment property is likely to be cash flow positive are the 1% and 50% rules. The 1% rule says the expected monthly rent needs to be 1% or greater of the purchase price of the house. So your hypothetical $150K/$10K scenario doesn't pass that test. Some people say this rule is 2% for new landlords, but in my experience you'd have to get lucky in Texas to find a house priced that competitively that didn't need a lot of work to get rents that high. The 50% rule says that the rent needs to be double your mortgage payment to account for expenses. You also have to factor in the hassle of dealing with tenants, the following are not going to happen when you own a mutual fund, but are almost inevitable if you are a landlord long enough: For whatever reason you have to go to court and evict a tenant. A tenant that probably lost their job, or had major medical issues. The nicest tenant you ever met with the cutest kids in the world that you are threatening to make homeless. Every fiber of your being wants to cut them some slack, but you have a mortgage to pay and can't set an expectation that paying the rent on time is a suggestion not a rule. or the tenant, who seemed nice at first, but now considers you \"\"the man\"\" decides to fight the eviction and won't move out. You have to go through a court process, then eventually get the Sheriff to come out and forcibly remove them from the property, which they are treating like crap because they are mad at you. All the while not paying rent or letting you re-let the place. The tenant isn't maintaining the lawn and the HOA is getting on your butt about it. Do you pay someone to mow the grass for them and then try to squeeze the money out of the tenant who \"\"never agreed to pay for that\"\"? You rent to a college kid who has never lived on their own and has adopted you as their new parent figure. \"\"The light in the closet went out, can you come replace the bulb?\"\" Tenants flat out lying to your face. \"\"Of course I don't have any pets that I didn't pay the deposit for!\"\" (Pics all over facebook of their kids playing with a dog in the \"\"pet-free\"\" house)\"" }, { "docid": "380753", "title": "", "text": "The below assessment is for primary residences as opposed to income properties. The truth is that with the exception of a housing bubble, the value of a house might outpace inflation by one or two percent. According to the US Census, the price of a new home per square foot only went up 4.42% between 1963 and 2008, where as inflation was 4.4%. Since home sizes increased, the price of a new home overall outpaced inflation by 1% at 5.4% (source). According to Case-Shiller, inflation adjusted prices increased a measly .4% from 1890-2004 (see graph here). On the other hand your down payment money and the interest towards owning that home might be in a mutual fund earning you north of eight percent. If you don't put down enough of a down payment to avoid PMI, you'll be literally throwing away money to get yourself in a home that could also be making money. Upgrades to your home that increase its value - unless you have crazy do-it-yourself skills and get good deals on the materials - usually don't return 100% on an investment. The best tend to be around 80%. On top of the fact that your money is going towards an asset that isn't giving you much of a return, a house has costs that a rental simply doesn't have (or rather, it does have them, but they are wrapped into your rent) - closing costs as a buyer, realtor fees and closing costs as a seller, maintenance costs, and constantly escalating property taxes are examples of things that renters deal with only in an indirect sense. NYT columnist David Leonhart says all this more eloquently than I ever could in: There's an interactive calculator at the NYT that helps you apply Leonhart's criteria to your own area. None of this is to say that home ownership is a bad decision for all people at all times. I'm looking to buy myself, but I'm not buying as an investment. For example, I would never think that it was OK to stop funding my retirement because my house will eventually fund it for me. Instead I'm buying because home ownership brings other values than money that a rental apartment would never give me and a rental home would cost more than the same home purchase (given 10 years)." }, { "docid": "175649", "title": "", "text": "\"You are assuming 100% occupancy and 100% rent collection. This is unrealistic. You could get lucky and find that long term tenant with great credit that always pays their bills... but in reality that person usually buys a home they do not rent long term. So you will need to be prepared for periods of no renters and periods of non payment. The expenses here I would expect could wipe out more than you can make in \"\"profit\"\" based on your numbers. Have you checked to find out what the insurance on a rental property is? I am guessing it will go up probably 200-500 a year possibly more depending on coverage. You will need a different type of insurance for rental property. Have you checked with your mortgage provider to make sure that you can convert to a rental property? Some mortgages (mine is one) restrict the use of the home from being a rental property. You may be required to refinance your home which could cost you more, in addition if you are under water it will be hard to find a new financier willing to write that mortgage with anything like reasonable terms. You are correct you would be taking on a new expense in rental. It is non deductible, and the IRS knows this well. As Littleadv's answer stated you can deduct some expenses from your rental property. I am not sure that you will have a net wash or loss when you add those expenses. If you do then you have a problem since you have a business losing money. This does not even address the headaches that come with being a landlord. By my quick calculations if you want to break even your rental property should be about 2175/Month. This accounts for 80% occupancy and 80% rental payment. If you get better than that you should make a bit of a profit... dont worry im sure the house will find a way to reclaim it.\"" }, { "docid": "456389", "title": "", "text": "\"Scenario 1: Assume that you plan to keep the parking space for the rest of your life and collect the income from the rental. You say these spaces rent for $250 per month and there are fees of $1400 per year. Are there any other costs? Like would you be responsible for the cost of repaving at some point? But assuming that's covered in the $1400, the net profit is 250 x 12 - 1400 = $1600 per year. So now the question becomes, what other things could you invest your money in, and what sort of returns do those give? If, say, you have investments in the stock market that are generating a 10% annual return and you expect that rate of return to continue indefinitely, than if you pay a price that gives you a return of less than 10%, i.e. if you pay more than $16,000, then you would be better off to put the money in the stock market. That is, you should calculate the fair price \"\"backwards\"\": What return on investment is acceptable, and then what price would I have to pay to get that ROI? Oh, you should also consider what the \"\"occupancy rate\"\" on such parking spaces is. Is there enough demand that you can realistically expect to have it rented out 100% of the time? When one renter leaves, how long does it take to find another? And do you have any information on how often renters fail to pay the rent? I own a house that I rent out and I had two tenants in a row who failed to pay the rent, and the legal process to get them evicted takes months. I don't know what it takes to \"\"evict\"\" someone from a parking space. Scenario 2: You expect to collect rent on this space for some period of time, and then someday sell it. In that case, there's an additional piece of information you need: How much can you expect to get for this property when you sell it? This is almost surely highly speculative. But you could certainly look at past pricing trends. If you see that the value of a parking space in your area has been going up by, whatever, say 4% per year for the past 20 years, it's reasonable to plan on the assumption that this trend will continue. If it's been up and down and all over the place, you could be taking a real gamble. If you pay $30,000 for it today and when the time comes to sell the best you can get is $15,000, that's not so good. But if there is some reasonable consistent average rate of growth in value, you can add this to the expected rents. Like if you can expect it to grow in value by $1000 per year, then the return on your investment is the $1600 in rent plus $1000 in capital growth equals $2600. Then again do an ROI calculation based on potential returns from other investments.\"" }, { "docid": "65835", "title": "", "text": "\"Consider property taxes (school, municipal, county, etc.) summing to 10% of the property value. So each year, another .02N is removed. Assume the property value rises with inflation. Allow for a 5% after inflation return on a 70/30 stock bond mix for N. After inflation return. Let's assume a 20% rate. And let's bump the .05N after inflation to .07N before inflation. Inflation is still taxable. Result Drop in value of investment funds due to purchase. Return after inflation. After-inflation return minus property taxes. Taxes are on the return including inflation, so we'll assume .06N and a 20% rate (may be lower than that, but better safe than sorry). Amount left. If no property, you would have .036N to live on after taxes. But with the property, that drops to .008N. Given the constraints of the problem, .008N could be anywhere from $8k to $80k. So if we ignore housing, can you live on $8k a year? If so, then no problem. If not, then you need to constrain N more or make do with less house. On the bright side, you don't have to pay rent out of the .008N. You still need housing out of the .036N without the house. These formulas should be considered examples. I don't know how much your property taxes might be. Nor do I know how much you'll pay in taxes. Heck, I don't know that you'll average a 5% return after inflation. You may have to put some of the money into cash equivalents with negligible return. But this should allow you to research more what your situation really is. If we set returns to 3.5% after inflation and 2.4% after inflation and taxes, that changes the numbers slightly but importantly. The \"\"no house\"\" number becomes .024N. The \"\"with house\"\" number becomes So that's $24,000 (which needs to include rent) versus -$800 (no rent needed). There is not enough money in that plan to have any remainder to live on in the \"\"with house\"\" option. Given the constraints for N and these assumptions about returns, you would be $800 to $8000 short every year. This continues to assume that property taxes are 10% of the property value annually. Lower property taxes would of course make this better. Higher property taxes would be even less feasible. When comparing to people with homes, remember the option of selling the home. If you sell your .2N home for .2N and buy a .08N condo instead, that's not just .12N more that is invested. You'll also have less tied up with property taxes. It's a lot easier to live on $20k than $8k. Or do a reverse mortgage where the lender pays the property taxes. You'll get some more savings up front, have a place to live while you're alive, and save money annually. There are options with a house that you don't have without one.\"" }, { "docid": "465256", "title": "", "text": "I used to own a few investment properties, so I'm pretty familiar with this. As MrChrister mentions, lenders see investment mortgages as higher risk. People who fall into financial trouble are much more likely to let their investment properties go than their personal residence. Consequently, the interest rates and downpayment requirements are generally higher. Typically a mortgage for an investment property will require 20% down, vs. as low as 3-5% down for a personal residence. With excellent credit and some shopping around, you could probably do 10% down. Interest rates are typically about a half-percent higher as well. You'll also find that the more investment properties you have, the harder it becomes to finance new ones. Banks look at debt-to-income ratios to determine if you are over extended. Typically banks like to see that your housing payments are less than 20% or so of your income. However, with rental properties, housing payments generally account for far more than 20% of your rental income. Other income you have can offset that, but after buying 2-3 houses or so, your DTI generally creeps into the range where lenders are uncomfortable lending to you anymore. This is why you'll find that many rental properties are bought on land contracts with owner financing rather than with mortgages." }, { "docid": "570131", "title": "", "text": "\"Off the top of my head, I don't know of any publicly-traded companies that routinely earmark distributions as return of capital, but theoretically, it's certainly applicable to any publicly-traded company. The Wikipedia article gives one situation in which a publicly-traded company may use return of capital: Public business may return capital as a means to increase the debt/equity ratio and increase their leverage (risk profile). Since return of capital is a distribution, it shrinks the firm's equity, thus increasing its leverage. Investopedia also has an article, Dividend Facts You May Not Know, that gives an example of when return of capital might be used: Sometimes, especially in the case of a special, large dividend, part of the dividend is actually declared by the company to be a return of capital. In this case, instead of being taxed at the time of distribution, the return of capital is used to reduce the basis of the stock, making for a larger capital gain down the road, assuming the selling price is higher than the basis. For instance, if you buy shares with a basis of $10 each and you get a $1 special dividend, 55 cents of which is return of capital, the taxable dividend is 45 cents, the new basis is $9.45 and you will pay capital gains tax on that 55 cents when you sell your shares sometime in the future. A company may choose to earmark some or all of its distribution as return of capital in order to provide shareholders with a more beneficial tax treatment. The IRS describes this different tax treatment: Distributions that qualify as a return of capital are not dividends. A return of capital is a return of some or all of your investment in the stock of the company. A return of capital reduces the basis of your stock. These distributions don't necessarily count as taxable income, except in some instances: Once the basis of your stock has been reduced to zero, any further non-dividend distribution is capital gain. The IRS also states: A distribution generally qualifies as a return of capital if the corporation making the distribution does not have any accumulated or current year earnings and profits. In this case, the firm is lowering its equity because it's paying distributions out of that equity instead of accumulated earnings/profits. A company may use return of capital to maintain a distribution even in times of financial difficulty. In the context of closed-end funds, however, return of capital can be much more complicated and can affect the fund's performance and reputation in numerous ways. Also, JB King is correct in cautioning you that \"\"return of capital\"\" is not the same thing as \"\"return on capital*. The latter is a method for valuing a company and determining \"\"how efficient a company is where it comes to using its resources.\"\" (to quote JB King's comment again).\"" }, { "docid": "584304", "title": "", "text": "\"You don't state a long term goal for your finances in your message, but I'm going to assume you want to retire early, and retire well. :-) any other ideas I'm missing out on? A fairly common way to reach financial independence is to build one or more passive income streams. The money returned by stock investing (capital gains and dividends) is just one such type of stream. Some others include owning rental properties, being a passive owner of a business, and producing goods that earn long-term royalties instead of just an immediate exchange of time & effort for cash. Of these, rental property is probably one of the most well-known and easiest to learn about, so I'd suggest you start with that as a second type of investment if you feel you need to diversify from stock ownership. Especially given your association with the military, it is likely there is a nearby supply of private housing that isn't too expensive (so easier to get started with) and has a high rental demand (so less risk in many ways.) Also, with our continued current low rate environment, now is the time to lock-in long term mortgage rates. Doing so will reap huge benefits as rates and rents will presumably rise from here (though that isn't guaranteed.) Regarding the idea of being a passive business owner, keep in mind that this doesn't necessarily mean starting a business yourself. Instead, you might look to become a partner by investing money with an existing or startup business, or even buying an existing business or franchise. Sometimes, perfectly good business can be transferred for surprisingly little down with the right deal structure. If you're creative in any way, producing goods to earn long-term royalties might be a useful path to go down. Writing books, articles, etc. is just one example of this. There are other opportunities depending on your interests and skill, but remember, the focus ought to be on passive royalties rather than trading time and effort for immediate money. You only have so many hours in a year. Would you rather spend 100 hours to earn $100 every year for 20 years, or have to spend 100 hours per year for 20 years to earn that same $100 every year? .... All that being said, while you're way ahead of the game for the average person of your age ($30k cash, $20k stocks, unknown TSP balance, low expenses,) I'm not sure I'd recommend trying to diversify quite yet. For one thing, I think you need to keep some amount of your $30k as cash to cover emergency situations. Typically people would say 6 months living expenses for covering employment gaps, but as you are in the military I don't think it's as likely you'll lose your job! So instead, I'd approach it as \"\"How much of this cash do I need over the next 5 years?\"\" That is, sum up $X for the car, $Y for fun & travel, $Z for emergencies, etc. Keep that amount as cash for now. Beyond that, I'd put the balance in your brokerage and get it working hard for you now. (I don't think an average of a 3% div yield is too hard to achieve even when picking a safe, conservative portfolio. Though you do run the risk of capital losses if invested.) Once your total portfolio (TSP + brokerage) is $100k* or more, then consider pulling the trigger on a second passive income stream by splitting off some of your brokerage balance. Until then, keep learning what you can about stock investing and also start the learning process on additional streams. Always keep an eye out for any opportunistic ways to kick additional streams off early if you can find a low cost entry. (*) The $100k number is admittedly a rough guess pulled from the air. I just think splitting your efforts and money prior to this will limit your opportunities to get a good start on any additional streams. Yes, you could do it earlier, but probably only with increased risk (lower capital means less opportunities to pick from, lower knowledge levels -- both stock investing and property rental) also increase risk of making bad choices.\"" }, { "docid": "166531", "title": "", "text": "I would suggest, both as an investor and as someone who has some experience with a family-run trust (not my own), that this is probably not something you should get involved with, unless the money is money you're not worried about - money that otherwise would turn into trips to the movies or something like that. If you're willing to treat it as such, then I'd say go for it. First off, this is not a short or medium term investment. This sort of thing will not be profitable right away, and it will take quite a few years to become profitable to the point that you could take money out of it - if ever. Your money will be effectively, if not actually, locked up for years, and be nearly entirely illiquid. Second, it's not necessarily a good investment even considering that. Real estate is something people tend to feel like it should be an amazing investment that just makes you money, and is better than risky things like the stock market; except it's really not. It's quite risky, vulnerable to things like the 2008 crash, but also to things like a local market being a bit down, or having several months with no renter. The amount your fund will have in it (at most $100x15/month) won't be enough to buy even one property for years ($1500/month means you're looking at what, 100-150 months before you have enough?), and as such won't have enough to buy multiple properties for even longer, which is where you reach some stability. Having a washing machine break down or a roof leak is a big deal when you only have one property to manage; having five or six properties spreads out the risk significantly. You won't get tax breaks from this, of course, and that's where the real issue is for you. You would be far better off putting your money in a Roth IRA (or a regular IRA, but based on your career choice and current income, I'd strongly consider a Roth). You'll get tax free growth, less risky than this fund AND probably faster growing - but regardless of both of those, tax free. That 15-25% that Uncle Sam is giving you back is a huge, huge deal, greater than any return a fund is going to give you (and if they promise that high, run far and fast). Finally, as someone who's watched a family trust work at managing itself - it's a huge, huge headache, and not something I'd recommend at least (unless it comes with money, in which case it's of course a different story). You won't agree on investments, inevitably, and you'll end up spending huge amounts of time trying to convince each other to go with your idea - and it will likely end up being fairly stagnant and conservative, because that's what everyone will be able to at least not object to. It might be something you all enjoy doing, in which case good luck - but definitely not my cup of tea." }, { "docid": "320442", "title": "", "text": "\"The way to resolve your dilemma is to consult the price-to-rent ratio of the property. According to smartasset.com: The price-to-rent ratio is a measure of the relative affordability of renting and buying in a given housing market. It is calculated as the ratio of home prices to annual rental rates. So, for example, in a real estate market where, on average, a home worth $200,000 could rent for $1000 a month, the price-rent ratio is 16.67. That’s determined using the formula: $200,000 ÷ (12 x $1,000). Smartasset.com also goes on to give a table comparing different cities' price-to-rent ratio and then claim that the average price-to-rent ratio is currently 19.21. If your price-to-rent ratio is lower than 19.21, then, yes, your rents are more expensive than the average house. Smartasset.com claims that a high price-to-rent ratio is an argument in favor of tenants \"\"renting\"\" properties while a low price-to-rent ratio favors people \"\"buying\"\" (either to live in the property or to just rent it out to other people). So let's apply the price-to-rent ratio formula towards the properties you just quoted. There's a specific house I could buy for 190 (perhaps even less) that rents for exactly 2000 / month. 190K/(2000 * 12) = 7.92 There's a house for sale asking 400 (been on the market 2 yrs! could probably get for 350) which rents for 2800 /month. (400K)/(2800*12) = 11.90 (350K)/(2800*12) = 10.42 One can quite easily today buy a house for 180k-270k that would rent out for 1700-2100 / month. Lower Bound: (180K)/(1700*12) = 8.82 Upper Bound: (270K)/(2100*12) = 10.71 Even so, the rental returns here seem \"\"ridiculously high\"\" to me based on other markets I've noticed. Considering how the average price-to-rent ratio is 19.21, and your price-to-rent ratio ranges from 7.92 to 11.90, you are indeed correct. They are indeed \"\"ridiculously high\"\". Qualification: I was involved in real estate, and used the price-to-rent ratio to determine how long it would take to \"\"recover\"\" a person's investment in the property. Keep in mind that it's not the only thing I care about, and obviously the price-to-rent ratio tends to downplay expenses involved in actually owning properties and trying to deal with periods of vacancy. There's also the problem of taking into account demand as well. According to smartasset.com, Detroit, MI has the lowest price-to-rent ratio (with 6.27), which should suggest that people should buy properties immediately in this city. But that's probably more of a sign of people not wanting to move to Detroit and bid up the prices of properties. EDIT: I should also say that just because the properties are \"\"ridiculously expensive\"\" right now doesn't mean you should expect your rents to decrease. Rather, if rents keep staying at their current level, I'd predict that the property values will slowly increase in the future, thereby raising the price-to-rent ratio to 'non-ridiculous' mode.\"" }, { "docid": "87324", "title": "", "text": "In general you do not want to show a taxable gain on rental properties if you can avoid it. One of the more beneficial advantages of owning cash flowing rental properties, is that the income is tax deferred because of the depreciation. I say deferred, because depreciation affects the cost basis of your property. Also since you are considering financing, it sounds like you don't need the cash flow currently. You usually can get better returns by financing and buying more rental properties, especially with investment mortgages at historical lows (Win via inflation over time)" }, { "docid": "557324", "title": "", "text": "There are a few reasons, particularly for businesses. The first is opportunity cost. That chunk of money they have could be used to get higher returns somewhere else. If they can borrow from a bank at low interest rates to finance their ongoing operations, they can use their cash to get a higher return somewhere else. The second is credit rating. For public companies, ratings companies give high emphasis to companies with large reserves. This strengthens their ability to pay back the loan should it become necessary. A good credit rating in turn let's the company borrow money at lower rates. When a company can borrow money at low rates, it circles back to the first point where they can now put their reserves to better use. The third is leverage. Companies can use the cash they have built up to leverage into a larger investment. Assuming the investment works out, it will pay for the cost of borrowing over time. For instance let's say I have $1 million to invest. I can pay all cash for a $1 million apartment building or I can leverage that into a $3 million building. Assuming I run it well, the tenants will pay for the cost of borrowing $2 million and at the end of the term I'll be left with my $3 million building." }, { "docid": "246624", "title": "", "text": "\"First of all, the annual returns are an average, there are probably some years where their return was several thousand percent, this can make a decade of 2% a year become an average of 20% . Second of all, accredited investors are allowed to do many things that the majority of the population cannot do. Although this is mostly tied to net worth, less than 3% of the US population is registered as accredited investors. Accredited Investors are allowed to participate in private offerings of securities that do not have to be registered with the SEC, although theoretically riskier, these can have greater returns. Indeed a lot of companies that go public these days only do so after the majority of the growth potential is done. For example, a company like Facebook in the 90s would have gone public when it was a million dollar company, instead Facebook went public when it was already a 100 billion dollar company. The people that were privileged enough to be ALLOWED to invest in Facebook while it was private, experienced 10000% returns, public stock market investors from Facebook's IPO have experienced a nearly 100% return, in comparison. Third, there are even more rules that are simply different between the \"\"underclass\"\" and the \"\"upperclass\"\". Especially when it comes to leverage, the rules on margin in the stock market and options markets are simply different between classes of investors. The more capital you have, the less you actually have to use to open a trade. Imagine a situation where a retail investor can invest in a stock by only putting down 25% of the value of the stock's shares. Someone with the net worth of an accredited investor could put down 5% of the value of the shares. So if the stock goes up, the person that already has money would earn a greater percentage than the peon thats actually investing to earn money at all. Fourth, Warren Buffett's fund and George Soros' funds aren't just in stocks. George Soros' claim to fame was taking big bets in the foreign exchange market. The leverage in that market is much greater than one can experience in the stock market. Fifth, Options. Anyone can open an options contract, but getting someone else to be on the other side of it is harder. Someone with clout can negotiate a 10 year options contract for pretty cheap and gain greatly if their stock or other asset appreciates in value much greater. There are cultural limitations that prompt some people to make a distinction between investing and gambling, but others are not bound by those limitations and can take any kind of bet they like.\"" }, { "docid": "351954", "title": "", "text": "\"With permanent contract in Germany you shouldn't have any problem getting a loan. It's even more important than how much do you earn. Generally, you should ask for a house mortgage (Baufinanzierungsdarlehen) with annuity as a type of credit to save on interest. Besides, you usually get a better conditions with a saving bank (Sparkasse) or a popular bank (Volksbank) situated in the area where your house is situated. You also shouldn't combine your credit with extra products (the simpler is the product, the better is for you), maybe I'll write later an extra piece on the common pitfalls in this regard. Probably, you could find a bank that would give you such a loan, but it would be very expensive. You should save at least 40%, because then the bank can refinance your loan cheaply and in return offer you a low interest. Taxes depend heavily on the place where you buy a house. When you buy it, you pay a tax between 3.5% and 6% (look up here). Then you pay a property tax (Grundsteuer), it depends on community how much do you pay, the leverage is called Hebesatz (here's example). Notary would cost ca. 1.5% of the house price. All and all, you should calculate with 10% A country-independent advice: if you want to save on interest in the long run, you should take an annuity loan with the shortest maturity. Pay attention to effective interest rate. Now to Germany specifics. Don't forget to ask about \"\"Sondertilgung\"\" (extra amortization) - an option to amortize additionaly. Usually, banks offer 5% Sondertilgung p.a. The interest-rate is usually fixed for 8 years (however, ask about it), this period is called Zinsbindung. It sound ridiculous, but in southern lands (Bayern, Baden-Württemberg) you usually get better conditions as in Berlin or Bremen. The gap could be as big as 0.5% p.a. of effective interest rate! In Germany they often use so-called \"\"anfängliche Tilgung\"\" (initial rate of amortizazion) as a parameter.\"" }, { "docid": "498417", "title": "", "text": "\"I very much agree with what @Grade 'Eh' Bacon said about townhouses, but wanted to add a bit about HOA's, renting after moving on, and appreciation: HOA's HOA's can be restrictive, but they can also help protect property values, not all HOA's are created equal, some mean you have zero exterior maintenance, some don't. You'll be able to review the HOA financials to see where the money goes (and if they have healthy reserves). You'll see how much they spend on administration, I think ~10% is typical, and administration can be offset by the savings associated with doing everything in bulk. A well-run HOA should actually save you money over paying for all the things separately, but many people are happy to do some things themselves rather than pay for it, and would come out ahead if they didn't have an HOA. And of course, not all HOA's are well-run. Just do your best to get informed Transitioning to Rental If you are interested in trying your hand being a landlord after living there for a while, a townhouse typically exposes you to less rental risk than a single-family home, because the cost is typically lower and if the HOA maintains everything outside the house then you don't have to worry as much about tenants keeping a lawn in good shape, for example. Appreciation Appreciation varies wildly by market, some research by Trulia suggests in general condo's have outperformed single-family houses over the last 5 years by 10.5%. The same article notes that others disagree with Trulia's assessment and put condo's below single-family houses by 1.3% annually. My first townhouse has appreciated 41% over the last 3 years, while houses in the area are closer to 30% over the same period, but I believe that's a function of my local market more than a nationwide trend. I wouldn't plan around any appreciation forecasts. Source: Condos may be appreciating faster than single-family houses My adviceYou have to do your research on each potential property regardless of whether it's a condo/townhouse/single-family to find out what restrictions there are and what services are provided by the HOA (if any), your agent should be provided with most of the pertinent info, and you may not get to see HOA financials until you're under contract. Most importantly in my view, I wouldn't buy anywhere near the top of your budget. Being \"\"house-poor\"\" is no fun and will limit your options, don't count on appreciation or better income in the future to justify stretching yourself thin in the short-term.\"" }, { "docid": "573301", "title": "", "text": "\"The buy-to-rent investment bubble created (in some markets) a large number of new housing starts often exceeding the available demand. Since people were investing in the capital gain, they didn't mind whether a place was rented or not. Many places stood empty at the prices investors wished to charge. In the UK where building restrictions are so dire that few new houses can be built, new house production is less than market demand which keeps up rental prices. There just isn't any stock. In the US, where construction is more liberal, rental prices can fall as new stock enters the market. A driver will be where the sales market dries up and owners must rent to cover at least some of their mortgage losses. Or, as Joel points out, if a major employer which dominates a small town, leaves. Many old industrial towns feature both low rentals and plenty of empty, low-priced property. Liverpool, in the UK, features entire empty neighbourhoods all boarded up. If you're looking to track metrics on this simply look at migration patterns. Where large numbers of people are moving \"\"towards\"\" prices (and rentals) will rise. Where people are moving \"\"away\"\" all prices fall.\"" }, { "docid": "369419", "title": "", "text": "\"I would say similar rules apply in the US. If you have a net loss from rental property, you certainly can claim that loss against your personal income. There are various rules around this though that make it a bit less clear cut. If you are a \"\"real estate professional\"\", which basicly means you spend at least 750 hours per year working on your rental properties (or related activities), then all losses are deductible against any other ordinary income you have. If you aren't a \"\"real estate professional\"\", then your rental income is considered a \"\"passive activity\"\" and losses you can count against regular income are limited to $25,000 per year (with a carry-forward provision) and begin to phase out entirely if your income is between $100,000 and $150,000. So, the law here is structured to allow most small-time investors to take rental real estate losses against their ordinary income, but the income phase-out provision is designed to prevent the wealthy from using rental property losses to avoid taxation.\"" }, { "docid": "117509", "title": "", "text": "What kind of financial analysis would make you comfortable about this decision? The HELOC and ARM are the biggest red flags to me in your current situation. While I don't expect interest rates to skyrocket in the near future, they introduce an interest rate risk that is easy to get rid of. Getting rid of the HELOC and converting to a fixed mortgage would be my first priority. If you also want to upgrade to a new home at the same time (meaning buy a new home contingent on the sale of your first, paying off the HELOC and mortgage), that's fine, but make sure that you can comfortably afford the payment on a fixed-rate mortgage with at least 20% down. I would not take additional cash out of your equity just to save it. You're going to pay more in interest that you're going to get in savings. From there things get trickier. While many people would keep the first property on a mortgage and rent it out, I am not willing to be a landlord for a part-time job, especially when the interest on the mortgage gouges my return on the rent. PLus leverage increases the risks as well - all it takes is to go one or two months without rent and you can find yourself unable to make a mortgage payment, wrecking your credit and possibly risking foreclosure. So my options in order of precedence would be: At what point does it make sense to become a landlord? The complicated answer is when the benefits (rent, appreciation) relative to the costs (maintenance, interest, taxes, etc.) and risks (lost rent, bad renters, home value variance) give you a better return that you could find in investments of similar risk. The simple answer is when you can pay cash for it. That takes interest and lost rent out of the equation. Again, some are willing to take those risks and pay 20% down on rental property. Some are able to make it work. Some of those go broke or lose their properties. when calculating the 20% down of a new property, does that need to be liquid funds, or can that be based on the value of the home you are selling You can make the purchase of the new home contingent on the sale of the first if you need to get the equity out of it to make the 20%. Do NOT refinance the first just to pull out the equity to make a down payment. It's not worth the fees of a refinance." } ]

[ { "docid": "466835", "title": "", "text": "\"This is several questions wrapped together: How can I diplomatically see the company's financial information? How strong a claim does a stockholder or warrantholder have to see the company's financials? What information do I need to know about the company financials before deciding to buy in? I'll start with the easier second question (which is quasi implicit). Stockholders typically have inspection rights. For example, Delaware General Corporate Law § 220 gives stockholders the right to inspect and copy company financial information, subject to certain restrictions. Check the laws and corporate code of your company's state of incorporation to find the specific inspection right. If it is an LLC or partnership, then the operating agreement usually controls and there may be no inspection rights. If you have no corporate stock, then of course you have no statutory inspection rights. My (admittedly incomplete) understanding is that warrantholders generally have no inspection rights unless somehow contracted for. So if you vest as a corporate stockholder, it'll be your right to see the financials—which may make even a small purchase valuable to you as a continuing employee with the right to see the financials. Until then, this is probably a courtesy and not their obligation. The first question is not easy to answer, except to say that it's variable and highly personal for small companies. Some people interpret it as prying or accusatory, the implication being that the founders are either hiding something or that you need to examine really closely the mouth of their beautiful gift horse. Other people may be much cooler about the question, understanding that small companies are risky and you're being methodical. And in some smaller companies, they may believe giving you the expenses could make office life awkward. If you approach it professionally, directly, and briefly (do not over-explain yourself) with the responsible accountant or HR person (if any), then I imagine it should not be a problem for them to give some information. Conversely, you may feel comfortable enough to review a high-level summary sheet with a founder, or to find some other way of tactfully reviewing the right information. In any case, I would keep the request vague, simple, and direct, and see what information they show you. If your request is too specific, then you risk pushing them to show information A, which they refuse to do, but a vague request would've prompted them to show you information B. A too-specific request might get you information X when a vague request could have garnered XYZ. Vague requests are also less aggressive and may raise fewer objections. The third question is difficult to say. My personal understanding is some perspective of how venture capitalists look at the investment opportunity (you didn't say how new this startup is or what series/stage they are on, so I'll try to stay vague). The actual financials are less relevant for startups than they are for other investments because the situation will definitely change. Most venture capital firms like to look at the burn rate or amount of cash spent, usually at a monthly rate. A high burn rate relative to infusions of cash suggests the company is growing rapidly but may have a risk of toppling (i.e. failing before exit). Burn rate can change drastically during the early life of the startup. Of course burn rate needs the context of revenues and reserves (and latest valuation is helpful as a benchmark, but you may be able to calculate that from the restricted share offer made to you). High burn rate might not be bad, if the company is booming along towards a successful exit. You might also want to look at some sort of business plan or info sheet, rather than financials alone. You want to gauge the size of the market (most startups like to claim 9- or 10-figure markets, so even a few percentage points of market share will hit revenue into the 8-figures). You'll also have to have a sense for the business plan and model and whether it's a good investment or a ridiculous rehash (\"\"it's Twitter for dogs meets Match.com for Russian Orthodox singles!\"\"). In other words, appraise it like an investor or VC and figure out whether it's a prospect for decent return. Typical things like competition, customer acquisition costs, manufacturing costs are relevant depending on the type of business activity. Of course, I wouldn't ignore psychology (note that economists and finance people don't generally condone the following sort of emotional thinking). If you don't invest in the company and it goes big, you'll kick yourself. If it goes really big, other people will either assume you are rich or feel sad for you if you say you didn't get rich. If you invest but lose money, it may not be so painful as not investing and losing out the opportunity. So if you consider the emotional aspect of personal finance, it may be wise to invest at least a little, and hedge against \"\"woulda-shoulda\"\" syndrome. That's more like emotional advice than hard-nosed financial advice. So much of the answer really depends on your particular circumstances. Obviously you have other considerations like whether you can afford the investment, which will be on you to decide. And of course, the § 83(b) election is almost always recommended in these situations (which seems to be what you are saying) to convert ordinary income into capital gain. You may also need cash to pay any up-front taxes on the § 83(b) equity, depending on your circumstances.\"" } ]

[ { "docid": "36366", "title": "", "text": "\"This is such a common question here and elsewhere that I will attempt to write the world's most canonical answer to this question. Hopefully in the future when someone on answers.onstartups asks how to split up the ownership of their new company, you can simply point to this answer. The most important principle: Fairness, and the perception of fairness, is much more valuable than owning a large stake. Almost everything that can go wrong in a startup will go wrong, and one of the biggest things that can go wrong is huge, angry, shouting matches between the founders as to who worked harder, who owns more, whose idea was it anyway, etc. That is why I would always rather split a new company 50-50 with a friend than insist on owning 60% because \"\"it was my idea,\"\" or because \"\"I was more experienced\"\" or anything else. Why? Because if I split the company 60-40, the company is going to fail when we argue ourselves to death. And if you just say, \"\"to heck with it, we can NEVER figure out what the correct split is, so let's just be pals and go 50-50,\"\" you'll stay friends and the company will survive. Thus, I present you with Joel's Totally Fair Method to Divide Up The Ownership of Any Startup. For simplicity sake, I'm going to start by assuming that you are not going to raise venture capital and you are not going to have outside investors. Later, I'll explain how to deal with venture capital, but for now assume no investors. Also for simplicity sake, let's temporarily assume that the founders all quit their jobs and start working on the new company full time at the same time. Later, I'll explain how to deal with founders who do not start at the same time. Here's the principle. As your company grows, you tend to add people in \"\"layers\"\". The top layer is the first founder or founders. There may be 1, 2, 3, or more of you, but you all start working about the same time, and you all take the same risk... quitting your jobs to go work for a new and unproven company. The second layer is the first real employees. By the time you hire this layer, you've got cash coming in from somewhere (investors or customers--doesn't matter). These people didn't take as much risk because they got a salary from day one, and honestly, they didn't start the company, they joined it as a job. The third layer are later employees. By the time they joined the company, it was going pretty well. For many companies, each \"\"layer\"\" will be approximately one year long. By the time your company is big enough to sell to Google or go public or whatever, you probably have about 6 layers: the founders and roughly five layers of employees. Each successive layer is larger. There might be two founders, five early employees in layer 2, 25 employees in layer 3, and 200 employees in layer 4. The later layers took less risk. OK, now here's how you use that information: The founders should end up with about 50% of the company, total. Each of the next five layers should end up with about 10% of the company, split equally among everyone in the layer. Example: Two founders start the company. They each take 2500 shares. There are 5000 shares outstanding, so each founder owns half. They hire four employees in year one. These four employees each take 250 shares. There are 6000 shares outstanding. They hire another 20 employees in year two. Each one takes 50 shares. They get fewer shares because they took less risk, and they get 50 shares because we're giving each layer 1000 shares to divide up. By the time the company has six layers, you have given out 10,000 shares. Each founder ends up owning 25%. Each employee layer owns 10% collectively. The earliest employees who took the most risk own the most shares. Make sense? You don't have to follow this exact formula but the basic idea is that you set up \"\"stripes\"\" of seniority, where the top stripe took the most risk and the bottom stripe took the least, and each \"\"stripe\"\" shares an equal number of shares, which magically gives employees more shares for joining early. A slightly different way to use the stripes is for seniority. Your top stripe is the founders, below that you reserve a whole stripe for the fancy CEO that you recruited who insisted on owning 10%, the stripe below that is for the early employees and also the top managers, etc. However you organize the stripes, it should be simple and clear and easy to understand and not prone to arguments. Now that we have a fair system set out, there is one important principle. You must have vesting. Preferably 4 or 5 years. Nobody earns their shares until they've stayed with the company for a year. A good vesting schedule is 25% in the first year, 2% each additional month. Otherwise your co-founder is going to quit after three weeks and show up, 7 years later, claiming he owns 25% of the company. It never makes sense to give anyone equity without vesting. This is an extremely common mistake and it's terrible when it happens. You have these companies where 3 cofounders have been working day and night for five years, and then you discover there's some jerk that quit after two weeks and he still thinks he owns 25% of the company for his two weeks of work. Now, let me clear up some little things that often complicate the picture. What happens if you raise an investment? The investment can come from anywhere... an angel, a VC, or someone's dad. Basically, the answer is simple: the investment just dilutes everyone. Using the example from above... we're two founders, we gave ourselves 2500 shares each, so we each own 50%, and now we go to a VC and he offers to give us a million dollars in exchange for 1/3rd of the company. 1/3rd of the company is 2500 shares. So you make another 2500 shares and give them to the VC. He owns 1/3rd and you each own 1/3rd. That's all there is to it. What happens if not all the early employees need to take a salary? A lot of times you have one founder who has a little bit of money saved up, so she decides to go without a salary for a while, while the other founder, who needs the money, takes a salary. It is tempting just to give the founder who went without pay more shares to make up for it. The trouble is that you can never figure out the right amount of shares to give. This is just going to cause conflicts. Don't resolve these problems with shares. Instead, just keep a ledger of how much you paid each of the founders, and if someone goes without salary, give them an IOU. Later, when you have money, you'll pay them back in cash. In a few years when the money comes rolling in, or even after the first VC investment, you can pay back each founder so that each founder has taken exactly the same amount of salary from the company. Shouldn't I get more equity because it was my idea? No. Ideas are pretty much worthless. It is not worth the arguments it would cause to pay someone in equity for an idea. If one of you had the idea but you both quit your jobs and started working at the same time, you should both get the same amount of equity. Working on the company is what causes value, not thinking up some crazy invention in the shower. What if one of the founders doesn't work full time on the company? Then they're not a founder. In my book nobody who is not working full time counts as a founder. Anyone who holds on to their day job gets a salary or IOUs, but not equity. If they hang onto that day job until the VC puts in funding and then comes to work for the company full time, they didn't take nearly as much risk and they deserve to receive equity along with the first layer of employees. What if someone contributes equipment or other valuable goods (patents, domain names, etc) to the company? Great. Pay for that in cash or IOUs, not shares. Figure out the right price for that computer they brought with them, or their clever word-processing patent, and give them an IOU to be paid off when you're doing well. Trying to buy things with equity at this early stage just creates inequality, arguments, and unfairness. How much should the investors own vs. the founders and employees? That depends on market conditions. Realistically, if the investors end up owning more than 50%, the founders are going to feel like sharecroppers and lose motivation, so good investors don't get greedy that way. If the company can bootstrap without investors, the founders and employees might end up owning 100% of the company. Interestingly enough, the pressure is pretty strong to keep things balanced between investors and founders/employees; an old rule of thumb was that at IPO time (when you had hired all the employees and raised as much money as you were going to raise) the investors would have 50% and the founders/employees would have 50%, but with hot Internet companies in 2011, investors may end up owning a lot less than 50%. Conclusion There is no one-size-fits-all solution to this problem, but anything you can do to make it simple, transparent, straightforward, and, above-all, fair, will make your company much more likely to be successful. The above awesome answer came from the Stack Exchange beta site for startups, which has now closed. I expect that this equity distribution question (which is strongly tied to personal finance) will come up more times in the future so I have copied the content originally posted. All credit for this excellent answer is due to Joel Spolsky, a moderator for the Startups SE beta site, and co-founder of Stack Exchange.\"" }, { "docid": "129255", "title": "", "text": "Investing is really about learning your own comfort level. You will make money and lose money. You will make mistakes but you will also learn a great deal. First off, invest in your own financial knowledge, this doesn't require capital at all but a commitment. No one will watch or care for your own money better than yourself. Read books, and follow some companies in a Google Finance virtual portfolio. Track how they're doing over time - you can do this as a virtual portfolio without actually spending or losing money. Have you ever invested before? What is your knowledge level? Investing long term is about trying to balance risk while reducing losses and trying not to get screwed along the way (by people). My personal advice: Go to an independent financial planner, go to one that charges you per hour only. Financial planners that don't charge you hourly get paid in commissions. They will be biased to sell you what puts the most money in their pockets. Do not go to the banks investment people, they are employed by the banks who have sales and quota requirements to have you invest and push their own investment vehicles like mutual funds. Take $15k to the financial planner and see what they suggest. Keep the other $5K in something slow and boring and $1k under your mattress in actual cash as an emergency. While you're young, compound interest is the magic that will make that $25k increase hand over fist in time. But you need to have it consistently make money. I'm young too and more risk tolerant because I have time. While I get older I can start to scale back my risk because I'm nearing retirement and preserve instead of try to make returns." }, { "docid": "11263", "title": "", "text": "The actual financial statements should always be referenced first before opening or closing a position. For US companies, they are freely available on EDGAR. Annual reports are called 10-Ks, and quarterly reports are called 10-Qs. YHOO and GOOG do a great job of posting financials that are quickly available, but money.msn has the best. These should be starting point, quick references. As you can see, they may all have the same strange accounting. Sometimes, it's difficult to find the information one seeks in the consolidated financial statements as in this case, so searching through the filing is necessary. The notes can be helpful, but Ctrl-F seems to do everything I need when I want something in a report. In AAPL's case, the Interest expense can be found in Note 3." }, { "docid": "100721", "title": "", "text": "a) Nothing would support this company going back to $.50 per share b) Fundamentally the market for this sectors has been obliterated and the fundamentals don't look like they will improve. Similar companies experience what this one is and will be going through, they borrow the hilt and hope they can pump enough oil and sell the oil at a high price. Oil goes below, WAYYY below the price they can sell it at and even break even, so they are burning cash until they declare bankruptcy. This company is not an exception. So here is what to look at on their balance sheet: assets and liabilities. Liabilities are debt. Their debt is over 50% of their assets, that debt has interest and there is NO WAY they are making a profit. Their website's last financial statement is from September 30th.. LOL, so they haven't even released a quarterly financial statement in two quarters straight, so have they released anything? Given what we know about the dire state of the entire oil drilling industry, lets see if these guys are the exception to the rule (spoiler; they aren't) February 15th, 2015 http://www.marketwatch.com/story/strategic-oil-gas-ltd-provides-operations-update-2015-02-19-16173591 The Company prudently elected to stop the winter Muskeg drilling program in order to preserve capital. So now they aren't even getting new assets to resale, they aren't making any money from that operation, their debt still has interest payments though. Approximately 700 Boe/d of production has been shut-in by suspending operations at Bistcho, Cameron Hills and Larne, which are not economic at current commodity prices. Predictable. Also, you should notice from their actual financial statements (from 6 months ago, lol) (when the price of oil was over 100% higher than it is today, lol), this company already wasn't a good performer. They have been financing themselves by doing private placements, by issuing shares to investors that are not you, and diluting the share value of ALL OTHER SHAREHOLDERS. Dead in the water. I got this from skimming their financial report, without even being familiar with how canadian companies report. Its just bad news. You shouldn't be married to this investment." }, { "docid": "536120", "title": "", "text": "Where are you planning on buying this ETF? I'm guessing it's directly through Vanguard? If so, that's likely your first reason - the majority of brokerage accounts charge a commission per trade for ETFs (and equities) but not for mutual funds. Another reason is that people who work in the financial industry (brokerages, mutual fund companies, etc) have to request permission for every trade before placing an order. This applies to equities and ETFs but does not apply to mutual funds. It's common for a request to be denied (if the brokerage has inside information due to other business lines they'll block trading, if a mutual fund company is trading the same security they'll block trading, etc) without an explanation. This can happen for months. For these folks it's typically easier to use mutual funds. So, if someone can open an account with Vanguard and doesn't work in the financial industry then I agree with your premise. The Vanguard Admiral shares have a much lower expense, typically very close to their ETFs. Source: worked for a brokerage and mutual fund company" }, { "docid": "490255", "title": "", "text": "\"IANAL, but I had heard (and would appreciate someone more qualified commenting on this) that one reason these things were often found unenforceable is that there is no consideration. The contract is to bind you for your work each day, but once you stop working, they allege you have a continued obligation that transcends your time at the company. Claiming that your day-to-day compensation covers this is as if to say some part of that compensation is not for your work but to pay you for not going elsewhere. It would be nice to see at minimum a requirement to separate these two concepts into separate contracts as bundling them creates a blur, and most importantly doesn't allow you to negotiate or walk away from the terms of one part without the other. At the heart of any \"\"market\"\", which the job market purports to be, is a sense that a fair price is reached when both parties can walk away from a bad deal. This is not so in the case of employment because, as Adlai Stevenson said, \"\"a hungry man is not a free man\"\", so someone who needs to eat (or feed a family) has a need to take an offer that is already biasing their acceptance of work, and this quasi-duress is compounded when a company can attach additional pressures that work agains that person's ability to fairly negotiate possible improvements of what may already have been a bad situation. I'm of the impression that duress itself has been argued to be a reason to hold a contract invalid. But more abstractly and generally, any time two parties are bargaining asymmetrically (I'm not sure the legal definition, but intuitively I'd say where one party has the ability to force a contract change and the other party is not), then those terms have to be suspect. Also, for the special case the pay is anything near minimum wage, I would suggest asking the question of whether the part of the compensation that is salary, not \"\"keeping you from working for the competition\"\", is the wage paid consistent with minimum wage, or does it have to draw from the pool of money that is not about wage but is about incentivizing you to not move. And, finally, if they stop paying you, and each day you've been paid a little to work and a little to incentivize you to leave, then are you getting a continued revenue stream to continue to incentivize you not to work for the competition? If not, there would seem again not to be consideration. As I said, I'm not an expert in this. I just follow such matters sometimes in the news. But I don't see these issues getting discussed here and I hope we'll see some useful responses from the crowd here, and also the smart folks at reddit can help through their discussions to form some useful political and legal defenses to help individuals overcome what is really a moral outrage on this matter. Capitalism is an often cruel engine. I worked at a company where one of the bosses said to me, after contributing really great things that added structurally in fundamental ways to the company, \"\"don't tell me what you've done, tell me what you've done lately\"\". Capitalism makes people scrap every day to prove their worth. So it's morally an outrage to see it also trying even as it beats down the price of someone and tells them they aren't entitled to better, to tell them that they may not go somewhere else that thinks they are better. That is not competition and it is not fair. Indentured servitude, not slavery, is more technically correct. And yet it is a push to treat people like capital, so slavery is not inappropriate metaphorically. The topic is non-competes, but really it's about businesses not wanting to have to compete for employees; that is, about businesses not wanting capitalism to prevail in hiring. Sorry for the length.\"" }, { "docid": "308178", "title": "", "text": "\"Generally speaking I find that jumping jobs either in-company or outside it is sometimes required for even advancing in title. When I was working at a F500 in the Portland Metro Area, people jumped around a lot. I'd say between a 1 1/2 years and 2 years was the average time someone stayed in a position before either moving around, moving out to another company, or maybe finally moving up. Lets say you were a Financial Analyst and you wanted to be a Senior Financial Analyst. Generally speaking you would need 4-5 years in to get there organically within the same org, if ever. The reality is for every single one of those Senior Financial Analyst positions there is probably 100-200 applicants including inside and outside applicants. While being an employee there was definitely a good thing, it doesn't guarantee you jack or shit. You might have worked at for 3 years, but some guy coming from Silicon Valley who is moving up North to Oregon so he can afford a house is probably going to beat you in the interview process. So that's when the other options come in. You can move around and get a new position, a new title, and the new experiences and connections that come with it. Or, you jump ship to a Senior Financial Analyst position somewhere else. The fact of the matter is applying for jobs is a giant crap shoot if you work in something that is unrelated to engineering, product creation, etc where your work can speak for you. If you have the word \"\"Analyst\"\" or \"\"Associate\"\" in your title, then career branding means more than anything else. Which job hopping gets you. Companies already expect you to leave for better opportunities. All the reasons to be loyal are dead if you aren't waiting for stock options to vest. There are no more pensions, raises are minimal if you get them at all, and if you become a burden on the Wage Expense line of the P&amp;L they will drop you without a second thought and *maybe* a severance. Get yours and remember that a job is a job and that no matter how much they tell you otherwise, you are replaceable and when your employer looks at you they don't see value, they see a business expense.\"" }, { "docid": "146657", "title": "", "text": "Yes, you should be able to deduct at least some of these expenses. For expense incurred before you started the business: What Are Deductible Startup Costs? The IRS defines “startup costs” as deductible capital expenses that are used to pay for: 1) The cost of “investigating the creation or acquisition of an active trade or business.” This includes costs incurred for surveying markets, product analysis, labor supply, visiting potential business locations and similar expenditures. 2) The cost of getting a business ready to operate (before you open your doors or start generating income). These include employee training and wages, consultant fees, advertising, and travel costs associated with finding suppliers, distributors, and customers. These expenses can only be claimed if your research and preparation ends with the formation of a successful business. The IRS has more information on how to claim the expenses if you don’t go into business. https://www.sba.gov/blogs/startup-cost-tax-deductions-how-write-expense-starting-your-business Once your business is underway, you can deduct expenses, but the exact details depend on how you organized. If you're a sole proprietor for tax purposes, then you'll deduct them on Schedule C of your Form 1040 on your personal tax. If you are a partnership, C-Corp, or S-Corp, they will be accounted at the business level and either passed on to you on a Schedule K (partnership and S-Corp) or deducted directly by the company (C-Corp). In any case, you will need good records that justify your expenses as business related. It might be well worth at least an initial meeting with a CPA to make sure that you get started on the right foot." }, { "docid": "174714", "title": "", "text": "\"When you pay the flight, hotel, conference attendance fees of $100: When you repay the credit card debt of $100: When you receive the gross salary of $5000: Your final balance sheet will show: Your final income statement will show: Under this method, your \"\"Salary\"\" account will show the salary net of business expense. The drawback is that the $4900 does not agree with your official documentation. For tax reporting purposes, you report $5000 to the tax agency, and if possible, report the $100 as Unreimbursed Employee Expenses (you weren't officially reimbursed). For more details see IRS Publication 529.\"" }, { "docid": "528475", "title": "", "text": "\"This is an old post I feel requires some more love for completeness. Though several responses have mentioned the inherent risks that currency speculation, leverage, and frequent trading of stocks or currencies bring about, more information, and possibly a combination of answers, is necessary to fully answer this question. My answer should probably not be the answer, just some additional information to help aid your (and others') decision(s). Firstly, as a retail investor, don't trade forex. Period. Major currency pairs arguably make up the most efficient market in the world, and as a layman, that puts you at a severe disadvantage. You mentioned you were a student—since you have something else to do other than trade currencies, implicitly you cannot spend all of your time researching, monitoring, and investigating the various (infinite) drivers of currency return. Since major financial institutions such as banks, broker-dealers, hedge-funds, brokerages, inter-dealer-brokers, mutual funds, ETF companies, etc..., do have highly intelligent people researching, monitoring, and investigating the various drivers of currency return at all times, you're unlikely to win against the opposing trader. Not impossible to win, just improbable; over time, that probability will rob you clean. Secondly, investing in individual businesses can be a worthwhile endeavor and, especially as a young student, one that could pay dividends (pun intended!) for a very long time. That being said, what I mentioned above also holds true for many large-capitalization equities—there are thousands, maybe millions, of very intelligent people who do nothing other than research a few individual stocks and are often paid quite handsomely to do so. As with forex, you will often be at a severe informational disadvantage when trading. So, view any purchase of a stock as a very long-term commitment—at least five years. And if you're going to invest in a stock, you must review the company's financial history—that means poring through 10-K/Q for several years (I typically examine a minimum ten years of financial statements) and reading the notes to the financial statements. Read the yearly MD&A (quarterly is usually too volatile to be useful for long term investors) – management discussion and analysis – but remember, management pays themselves with your money. I assure you: management will always place a cherry on top, even if that cherry does not exist. If you are a shareholder, any expense the company pays is partially an expense of yours—never forget that no matter how small a position, you have partial ownership of the business in which you're invested. Thirdly, I need to address the stark contrast and often (but not always!) deep conflict between the concepts of investment and speculation. According to Seth Klarman, written on page 21 in his famous Margin of Safety, \"\"both investments and speculations can be bought and sold. Both typically fluctuate in price and can thus appear to generate investment returns. But there is one critical difference: investments throw off cash flow for the benefit of the owners; speculations do not. The return to the owners of speculations depends exclusively on the vagaries of the resale market.\"\" This seems simple and it is; but do not underestimate the profound distinction Mr. Klarman makes here. (and ask yourself—will forex pay you cash flows while you have a position on?) A simple litmus test prior to purchasing a stock might help to differentiate between investment and speculation: at what price are you willing to sell, and why? I typically require the answer to be at least 50% higher than the current salable price (so that I have a margin of safety) and that I will never sell unless there is a material operating change, accounting fraud, or more generally, regime change within the industry in which my company operates. Furthermore, I then research what types of operating changes will alter my opinion and how severe they need to be prior to a liquidation. I then write this in a journal to keep myself honest. This is the personal aspect to investing, the kind of thing you learn only by doing yourself—and it takes a lifetime to master. You can try various methodologies (there are tons of books) but overall just be cautious. Money lost does not return on its own. I've just scratched the surface of a 200,000 page investing book you need to read if you'd like to do this professionally or as a hobbyist. If this seems like too much or you want to wait until you've more time to research, consider index investing strategies (I won't delve into these here). And because I'm an investment professional: please do not interpret anything you've read here as personal advice or as a solicitation to buy or sell any securities or types of securities, whatsoever. This has been provided for general informational purposes only. Contact a financial advisor to review your personal circumstances such as time horizon, risk tolerance, liquidity needs, and asset allocation strategies. Again, nothing written herein should be construed as individual advice.\"" }, { "docid": "426607", "title": "", "text": "\"&gt;My article on businessweek.com was headlined, “American Families Are Poorer Than in 1989.” (It shouldn’t have said “are,” by the way, because the data only went through 2010.) The guy deserves some kudos for stating the above (the rare bare honestly about the \"\"are\"\" being inappropriate\\*). And really he deserves kudos for the entire clarifying article (even if the conclusion is a vague \"\"we don't know\"\" -- which is also a rarely honest statement. And of course the term \"\"richer\"\" (or \"\"wealthier\"\") is a relative one, subject to a variety of interpretations. Back in 1962 someone may have *felt* extremely wealthy if they owned the only \"\"air conditioner\"\" on the block; but are they then more wealthy or less wealthy now when they have central air... but so does everyone else. Or per example, the \"\"jokes\"\" in the Wall Street 2 sequel -- one of the things that made the Gordon Gekko of the original movie \"\"wealthy\"\" was his cell phone, because it was an expensive and rare luxury -- but today of course his original cell phone is a useless and clunky \"\"brick\"\"; and meanwhile just about everyone else (including the \"\"riff raff\"\") owns smart-phones with internet access (something the old Gordon Gekko couldn't have even *dreamed* of owning, no matter how much money he had). So \"\"wealth\"\" is a difficult thing to nail down. --- \\* Soapbox: It's a rare exception to the one thing that never ceases to piss me off -- when people make \"\"expert\"\" statements in the present tense, based on data that (of necessity) is not, indeed cannot be strictly \"\"current\"\". (For example, when some loudmouth \"\"scientist\"\" states that the Earth IS warming... when of course that cannot be known as the statement is concerning a \"\"trend\"\" and is entirely based on NON-real-time aggregates; the best an *honest* scientist would say is that \"\"based on the past x years of data we know the Earth *has been* warming\"\"... not \"\"is\"\"; the current status is never certain since the previous trend may have already \"\"peaked\"\" -- absent a real-time data stream, one cannot know.)\"" }, { "docid": "317812", "title": "", "text": "\"Hey, I hope I didnt come off as harsh on you. I'm not sure how much I can help, but Id be glad to give you tips on getting you name in the door with the big companies, and other career-y advice. If you haven't already though, please read this article on [negotiating from the perspective of an engineer](http://www.kalzumeus.com/2012/01/23/salary-negotiation/). I don't think anyone truly enjoys negotiating, but with experience it becomes much easier and more natural. See yourself as an asset - because you obviously are if they are offering their money to you! And in reading your post - let me say this. Never see your company as your friend. Yeah, you might be friends with your boss and coworkers, you all might be in a softball league and hangout, but when it comes to the hours of 9-5, to someone somewhere in your chain of command you are a line item that costs them X amount of money and makes them X amount. Don't forget that, and don't let yourself have \"\"feelings\"\" towards the company. If the company isn't smart enough to hire a backup, even after you have advised them to do so, that is their doing and any repercussions are for them to take. I'm not saying be unflexible, but if you ever, ***ever***, start to think about making or not making a major decision (such as not leaving a company) that is bad for your bottom line in exchange for helping out the company or due to \"\"feeling\"\" in some way towards the company, stop, forget your feelings, and do what logic alone tells you to do. You and your company are not friends. If the company can find someone cheaper to do your job, they will do so with no feelings towards you. And the being solo part -- yeah, thats not a good way to go early in your career. I've made it my objective to surround myself with people smarter than me who are willing to guide me, even at the cost of current financial gains, simply because as a young professional learning from others is one of the top priorities for me now. Running solo - being shoved to a corner to do your work alone - is a huge no-no IMO.\"" }, { "docid": "427997", "title": "", "text": "\"typically, your employer will automatically stop making contributions once you hit the 18k$ limit. it is worth noting that employer contributions (e.g. \"\"matching\"\") do not count towards the 18k$ employee pre-tax contribution limit. however, if you have 2 employers during the year their combined payroll deductions might exceed the limit if you do not inform your later employer of the contributions you made at your former employer (or they ignore the info). in which case, you must request a refund of \"\"excess contributions\"\" from one of the plans (your choice). you must report the refund as taxable income on your taxes. if you do not make this request by the time you file your taxes, the tax man will reject your filing and \"\"adjust\"\" your return with more taxes and penalties. sometimes requesting a refund of excess contributions might cause your employer to remove \"\"matching\"\" funds, but i am not clear on the rules behind that. there are some 401k plans that allow \"\"supplemental after-tax contributions\"\" up to the combined employee/employer limit (53k$ in 2015 and 2016). it is a rare feature, and if your company offers it, you probably already know. however, generally it is governed by a separate contribution election that only take effect once you hit the employee pre-tax contribution limit (18k$ in 2015 and 2016). you could ask your hr department to be sure. 401k plans can be changed if there is enough employee demand for a rule change. especially in a small company, simply asking for them to allow dollar based contributions instead of percent based contributions can cause them to change the plan to allow it. similarly, you could request they allow \"\"supplemental after-tax contributions\"\", but that might be a harder change to get.\"" }, { "docid": "51803", "title": "", "text": "3G capital is one of the major holding companies of Heinz. They own (co-own) many major bands, such as Burger King. They are known for completely gutting the core values these companies were built on. All the matters to them is cost cutting (often food/product quality, salaries, wages, benefits, company perks, company celebrations, etc). They promote a zero based budget meaning every organizational expense is tirelessly scrutinized in the search of slimmer costs to increase profit. They embody all the is wrong with capitalism when it comes to society-at-large. So how does this guy play into it? They are also known for promoting their young employees quickly. It effectively allows them to pay young employees less for more work. I know first hand, it creates a culture of young people working long hours for low pay with the hopes of being the next rising star. People like this 29 year old CFO may be compensated well, but likely has most of the compensation held in bonuses for short-term results. The result is very quick employee burnout and turnover, and zero work-life balance. All i can say to finish this rant off is that in the short-term, the system 3G is putting into place for the companies they are absorbing is effective for trimming costs and increasing profits for shareholders. Long-term, the low pay, long hours, and zero family values is and drain on society. They are a cancer in the business world. Read some articles about their takeovers of Heinz, Burger King, Tim Hortons. Their treatment of employees is horrific, again I've seen it first hand. Head over to /r/Canada and read how Canadians now view the products and values of their once beloved Tim Hortons." }, { "docid": "381568", "title": "", "text": "I started a company that's in the process of trying to become an SEC approved funding portal as defined by this Act. That being said, I obviously think it was a good thing overall. It's going to be much easier for companies to raise money. However, I think it's also going to be much more difficult find good investments. There's a chance that it might fuel a bubble similar to the Dotcom bubble in the late 90's/early 00's. That's *if* it takes off. I have some doubts that it will really change the landscape a whole lot. Even though it's now legal, you still don't see startups, hedge funds, etc. soliciting investments. At least I don't. Some of the relaxing of SOX requirements is interesting, but I don't think that really does anything but just defer the inevitable. There are quite a few private companies that are already SOX compliant simply because if they go public or get purchased by a public company, that can be a big advantage. The increasing of shareholders of record from 500 to 2,000 is irrelevant really. One shareholder of record can sell portions of their interest to as many people as they want (See: Goldman Sachs and Facebook). Making equity investments in startups available to regular Joe's is a good thing overall. It allows the possibility that someone making $50k per year to invest in a company that could, in the long run, boost them up a tax bracket or two. The flipside of that is that I still believe most of the US to be financially illiterate. There's a possibility of abuse. The SEC is currently writing rules to try and stem that, but there will still be people who do it. Hopefully it's not too bad. Lifting the ban on general solicitation is, in general, a good thing. For startups I think this might be advantageous, but won't be used very much. Part of the reason startups choose the investors they do (if they're smart) is for what value that person or people bring to the table besides cash. If I'm a startup and I need some money, I'm giving up a portion of my baby to someone. I want to make sure that person is smart and on the same page with me. I'm not going to settle for just anyone. It's important to remember that even if that person has one share, they still get a vote and a say in how I run my company. **TL;DR** - Overall I think it's going to be good. It's not going to be quite as radical as most people think. There will be some abuses of the new laws and regs, but that comes with the territory." }, { "docid": "258306", "title": "", "text": "Reading and analyzing financial statements is one of the most important tasks of Equity Analysts which look at a company from a fundamental perspective. However, analyzing a company and its financial statements is much more than just reading the absolute dollar figures provided in financial statements: You need to calculate financial ratios which can be compared over multiple periods and companies to be able to gauge the development of a company over time and compare it to its competitors. For instance, for an Equity Analyst, the absolute dollar figures of a company's operating profit is less important than the ratio of the operating profit to revenue, which is called the operating margin. Another very important figure is Free Cash Flow which can be set in relation to sales (= Free Cash Flow / Sales). The following working capital related metrics can be used as a health check for a company and give you early warning signs when they deviate too much: You can either calculate those metrics yourself using a spreadsheet (e.g. Excel) or use a professional solution, e.g. Bloomberg Professional, Reuters Eikon or WorldCap." }, { "docid": "346387", "title": "", "text": "There are several things being mixed up in the questions being asked. The expense ratio charged by the mutual fund is built into the NAV per share of the fund, and you do not see the charge explicitly mentioned as a deduction on your 401k statement (or in the statement received from the mutual fund in a non-401k situation). The expense ratio is listed in the fund's prospectus, and should also have been made available to you in the literature about the new 401k plan that your employer is setting up. Mutual fund fees (for things like having a small balance, or for that matter, sales charges if any of the funds in the 401k are load funds, God forbid) are different. Some load mutual funds waive the sales charge load for 401k participants, while some may not. Actually, it all depends on how hard the employer negotiates with the 401k administration company who handles all the paperwork and the mutual fund company with which the 401k administration company negotiates. (In the 1980s, Fidelity Magellan (3% sales load) was a hot fund, but my employer managed to get it as an option in our plan with no sales load: it helped that my employer was large and could twist arms more easily than a mom-and-pop outfit or Solo 401k plan could). A long long time ago in a galaxy far far away, my first ever IRA contribution of $2000 into a no-load mutual fund resulted in a $25 annual maintenance fee, but the law allowed the payment of this fee separately from the $2000 if the IRA owner wished to do so. (If not, the $25 would reduce the IRA balance (and no, this did not count as a premature distribution from the IRA). Plan expenses are what the 401k administration company charges the employer for running the plan (and these expenses are not necessarily peanuts; a 401k plan is not something that needs just a spreadsheet -- there is lots of other paperwork that the employee never gets to see). In some cases, the employer pays the entire expense as a cost of doing business; in other cases, part is paid by the employer and the rest is passed on to the employees. As far as I know, there is no mechanism for the employee to pay these expenses outside the 401k plan (that is, these expenses are (visibly) deducted from the 401k plan balance). Finally, with regard to the question asked: how are plan fees divided among the investment options? I don't believe that anyone other than the 401k plan administrator or the employer can answer this. Even if the employer simply adopts one of the pre-packaged plans offered by a big 401k administrator (many brokerages and mutual fund companies offer these), the exact numbers depend on which pre-packaged plan has been chosen. (I do think the answers the OP has received are rubbish)." }, { "docid": "429251", "title": "", "text": "When youre young, youre basically a sponge. You dont really know much (sorry) so you just kinda set out to learn all these new things. When you get old, you brain solidifies and you get stuck in your ways. New information bounces right off. There's a reason all these tech startups are from teenagers and 20 somethings, and not say people in their 50's-60's. It becomes a lot harder to learn at that age and a lot harder to envision change." }, { "docid": "220772", "title": "", "text": "\"The following is only an overview and does not contain all of the in-depth reasons why you should look more deeply. When you look at a stock's financials in depth you are looking for warning signs. These may warn of many things but one important thing to look for is ratio and growth rate manipulation. Using several different accounting methods it is possible to make a final report reflect a PE ratio (or any other ratio) that is inconsistent with the realities of the company's position. Earnings manipulation (in the way that Enron in particular manipulated them) is more widespread than you might think as \"\"earnings smoothing\"\" is a common way of keeping earnings in line (or smooth) in a recession or a boom. The reason that PE ratio looks so good could well be because professional investors have avoided the stock as there appear to be \"\"interesting\"\" (but legal) accounting decisions that are of concern. Another issue that you don't consider is growth. earnings may look good in the current reporting period but may have been stagnant or falling when considered over multiple periods. The low price may indicate falling revenues, earnings and market share that you would not be aware of when taking only your criteria into account. Understanding a firm will also give you an insight into how future news might affect the company. If the company has a lot of debt and market interest rates rise or fall how will that effect their debt, if another company brings out a competing product next week how will it effect the company? How will it effect their bottom line? How much do they rely on a single product line? How likely is it that their flagship product will become obsolete? How would that effect the company? Looking deeply into a company's financial statements will allow you to see any issues in their accounting practices and give you a feel for how they are preforming over time, it will also let you look into their cost of capital and investment decisions. Looking deeply into their products, company structure and how news will effect them will give you an understanding of potential issues that could threaten your investment before they occur. When looking for value you shouldn't just look at part of the value of the company; you wouldn't just look at sales of a single T-shirt range at Wallmart when deciding whether to invest in them. It is exactly the same argument for why you should look at the whole of the company's state when choosing to invest rather than a few small metrics.\"" } ]

[ { "docid": "115042", "title": "", "text": "\"I think you need to realize that regardless of whether they are \"\"shady\"\" or not, owners/founders are by and large in it for themselves. You as an employee as just a resource - why should they divulge their finances to you? You won't offend them if you pry and ask for it, but they simply are not going to give you the straight up. They will give you a bare minimum or some song and dance that beats around the bush without actually telling you what you need to know. In regards to whether you should buy the restricted shares: why not? Startups are a gamble anyway. So simply decide how much you're willing to gamble, and spend that much buying some shares. I mean, you're already taking the gamble by accepting a lower salary in exchange for equity which, in all likelihood, will never be worth anything anyway.\"" } ]

[ { "docid": "457737", "title": "", "text": "I have a hard time swallowing this opinion from somebody who actually thinks startups can or should get into a contract with anybody stipulating continuing employment. Nobody does that. If that was done, any VC worth their salt would insist that it be undone before they got involved. As for the rest of her article, I don't care for the venom but underneath theres a lot of stuff that's mostly true. VCs have a set of motivations that you have to understand to be successful with them. Those motivations are often at cross purposes with cofounders and almost certainly at cross purposes for general employees. The problems start when startup folks don't understand the motivations. Yes, you have to check your wallet and your fingers too whenever you deal with VCs but if you don't think that's the case with almost every deal you make, you are delusional." }, { "docid": "29397", "title": "", "text": "\"But I have been having a little difficulty to include the expenditure in my monthly budget as the billing cycle is from the 16th to 15th of the next month and my income comes in at the end of the month. Many companies will let you change the statement date if you want, so one way to do this would be to request your bank to have statements due at the end of the month or first of month. You can call and ask, this might resolve your problem entirely. How can I efficiently add the credit card expenditure to my monthly budget? We do this using YNAB, which then means our monthly budget is separate from our actual bank accounts. When we spend, we enter the transaction into YNAB and it's \"\"spent.\"\" Additionally, we just pay whatever our credit card balance is a day before the end of the month so it is at $0 when we do our budget discussion at the end of each month.\"" }, { "docid": "139501", "title": "", "text": "\"There are a few sites out there that can give you some reasoning behind the request. LegalZoom, for instance. To quote the LZ doc in case the link dies: Employee vs. Independent Contractor If a worker is an employee, the employer is responsible for paying Social Security, unemployment insurance, Medicare, and possibly other costs like workers' compensation insurance for the employee; at the end of the tax year, the employer is responsible for compiling all necessary payroll reports, including W-2 forms. If a worker is an independent contractor, the employer is not responsible for any of the above taxes or payments, and the only added paperwork is the issuing of a 1099 to the independent contractor at the end of the tax year, if he or she has made more than $600 with the employer. As Kent suggested, you should speak with an attorney (really you need one if setting up an LLC). There are a lot of companies out there these days that try to classify people as contractors rather than full-time employees as it gets them out of paying benefits and dealing with taxes. This is being heavily cracked down on, and several \"\"contractor\"\" employees are winning lawsuits to get full-time status. If you are truly acting as a contractor, then setting up an LLC can help with a few items such as taxes and protection on certain business aspects (see comments below regarding this). It's easy and relatively cheap (cost me about $250 with extra legal advice tacked on). If you are reporting directly to a manager with the company, or really working in any way that isn't consistent with the definition of a contractor, then I'd turn down the offer and ask to be made a FT employee. Additional information: https://www.sba.gov/content/hire-contractor-or-employee\"" }, { "docid": "518200", "title": "", "text": "Hmm, others are hating on the article, but from my experience, there is truth there. Every single tiny company that's trying to hire you as a young coder will dangle the possibility of a massive upside later on - the founder/CEO believes that success is just around the corner, and a good one has the ability to charm everyone else into believing it, too. Alas, this is not a guarantee of success. So I think if you're in that position - young coder trying to pick a job, or decide whether to stick with one - the advice is this: if you're not sure whether you know what you're doing, you probably don't, in which case look at the base odds (1 in 100 startups succeed, the rest crater) and act accordingly. If you *are* sure you know what you're doing, then more power to you." }, { "docid": "397059", "title": "", "text": "California and New York are very aggressive when it comes to revenue and taxes. As such, mere having an employee in these States creates a nexus and tax/filing liability for the company. @Adam Wood mentioned sales tax - that is correct. Having an employee in the State of California will require collecting sales tax for CA, and if until now your employer didn't have to - that would be a good enough reason to refuse your request. In addition to sales taxes, there's also the issue of corporate filings (they will now have to file paperwork in CA and pay CA franchise taxes just because of you) and payroll taxes (which are pretty high in CA and NY). It will also subject the to CA/NY/WA labor laws, which are more liberal than in most of the other States. Washington doesn't have personal income tax, but does have corporate income tax and sales tax, so I'm guessing the reasons to exclude this State are the same." }, { "docid": "308178", "title": "", "text": "\"Generally speaking I find that jumping jobs either in-company or outside it is sometimes required for even advancing in title. When I was working at a F500 in the Portland Metro Area, people jumped around a lot. I'd say between a 1 1/2 years and 2 years was the average time someone stayed in a position before either moving around, moving out to another company, or maybe finally moving up. Lets say you were a Financial Analyst and you wanted to be a Senior Financial Analyst. Generally speaking you would need 4-5 years in to get there organically within the same org, if ever. The reality is for every single one of those Senior Financial Analyst positions there is probably 100-200 applicants including inside and outside applicants. While being an employee there was definitely a good thing, it doesn't guarantee you jack or shit. You might have worked at for 3 years, but some guy coming from Silicon Valley who is moving up North to Oregon so he can afford a house is probably going to beat you in the interview process. So that's when the other options come in. You can move around and get a new position, a new title, and the new experiences and connections that come with it. Or, you jump ship to a Senior Financial Analyst position somewhere else. The fact of the matter is applying for jobs is a giant crap shoot if you work in something that is unrelated to engineering, product creation, etc where your work can speak for you. If you have the word \"\"Analyst\"\" or \"\"Associate\"\" in your title, then career branding means more than anything else. Which job hopping gets you. Companies already expect you to leave for better opportunities. All the reasons to be loyal are dead if you aren't waiting for stock options to vest. There are no more pensions, raises are minimal if you get them at all, and if you become a burden on the Wage Expense line of the P&amp;L they will drop you without a second thought and *maybe* a severance. Get yours and remember that a job is a job and that no matter how much they tell you otherwise, you are replaceable and when your employer looks at you they don't see value, they see a business expense.\"" }, { "docid": "232544", "title": "", "text": "\"I agree that you should have received both a 1099 and a W2 from your employer. They may be reluctant to do that because some people believe that could trigger an IRS audit. The reason is that independent contractor vs employee is supposed to be defined by your job function, not by your choice. If you were a contractor and then switched to be an employee without changing your job description, then the IRS could claim that you should have always been an employee the entire time, and so should every one of the other contractors that work for that company with a similar job function. It's a hornet's nest that the employer may not want to poke. But that's not your problem; what should you do about it? When you say \"\"he added my Federal and FICA W/H together\"\", do you mean that total appears in box 4 of your 1099? If so, it sounds like the employer is expecting you to re-pay the employer portion of FICA. Can you ask them if they actually paid it? If they did, then I don't see them having a choice but to issue a W2, since the IRS would be expecting one. If they didn't pay your FICA, then the amount this will cost you is 7.65% of what would have been your W2 wages. IMHO it would be reasonable for you to request that they send you a check for that extra amount. Note: even though that amount will be less than $600 and you won't receive a 1099 in 2017 for it, legally you'll still have to pay tax on that amount so I think a good estimate would be to call it 10% instead. Depending on your personality and your relationship with the employer, if they choose not to \"\"make you whole\"\", you could threaten to fill out form SS-8. Additional Info: (Thank you Bobson for bringing this up.) The situation you find yourself in is similar to the concept of \"\"Contract-to-Hire\"\". You start off as a contractor, and later convert to an employee. In order to avoid issuing a 1099 and W2 to the same person in a single tax year, companies typically utilize one of the following strategies: Your particular situation is closest to situation 2, but the reverse. Instead of retroactively calling you a W2 employee the entire time, your employer is cheating and attempting to classify you as a 1099 contractor the entire time. This is frowned upon by the IRS, as well as the employee since as you discovered it costs you more money in the form of employer FICA. From your description it sounds like your employer was trying to do you a favor and didn't quite follow through with it. What they should have done was never switch you to W2 in the first place (if you really should have been a contractor), or they should have done the conversion properly without stringing you along.\"" }, { "docid": "36366", "title": "", "text": "\"This is such a common question here and elsewhere that I will attempt to write the world's most canonical answer to this question. Hopefully in the future when someone on answers.onstartups asks how to split up the ownership of their new company, you can simply point to this answer. The most important principle: Fairness, and the perception of fairness, is much more valuable than owning a large stake. Almost everything that can go wrong in a startup will go wrong, and one of the biggest things that can go wrong is huge, angry, shouting matches between the founders as to who worked harder, who owns more, whose idea was it anyway, etc. That is why I would always rather split a new company 50-50 with a friend than insist on owning 60% because \"\"it was my idea,\"\" or because \"\"I was more experienced\"\" or anything else. Why? Because if I split the company 60-40, the company is going to fail when we argue ourselves to death. And if you just say, \"\"to heck with it, we can NEVER figure out what the correct split is, so let's just be pals and go 50-50,\"\" you'll stay friends and the company will survive. Thus, I present you with Joel's Totally Fair Method to Divide Up The Ownership of Any Startup. For simplicity sake, I'm going to start by assuming that you are not going to raise venture capital and you are not going to have outside investors. Later, I'll explain how to deal with venture capital, but for now assume no investors. Also for simplicity sake, let's temporarily assume that the founders all quit their jobs and start working on the new company full time at the same time. Later, I'll explain how to deal with founders who do not start at the same time. Here's the principle. As your company grows, you tend to add people in \"\"layers\"\". The top layer is the first founder or founders. There may be 1, 2, 3, or more of you, but you all start working about the same time, and you all take the same risk... quitting your jobs to go work for a new and unproven company. The second layer is the first real employees. By the time you hire this layer, you've got cash coming in from somewhere (investors or customers--doesn't matter). These people didn't take as much risk because they got a salary from day one, and honestly, they didn't start the company, they joined it as a job. The third layer are later employees. By the time they joined the company, it was going pretty well. For many companies, each \"\"layer\"\" will be approximately one year long. By the time your company is big enough to sell to Google or go public or whatever, you probably have about 6 layers: the founders and roughly five layers of employees. Each successive layer is larger. There might be two founders, five early employees in layer 2, 25 employees in layer 3, and 200 employees in layer 4. The later layers took less risk. OK, now here's how you use that information: The founders should end up with about 50% of the company, total. Each of the next five layers should end up with about 10% of the company, split equally among everyone in the layer. Example: Two founders start the company. They each take 2500 shares. There are 5000 shares outstanding, so each founder owns half. They hire four employees in year one. These four employees each take 250 shares. There are 6000 shares outstanding. They hire another 20 employees in year two. Each one takes 50 shares. They get fewer shares because they took less risk, and they get 50 shares because we're giving each layer 1000 shares to divide up. By the time the company has six layers, you have given out 10,000 shares. Each founder ends up owning 25%. Each employee layer owns 10% collectively. The earliest employees who took the most risk own the most shares. Make sense? You don't have to follow this exact formula but the basic idea is that you set up \"\"stripes\"\" of seniority, where the top stripe took the most risk and the bottom stripe took the least, and each \"\"stripe\"\" shares an equal number of shares, which magically gives employees more shares for joining early. A slightly different way to use the stripes is for seniority. Your top stripe is the founders, below that you reserve a whole stripe for the fancy CEO that you recruited who insisted on owning 10%, the stripe below that is for the early employees and also the top managers, etc. However you organize the stripes, it should be simple and clear and easy to understand and not prone to arguments. Now that we have a fair system set out, there is one important principle. You must have vesting. Preferably 4 or 5 years. Nobody earns their shares until they've stayed with the company for a year. A good vesting schedule is 25% in the first year, 2% each additional month. Otherwise your co-founder is going to quit after three weeks and show up, 7 years later, claiming he owns 25% of the company. It never makes sense to give anyone equity without vesting. This is an extremely common mistake and it's terrible when it happens. You have these companies where 3 cofounders have been working day and night for five years, and then you discover there's some jerk that quit after two weeks and he still thinks he owns 25% of the company for his two weeks of work. Now, let me clear up some little things that often complicate the picture. What happens if you raise an investment? The investment can come from anywhere... an angel, a VC, or someone's dad. Basically, the answer is simple: the investment just dilutes everyone. Using the example from above... we're two founders, we gave ourselves 2500 shares each, so we each own 50%, and now we go to a VC and he offers to give us a million dollars in exchange for 1/3rd of the company. 1/3rd of the company is 2500 shares. So you make another 2500 shares and give them to the VC. He owns 1/3rd and you each own 1/3rd. That's all there is to it. What happens if not all the early employees need to take a salary? A lot of times you have one founder who has a little bit of money saved up, so she decides to go without a salary for a while, while the other founder, who needs the money, takes a salary. It is tempting just to give the founder who went without pay more shares to make up for it. The trouble is that you can never figure out the right amount of shares to give. This is just going to cause conflicts. Don't resolve these problems with shares. Instead, just keep a ledger of how much you paid each of the founders, and if someone goes without salary, give them an IOU. Later, when you have money, you'll pay them back in cash. In a few years when the money comes rolling in, or even after the first VC investment, you can pay back each founder so that each founder has taken exactly the same amount of salary from the company. Shouldn't I get more equity because it was my idea? No. Ideas are pretty much worthless. It is not worth the arguments it would cause to pay someone in equity for an idea. If one of you had the idea but you both quit your jobs and started working at the same time, you should both get the same amount of equity. Working on the company is what causes value, not thinking up some crazy invention in the shower. What if one of the founders doesn't work full time on the company? Then they're not a founder. In my book nobody who is not working full time counts as a founder. Anyone who holds on to their day job gets a salary or IOUs, but not equity. If they hang onto that day job until the VC puts in funding and then comes to work for the company full time, they didn't take nearly as much risk and they deserve to receive equity along with the first layer of employees. What if someone contributes equipment or other valuable goods (patents, domain names, etc) to the company? Great. Pay for that in cash or IOUs, not shares. Figure out the right price for that computer they brought with them, or their clever word-processing patent, and give them an IOU to be paid off when you're doing well. Trying to buy things with equity at this early stage just creates inequality, arguments, and unfairness. How much should the investors own vs. the founders and employees? That depends on market conditions. Realistically, if the investors end up owning more than 50%, the founders are going to feel like sharecroppers and lose motivation, so good investors don't get greedy that way. If the company can bootstrap without investors, the founders and employees might end up owning 100% of the company. Interestingly enough, the pressure is pretty strong to keep things balanced between investors and founders/employees; an old rule of thumb was that at IPO time (when you had hired all the employees and raised as much money as you were going to raise) the investors would have 50% and the founders/employees would have 50%, but with hot Internet companies in 2011, investors may end up owning a lot less than 50%. Conclusion There is no one-size-fits-all solution to this problem, but anything you can do to make it simple, transparent, straightforward, and, above-all, fair, will make your company much more likely to be successful. The above awesome answer came from the Stack Exchange beta site for startups, which has now closed. I expect that this equity distribution question (which is strongly tied to personal finance) will come up more times in the future so I have copied the content originally posted. All credit for this excellent answer is due to Joel Spolsky, a moderator for the Startups SE beta site, and co-founder of Stack Exchange.\"" }, { "docid": "534059", "title": "", "text": "I use 10-K and 10-Qs to understand to read the disclosed risk factors related to a business. Sometimes they are very comical. But when you see that risk factor materializing you can understand how it will effect the company. For example, one microlending company's risk factor stated that if Elizabeth Warren becomes head of the Consumer Financial Protection Bureau we will have a hard time... so we are expanding in Mexico and taking our politically unfavorable lending practices there. I like seeing how many authorized shares there are or if there are plans to issue more. An example was where I heard from former employees of a company how gullible the other employees at that company were and how they all thought they were going to get rich or were being told so by upper management. Poor/Quirky/Questionable/Misleading management is one of my favorite things to look for in a company so I started digging into their SEC filings and saw that they were going to do a reverse split which would make the share prices trade higher (while experiencing no change in market cap), but then digging further I saw that they were only changing the already issued shares, but keeping the authorized shares at the much larger amount of shares, and that they planned to do financing by issuing more of the authorized shares. I exclaimed that this would mean the share prices would drop by 90%-99% after the reverse split and you mean to tell me that nobody realizes this (employees or the broad market). I was almost tempted to stand outside their office and ask employees if I could borrow their shares to short, because there wasn't enough liquidity on the stock market! This was almost the perfect short but it wasn't liquid or have any options so not perfect after all. It traded from $20 after the reverse split to $1.27 I like understanding how much debt a company is in and the structure of that debt, like if a loan shark has large payments coming up soon. This is generally what I use those particular forms for. But they contain a lot of information A lot of companies are able to act they way they do because people do not read." }, { "docid": "317812", "title": "", "text": "\"Hey, I hope I didnt come off as harsh on you. I'm not sure how much I can help, but Id be glad to give you tips on getting you name in the door with the big companies, and other career-y advice. If you haven't already though, please read this article on [negotiating from the perspective of an engineer](http://www.kalzumeus.com/2012/01/23/salary-negotiation/). I don't think anyone truly enjoys negotiating, but with experience it becomes much easier and more natural. See yourself as an asset - because you obviously are if they are offering their money to you! And in reading your post - let me say this. Never see your company as your friend. Yeah, you might be friends with your boss and coworkers, you all might be in a softball league and hangout, but when it comes to the hours of 9-5, to someone somewhere in your chain of command you are a line item that costs them X amount of money and makes them X amount. Don't forget that, and don't let yourself have \"\"feelings\"\" towards the company. If the company isn't smart enough to hire a backup, even after you have advised them to do so, that is their doing and any repercussions are for them to take. I'm not saying be unflexible, but if you ever, ***ever***, start to think about making or not making a major decision (such as not leaving a company) that is bad for your bottom line in exchange for helping out the company or due to \"\"feeling\"\" in some way towards the company, stop, forget your feelings, and do what logic alone tells you to do. You and your company are not friends. If the company can find someone cheaper to do your job, they will do so with no feelings towards you. And the being solo part -- yeah, thats not a good way to go early in your career. I've made it my objective to surround myself with people smarter than me who are willing to guide me, even at the cost of current financial gains, simply because as a young professional learning from others is one of the top priorities for me now. Running solo - being shoved to a corner to do your work alone - is a huge no-no IMO.\"" }, { "docid": "217748", "title": "", "text": "Edit: Let's forget about Wikipedia. From the horse's mouth: The cafeteria plan rules require that a health FSA provide uniform coverage throughout the coverage period (which is the period when the employee is covered by the plan). See Proposed Treasury Regulations Section 1.125-5(d). Under the uniform coverage rules, the maximum amount of reimbursement from a health FSA must be available at all times during the coverage period. This means that the employee’s entire health FSA election is available from the first day of the plan year to reimburse qualified medical expenses incurred during the coverage period. The cafeteria plan may not, therefore, base its reimbursements to an employee on what that employee may have contributed up to any particular date, such as the date the employee is laid-off or terminated. Thus, if an employee’s reimbursements from the health FSA exceed his contributions to the health FSA at the time of lay-off or termination, the employer cannot recoup the difference from the employee. (emphasis added) http://www.irs.gov/pub/irs-wd/1012060.pdf Uniform Coverage Rule The IRS has required that “health FSAS must qualify as accident or health plans. This means that, in general, while the health coverage under the FSA need not be provided through a commercial insurance contract, health FSAS must exhibit the risk-shifting and risk-distribution characteristics of insurance.” This concept has led to the “uniform coverage” rule. The uniform­coverage rule requires that the maximum amount of an employee’s projected elective contributions to a health FSA must be available from the first day of the plan year to reimburse the employee’s qualified medical expenses, regardless of the amount actually contributed to the plan at the time that reimbursement is sought. Citing proposed Treasury Regulations Section the IRS General Counsel has determined that: “Under the uniform coverage rules, the maximum amount of reimbursement from a health FSA must be available at all times during the coverage period. The cafeteria plan may not, therefore, base its reimbursements to an employee on what that employee may have contributed up to any particular date, such as the date the employee is laid-off or terminated. Thus, if an employee’s reimbursements from the health FSA exceed his contributions to the health FSA at the time of or termination, the employer cannot recoup the difference from the employee.” This rule is unfair and also constitutes a disincentive to establishing FSAS because of the exposure to out-of pocket expenditures arising from employees who leave the company. NSBA believes that the uniform coverage rule should also be revised if the or lose- it rule is changed. Revising the use-it or lose-it rule while leaving the uniform coverage rule unchanged will introduce an inappropriate asymmetry to FSAS. An employer should be allowed to deduct any negative amount arising from insuftîcient employee contributions from a terminating partieipant’s last paycheck. http://www.ecfc.org/files/legislative-news/NSBA_(David_Burton).pdf (emphasis added) Now, that's some fresh bitterness for you right there. (Dated August 17, 2012)" }, { "docid": "276927", "title": "", "text": "\"First, don't use Yahoo's mangling of the XBRL data to do financial analysis. Get it from the horse's mouth: http://www.sec.gov/edgar/searchedgar/companysearch.html Search for Facebook, select the latest 10-Q, and look at the income statement on pg. 6 (helpfully linked in the table of contents). This is what humans do. When you do this, you see that Yahoo omitted FB's (admittedly trivial) interest expense. I've seen much worse errors. If you're trying to scrape Yahoo... well do what you must. You'll do better getting the XBRL data straight from EDGAR and mangling it yourself, but there's a learning curve, and if you're trying to compare lots of companies there's a problem of mapping everybody to a common chart of accounts. Second, assuming you're not using FCF as a valuation metric (which has got some problems)... you don't want to exclude interest expense from the calculation of free cash flow. This becomes significant for heavily indebted firms. You might as well just start from net income and adjust from there... which, as it happens, is exactly the approach taken by the normal \"\"indirect\"\" form of the statement of cash flows. That's what this statement is for. Essentially you want to take cash flow from operations and subtract capital expenditures (from the cash flow from investments section). It's not an encouraging sign that Yahoo's lines on the cash flow statement don't sum to the totals. As far as definitions go... working capital is not assets - liabilities, it is current assets - current liabilities. Furthermore, you want to calculate changes in working capital, i.e. the difference in net current assets from the previous quarter. What you're doing here is subtracting the company's accumulated equity capital from a single quarter's operating results, which is why you're getting an insane result that in no way resembles what appears in the statement of cash flows. Also you seem to be using the numbers for the wrong quarter - 2014q4 instead of 2015q3. I can't figure out where you're getting your depreciation number from, but the statement of cash flows shows they booked $486M in depreciation for 2015q3; your number is high. FB doesn't have negative FCF.\"" }, { "docid": "560338", "title": "", "text": "&gt;Companies requesting unnecessary levels of qualification or experience and thus making it very difficult for young people to find work. I've found this is often largely a screener to deter the more weak minded people from applying." }, { "docid": "24231", "title": "", "text": "If one makes say, $10K/mo, and the company will match the first 5% dollar for dollar, a 10%/mo deposit of $1K/mo will see a $500/mo match. If the employee manages to request 90% get put into the 401(k), after 2 months, he's done. If the company wished, they could continue the $500/mo match, I agree. They typically don't and in fact, the 'true up' you mention isn't even required, one is fortunate to get it. Many companies that match are going the other way, matching only after the year is over. Why? Why does any company do anything? To save money. I used to make an attempt to divide my deposit over the year to max out the 401(k) in December and get the match real time, not a true up." }, { "docid": "449101", "title": "", "text": "In accrual accounting, you account for items on the income statement when the service has been delivered - in this case, the service that your employees are providing your company. Because of this, you incur the expense in the fiscal year that your employees work for you. So, you incur the expense, and net income decreases by (1-t)*wage expense. Net income decreases, so owners' equity decreases; to balance you credit wages payable. Once the wages are paid, you decrease the liabilities side (wages payable) and offset it with a Cash change on the assets side." }, { "docid": "555176", "title": "", "text": "\"Working for a lot of startups, I have seen this cycle. Really it has little to do with making the IPO look good because of number of employees, and is more about making the IPO look good because of planning for the future. Many times an IPO is released, it will be valued at $1.00 (made up) and the market will soar and spike. Now stock shares are valued at $3.00. Great. Till after the dust settles a bit, and stocks are valued at $0.85. This is \"\"normal\"\" and good. It would be better if the stocks ended a little higher than their initial value, but... such is life. Now the initial value of the stock is made up of basically the value of the company's assets, and employees are part of those assets and its earning power. They are also a liability, but that has less impact on initial value than assets. Sales right after IPO are based on how well a company will do. Part of that is growth. So it looks nicer to say: \"\"We have 500 employees and have been growing by 20% per month.\"\" than to say \"\"We have 100 employees\"\". In other words, before IPO, employees may be hired to make the company look like it is growing. They may be hired because the budget is projected based on expected growth and expected valuation. After IPO, you get a concrete number. You have your budget. It may be more than you thought, or it may be less. In our example, the real budget (from capital), is only 28% of the entire projected budget, and 85% of the initial value. It's time to make some budget cuts. Also, normally, there is a period of adjustment, company wide, as a company goes from VC funding, \"\"here, have as much money as you want\"\", to \"\"real world\"\" funding, with stricter limits and less wiggle room.\"" }, { "docid": "459906", "title": "", "text": "You're extremely fortunate to have $50k in CDs, no debt, and $3800 disposable after food and rent. Congrats. Here's how I would approach it. If you see yourself getting into a home in the next couple of years, stay safe and liquid. CDs (depending on the duration) fit that description. Because you have disposable income and you're young, you should be contributing to a Roth IRA. This will build in value and compound over your lifetime, so that when you're in your 70s you'll actually have a retirement. Financial planners love life insurance because that's how they make all their money. I have whole life insurance because its cash value will be part of my retirement. It may also cover my wife if I ever decide to get married. It may or may not make sense for you now depending on how soon you want to buy a home and home expensive they are in your zip code. Higher risk, higher reward- you can count on that. Keep the funds in the United States and don't try to get into any slick financial moves. If you have a school in town, see if you can take an Intro to Financial Planning class. It's extremely helpful for anyone with these kinds of questions." }, { "docid": "301998", "title": "", "text": "\"I heard today while listening to an accounting podcast that a balance sheet... can be used to determine if a company has enough money to pay its employees. The \"\"money\"\" that you're looking at is specifically cash on the balance sheet. The cash flows document mentioned is just a more-finance-related document that explains how we ended at cash on the balance sheet. ...even looking for a job This is critical, that i don't believe many people look at when searching for a job. Using the ratios listed below can (and many others), one can determine if the business they are applying for will be around in the next five years. Can someone provide me a pair of examples (one good)? My favorite example of a high cash company is Nintendo. Rolling at 570 Billion USD IN CASH ALONE is astonishing. Using the ratios we can see how well they are doing. Can someone provide me a pair of examples (one bad)? Tesla is a good example of the later on being cash poor. Walk me though how to understand such a document? *Note: This question is highly complex and will take months of reading to fully comprehend the components that make up the financial statements. I would recommend that this question be posted completely separate.\"" }, { "docid": "420810", "title": "", "text": "\"There is no numerical convention in finance that I have ever seen. If you look at statements or reports that measure growth when the starting value is negative or zero, you typically see \"\"n/a\"\" or \"\"-\"\" or \"\"*\"\" as the result. Any numerical result would be meaningless. Suppose you used 100% and another company had a legitimate 150% gain - where would the 100% change rank? What do my manager and investors expect to see? As a financial analyst - I would not want to see 100%. I would instead rather see something that indicates that the % change is meaningless. As an example, here's the WSJ documentation on change in Net Income: Net Income percent change is the change from the same period from a year ago. Percent change is not provided if either the latest period or the year-ago period contains a net loss. Thinking about it in another context: Yesterday you and your friend had no apples. Today you have 1 and your friend has 20. What percentage increase did you both have? Did you both have a 100% increase? How can you indicate that your friend had a larger \"\"increase\"\"? In that case (and in finance), the context needs to turn from a percentage increase to an absolute increase. A percentage increase is that scenario is meaningless.\"" } ]

[ { "docid": "345697", "title": "", "text": "\"It all comes down to how the loan itself is structured and reported - the exact details of how they run the loan paperwork, and how/if they report the activity on the loan to one of the credit bureaus (and which one they report to). It can go generally one of three ways: A) The loan company reports the status to a credit reporting agency on behalf of both the initiating borrower and the cosigner. In this scenario, both individuals get a new account on their credit report. Initially this will generally drop related credit scores somewhat (it's a \"\"hard pull\"\", new account with zero history, and increased debt), but over time this can have a positive effect on both people's credit rating. This is the typical scenario one might logically expect to be the norm, and it effects both parties credit just as if they were a sole signor for the loan. And as always, if the loan is not paid properly it will negatively effect both people's credit, and the owner of the loan can choose to come after either or both parties in whatever order they want. B) The loan company just runs the loan with one person, and only reports to a credit agency on one of you (probably the co-signor), leaving the other as just a backup. If you aren't paying close attention they may even arrange it where the initial party wanting to take the loan isn't even on most of the paperwork. This let the person trying to run the loan get something accepted that might not have been otherwise, or save some time, or was just an error. In this case it will have no effect on Person A's credit. We've had a number of question like this, and this isn't really a rare occurrence. Never assume people selling you things are necessarily accurate or honest - always verify. C) The loan company just doesn't report the loan at all to a credit agency, or does so incorrectly. They are under no obligation to report to credit agencies, it's strictly up to them. If you don't pay then they can report it as something \"\"in collections\"\". This isn't the typical way of doing business for most places, but some businesses still operate this way, including some places that advertise how doing business with them (paying them grossly inflated interest rates) will \"\"help build your credit\"\". Most advertising fraud goes unpunished. Note: Under all of the above scenarios, the loan can only effect the credit rating attached to the bureau it is reported to. If the loan is reported to Equifax, it will not help you with a TransUnion or Experian rating at all. Some loans report to multiple credit bureaus, but many don't bother, and credit bureaus don't automatically copy each other. It's important to remember that there isn't so much a thing as a singular \"\"consumer credit rating\"\", as there are \"\"consumer credit ratings\"\" - 3 of them, for most purposes, and they can vary widely depending on your reported histories. Also, if it is only a short-term loan of 3-6 months then it is unlikely to have a powerful impact on anyone's credit rating. Credit scores are formulas calibrated to care about long-term behavior, where 3 years of perfect credit history is still considered a short period of time and you will be deemed to have a significant risk of default without more data. So don't expect to qualify for a prime-rate mortgage because of a car loan that was paid off in a few months; it might be enough to give you a score if you don't have one, but don't expect much more. As always, please remember that taking out a loan just to improve credit is almost always a terrible idea. Unless you have a very specific reason with a carefully researched and well-vetted plan that means that it's very important you build credit in this specific way, you should generally focus on establishing credit in ways that don't actually cost you any money at all. Look for no fee credit cards that you pay in full each month, even if you have to start with credit-building secured card plans, and switch to cash-value no-fee rewards cards for a 1-3% if you operate your financial life in a way that this doesn't end up manipulating your purchasing decisions to cost you money. Words to the wise: \"\"Don't let the credit score tail wag the personal financial dog!\"\"\"" } ]

[ { "docid": "274832", "title": "", "text": "It can certainly help build a credit score, but remember that businesses gain credit differently from individuals. Depending on the country, there isn't usually a national register of business credit ratings the way there is for individuals. The credit record you'd be gaining is with your own bank only. Banks will usually base your business credit record on revenue and transactional loads rather than merely on having and holding a credit card. That said, it isn't always that easy to get a business credit card and so it is a useful thing to have for credibility with clients (depending on the type of work you do). A credit card can also sometimes work out cheaper (and faster) for financing small overdrafts than a regular business overdraft facility. That said, I've found that larger loans over a five-year term can work out much cheaper for an established business than they would for an individual, even where the business itself has no history of using credit." }, { "docid": "188756", "title": "", "text": "Its a huuuuuuuuuuuge topic, and to answer your question in full will require a book, with a small booklet of legal advice attached to it. I'm not going to write it here, but I'll give you some very specific points to start your research with: ARM/Baloon - big NO NO. Don't touch that. Get rid of those you have any way you can, and then never ever do it again. That's the kind of crap that got us into the housing bubble mess to begin with. Especially with the rates as low as now, the only future with ARM/Baloon is that you're going to pay more, way more, than your initial period payments. Rates - the rates now are very low. They were even lower 12-24 months ago, but are still extremely low. Make sure you get a fixed rate loan, in order to lock these rates in for the remainder of the loan. Any ARM loan will have higher rates in the future. So go with FIXED RATE. Period - fixed rate loans are given for periods up to 30 years. The shorter the period, the lower the rate. However, at the level they're now, you're practically getting money for free (the APR is comparable to the inflation) even for 30 yr/fixed loans. PMI - private mortgage insurance - since you don't have much equity, the lender is likely to require you paying PMI. This is a significant amount of money you pay until you have at least 20% equity. It changes from lender to lender, so shop around and compare. Government assistance - that's what the broker was referring to. There were programs allowing people refinance even under-water mortgages. Check what programs are still available in your area. Some banks will not refinance with less than 20% equity, but some government assistance programs may help you get a loan even if you don't have enough equity. Closing fees and points - that's the money out of your pocket. Shop around, these vary wildly. Generally, Credit Unions, being non-profits, are cheaper on this item specifically, while comparable to big banks on everything else." }, { "docid": "243735", "title": "", "text": "I don't think there's anything to worry about. TFS doesn't really care who's paying, as long as the loan is being paid as agreed. Of course you're helping your dad's credit history and not your own, but I doubt TFS would give back money just because it came from your bank account. A business may claim a payment wasn't made against the loan, but you'd have the records that you did in fact pay (keep those bank statements). In theory they could sue you, in practice you'd send them the proof and they'd investigate and find the misplaced money. THAT does happen sometimes; the wrong account is credited. If it did end up in court, again you'd win because you have proof you sent payments. Even if you put the wrong loan account number to pay to, you'd have proof you in fact sent the money. If you're talking about something like a loan shark... they can do whatever they like. They won't sue you though, because again you'd have proof. That's why they'd use violence. But probably a loan shark wouldn't falsely claim you didn't pay if you did, as word would get out and the loan shark would lose business. And again, as long as they get what's agreed to, they don't care how they get it or who they get it from." }, { "docid": "123991", "title": "", "text": "\"Banks are currently a lot less open to 'creative financing' than they were a few years ago, but you may still be able to take advantage of the tactic of splitting the loan into two parts, a smaller 'second mortgage' sometimes called a 'purchase money second' at a slightly higher interest rate for around 15-20% of the value, and the remaining in a conventional mortgage. Since this tactic has been around for a long time, it's not quite in the category of the shenanegans they were pulling a few years back, so has a lot more potential to still be an option. I did this in for my first house in '93 and again in '99 when I moved to a larger home after getting married. It allowed me to get into both houses with less than 20% down and not pay PMI. This way neither loan is above 80% so you don't have to pay PMI. The interest on the second loan will be higher, but usually only a few percent, and is thus usually a fraction of what you were paying for the PMI. (and it's deductible from your taxes) If you've been making your payments on time and have a good credit rating, then you might be able to find someone who would offer you such a deal. You might even be able to get a rate for your primary that is down in the low 4's depending on where rates are today and what your credit rating is like. If you can get the main loan low enough, even if the other is like say 7%, your blended rate may still be right around 5% If you can find a deal like this, it's also great material to use to negotiate with your current lender \"\"either help me get the PMI off this loan or I'm going to refinance.\"\" Then you can compare what they will offer you with what you can get in a refinance and decide what makes the most sense for you. On word of warning, when refinancing, do NOT get sucked into an adjustable rate mortgage. If you are finding life 'tight' right now with house payments and all, the an ARM could be highly seductive since they often offer a very low initial rate.. however then invariably adjust upwards, and you could suddenly find yourself with a monster payment far larger than what you have now. With low rates where they are, getting a conventional fixed rate loan (or loans in the case of the tactic being discussed here) is the way to go.\"" }, { "docid": "30623", "title": "", "text": "From my understanding by paying your bills more than 5 days late will not lead you into bankruptcy or stop you from getting a new loan in the future, however it may mean that lenders offer you credit at a higher interest rate. This of course would not help you as you are already struggling with your finances. However, no matter how bad you think things might be for you financially, there are always things you can do to improve your situation. Set a Budget The first thing you must do is to set a budget. List down all sources of income you receive each month, including any allowances. Then list all your sources of expenses and spending. List all your bills such as rent, telephone, electricity, car maintenance, credit card and other loans. Keep a diary for a month for all your discretionary spending - including coffees, lunches, and other odd bits and ends. You can also talk with your existing lenders and come to some agreement on reducing you interest rates on your debts and the repayments. But remember any reduction in repayments may increase your repayment period and the total interest you have to pay in the long term. If you need help setting up your budget here are some links to resources you can download to help you get started: Once you set up your budget you want your total income to be more than your total expenses. If it isn't you will be getting further and further behind each month. Some things you can do are to increase your income - get a job/second job, sell some unwanted items, or start a small home business. Some things you can do to reduce your expenses - make coffees and lunches at home before going out and buying these, pay off higher interest debts first, consolidate all your debts into a lower interest rate loan, reduce discretionary spending to an absolute minimum, cancel all unnecessary services, etc. Debt Consolidation In regards to a Debt Consolidation for your existing personal loans and credit cards into a single lower interest rate loan can be a good idea, but there are some pitfalls you should consider. Manly, if you are taking out a loan with a lower interest rate but a longer term to pay it off, you may end up paying less in monthly repayments but will end up paying more interest in the long run. If you do take this course of action try to keep your term to no longer than your current debt's terms, and try to keep your repayments as high as possible to pay the debt off as soon as possible and reduce any interest you have to pay. Again be wary of the fine print and read the PDS of any products you are thinking of getting. Refer to ASIC - Money Smart website for more valuable information you should consider before taking out any debt consolidation. Assistance improving your skills and getting a higher paid job If you are finding it hard to get a job, especially one that pays a bit more, look into your options of doing a course and improving your skills. There is plenty of assistance available for those wanting to improve their skills in order to improve their chances of getting a better job. Check out Centrelink's website for more information on Payments for students and trainees. Other Action You Can Take If you are finding that the repayments are really getting out of hand and no one will help you with any debt consolidation or reducing your interest rates on your debts, as a last resort you can apply for a Part 9 debt agreement. But be very careful as this is an alternative to bankruptcy, and like bankruptcy a debt agreement will appear on your credit file for seven years and your name will be listed on the National Personal Insolvency Index forever. Further Assistance and Help If you have trouble reading any PDS, or want further information or help regarding any issues I have raised or any other part of your financial situation you can contact Centrelink's Financial Information Service. They provide a free and confidential service that provides education and information on financial and lifestyle issues to all Australians. Learn how to manage your money so you can get out of your debt and can lead a much more comfortable and less stressful life into the future." }, { "docid": "7928", "title": "", "text": "I doubt it. If you have a good track record with your car loan, that will count for a lot more than the fact that you don't have it anymore. When you look for a house, your debt load will be lower without the car loan, which may help you get the mortgage you want. Just keep paying your credit card bills on time and your credit rating will improve month by month." }, { "docid": "158609", "title": "", "text": "\"I don't know of any way to \"\"transfer\"\" a debt to another person without their consent or the lender's consent. You are responsible for the loan, and you need to either pay it or give up the asset that it's tied to (the car). At least you weren't just a cosigner with no title to the car - then you'd be in worse shape. If you don't want your credit tarnished, I would start (or keep) making the payments, knowing that you are getting the equity that results from the principal you're paying (you're only out the interest portion). If it were me, here are the things I would do:\"" }, { "docid": "287693", "title": "", "text": "\"I'll take an alternate route: honesty + humor. Say something like this with a smile and a laugh, like you know they're crazy, but they maybe don't know it yet. \"\"Are you crazy? Co-signing a loan can put us both in a lot of potential danger. First, you shouldn't get a loan that you can't afford/attain on your own, and second, I'd be crazy to agree to be liable for a loan that someone else can't get on their own. You want something bad enough, you get your credit rating in order, or you save up the money - that's how I bought (my car/house/trip to Geneva). I'd be happy to point you in the right direction if you want to put a plan together.\"\" You're offering help, but not the kind that puts you in danger. Declining to co-sign a loan can't damage your relationship with this person as much as failure to pay will.\"" }, { "docid": "65461", "title": "", "text": "First, let me fill in the gaps on your situation, based on the numbers you've given so far. I estimate that your student loan balance (principal) is $21,600. With the variable rate loan option that you've presented, the maximum interest rate you could be charged would be 11.5%, which would bring your monthly payment up to that $382 number you gave in the comments. Your thoughts are correct about the advantage to paying this loan off sooner. If you are planning on paying off this loan sooner, the interest rate on the variable rate loan has less opportunity to climb. One thing to be cautious of with the comparison, though: The $1200 difference between the two options is only valid if your rate does not increase. If the rate does increase, of course, the difference would be less, or it could even go the other way. So keep in mind that the $1200 savings is only a theoretical maximum; you won't actually see that much savings with the variable rate option. Before making a decision, you need to find out more about the terms of this variable rate loan: How often can your rate go up? What is the loan rate based on? I'm not as familiar with student loan variable rate loans, but there are other variable rate loans I am familiar with: With a typical adjustable rate home mortgage, the rate is locked for a certain number of years (perhaps 5 years). After that, the bank might be allowed to raise the rate once every period of months (perhaps once every year). There will be a limit to how much the rate can rise on each increase (perhaps 1.0%), and there will be a maximum rate that could be charged over the life of the loan (perhaps 12%). The interest rate on your mortgage can adjust up, inside of those parameters. (The actual formula used to adjust will be found in the fine print of your mortgage contract.) However, the bank knows that if they let your rate get too high above the current market rates, you will refinance to a different bank. So the mortgage is typically structured so that it will raise your rate somewhat, but it won't usually get too far above the market rate. If you knew ahead of time that you would have the house paid off in 5 years, or that you would be selling the house before the 5 years is over, you could confidently take the adjustable rate mortgage. Credit cards, on the other hand, also typically have variable rates. These rates can change every month, but they are usually calculated on some formula determined ahead of time. For example, on my credit card, the interest rate is the published Prime Rate plus 13.65%. On my last statement, it said the rate was 17.15%. (Of course, because I pay my balance in full each month, I don't pay any interest. The rate could go up to 50%, for all I care.) As I said, I don't know what determines the rate on your variable rate student loan option, and I don't know what the limits are. If it climbs up to 11.5%, that is obviously ridiculously high. I recommend that you try to pay off this student loan as soon as you possibly can; however, if you are not planning on paying off this student loan early, you need to try to determine how likely the rate is to climb if you want to pick the variable rate option." }, { "docid": "489561", "title": "", "text": "I have a car loan paid in full and even paid off early, and 2 personal loans paid in full from my credit union that don't seem to reflect in a positive way and all 3 were in good standing. But you also My credit card utilization is 95%. I have a total of 4 store credit cards, a car loan, 2 personal loans. So assuming no overlap, you've paid off three of your ten loans (30%). And you still have 95% utilization. What would you do if you were laid off for six months? Regardless of payment history, you would most likely stop making payments on your loans. This is why your credit score is bad. You are in fact a credit risk. Not due to payment history. If your payment history was bad, you'd likely rank worse. But simple fiscal reality is that you are an adverse event away from serious fiscal problems. For that matter, the very point that you are considering bankruptcy says that they are right to give you a poor score. Bankruptcy has adverse effects on you, but for your creditors it means that many of them will never get paid or get paid less than what they loaned. The hard advice that we can give is to reduce your expenses. Stop going to restaurants. Prepare breakfast and supper from scratch and bag your lunch. Don't put new expenses on your credit cards unless you can pay them this month. Cut up your store cards and don't shop for anything but necessities. Whatever durables (furniture, appliances, clothes, shoes, etc.) you have now should be enough for the next year or so. Cut your expenses. Have premium channels on your cable or the extra fast internet? Drop back to the minimum instead. Turn the heat down and the A/C temperature up (so it cools less). Turn off the lights if you aren't using them. If you move, move to a cheaper apartment. Nothing to do? Get a second job. That will not only keep you from being bored, it will help with your financial issues. Bankruptcy will not itself fix the problems you describe. You are living beyond your means. Bankruptcy might make you stop living beyond your means. But it won't fix the problem that you make less money than you want to spend. Only you can do that. Better to stop the spending now rather than waiting until bankruptcy makes your credit even worse and forces you to cut spending. If you have extra money at the end of the month, pick the worst loan and pay as much of it as you can. By worst, I mean the one with the worst terms going forward. Highest interest rate, etc. If two loans have the same rate, pay the smaller one first. Once you pay off that loan, it will increase the amount of money you have left to pay off your other loans. This is called the debt snowball (snowball effect). After you finish paying off your debt, save up six months worth of expenses or income. These will be your emergency savings. Once you have your emergency fund, write out a budget and stick to it. You can buy anything you want, so long as it fits in your budget. Avoid borrowing unless absolutely necessary. Instead, save your money for bigger purchases. With savings, you not only avoid paying interest, you may actually get paid interest. Even if it's a low rate, paid to you is better than paying someone else. One of the largest effects of bankruptcy is that it forces you to act like this. They offer you even less credit at worse terms. You won't be able to shop on credit anymore. No new car loan. No mortgage. No nice clothes on credit. So why declare bankruptcy? Take charge of your spending now rather than waiting until you can't do anything else." }, { "docid": "257483", "title": "", "text": "\"First of all, congratulations on admitting your problem and on your determination to be debt-free. Recognizing your mistakes is a huge first step, and getting rid of your debt is a very worthwhile goal. When considering debt consolidation, there are really only two reasons to do so: Reason #1: To lower your monthly payment. If you are having trouble coming up with enough money to meet your monthly obligations, debt consolidation can lower your monthly payment by extending the time frame of the debt. The problem with this one is that it doesn't help you get out of debt faster. It actually makes it longer before you are out of debt and will increase the total amount of interest that you will pay to the banks before you are done. So I would not recommend debt consolidation for this reason unless you are truly struggling with your cashflow because your minimum monthly payments are too high. In your situation, it does not sound like you need to consolidate for this reason. Reason #2: To lower your interest rate. If your debt is at a very high rate, debt consolidation can lower your interest rate, which can reduce the time it will take to eliminate your debt. The consolidation loan you are considering is at a high interest rate on its own: 13.89%. Now, it is true that some of your debt is higher than that, but it looks like the majority of your debt is less than that rate. It doesn't sound to me that you will save a significant amount of money by consolidating in this loan. If you can obtain a better consolidation loan in the future, it might be worth considering. From your question, it looks like your reasoning for the consolidation loan is to close the credit card accounts as quickly as possible. I agree that you need to quit using the cards, but this can also be accomplished by destroying the cards. The consolidation loan is not needed for this. You also mentioned that you are considering adding $3,000 to your debt. I have to say that it doesn't make sense at all to me to add to your debt (especially at 13.89%) when your goal is to eliminate your debt. To answer your question explicitly, yes, the \"\"cash buffer\"\" from the loan is a very bad idea. Here is what I recommend: (This is based on this answer, but customized for you.) Cut up/destroy your credit cards. Today. You've already recognized that they are a problem for you. Cash, checks, and debit cards are what you need to use from now on. Start working from a monthly budget, assigning a job for every dollar that you have. This will allow you to decide what to spend your money on, rather than arriving at the end of the month with no idea where your money was lost. Budgeting software can make this task easier. (See this question for more information. Your first goal should be to put a small amount of money in a savings account, perhaps $1000 - $1500 total. This is the start of your emergency fund. This money will ensure that if something unexpected and urgent comes up, you won't be so cash poor that you need to borrow money again. Note: this money should only be touched in an actual emergency, and if spent, should be replenished as soon as possible. At the rate you are talking about, it should take you less than a month to do this. After you've got your small emergency fund in place, attack the debt as quickly and aggressively as possible. The order that you pay off your debts is not significant. (The optimal method is up for debate.) At the rate you suggested ($2,000 - 2,500 per month), you can be completely debt free in maybe 18 months. As you pay off those credit cards, completely close the accounts. Ignore the conventional wisdom that tells you to leave the unused credit card accounts open to try to preserve a few points on your credit score. Just close them. After you are completely debt free, take the money that you were throwing at your debt, and use it to build up your emergency fund until it is 3-6 months' worth of your expenses. That way, you'll be able to handle a small crisis without borrowing anything. If you need more help/motivation on becoming debt free and budgeting, I recommend the book The Total Money Makeover by Dave Ramsey.\"" }, { "docid": "82472", "title": "", "text": "\"It's rarely advisable to pay interest for something you can afford with cash. Just because you have no credit or loan history doesn't mean you aren't credit worthy. When applying for loans or credit, the lending institutions look at your credit report, not just your credit score. There are lots of things that show up on the reports they receive including (but not limited to): Right now, so many people are focused on their credit score, they're taking on unnecessary debt and potentially losing money in the long run. Yes, having a higher credit score will ultimately be beneficial, but your score will start growing naturally as you live your life. Unless of course you can and do pay for everything with cash. The concept of monitoring your score and striving to get it as high as possible is being shoved down our throats by advertisers at the moment. Don't fall for it. Rather than taking out a loan, which will cost you money in interest and actually show up as a closed account once it's paid off, you might be better served by applying for a credit card and using it sparingly just to start getting that credit history together. (Add usual \"\"don't spend more than you can pay back\"\" mantra here). Get a card with no annual fee and maybe some cash back options, and use it as the auto-payment for a utility if possible. You build credit history, increase your score, and it doesn't cost you any more than you'd be paying anyways. With regards to the investment question: With little to no credit history, you're not going to be approved for a loan with a low enough interest rate anyways. Think double digits. With a co-signer, you'll get a better rate, but then you need a co-signer. I don't know the exact math, but in today's market I'd say you'd need a loan interest rate of 2% or lower for investing to be worth thinking about. I believe this answer helps clarify the loan to invest math: https://money.stackexchange.com/a/26193/30798\"" }, { "docid": "576269", "title": "", "text": "Unfortunately not. Even if the credit card balance is positive (i.e. customer has overpaid the credit card account), you cannot withdraw cash (for free) - as any cash withdrawal is subject to 12.9% interest - even if repaid in full at the end of the month! The clarity credit card is one of the best cards for overseas spending, as its load free (no fees for purchases abroad) and it gives near perfect exchange rates. If your balance is positive, you start at £0, then fund that credit card account from your bank account £500. You can then spend on your credit card, and when your next bill is due at the end of the month - they will use that extra £500 sitting in your account first, and ask for the remainder from you. i.e. scenario1: scenario 2: It is better in my opinion, to set up a direct debit to always clear out the full amount on your credit card. That way, you have cash in your bank account for emergencies (getting £500 back from a credit card will take a few days to process as opposed to having the ability to withdraw cash from the cashpoint 24/7). And once the direct debit is paid automatically at the end of the month, there are no fees - voila your credit card is almost like a debit card, spend on it when you like, it gets paid automatically, no hassle, no worries. This approach does take a careful mindset though, as you need to know your credit limits and also you need to ensure your bank account has enough to pay off the direct debit at the end of the month. Otherwise those darn fees will get you (and hurt your credit rating). For cash spending, you will want to either take cash with you (check online here for best rates & get the money well in advance to avoid fees). Also in some countries the exchange rate is better there, than in the UK, google will help you here. If you dont like the idea of carrying large sums of cash with you can use a prepaid card like CaxtonFX, which is one of the better ones out there. The other well known ones are FairFX and Travelex Cash Passport." }, { "docid": "313623", "title": "", "text": "\"It depends on the deal: and you didn't give any details. That said, there are some things that stand out regardless, and some more specific answers to your questions. First, Mortgage rates (at the bank) are absurdly low right now. Like 4%-5%; less than 4% for excellent credit. You say your credit is ok, so unless your landlord is willing to do a deal where they get no benefit (beyond the price of the house), the bank is the way to go. If you don't have much for a down payment, go with an FHA loan, where you need only 3.5% down. Second, there is another option in between bank mortgage and rent-to-own. And that is that where your landlord \"\"carries the note\"\". Basically, there is a mortgage, and it works like a bank mortgage, but instead of the bank owning the mortgage, your landlord does. Now, in terms of them carrying all of it, this isn't really helpful. Who wants to make 3-4% interest? But, there is an interesting opportunity here. With your ok credit, you can probably get pretty close to 4% interest at the bank IF the loan is for 80% LTV (loan to value; that is, 20% equity). At 80% LTV you also won't have PMI, so between the two that loan will be very cheap. Then, your accommodating landlord can \"\"carry\"\" the rest at, say, 6-7% interest, junior to the bank mortgage (meaning if you default, the bank gets first dibs on the value of the house). Under that scenario, your over all interest payment is very reasonable, and you wouldn't have to put any money down. Now for your other questions: If we rent to own are we building equity? Not usually. Like the other posters said, rent-to-own is whatever both parties agree on. But objectively, most rent-to-own agreements, whether for a TV or a house, are set up to screw the buyer. Sorry to be blunt, and I'm not saying your landlord would do that, this is just generally how it is with rent to own. You don't own it till you make the last payment, and if you miss a payment they repo the property. There is no recourse because, hey, it was a rental agreement! Of course the agreements vary, and people who offer rent to own aren't necessarily bad people, but it's like one of those payday loan places: They provide a valid service but no one with other options uses them. If we rent to own, can we escape if we have to (read: can't pay anymore). Usually, sure! Think about what you're saying: \"\"Here's the house back, and all that money I paid you? Keep it!\"\" It's a great deal if you're on the selling side. How does rent to own affect (or not) our credit? It all depends on how it's structured. But really, it comes down to are they going to do reporting to the credit bureaus? In a rent-to-own agreement between individuals, the answer is no. (individuals can't report to a credit bureau. it's kind of a big deal to be set up to be able to do that)\"" }, { "docid": "342852", "title": "", "text": "Are you interested in refurbishing your rented home here in Singapore? If you are struggling with financial difficulties, you can apply for a renovation loan offered by banks. Most banks in Singapore offer renovation loans and home loans only to those who own a property. It is very hard to find a renovation loan for a rented home. **Home loans for renovation** You can take a home loan for your rented property and top up your home loan to finance your renovation project. If you already have a home loan, all you need to do is ask your bank representative to add extra financing to your [home loan](https://www.bankbazaar.sg/home-loan.html) for renovation purpose. Applying for a home loan for a rented property is simple. You can use an online loan calculator and compare home loans provided for a rented property. According to your repayment capacity and financial requirements, you can choose a home loan and use it for renovation. Make sure you have a good credit score while applying so that your home loan gets approved easily. **Personal loans for renovation** If you are not able to find too many home loans or renovation loans for rented property, you need not worry. Have you considered taking a personal loan to make awesome home improvement measures? That’s right; you can apply for a personal loan and use the funds to renovate your abode. The best thing about a personal loan is that a lender does not enquire about the purpose for your loan application. So, you can use your personal loan for any of your needs. *Eligibility criteria for personal loans* The general criteria to be qualified for a personal loan in Singapore are: The applicant should be 21 to 65 years old. The applicant should be a Singaporean or a permanent resident or a foreigner. The minimum income requirement for a Singaporean or PR is generally S$20,000 p.a. and S$40,000 p.a. for a foreigner. **When are personal loans ideal for renovation?** There are a few situations when a personal loan is the best option for renovating your rented property: Many banks give personal loans with attractive promotions such as interest-free loan for a certain period. You can take this loan and even repay the full amount before the zero-interest period expires. This will help you save efficiently on your renovation project. The minimum income required to secure a home loan is generally higher than the income requirement for a personal loan. Hence, a personal loan is a better option. A home loan generally gives a higher sum of money than a personal loan. This high amount is suitable for a construction project but will be excessive for renovation work. Therefore, it makes more sense to apply for a personal loan to give the perfect makeover to the kitchenette in your home. The approval process for a home loan is typically very lengthy. Personal loan applications get approved within 24 hours by most banks in Singapore. So now you can apply for a personal loan without any tension and remodel your balcony to have a party at home sweet home! Personal loan rates are generally lower than home loan rates. You can refurbish your living space by paying your loan at an interest rate not more than 4%. Now, you would have got a fair idea about how to finance your remodelling work. Always remember to enquire about every loan’s terms and conditions. Never sign any loan contract without being absolutely clear about the loan’s features." }, { "docid": "442241", "title": "", "text": "A traditional bank is not likely to give you a loan if you have no source of income. Credit card application forms also ask for your current income level and may reject you based on not having a job. You might want to make a list of income and expenses and look closely at which expenses can be reduced or eliminated. Use 6 months of your actual bills to calculate this list. Also make a list of your assets and liabilities. A sheet that lists income/expenses and assets/liabilities is called a Financial Statement. This is the most basic tool you'll need to get your expenses under control. There are many other options for raising capital to pay for your monthly expenses: Sell off your possessions that you no longer need or can't afford Ask for short term loan help from family and friends Advertise for short term loan help on websites such as Kijiji Start a part-time business doing something that you like and people need. Tutoring, dog-walking, photography, you make the list and pick from it. Look into unemployment insurance. Apply as soon as you are out of work. The folks at the unemployment office are willing to answer all your questions and help you get what you need. Dip into your retirement fund. To reduce your expenses, here are a few things you may not have considered: If you own your home, make an appointment with your bank to discuss renegotiation of your mortgage payments. The bank will be more interested in helping you before you start missing payments than after. Depending on how much equity you have in your home, you may be able to significantly reduce payments by extending the life of the mortgage. Your banker will be impressed if you can bring them a balance sheet that shows your assets, liabilities, income and expenses. As above, for car payments as well. Call your phone, cable, credit card, and internet service providers and tell them you want to cancel your service. This will immediately connect you to Customer Retention. Let them know that you are having a hard time paying your bill and will either have to negotiate a lower payment or cancel the service. This tactic can significantly reduce your payments. When you have your new job, there are some things you can do to make sure this doesn't happen again: Set aside 10% of your income in a savings account. Have it automatically deducted from your income at source if you can. 75% of Americans are 4 weeks away from bankruptcy. You can avoid this by forcing yourself to save enough to manage your household finances for 3 - 6 months, a year is better. If you own your own home, take out a line of credit against it based on the available equity. Your bank can help you with that. It won't cost you anything as long as you don't use it. This is emergency money; do not use it for vacations or car repairs. There will always be little emergencies in life, this line of credit is not for that. Pay off your credit cards and loans, most expensive rate first. Use 10% of your income to do this. When the first one is paid off, use the 10% plus the interest you are now saving to pay off the next most expensive card/loan. Create a budget you can stick to. You can find a great budget calculator here: http://www.gailvazoxlade.com/resources/interactive_budget_worksheet.html Note I have no affiliation with the above-mentioned site, and have a great respect for this woman's ability to teach people about how to handle money." }, { "docid": "111466", "title": "", "text": "When you start living in US, it doesn't actually matter what was your Credit history in another country. Your Credit History in US is tied to your SSN (Social Security Number), which will be awarded once you are in the country legally and apply for it. Getting an SSN also doesn't guarantee you nothing and you have to build your credit history slowly. Opening a Checking or Savings account will not help you in building a credit history. You need to have some type of Credit Account (credit card, car loan, mortgage etc.) linked to your SSN to start building your credit history. When you are new to US, you probably won't find any bank that will give you a Credit Card as you have no Credit history. One alternative is to apply for a secured credit card. A secured credit card is one you get by putting money or paying money to a bank and open a Credit Card against that money, thereby the bank can be secure that they won't lose any money. Once you have that, you can use that to build up your credit history slowly and once you have a good credit history and score, apply for regular Credit Card or apply for a car loan, mortgage etc. When I came to US 8 years ago, my Credit History was nothing, even though I had pretty good balance and credit history back in my country. I applied for secured credit card by paying $500 to a bank ( which got acquired by CapitalOne ), got it approved and used it for everything, for three years. I applied for other cards in the mean time but got rejected every time. Finally got approved for a regular credit card after three years and in one year added a mortgage and car loan, which helped me to get a decent score now. And Yes, a good Credit Score is important and essential for renting an apartment, leasing a car, getting a Credit Card etc. but normally your employer can always arrange for an apartment given your situation or you need to share apartment with someone else. You can rent a car without and credit score, but need a valid US / International Drivers license and a Credit Card :-) Best option will be to open a secured credit card and start building your credit. When your wife and family arrives, they also will be assigned individual SSN and can start building their credit history themselves. Please keep in mind that Credit Score and Credit History is always individual here..." }, { "docid": "188903", "title": "", "text": "\"I am interested in seeing what happens to your report after you test this, but I don't think it's possible in practice, would not affect your credit score, and also wouldn't be worth it for you to carry a negative balance like that. Having a -1% credit utilization essentially means that you are lending the credit card company money, which isn't really something that the credit card companies \"\"do\"\". They would likely not accept an agreement where you are providing the credit to them. Having credit is a more formal agreement than just 'I paid you too much this month'. Even if your payment does post before the transaction and it says you have a negative balance and gets reported to the credit bureau like that, this would probably get flagged for human review, and a negative credit utilization doesn't really reflect what is happening. Credit utilization is 'how much do you owe / amount of credit available to you', and it's not really correct to say that you owe negative dollars. Carrying a negative balance like that is money that could be invested elsewhere. My guess is that the credit card company is not paying you the APR of your card on the amount they owe you (if they are please provide the name of your card!). They probably don't pay you anything for that negative balance and it's money that's better used elsewhere. Even if it does benefit your credit score you're losing out on any interest (each month!) you could have earned with that money to get maybe 1-2% better rate on your next home or car loan (when will that be?). TLDR: I think credit utilization approaches a limit at 0% because it's based on the amount you owe and you don't really owe negative dollars. I am very interested in seeing the results of this experiment, please update us when you find out!\"" }, { "docid": "170481", "title": "", "text": "Good credit is calculated (by many lenders) by taking your FICO score which is calculated based upon what is in your credit report. Building credit generally means building up your FICO score. Your FICO score is impacted my many factors, one small one of which is your utilization ratio of your installment loans like student loans. This is the ratio of the current balance to your original balance. To improve your score (slightly) you would want a lower ratio. I would recommend paying your student loan down to 75% ratio as fast as you can and then you can go back to $50/month. A much better way to improve your FICO score is to have revolving credit. Your student loans are not revolving, they are installment loans. Therefore, you should open at least one credit card (assuming you currently have none) right away. The longer you have had a credit card open, the better your FICO score gets. Your revolving credit utilization ratio is way more important than your installment loan ratio. Therefore, to maximize your FICO, try to never have more than 10% utilization on your revolving credit report to the credit bureaus each month. Only the current month's ratio affects your score at any given moment. You can ensure you don't go above 10% by paying your balance before the statement cuts each month to get it below 10% way before any payment would be due. (You should always pay your remaining credit card statement balance in full each month by the due date after the statement cuts to avoid any interest charges.) Note that there is a slight FICO advantage to having at least one major bank credit card instead of just only credit union credit cards. Also, never let all your revolving credit report a zero balance in a month, you must always have at least $1 reporting to the credit bureaus on at least one of your open credit cards or your FICO score will take a big negative hit. If you cannot get a normal credit card, go to a credit union and find one that offers secured credit cards, or a bank that does. A secured credit card is where you place a deposit with the bank that they hold and give you a credit limit to match your security. Ideally it would be a card that graduates to unsecured after your demonstrate good history with them. For example, the Navy Federal Credit Union secured card unsecures for many people. I also believe the Wells Fargo Bank credit card (you can join if there is a family member who served or a roomate who did) also will unsecure. The reason you want it to unsecure and not be forced to open a new account to get an unsecured account is that you want your average age and oldest age of open revolving credit accounts to be as high as possible as this is another impact on your FICO score. Credit unions that anyone can join include, Digital Federal Credit Union, the Pentagon Federal Credit Union (which offers a secured card that does not graduate), and The State Department Federal Credit Union (also offers secured card that I think does not graduate). One other method to boost your FICO score is to get added as an authorized user on one of your parent's credit cards that has been open a long time. Not all lenders will report such an authorized user, however, ones that are known to do so are: Bank of America, Citi Bank, and Capital One. It is a good sign that it will report if they ask for the social security number of the authorized user. However, note that the Authorized User addition can have no impact if the lender is using one of the newer versions of the FICO scoring model, only the older versions reward you for the age of accounts for which you are an authorized user. A very long term boost is to open your first American Express card underwritten directly by Amex such as their Zync card which is pretty easy to get. The advantage of American express is that they remember the date your first credit card was opened with them and if you open new accounts in the future they will back date the date of their opening to match the date your first card was opened. If you let your membership lapse, be sure to record the account number and date opened in your personal files so that you can help them locate it again if you reopen as they can have trouble if it has been on the order of ten years or more. Finally, note that the number of accounts opened in the last twelve months is a small negative mark on your score (along with number of inquiries), so if you open a lot of accounts all at once, in addition to bringing down your average age of accounts, you will also get dinged for how many were opened in the last year." } ]

[ { "docid": "189190", "title": "", "text": "\"Chris - you realize that when you buy a stock, the seller gets the money, not the company itself, unless of course, you bought IPO shares. And the amount you'd own would be such a small portion of the company, they don't know you exist. As far as morals go, if you wish to avoid certain stocks for this reason, look at the Socially Responsible funds that are out there. There are also funds that are targeted to certain religions and avoid alcohol and tobacco. The other choice is to invest in individual stocks which for the small investor is very tough and expensive. You'll spend more money to avoid the shares than these very shares are worth. Your proposal is interesting but impractical. In a portfolio of say $100K in the S&P, the bottom 400 stocks are disproportionately smaller amounts of money in those shares than the top 100. So we're talking $100 or less. You'd need to short 2 or 3 shares. Even at $1M in that fund, 20-30 shares shorted is pretty silly, no offense. Why not 'do the math' and during the year you purchase the fund, donate the amount you own in the \"\"bad\"\" companies to charity. And what littleadv said - that too.\"" } ]

[ { "docid": "226967", "title": "", "text": "It is not necessary that the mutual fund pays out the dividend. The money would be used to buy more shares of the same stock or of some other stock depending on overall policy goal of the fund and current allocation of funds. This would increase the NAV of the mutual fund and hence its indirectly comes to you once you sell the mutual fund. The dividend would not be taxable as its not directly paid out." }, { "docid": "508764", "title": "", "text": "Mutual funds don't work like stocks in that way. The price of a mutual fund is set at the end of each day and doesn't fluctuate during the day. So no matter when you put in your order, it will be filled at the end of the day at whatever the closing price is for that day. Here is some good information on that There is no continuous pricing of fund shares throughout the trading day. When an investor places an order to buy or sell a fund's shares, the order is executed based on the NAV calculated at the end of that trading day, regardless of what time during the day the order was placed. On the other hand, if the investor were to check the price of his or her fund shares halfway through the business day, the price quoted would be the previous day's NAV because that was the last time the fund calculated and reported the value. -http://www.finweb.com/investing/how-mutual-funds-are-priced.html" }, { "docid": "328477", "title": "", "text": "\"Don't do it until you have educated yourself enough to know what you are doing. I hope you won't take this personally, but given that you are wandering around asking random strangers on the Internet how to \"\"get into investing,\"\" I feel safe in concluding that you are by no means a sophisticated enough investor to be choosing individual investments, nor should you be trusting financial advisors to choose investments for you. Believe me, they do not have your interests at heart. I usually advise people in your position to start by reading one book: A Random Walk Down Wall Street by Burton Malkiel. Once you've read the book by Malkiel you'll understand that the best strategy for all but the most sophisticated investors is to buy an index fund, which simply purchases a portfolio of ALL available stocks without trying to pick winners and losers. The best index funds are at Vanguard (there is also a Vanguard site for non-US residents). Vanguard is one of the very, very, very few honest players in the business. Unlike almost any other mutual fund, Vanguard is owned by its investors, so it has no profit motive. They never try to pick individual stocks, so they don't have to pay fancy high-priced analysts to pick stocks. If you find it impossible to open a Vanguard account from wherever you're living, find a local brokerage account that will allow you to invest in the US stock market. Many Vanguard mutual funds are available as ETFs which means that you buy and sell them just like any other stock on the US market, which should be easy to do from any reasonably civilized place.\"" }, { "docid": "186538", "title": "", "text": "\"How often should one use dollar-cost averaging? Trivially, a dollar cost averaging (DCA) strategy must be used at least twice! More seriously, DCA is a discipline that people (typically investors with relatively small amounts of money to invest each month or each quarter) use to avoid succumbing to the temptation to \"\"time the market\"\". As mhoran_psprep points out, it is well-suited to 401k plans and the like (e.g. 403b plans for educational and non-profit institutions, 457 plans for State employees, etc), and indeed is actually the default option in such plans, since a fixed amount of money gets invested each week, or every two weeks, or every month depending on the payroll schedule. Many plans offer just a few mutual funds in which to invest, though far too many people, having little knowledge or understanding of investments, simply opt for the money-market fund or guaranteed annuity fund in their 4xx plans. In any case, all your money goes to work immediately since all mutual funds let you invest in thousandths of a share. Some 401k/403b/457 plans allow investments in stocks through a brokerage, but I think that using DCA to buy individual stocks in a retirement plan is not a good idea at all. The reasons for this are that not only must shares must be bought in whole numbers (integers) but it is generally cheaper to buy stocks in round lots of 100 (or multiples of 100) shares rather than in odd lots of, say, 37 shares. So buying stocks weekly, or biweekly or monthly in a 401k plan means paying more or having the money sit idle until enough is accumulated to buy 100 shares of a stock at which point the brokerage executes the order to buy the stock; and this is really not DCA at all. Worse yet, if you let the money accumulate but you are the one calling the shots \"\"Buy 100 shares of APPL today\"\" instead of letting the brokerage execute the order when there is enough money, you are likely to be timing the market instead of doing DCA. So, are brokerages useless in retirement fund accounts? No, they can be useful but they are not suitable for DCA strategies involving buying stocks. Stick to mutual funds for DCA. Do people use it across the board on all stock investments? As indicated above, using DCA to buy individual stocks is not the best idea, regardless of whether it is done inside a retirement plan or outside. DCA outside a retirement plan works best if you not trust yourself to stick with the strategy (\"\"Ooops, I forgot to mail the check yesterday; oh, well, I will do it next week\"\") but rather, arrange for your mutual fund company to take the money out of your checking account each week/month/quarter etc, and invest it in whatever fund(s) you have chosen. Most companies have such programs under names such as Automatic Investment Program (AIP) etc. Why not have your bank send the money to the mutual fund company instead? Well, that works too, but my bank charges me for sending the money whereas my mutual fund company does AIP for free. But YMMV. Dollar-cost averaging generally means investing a fixed amount of money on a periodic basis. An alternative strategy, if one has decided that owning 1200 shares of FlyByKnight Co is a good investment to have, is to buy round lots of 100 shares of FBKCO each month. The amount of money invested each month varies, but at the end of the year, the average cost of the 1200 shares is the average of the prices on the 12 days on which the investments were made. Of course, by the end of the year, you might not think FBKCO is worth holding any more. This technique worked best in the \"\"good old days\"\" when blue-chip stocks paid what was for all practical purposes a guaranteed dividend each year, and people bought these stocks with the intention of passing them on to their widows and children.\"" }, { "docid": "580364", "title": "", "text": "\"This is a misconception. One of the explanations is that if you buy at the ask price and want to sell it right away, you can only sell at the bid price. This is incorrect. There are no two separate bid and ask prices. The price you buy (your \"\"bid\"\") is the same price someone else sells (their \"\"sell\"\"). The same goes when you sell - the price you sell at is the price someone else buys. There's no spread with stocks. Emphasized it on purpose, because many people (especially those who gamble on stock exchange without knowing what they're doing) don't understand how the stock market works. On the stock exchange, the transaction price is the match between the bid price and the ask price. Thus, on any given transaction, bid always equals ask. There's no spread. There is spread with commodities (if you buy it directly, especially), contracts, mutual funds and other kinds of brokered transactions that go through a third party. The difference (spread) is that third party's fee for assuming part of the risk in the transaction, and is indeed added to your cost (indirectly, in the way you described). These transactions don't go directly between a seller and a buyer. For example, there's no buyer when you redeem some of your mutual fund - the fund pays you money. So the fund assumes certain risk, which is why there's a spread in the prices to invest and to redeem. Similarly with commodities: when you buy a gold bar - you buy it from a dealer, who needs to keep a stock. Thus, the dealer will not buy from you at the same price: there's a premium on sale and a discount on buy, which is a spread, to compensate the dealer for the risk of keeping a stock.\"" }, { "docid": "371176", "title": "", "text": "First, you need to understand the difference in discussing types of investments and types of accounts. Certificate of Deposits (CDs), money market accounts, mutual funds, and stocks are all examples of types of investments. 401(k), IRA, Roth IRA, and taxable accounts are all examples of types of accounts. In general, those are separate decisions to make. You can invest in any type of investment inside any type of account. So your question really has two different parts: Tax-advantaged retirement accounts vs. Standard taxable accounts FDIC-insured CDs vs. at-risk investments (such as stock mutual funds) Retirement accounts are special accounts allowed by the federal government that allow you to delay (or, in some cases, completely avoid) paying taxes on your investment. The trade-off for these accounts is that, in general, you cannot access any of the money that you put into these accounts until you get to retirement age without paying a steep penalty. These accounts exist to encourage citizens to save for their own retirement. Examples of retirement accounts include 401(k) and IRAs. Standard taxable accounts have no tax advantages, but no restrictions, either. You can put money in and take money out whenever you like. However, anything that your investment earns is taxable each year. Inside any of these accounts, you can invest in FDIC-insured bank accounts, such as savings accounts or CDs, or you can invest in any number of non-insured investments, including money market accounts, bonds, mutual funds, stocks, precious metals, etc. Something you need to understand about investing in general is that your potential returns are directly related to the amount of risk that you take on. Investing in an insured investment, which is guaranteed by the government to never lose its value, will result in the lowest potential investment returns that you can get. Interest-bearing savings accounts are currently paying less than 1% interest. A CD will get you a slightly higher interest rate in exchange for you agreeing not to withdraw your money for a period of time. However, it takes a long time for your investments to grow with these investments. If you are earning 1%, it takes 72 years for your investment to double. If you are willing to take some risk, you can earn much more with your investments. Bonds are often considered quite safe; with a bond, you loan money to a government or corporation, and they pay you back with interest. The risk comes from the possibility that the government or corporation won't pay you back, so it is important to choose a bond from an entity that you trust. Stocks are shares in for-profit companies. Your potential investment gain is unlimited, but it is risky, as stocks can go down in value, and companies can close. However, it is important to note that if you take the largest 500 stocks together (S&P 500), the average value has consistently gone up over the long term. In the last 35 years, this average value has gone up about 11%. At this rate, your investment would double in less than 7 years. To avoid the risk of picking a losing stock, you can invest in a mutual fund, which is a collection of stocks, bonds, or other investments. The idea is that you can, with one investment, invest in many stocks, essentially earning the average performance of all the stocks. There is still risk, as the market can be down as a whole, but you are insulated from any one stock being bad because you are diversified. If you are investing for something in the long-term future, such as retirement, stock mutual funds provide a good rate of return at an acceptably-low level of risk, in my opinion." }, { "docid": "467575", "title": "", "text": "There are ETFs and mutual funds that pay dividends. Mutual funds and ETFs are quite similar. Your advisor is correct regarding future funds you invest. But you already had incurred the risk of buying an individual stock. That is a 'sunk cost'. If you were satisfied with the returns you could have retained the HD stock you already owned and just put future moneys into an ETF or mutual fund. BTW: does your advisor receive a commission from your purchase of a mutual fund? That may have been his motivation to give you the advice to sell your existing holdings." }, { "docid": "594257", "title": "", "text": "\"My original plan was to wait for the next economic downturn and invest in index funds. These funds have historically yielded 6-7% annually when entered at any given time, but maybe around 8-9% annually when entered during a recession. These numbers have been adjusted for inflation. Questions or comments on this strategy? Educate yourself as index funds are merely a strategy that could be applied to various asset classes such as US Large-cap value stocks, Emerging Market stocks, Real Estate Investment Trusts, US Health Care stocks, Short-term bonds, and many other possibilities. Could you be more specific about which funds you meant as there is some great work by Fama and French on the returns of various asset classes over time. What about a Roth IRA? Mutual fund? Roth IRA is a type of account and not an investment in itself, so while I think it is a good idea to have Roth IRA, I would highly advise researching the ins and outs of this before assuming you can invest in one. You do realize that index funds are just a special type of mutual fund, right? It is also worth noting that there are a few kinds of mutual funds: Open-end, exchange-traded and closed-end. Which kind did you mean? What should I do with my money until the market hits another recession? Economies have recessions, markets have ups and downs. I'd highly consider forming a real strategy rather than think, \"\"Oh let's toss it into an index fund until I need the money,\"\" as that seems like a recipe for disaster. Figure out what long-term financial goals do you have in mind, how OK are you with risk as if the market goes down for more than a few years straight, are you OK with seeing those savings be cut in half or worse?\"" }, { "docid": "266457", "title": "", "text": "TL; DR version of my answer: In view of your age and the fact that you have just opened a Roth IRA account with Vanguard, choose the Reinvest Dividend and Capital Gains distributions option. If Vanguard is offering an option of having earnings put into a money market settlement account, it might be that you have opened your Roth IRA account with Vanguard's brokerage firm. Are you doing things like investing your Roth money into CDs or bonds (including zero-coupon or STRIP bonds) or individual stocks? If so, then the money market settlement account (might be VMMXX, the Vanguard Prime Money Market Fund) within the Roth IRA account is where all the money earned as interest on the CDs or bonds, dividends from the stocks, and the proceeds (including any resulting capital gains) from the sales of any of these will go. You can then decide where to invest that money (all within the Roth IRA). Leaving the money in the settlement account for a long time is not a good idea even if you are just accumulating the money so as to be able to buy 100 shares of APPL or GOOG at some time in the future. Put it into a CD in your Roth IRA brokerage account while you wait. If your Roth IRA is invested only in Vanguard's mutual funds and is likely to remain so in the foreseeable future, then you don't really need an account with their brokerage. You can still use a money market settlement fund to transfer money between various mutual fund investments within the Roth IRA account, but it really is adding an extra layer of money movement where it is not really necessary. You can sell one Vanguard mutual fund and invest the proceeds into another Vanguard mutual fund or even into several Vanguard funds without needing to have the funds transit through a money market account. Vanguard calls such a transaction an Exchange on their site. And, of course, you can just choose to reinvest all the dividends and capital gains distributions made by a mutual fund into the fund itself. Mutual funds allow purchases of fractional shares (down to three or even four decimal places) instead of insisting on integer numbers of shares let alone round lots of 100 shares. All this, of course, within the Roth IRA." }, { "docid": "513281", "title": "", "text": "\"First, let me say that $1000 is not that much of amount to invest in stocks. You need to remember that each transaction (buy/sell) has fees, which vary between $4-$40 (depending on the broker, you mentioned Scottrade - they charge $7 per transaction for stocks and about twice as much for some mutual funds). Consider this: you invest $1000, you gain $100. You'll pay $15 in fees just to buy/sell, that's 1.5% expense ratio. If you invest in more than 1 stock - multiply your fees. To avoid that you can look into mutual funds. Different brokers offer different funds for free, and almost all of them carry many of the rest for a fee. When looking into funds, you can find their expense ratio and compare. Remember that a fund with 1% expense ratio diversifies and invests in many stocks, while for you 1.5% expense ratio is for investing in a single stock. Is it a good idea to invest only in US or diversify worldwide? You can invest in the US, but in funds that diversify worldwide or across industries. Generally it is a good idea to diversify. I am 28. Should I be a conservative investor or take some risks? Depends on how bad of a shape will you be if you lose all your principle. What online brokerage service is the best? I have heard a lot about Scotttrade but want to be sure before I start. It seems to be the least expensive and most user-friendly to me. \"\"Best\"\" is a problematic term. Scottrade is OK, E*Trade is OK, you can try Sharebuilder, Ameritrade, there are several \"\"discount\"\" online brokers and plenty of on-line reviews and comparisons amongst them. What is a margin account and how would it affect my investing? From what I understand it comes into play when an investor borrows money from the broker. Do I need to use it at all as I won't be investing on a big scale yet. You understand right. There are rules to use margin accounts, and with the amount you have I'd advise against them even if you get approved. Read through the brokers' FAQ's on their requirement. Should I keep adding money on a monthly basis to my brokerage account to give me more money to invest or keep it at a certain amount for an extended period of time? Sharebuilder has a mechanism to purchase monthly at discounted prices. But be careful, they give you discounted prices to buy, but not to sell. You may end up with a lot of positions, and the discounts you've gotten to buy will cause you spend much more on selling. Generally, averaging (investing monthly) is a good way to save and mitigate some risks, but the risks are still there. This is good only for long term savings. How should my breakdown my investments in terms of bonds vs stocks? Depends on your vulnerability and risk thresholds.\"" }, { "docid": "427300", "title": "", "text": "I think you may be confused on terminology here. Financial leverage is debt that you have taken on, in order to invest. It increases your returns, because it allows you to invest with more money than what you actually own. Example: If a $1,000 mutual fund investment returns $60 [6%], then you could also take on $1,000 of debt at 3% interest, and earn $120 from both mutual fund investments, paying $30 in interest, leaving you with a net $90 [9% of your initial $1,000]. However, if the mutual fund 'takes a nose dive', and loses money, you still need to pay the $30 interest. In this way, using financial leverage actually increases your risk. It may provide higher returns, but you have the risk of losing more than just your initial principle amount. In the example above, imagine if the mutual fund you owned collapsed, and was worth nothing. Now, you would have lost $1,000 from the money you invested in the first place, and you would also still owe $1,000 to the bank. The key take away is that 'no risk' and 'high returns' do not go together. Safe returns right now are hovering around 0% interest rates. If you ever feel you have concocted a mix of options that leaves you with no risk and high returns, check your math again. As an addendum, if instead what you plan on doing is investing, say, 90% of your money in safe(r) money-market type funds, and 10% in the stock market, then this is a good way to reduce your risk. However, it also reduces your returns, as only a small portion of your portfolio will realize the (typically higher) gains of the stock market. Once again, being safer with your investments leads to less return. That is not necessarily a bad thing; in fact investing some part of your portfolio in interest-earning low risk investments is often advised. 99% is basically the same as 100%, however, so you almost don't benefit at all by investing that 1% in the stock market." }, { "docid": "27671", "title": "", "text": "\"For an RRSP, you do not have to pay taxes on money or investments until you withdraw the money. If you do not reinvest the dividends but instead, take them out as cash, that would be withdrawing the money. For mutual funds, you would normally reinvest the dividends if holding the investment inside an RRSP. For stocks, I believe the dividends would end up sitting in the cash part of your RRSP account (and you'd probably use the money to buy more stocks, though would not be required to do so). Either way, you do not pay tax on this investment income unless you withdraw it from your RRSP. For example, you invest $10,000 inside your RRSP. You get the tax benefit from doing so. You get dividends of $1,000 (hey, it was a good year), and use these to buy more stock. As the money never left your RRSP account, you are considered to have invested only your initial $10,000. If instead, you withdraw the $1,000 in dividends, you are taxed on $1000 income. TFSA are slightly more complicated. You don't get a tax benefit from your initial contribution, but then do not pay tax when you withdraw from the TFSA. Your investment income is still tax-free, and you are (generally) much more limited in how much you can contribute. For example, you invest $10,000 inside your TFSA. You get dividends of $1,000, and use these to buy more stock. Your total contributions to your TFSA remains at $10,000 as the money never left your account. You could instead withdraw the $1000 from your TFSA and would not pay tax on it. In the next calendar year (or later) after the withdrawal, you could \"\"repay\"\" the $1000 you took out without suffering an overcontribution penalty. This makes TFSA an excellent place to park emergency funds, as you can withdraw and subsequently replace the investment while continuing to get the tax benefits on your investment income. RRSPs are better for retirement or for the home buyers plan. In general, you should not be withdrawing money from either your TFSA or RRSP, except in emergencies, when retiring, or when purchasing a home. I prefer indexed mutual funds or money market accounts for both my RRSP and TFSA rather than individual stocks, but that's up to you.\"" }, { "docid": "245867", "title": "", "text": "I strongly suggest you go to www.investor.gov as it has excellent information regarding these types of questions. A mutual fund is a company that pools money from many investors and invests the money in securities such as stocks, bonds, and short-term debt. The combined holdings of the mutual fund are known as its portfolio. Investors buy shares in mutual funds. Each share represents an investor’s part ownership in the fund and the income it generates. When you buy shares of a mutual fund you're buying it at NAV, or net asset value. The NAV is the value of the fund’s assets minus its liabilities. SEC rules require funds to calculate the NAV at least once daily. Different funds may own thousands of different stocks. In order to calculate the NAV, the fund company must value every security it owns. Since each security's valuation is changing throughout the day it's difficult to determine the valuation of the mutual fund except for when the market is closed. Once the market has closed (4pm eastern) and securities are no longer trading, the company must get accurate valuations for every security and perform the valuation calculations and distribute the results to the pricing vendors. This has to be done by 6pm eastern. This is a difficult and, more importantly, a time consuming process to get it done right once per day. Having worked for several fund companies I can tell you there are many days where companies are getting this done at the very last minute. When you place a buy or sell order for a mutual fund it doesn't matter what time you placed it as long as you entered it before 4pm ET. Cutoff times may be earlier depending on who you're placing the order with. If companies had to price their funds more frequently, they would undoubtedly raise their fees." }, { "docid": "486974", "title": "", "text": "Generally speaking, each year, mutual funds distribute to their shareholders the dividends that are earned by the stocks that they hold and also the net capital gains that they make when they sell stocks that they hold. If they did not do so, the money would be income to the fund and the fund would have to pay taxes on the amount not distributed. (On the other hand, net capital losses are held by the fund and carried forward to later years to offset future capital gains). You pay taxes on the amounts of the distributions declared by the fund. Whether the fund sold a particular stock for a loss or a gain (and if so, how much) is not the issue; what the fund declares as its distribution is. This is why it is not a good idea to buy a mutual fund just before it makes a distribution; your share price drops by the per-share amount of the distribution, and you have to pay taxes on the distribution." }, { "docid": "418551", "title": "", "text": "\"Aggressiveness in a retirement portfolio is usually a function of your age and your risk tolerance. Your portfolio is usually a mix of the following asset classes: You can break down these asset classes further, but each one is a topic unto itself. If you are young, you want to invest in things that have a higher return, but are more volatile, because market fluctuations (like the current financial meltdown) will be long gone before you reach retirement age. This means that at a younger age, you should be investing more in stocks and foreign/developing countries. If you are older, you need to be into more conservative investments (bonds, money market, etc). If you were in your 50s-60s and still heavily invested in stock, something like the current financial crisis could have ruined your retirement plans. (A lot of baby boomers learned this the hard way.) For most of your life, you will probably be somewhere in between these two. Start aggressive, and gradually get more conservative as you get older. You will probably need to re-check your asset allocation once every 5 years or so. As for how much of each investment class, there are no hard and fast rules. The idea is to maximize return while accepting a certain amount of risk. There are two big unknowns in there: (1) how much return do you expect from the various investments, and (2) how much risk are you willing to accept. #1 is a big guess, and #2 is personal opinion. A general portfolio guideline is \"\"100 minus your age\"\". This means if you are 20, you should have 80% of your retirement portfolio in stocks. If you are 60, your retirement portfolio should be 40% stock. Over the years, the \"\"100\"\" number has varied. Some financial advisor types have suggested \"\"150\"\" or \"\"200\"\". Unfortunately, that's why a lot of baby boomers can't retire now. Above all, re-balance your portfolio regularly. At least once a year, perhaps quarterly if the market is going wild. Make sure you are still in-line with your desired asset allocation. If the stock market tanks and you are under-invested in stocks, buy more stock, selling off other funds if necessary. (I've read interviews with fund managers who say failure to rebalance in a down stock market is one of the big mistakes people make when managing a retirement portfolio.) As for specific mutual fund suggestions, I'm not going to do that, because it depends on what your 401k or IRA has available as investment options. I do suggest that your focus on selecting a \"\"passive\"\" index fund, not an actively managed fund with a high expense ratio. Personally, I like \"\"total market\"\" funds to give you the broadest allocation of small and big companies. (This makes your question about large/small cap stocks moot.) The next best choice would be an S&P 500 index fund. You should also be able to find a low-cost Bond Index Fund that will give you a healthy mix of different bond types. However, you need to look at expense ratios to make an informed decision. A better-performing fund is pointless if you lose it all to fees! Also, watch out for overlap between your fund choices. Investing in both a Total Market fund, and an S&P 500 fund undermines the idea of a diversified portfolio. An aggressive portfolio usually includes some Foreign/Developing Nation investments. There aren't many index fund options here, so you may have to go with an actively-managed fund (with a much higher expense ratio). However, this kind of investment can be worth it to take advantage of the economic growth in places like China. http://www.getrichslowly.org/blog/2009/04/27/how-to-create-your-own-target-date-mutual-fund/\"" }, { "docid": "201361", "title": "", "text": "\"I assume that mutual funds are being discussed here. As Bryce says, open-ended funds are bought from the mutual fund company and redeemed from the fund company. Except in very rare circumstances, they exist only as bits in the fund company's computers and not as share certificates (whether paper or electronic) that can be delivered from the selling broker to the buying broker on a stock exchange. Effectively, the fund company is the sole market maker: if you want to buy, ask the fund company at what price it will sell them to you (and it will tell you the answer only after 4 pm that day when a sale at that price is no longer possible unless you committed to buy, say, 100 shares and authorized the fund company to withdraw the correct amount from your bank account or other liquid asset after the price was known). Ditto if you want to sell: the mutual fund company will tell you what price it will give you only after 4 pm that day and you cannot sell at that price unless you had committed to accept whatever the company was going to give you for your shares (or had said \"\"Send me $1000 and sell as many shares of mine as are needed to give me proceeds of $1000 cash.\"\")\"" }, { "docid": "324012", "title": "", "text": "Nowhere. To back up a bit, mutual funds are the stock market (and the bond market). That is, when you invest in a mutual fund, your money is ultimately buying stocks on the open market. Some of it might be buying bonds. The exact mix of stocks and bonds depends on the mutual fund. But a mutual fund is just a basket of stocks and/or bonds (and/or other, more exotic investments). At 25, you probably should just be investing your Roth IRA in index stock mutual funds and index bond mutual funds. You probably shouldn't even be doing peer-to-peer lending (unless you're willing to think of any losses as the cost of a hobby); the higher interest rate you're getting is a reflection of the risk that your borrowers will default. I'm not even sure if peer-to-peer lending is allowed in Roth IRA's. Investing in just stocks, bonds, and cast is boring, but these are easy investments to understand. The harder the investment is to understand, the easier it is for it to be a scam (or just a bad investment). There's not necessarily anything wrong with boring." }, { "docid": "87261", "title": "", "text": "S & P Index Announcements would have notes on when there are changes to the index. For example in the S & P Small-cap 600 there is a change that takes affect on Feb. 19, 2013. As for how index funds handle changes to the fund, this depends a bit on the nature of the fund as open-end mutual funds would be different than exchange-traded funds. The open-end fund would have to sell and purchase to keep tracking the index which can be interesting to see how well this is handled to keep the transaction costs down while the ETFs will just unload the shares in the redemption units of the stock leaving the index while taking in new shares with creation units of the newly added stock to the index." }, { "docid": "241101", "title": "", "text": "\"A good measurement would be to compare to index's. Basically a good way to measure your self would be to ask \"\"If I put my money somewhere else how much better or worse would I have done?\"\" Mutual funds and Hedge funds use the SP500 as a bench mark. Some funds actually wave their fee if they do not outperform the SP or only take a fee on the portion that has outperformed the SP500. in today's economy i dont know how to expect such a return The economy is not a good benchmark on what to expect from the stock market. For example in 2009 by certain standards the economy was worse then today but in 2009 the market rallied a great deal so your returns should have reflected that. You can use the SP500 as a quick reference to compare your returns (this is also considered the \"\"standard\"\" for a quick comparison). The way you compare your performance is also dependent on how you invest your money. If you are outperforming the SP500 you are doing well. Many mutual funds DO NOT outperform the SP500. Edit Additional Info: Here is an article with more comprehensive information on how to gauge your performance. In the article is a link to a free tool from morning star. Use the Right Benchmark to Accurately Measure Investment Performance\"" } ]

[ { "docid": "184299", "title": "", "text": "\"Mutual funds invest according to their prospectus. If they declare that they match the investments to a certain index - then that's what they should do. If you don't want to be invested in a company that is part of that index, then don't invest in that fund. Short-selling doesn't \"\"exclude\"\" your investment. You cannot sell your portion of the position in the fund to cover it. Bottom line is that money has no smell. But if you want to avoid investing in a certain company and it is important to you - you should also avoid the funds that invest in it, and companies that own portions of it, and also probably the companies that buy their products or services. Otherwise, its just \"\"nice talk\"\" bigotry.\"" } ]

[ { "docid": "593475", "title": "", "text": "There are more than a few ideas here. Assuming you are in the U.S., here are a few approaches: First, DRIPs: Dividend Reinvestment Plans. DRIP Investing: How To Actually Invest Only A Hundred Dollars Per Month notes: I have received many requests from readers that want to invest in individual stocks, but only have the available funds to put aside $50 to $100 into a particular company. For these investors, keeping costs to a minimum is absolutely crucial. I have often made allusions and references to DRIP Investing, but I have never offered an explanation as to how to logistically set up DRIP accounts. Today, I will attempt to do that. A second option, Sharebuilder, is a broker that will allow for fractional shares. A third option are mutual funds. Though, these often will have minimums but may be waived in some cases if you sign up with an automatic investment plan. List of mutual fund companies to research. Something else to consider here is what kind of account do you want to have? There can be accounts for specific purposes like education, e.g. a college or university fund, or a retirement plan. 529 Plans exist for college savings that may be worth noting so be aware of which kinds of accounts may make sense for what you want here." }, { "docid": "79375", "title": "", "text": "The presence of the 401K option means that your ability to contribute to an IRA will be limited, it doesn't matter if you contribute to the 401K or not. Unless your company allows you to roll over 401K money into an IRA while you are still an employee, your money in the 401K will remain there. Many 401K programs offer not just stock mutual funds, but bond mutual funds, and international funds. Many also have target date funds. You will have to look at the paperwork for the funds to determine if any of them meet your definition of low expense. Because any money you have in those 401K funds is going to remain in the 401K, you still need to look at your options and make the best choice. Very few companies allow employees to invest in individual stocks, but some do. You can ask your employer to research other options for the 401K. The are contracting with a investment company to make the plan. They may be able to switch to a different package from the same company or may need to switch companies. How much it will cost them is unknown. You will have to understand when their current contract is up for renewal. If you feel their current plan is poor, it may be making hiring new employees difficult, or ti may lead to some employees to leave in search of better options. It may also be a factor in the number of employees contributing and how much they contribute." }, { "docid": "162916", "title": "", "text": "In the absence of a country designation where the mutual fund is registered, the question cannot be fully answered. For US mutual funds, the N.A.V per share is calculated each day after the close of the stock exchanges and all purchase and redemption requests received that day are transacted at this share price. So, the price of the mutual fund shares for April 2016 is not enough information: you need to specify the date more accurately. Your calculation of what you get from the mutual fund is incorrect because in the US, declared mutual fund dividends are net of the expense ratio. If the declared dividend is US$ 0.0451 per share, you get a cash payout of US$ 0.0451 for each share that you own: the expense ratio has already been subtracted before the declared dividend is calculated. The N.A.V. price of the mutual fund also falls by the amount of the per-share dividend (assuming that the price of all the fund assets (e.g. shares of stocks, bonds etc) does not change that day). Thus. if you have opted to re-invest your dividend in the same fund, your holding has the same value as before, but you own more shares of the mutual fund (which have a lower price per share). For exchange-traded funds, the rules are slightly different. In other jurisdictions, the rules might be different too." }, { "docid": "487890", "title": "", "text": "\"An alternative to a savings account is a money market account. Not a bank \"\"Money Market\"\" account which pays effectively the same silly rate as a savings account, but an actual Money Market investment account. You can even write checks against some Money Market investment accounts. I have several accounts worth about 13,000 each. Originally, my \"\"emergency fund\"\" was in a CD ladder. I started experimenting with two different Money market investment accounts recently. Here's my latest results: August returns on various accounts worth about $13k: - Discover Bank CD: $13.22 - Discover Bank CD: $13.27 - Discover Bank CD: $13.20 - Discover Savings: $13.18 - Credit Union \"\"Money Market\"\" Savings account: $1.80 - Fidelity Money Market Account (SPAXX): $7.35 - Vanguard Money market Account (VMFXX): $10.86 The actual account values are approximate. The Fidelity Money Market Account holds the least value, and the Credit Union account by far the most. The result of the experiment is that as the CDs mature, I'll be moving out of Discover Bank into the Vanguard Money Market account. You can put your money into more traditional equities mutual fund. The danger with them is the stock market may drop big the day before you want to make your withdrawl... and then you don't have the down payment for your house anymore. But a well chosen mutual fund will yield better. There are 3 ways a mutual fund increase in value: Here's how three of my mutual funds did in the past month... adjusted as if the accounts had started off to be worth about $13,000: Those must vary wildly month-to-month. By the way, if you look up the ticker symbols, VASGX is a Vanguard \"\"Fund of Funds\"\" -- it invests not 100% in the stock market, but 80% in the stock market and 20% in bonds. VSMGX is a 60/40 split. Interesting that VASGX grew less than VSMGX...but that assumes my spreadsheet is correct. Most of my mutual funds pay dividends and capital gains once or twice a year. I don't think any pay in August.\"" }, { "docid": "241101", "title": "", "text": "\"A good measurement would be to compare to index's. Basically a good way to measure your self would be to ask \"\"If I put my money somewhere else how much better or worse would I have done?\"\" Mutual funds and Hedge funds use the SP500 as a bench mark. Some funds actually wave their fee if they do not outperform the SP or only take a fee on the portion that has outperformed the SP500. in today's economy i dont know how to expect such a return The economy is not a good benchmark on what to expect from the stock market. For example in 2009 by certain standards the economy was worse then today but in 2009 the market rallied a great deal so your returns should have reflected that. You can use the SP500 as a quick reference to compare your returns (this is also considered the \"\"standard\"\" for a quick comparison). The way you compare your performance is also dependent on how you invest your money. If you are outperforming the SP500 you are doing well. Many mutual funds DO NOT outperform the SP500. Edit Additional Info: Here is an article with more comprehensive information on how to gauge your performance. In the article is a link to a free tool from morning star. Use the Right Benchmark to Accurately Measure Investment Performance\"" }, { "docid": "287537", "title": "", "text": "You do realize that the fund will have management expenses that are likely already factored into the NAV and that when you sell, the NAV will not yet be known, right? There are often fees to run a mutual fund that may be taken as part of managing the fund that are already factored into the Net Asset Value(NAV) of the shares that would be my caution as well as possible fee changes as Dilip Sarwate notes in a comment. Expense ratios are standard for mutual funds, yes. Individual stocks that represent corporations not structured as a mutual fund don't declare a ratio of how much are their costs, e.g. Apple or Google may well invest in numerous other companies but the costs of making those investments won't be well detailed though these companies do have non-investment operations of course. Don't forget to read the fund's prospectus as sometimes a fund will have other fees like account maintenance fees that may be taken out of distributions as well as being aware of how taxes will be handled as you don't specify what kind of account these purchases are being done using." }, { "docid": "59670", "title": "", "text": "\"Lifecycle funds might be a suitable fit for you. Lifecycle funds (aka \"\"target date funds\"\") are a mutual fund that invests your money in other mutual funds based on how much time is left until you need the money-- they follow a \"\"glide-path\"\" of reducing stock holdings in favor of bonds over time to reduce volatility of your final return as you near retirement. The ones I've looked at don't charge a fee of their own for this, but they do direct your portfolio to actively managed funds. That said, the ones I've seen have an \"\"acquired\"\" expense ratio of less than what you're proposing you'd pay a professional. FWIW, my current plan is to invest in a binary portfolio of cheap mutual funds that track S&P500 and AGG and rebalance regularly. This is easy enough that I don't see the point of adding in a 1 percent commission.\"" }, { "docid": "464668", "title": "", "text": "\"The mutual fund is legally its own company that you're investing in, with its own expenses. Mutual fund expense ratios are a calculated value, not a promise that you'll pay a certain percentage on a particular day. That is to say, at the end of their fiscal year, a fund will total up how much it spent on administration and divide it by the total assets under management to calculate what the expense ratio is for that year, and publish it in the annual report. But you can't just \"\"pay the fee\"\" for any given year. In a \"\"regular\"\" account, you certainly could look at what expenses were paid for each fund by multiplying the expense ratio by your investment, and use it in some way to figure out how much additional you want to contribute to \"\"make it whole\"\" again. But it makes about as much sense as trying to pay the commission for buying a single stock out of one checking account while paying for the share price out of another. It may help you in some sort of mental accounting of expenses, but since it's all your money, and the expenses are all part of what you're paying to be able to invest, it's not really doing much good since money is fungible. In a retirement account with contribution limits, it still doesn't really make sense, since any contribution from outside funds to try to pay for expense ratios would be counted as contributions like any other. Again, I guess it could somehow help you account for how much money you wanted to contribute in a year, but I'm not really sure it would help you much. Some funds or brokerages do have non-expense-ratio-based fees, and in some cases you can pay for those from outside the account. And there are a couple cases where for a retirement account this lets you keep your contributions invested while paying for fees from outside funds. This may be the kind of thing that your coworker was referring to, though it's hard to tell exactly from your description. Usually it's best just to have investments with as low fees as possible regardless, since they're one of the biggest drags on returns, and I'd be very wary of any brokerage-based fees when there are very cheap and free mutual fund brokerages out there.\"" }, { "docid": "560783", "title": "", "text": "Mutual funds don't do what ETFs do because, according to how the fund was built in their contract, they can't. That is not how they are built and the people that invested in them expect them to act in a certain way. That is ok, though. Many people still invest in mutual funds partially because of their history but there are some advantages to mutual funds over etfs. Mainly mutual funds must mark-to-market at the end of day while etf values can drift from the asset value especially in crisis. As long enough people invest in mutual funds the funds make enough money on their fees they don't need to change. Maybe mutual funds will go extinct as etfs do have significant advantages, but it likely won't happen soon." }, { "docid": "464297", "title": "", "text": "If you have money and may need to access it at any time, you should put it in a savings account. It won't return much interest, but it will return some and it is easily accessible. If you have all your emergency savings that you need (at least six months of income), buy index-based mutual funds. These should invest in a broad range of securities including both stocks and bonds (three dollars in stocks for every dollar in bonds) so as to be robust in the face of market shifts. You should not buy individual stocks unless you have enough money to buy a lot of them in different industries. Thirty different stocks is a minimum for a diversified portfolio, and you really should be looking at more like a hundred. There's also considerable research effort required to verify that the stocks are good buys. For most people, this is too much work. For most people, broad-based index funds are better purchases. You don't have as much upside, but you also are much less likely to find yourself holding worthless paper. If you do buy stocks, look for ones where you know something about them. For example, if you've been to a restaurant chain with a recent IPO that really wowed you with their food and service, consider investing. But do your research, so that you don't get caught buying after everyone else has already overbid the price. The time to buy is right before everyone else notices how great they are, not after. Some people benefit from joining investment clubs with others with similar incomes and goals. That way you can share some of the research duties. Also, you can get other opinions before buying, which can restrain risky impulse buys. Just to reiterate, I would recommend sticking to mutual funds and saving accounts for most investors. Only make the move into individual stocks if you're willing to be serious about it. There's considerable work involved. And don't forget diversification. You want to have stocks that benefit regardless of what the overall economy does. Some stocks should benefit from lower oil prices while others benefit from higher prices. You want to have both types so as not to be caught flat-footed when prices move. There are much more experienced people trying to guess market directions. If your strategy relies on outperforming them, it has a high chance of failure. Index-based mutual funds allow you to share the diversification burden with others. Since the market almost always goes up in the long term, a fund that mimics the market is much safer than any individual security can be. Maintaining a three to one balance in stocks to bonds also helps as they tend to move in opposite directions. I.e. stocks tend to be good when bonds are weak and vice versa." }, { "docid": "312591", "title": "", "text": "\"Funds - especially index funds - are a safe way for beginning investors to get a diversified investment across a lot of the stock market. They are not the perfect investment, but they are better than the majority of mutual funds, and you do not spend a lot of money in fees. Compared to the alternative - buying individual stocks based on what a friend tells you or buying a \"\"hot\"\" mutual fund - it's a great choice for a lot of people. If you are willing to do some study, you can do better - quite a bit better - with common stocks. As an individual investor, you have some structural advantages; you can take significant (to you) positions in small-cap companies, while this is not practical for large institutional investors or mutual fund managers. However, you can also lose a lot of money quickly in individual stocks. It pays to go slow and to your homework, however, and make sure that you are investing, not speculating. I like fool.com as a good place to start, and subscribe to a couple of their newsletters. I will note that investing is not for the faint of heart; to do well, you may need to do the opposite of what everybody else is doing; buying when the market is down and selling when the market is high. A few people mentioned the efficient market hypothesis. There is ample evidence that the market is not efficient; the existence of the .com and mortgage bubbles makes it pretty obvious that the market is often not rationally valued, and a couple of hedge funds profited in the billions from this.\"" }, { "docid": "418551", "title": "", "text": "\"Aggressiveness in a retirement portfolio is usually a function of your age and your risk tolerance. Your portfolio is usually a mix of the following asset classes: You can break down these asset classes further, but each one is a topic unto itself. If you are young, you want to invest in things that have a higher return, but are more volatile, because market fluctuations (like the current financial meltdown) will be long gone before you reach retirement age. This means that at a younger age, you should be investing more in stocks and foreign/developing countries. If you are older, you need to be into more conservative investments (bonds, money market, etc). If you were in your 50s-60s and still heavily invested in stock, something like the current financial crisis could have ruined your retirement plans. (A lot of baby boomers learned this the hard way.) For most of your life, you will probably be somewhere in between these two. Start aggressive, and gradually get more conservative as you get older. You will probably need to re-check your asset allocation once every 5 years or so. As for how much of each investment class, there are no hard and fast rules. The idea is to maximize return while accepting a certain amount of risk. There are two big unknowns in there: (1) how much return do you expect from the various investments, and (2) how much risk are you willing to accept. #1 is a big guess, and #2 is personal opinion. A general portfolio guideline is \"\"100 minus your age\"\". This means if you are 20, you should have 80% of your retirement portfolio in stocks. If you are 60, your retirement portfolio should be 40% stock. Over the years, the \"\"100\"\" number has varied. Some financial advisor types have suggested \"\"150\"\" or \"\"200\"\". Unfortunately, that's why a lot of baby boomers can't retire now. Above all, re-balance your portfolio regularly. At least once a year, perhaps quarterly if the market is going wild. Make sure you are still in-line with your desired asset allocation. If the stock market tanks and you are under-invested in stocks, buy more stock, selling off other funds if necessary. (I've read interviews with fund managers who say failure to rebalance in a down stock market is one of the big mistakes people make when managing a retirement portfolio.) As for specific mutual fund suggestions, I'm not going to do that, because it depends on what your 401k or IRA has available as investment options. I do suggest that your focus on selecting a \"\"passive\"\" index fund, not an actively managed fund with a high expense ratio. Personally, I like \"\"total market\"\" funds to give you the broadest allocation of small and big companies. (This makes your question about large/small cap stocks moot.) The next best choice would be an S&P 500 index fund. You should also be able to find a low-cost Bond Index Fund that will give you a healthy mix of different bond types. However, you need to look at expense ratios to make an informed decision. A better-performing fund is pointless if you lose it all to fees! Also, watch out for overlap between your fund choices. Investing in both a Total Market fund, and an S&P 500 fund undermines the idea of a diversified portfolio. An aggressive portfolio usually includes some Foreign/Developing Nation investments. There aren't many index fund options here, so you may have to go with an actively-managed fund (with a much higher expense ratio). However, this kind of investment can be worth it to take advantage of the economic growth in places like China. http://www.getrichslowly.org/blog/2009/04/27/how-to-create-your-own-target-date-mutual-fund/\"" }, { "docid": "93882", "title": "", "text": "\"I hope a wall of text with citations qualifies as \"\"relatively easy.\"\" Many of these studies are worth quoting at length. Long story short, a great deal of research has found that actively-managed funds underperform market indexes and passively-managed funds because of their high turnover and higher fees, among other factors. Longer answer: Chris is right in stating that survivorship bias presents a problem for such research; however, there are several academic papers that address the survivorship problem, as well as the wider subject of active vs. passive performance. I'll try to provide a brief summary of some of the relevant literature. The seminal paper that started the debate is Michael Jensen's 1968 paper titled \"\"The Performance of Mutual Funds in the Period 1945-1964\"\". This is the paper where Jensen's alpha, the ubiquitous measure of the performance of mutual fund managers, was first defined. Using a dataset of 115 mutual fund managers, Jensen finds that The evidence on mutual fund performance indicates not only that these 115 mutual funds were on average not able to predict security prices well enough to outperform a buy-the-market-and-hold policy, but also that there is very little evidence that any individual fund was able to do significantly better than that which we expected from mere random chance. Although this paper doesn't address problems of survivorship, it's notable because, among other points, it found that managers who actively picked stocks performed worse even when fund expenses were ignored. Since actively-managed funds tend to have higher expenses than passive funds, the actual picture looks even worse for actively managed funds. A more recent paper on the subject, which draws similar conclusions, is Martin Gruber's 1996 paper \"\"Another puzzle: The growth in actively managed mutual funds\"\". Gruber calls it \"\"a puzzle\"\" that investors still invest in actively-managed funds, given that their performance on average has been inferior to that of index funds. He addresses survivorship bias by tracking funds across the entire sample, including through mergers. Since most mutual funds that disappear are merged into existing funds, he assumes that investors in a fund that disappear choose to continue investing their money in the fund that resulted from the merger. Using this assumption and standard measures of mutual fund performance, Gruber finds that mutual funds underperform an appropriately weighted average of the indices by about 65 basis points per year. Expense ratios for my sample averaged 113 basis points a year. These numbers suggest that active management adds value, but that mutual funds charge the investor more than the value added. Another nice paper is Mark Carhart's 1997 paper \"\"On persistence in mutual fund performance\"\" uses a sample free of survivorship bias because it includes \"\"all known equity funds over this period.\"\" It's worth quoting parts of this paper in full: I demonstrate that expenses have at least a one-for-one negative impact on fund performance, and that turnover also negatively impacts performance. ... Trading reduces performance by approximately 0.95% of the trade's market value. In reference to expense ratios and other fees, Carhart finds that The investment costs of expense ratios, transaction costs, and load fees all have a direct, negative impact on performance. The study also finds that funds with abnormally high returns last year usually have higher-than-expected returns next year, but not in the following years, because of momentum effects. Lest you think the news is all bad, Russ Wermer's 2000 study \"\"Mutual fund performance: An empirical decomposition into stock‐picking talent, style, transactions costs, and expenses\"\" provides an interesting result. He finds that many actively-managed mutual funds hold stocks that outperform the market, even though the net return of the funds themselves underperforms passive funds and the market itself. On a net-return level, the funds underperform broad market indexes by one percent a year. Of the 2.3% difference between the returns on stock holdings and the net returns of the funds, 0.7% per year is due to the lower average returns of the nonstock holdings of the funds during the period (relative to stocks). The remaining 1.6% per year is split almost evenly between the expense ratios and the transaction costs of the funds. The final paper I'll cite is a 2008 paper by Fama and French (of the Fama-French model covered in business schools) titled, appropriately, \"\"Mutual Fund Performance\"\". The paper is pretty technical, and somewhat above my level at this time of night, but the authors state one of their conclusions bluntly quite early on: After costs (that is, in terms of net returns to investors) active investment is a negative sum game. Emphasis mine. In short, expense ratios, transaction costs, and other fees quickly diminish the returns to active investment. They find that The [value-weight] portfolio of mutual funds that invest primarily in U.S. equities is close to the market portfolio, and estimated before fees and expenses, its alpha is close to zero. Since the [value-weight] portfolio of funds produces an α close to zero in gross returns, the alpha estimated on the net returns to investors is negative by about the amount of fees and expenses. This implies that the higher the fees, the farther alpha decreases below zero. Since actively-managed mutual funds tend to have higher expense ratios than passively-managed index funds, it's safe to say that their net return to the investor is worse than a market index itself. I don't know of any free datasets that would allow you to research this, but one highly-regarded commercial dataset is the CRSP Survivor-Bias-Free US Mutual Fund Database from the Center for Research in Security Prices at the University of Chicago. In financial research, CRSP is one of the \"\"gold standards\"\" for historical market data, so if you can access that data (perhaps for a firm or academic institution, if you're affiliated with one that has access), it's one way you could run some numbers yourself.\"" }, { "docid": "594257", "title": "", "text": "\"My original plan was to wait for the next economic downturn and invest in index funds. These funds have historically yielded 6-7% annually when entered at any given time, but maybe around 8-9% annually when entered during a recession. These numbers have been adjusted for inflation. Questions or comments on this strategy? Educate yourself as index funds are merely a strategy that could be applied to various asset classes such as US Large-cap value stocks, Emerging Market stocks, Real Estate Investment Trusts, US Health Care stocks, Short-term bonds, and many other possibilities. Could you be more specific about which funds you meant as there is some great work by Fama and French on the returns of various asset classes over time. What about a Roth IRA? Mutual fund? Roth IRA is a type of account and not an investment in itself, so while I think it is a good idea to have Roth IRA, I would highly advise researching the ins and outs of this before assuming you can invest in one. You do realize that index funds are just a special type of mutual fund, right? It is also worth noting that there are a few kinds of mutual funds: Open-end, exchange-traded and closed-end. Which kind did you mean? What should I do with my money until the market hits another recession? Economies have recessions, markets have ups and downs. I'd highly consider forming a real strategy rather than think, \"\"Oh let's toss it into an index fund until I need the money,\"\" as that seems like a recipe for disaster. Figure out what long-term financial goals do you have in mind, how OK are you with risk as if the market goes down for more than a few years straight, are you OK with seeing those savings be cut in half or worse?\"" }, { "docid": "472663", "title": "", "text": "\"An Exchange-Traded Fund (ETF) is a special type of mutual fund that is traded on the stock exchange like a stock. To invest, you buy it through a stock broker, just as you would if you were buying an individual stock. When looking at a mutual fund based in the U.S., the easiest way to tell whether or not it is an ETF is by looking at the ticker symbol. Traditional mutual funds have ticker symbols that end in \"\"X\"\", and ETFs have ticker symbols that do not end in \"\"X\"\". The JPMorgan Emerging Markets Equity Fund, with ticker symbol JFAMX, is a traditional mutual fund, not an ETF. JPMorgan does have ETFs; the JPMorgan Diversified Return Emerging Markets Equity ETF, with ticker symbol JPEM, is an example. This ETF invests in similar stocks as JFAMX; however, because it is an index-based fund instead of an actively managed fund, it has lower fees. If you aren't sure about the ticker symbol, the advertising/prospectus of any ETF should clearly state that it is an ETF. (In the example of JPEM above, they put \"\"ETF\"\" right in the fund name.) If you don't see ETF mentioned, it is most likely a traditional mutual fund. Another way to tell is by looking at the \"\"investment minimums\"\" of the fund. JFAMX has a minimum initial investment of $1000. ETFs, however, do not have an investment minimum listed; because it is traded like a stock, you simply buy whole shares at whatever the current share price is. So if you look at the \"\"Fees and Investment Minimums\"\" section of the JPEM page, you'll see the fees listed, but not any investment minimums.\"" }, { "docid": "180196", "title": "", "text": "Not according to the SEC: A mutual fund is an SEC-registered open-end investment company that pools money from many investors and invests the money in stocks, bonds, short-term money-market instruments, other securities or assets, or some combination of these investments. The combined securities and assets the mutual fund owns are known as its portfolio, which is managed by an SEC-registered investment adviser. Each mutual fund share represents an investor’s proportionate ownership of the mutual fund’s portfolio and the income the portfolio generates. And further down: Mutual funds are open-end funds." }, { "docid": "423754", "title": "", "text": "\"I don't think you have your head in the right space - you seem to be thinking of these lifecycle funds like they're an annuity or a pension, but they're not. They're an investment. Specifically, they're a mutual fund that will invest in a collection of other mutual funds, which in turn invest in stock and bonds. Stocks go up, and stocks go down. Bonds go up, and bonds go down. How much you'll have in this fund next year is unknowable, much less 32 years from now. What you can know, is that saving regularly over the next 32 years and investing it in a reasonable, and diversified way in a tax sheltered account like that Roth will mean you have a nice chunk of change sitting there when you retire. The lifecycle funds exist to help you with that \"\"reasonable\"\" and \"\"diversified\"\" bit.They're meant to be one stop shopping for a retirement portfolio. They put your money into a diversified portfolio, then \"\"age\"\" the portfolio allocations over time to make it go from a high risk, (potentially) high reward allocation now to a lower risk, lower reward portfolio as you approach retirement. The idea is is that you want to shoot for making lots of money now, but when you're older, you want to focus more on keeping the money you have. Incidentally, kudos for getting into seriously saving for retirement when you're young. One of the biggest positive effects you can have on how much you retire with is simply time. The more time your money can sit there, the better. At 26, if you're putting away 10 percent into a Roth, you're doing just fine. If that 5k is more than 10 percent, you'll do better than fine. (That's a rule of thumb, but it's based on a lot of things I've read where people have gamed out various scenarios, as well as my own, cruder calculations I've done in the past)\"" }, { "docid": "187124", "title": "", "text": "\"There's already an excellent answer here from @BenMiller, but I wanted to expand a bit on Types of Investments with some additional actionable information. You can invest in stocks, bonds, mutual funds (which are simply collections of stocks and bonds), bank accounts, precious metals, and many other things. Discussing all of these investments in one answer is too broad, but my recommendation is this: If you are investing for retirement, you should be investing in the stock market. However, picking individual stocks is too risky; you need to be diversified in a lot of stocks. Stock mutual funds are a great way to invest in the stock market. So how does one go about actually investing in the stock market in a diversified way? What if you also want to diversify a bit into bonds? Fortunately, in the last several years, several products have come about that do just these things, and are targeted towards newer investors. These are often labeled \"\"robo-advisors\"\". Most even allow you to adjust your allocation according to your risk preferences. Here's a list of the ones I know about: While these products all purport to achieve similar goals of giving you an easy way to obtain a diversified portfolio according to your risk, they differ in the buckets of stocks and funds they put your money into; the careful investor would be wise to compare which specific ETFs they use (e.g. looking at their expense ratios, capitalization, and spreads).\"" }, { "docid": "550319", "title": "", "text": "This depends on a lot actually - with the overall being your goals and how much you like risk. Question: What are your fees/commissions for selling? $8.95/trade will wipe out some gains on those trades. (.69% if all are sold with $8.95 commission - not including the commission payed when purchased that should be factored into the cost basis) Also, I would recommend doing commission free ETFs. You can get the same affect as a mutual fund without the fees associated with paying someone to invest in ETFs and stocks. On another note: Your portfolio looks rather risky. Although everyone has their own risk preference so this might be yours but if you are thinking about a mutual fund instead of individual stocks you probably are risk averse. I would suggest consulting with an adviser on how to set up for the future. Financial advice is free flowing from your local barber, dentist, and of course StackExchange but I would look towards a professional. Disclaimer: These are my thoughts and opinions only ;) Feel free to add comments below." } ]

[ { "docid": "239998", "title": "", "text": "Owning a stock via a fund and selling it short simultaneously should have the same net financial effect as not owning the stock. This should work both for your personal finances as well as the impact of (not) owning the shares has on the stock's price. To use an extreme example, suppose there are 4 million outstanding shares of Evil Oil Company. Suppose a group of concerned index fund investors owns 25% of the stock and sells short the same amount. They've borrowed someone else's 25% of the company and sold it to a third party. It should have the same effect as selling their own shares of the company, which they can't otherwise do. Now when 25% of the company's stock becomes available for purchase at market price, what happens to the stock? It falls, of course. Regarding how it affects your own finances, suppose the stock price rises and the investors have to return the shares to the lender. They buy 1 million shares at market price, pushing the stock price up, give them back, and then sell another million shares short, subsequently pushing the stock price back down. If enough people do this to effect the share price of a stock or asset class, the managers at the companies might be forced into behaving in a way that satisfies the investors. In your case, perhaps the company could issue a press release and fire the employee that tried to extort money from your wife's estate in order to win your investment business back. Okay, well maybe that's a stretch." } ]

[ { "docid": "554015", "title": "", "text": "What account you put it in depends on why you have those different accounts. First, if you have them due to regulatory requirements, then you of course must follow said regulations. I doubt that's the case here. Otherwise, you might be splitting based on how they trade (ETFs trade as stocks) or you could be splitting based on how you build a portfolio out of them. When you build a non-speculative stock portfolio, you typically want to limit your holdings in a single stock to a fairly small portion of your portfolio (say, 3%) to limit your exposure to bad stuff happening to a single company. That doesn't apply nearly a much to mutual funds, especially index funds. ETFs are much more like mutual funds here. You can also, of course, create an ETF account and put them there. You also say you have a market index account, what is that used for?" }, { "docid": "427300", "title": "", "text": "I think you may be confused on terminology here. Financial leverage is debt that you have taken on, in order to invest. It increases your returns, because it allows you to invest with more money than what you actually own. Example: If a $1,000 mutual fund investment returns $60 [6%], then you could also take on $1,000 of debt at 3% interest, and earn $120 from both mutual fund investments, paying $30 in interest, leaving you with a net $90 [9% of your initial $1,000]. However, if the mutual fund 'takes a nose dive', and loses money, you still need to pay the $30 interest. In this way, using financial leverage actually increases your risk. It may provide higher returns, but you have the risk of losing more than just your initial principle amount. In the example above, imagine if the mutual fund you owned collapsed, and was worth nothing. Now, you would have lost $1,000 from the money you invested in the first place, and you would also still owe $1,000 to the bank. The key take away is that 'no risk' and 'high returns' do not go together. Safe returns right now are hovering around 0% interest rates. If you ever feel you have concocted a mix of options that leaves you with no risk and high returns, check your math again. As an addendum, if instead what you plan on doing is investing, say, 90% of your money in safe(r) money-market type funds, and 10% in the stock market, then this is a good way to reduce your risk. However, it also reduces your returns, as only a small portion of your portfolio will realize the (typically higher) gains of the stock market. Once again, being safer with your investments leads to less return. That is not necessarily a bad thing; in fact investing some part of your portfolio in interest-earning low risk investments is often advised. 99% is basically the same as 100%, however, so you almost don't benefit at all by investing that 1% in the stock market." }, { "docid": "312591", "title": "", "text": "\"Funds - especially index funds - are a safe way for beginning investors to get a diversified investment across a lot of the stock market. They are not the perfect investment, but they are better than the majority of mutual funds, and you do not spend a lot of money in fees. Compared to the alternative - buying individual stocks based on what a friend tells you or buying a \"\"hot\"\" mutual fund - it's a great choice for a lot of people. If you are willing to do some study, you can do better - quite a bit better - with common stocks. As an individual investor, you have some structural advantages; you can take significant (to you) positions in small-cap companies, while this is not practical for large institutional investors or mutual fund managers. However, you can also lose a lot of money quickly in individual stocks. It pays to go slow and to your homework, however, and make sure that you are investing, not speculating. I like fool.com as a good place to start, and subscribe to a couple of their newsletters. I will note that investing is not for the faint of heart; to do well, you may need to do the opposite of what everybody else is doing; buying when the market is down and selling when the market is high. A few people mentioned the efficient market hypothesis. There is ample evidence that the market is not efficient; the existence of the .com and mortgage bubbles makes it pretty obvious that the market is often not rationally valued, and a couple of hedge funds profited in the billions from this.\"" }, { "docid": "401939", "title": "", "text": "\"It sounds like you need an index fund that follows so called Sustainability index. A sustainability index does not simply select \"\"socially responsible\"\" industries. It attempts to replicate the target market, in terms of countries, industries, and company sizes, but it also aims to select most \"\"sustainable\"\" companies from each category. This document explains how Dow Jones Sustainability World index is constructed (emphasis mine): An example of a fund following such index is iShares Dow Jones Global Sustainability Screened UCITS ETF, which also excludes \"\"sin stocks\"\".\"" }, { "docid": "287537", "title": "", "text": "You do realize that the fund will have management expenses that are likely already factored into the NAV and that when you sell, the NAV will not yet be known, right? There are often fees to run a mutual fund that may be taken as part of managing the fund that are already factored into the Net Asset Value(NAV) of the shares that would be my caution as well as possible fee changes as Dilip Sarwate notes in a comment. Expense ratios are standard for mutual funds, yes. Individual stocks that represent corporations not structured as a mutual fund don't declare a ratio of how much are their costs, e.g. Apple or Google may well invest in numerous other companies but the costs of making those investments won't be well detailed though these companies do have non-investment operations of course. Don't forget to read the fund's prospectus as sometimes a fund will have other fees like account maintenance fees that may be taken out of distributions as well as being aware of how taxes will be handled as you don't specify what kind of account these purchases are being done using." }, { "docid": "578728", "title": "", "text": "The simple answer is: YES, the JP Morgan emerging markets equity fund is a mutual fund. A mutual fund is a pooling of money from investors to invest in stocks and bonds. Investors in mutual funds arrive there in different ways. Some get there via their company 401K, others by an IRA, still others as a taxable account. The fund can be sold by the company directly or through a broker. You can also have a fund of funds. So the investors are other funds. Some investors are only indirect investors. They are owed a pension by a past or current employer, and the pension fund has invested in a mutual fund." }, { "docid": "17823", "title": "", "text": "\"I'd suggest you start by looking at the mutual fund and/or ETF options available via your bank, and see if they have any low-cost funds that invest in high-risk sectors. You can increase your risk (and potential returns) by allocating your assets to riskier sectors rather than by picking individual stocks, and you'll be less likely to make an avoidable mistake. It is possible to do as you suggest and pick individual stocks, but by doing so you may be taking on more risk than you suspect, even unnecessary risk. For instance, if you decide to buy stock in Company A, you know you're taking a risk by investing in just one company. However, without a lot of work and financial expertise, you may not be able to assess how much risk you're taking by investing in Company A specifically, as opposed to Company B. Even if you know that investing in individual stocks is risky, it can be very hard to know how risky those particular individual stocks are, compared to other alternatives. This is doubly true if the investment involves actions more exotic than simply buying and holding an asset like a stock. For instance, you could definitely get plenty of risk by investing in commercial real estate development or complicated options contracts; but a certain amount of work and expertise is required to even understand how to do that, and there is a greater likelihood that you will slip up and make a costly mistake that negates any extra gain, even if the investment itself might have been sound for someone with experience in that area. In other words, you want your risk to really be the risk of the investment, not the \"\"personal\"\" risk that you'll make a mistake in a complicated scheme and lose money because you didn't know what you were doing. (If you do have some expertise in more exotic investments, then maybe you could go this route, but I think most people -- including me -- don't.) On the other hand, you can find mutual funds or ETFs that invest in large economic sectors that are high-risk, but because the investment is diversified within that sector, you need only compare the risk of the sectors. For instance, emerging markets are usually considered one of the highest-risk sectors. But if you restrict your choice to low-cost emerging-market index funds, they are unlikely to differ drastically in risk (at any rate, far less than individual companies). This eliminates the problem mentioned above: when you choose to invest in Emerging Markets Index Fund A, you don't need to worry as much about whether Emerging Markets Index Fund B might have been less risky; most of the risk is in the choice to invest in the emerging markets sector in the first place, and differences between comparable funds in that sector are small by comparison. You could do the same with other targeted sectors that can produce high returns; for instance, there are mutual funds and ETFs that invest specifically in technology stocks. So you could begin by exploring the mutual funds and ETFs available via your existing investment bank, or poke around on Morningstar. Fees will still matter no matter what sector you're in, so pay attention to those. But you can probably find a way to take an aggressive risk position without getting bogged down in the details of individual companies. Also, this will be less work than trying something more exotic, so you're less likely to make a costly mistake due to not understanding the complexities of what you're investing in.\"" }, { "docid": "27671", "title": "", "text": "\"For an RRSP, you do not have to pay taxes on money or investments until you withdraw the money. If you do not reinvest the dividends but instead, take them out as cash, that would be withdrawing the money. For mutual funds, you would normally reinvest the dividends if holding the investment inside an RRSP. For stocks, I believe the dividends would end up sitting in the cash part of your RRSP account (and you'd probably use the money to buy more stocks, though would not be required to do so). Either way, you do not pay tax on this investment income unless you withdraw it from your RRSP. For example, you invest $10,000 inside your RRSP. You get the tax benefit from doing so. You get dividends of $1,000 (hey, it was a good year), and use these to buy more stock. As the money never left your RRSP account, you are considered to have invested only your initial $10,000. If instead, you withdraw the $1,000 in dividends, you are taxed on $1000 income. TFSA are slightly more complicated. You don't get a tax benefit from your initial contribution, but then do not pay tax when you withdraw from the TFSA. Your investment income is still tax-free, and you are (generally) much more limited in how much you can contribute. For example, you invest $10,000 inside your TFSA. You get dividends of $1,000, and use these to buy more stock. Your total contributions to your TFSA remains at $10,000 as the money never left your account. You could instead withdraw the $1000 from your TFSA and would not pay tax on it. In the next calendar year (or later) after the withdrawal, you could \"\"repay\"\" the $1000 you took out without suffering an overcontribution penalty. This makes TFSA an excellent place to park emergency funds, as you can withdraw and subsequently replace the investment while continuing to get the tax benefits on your investment income. RRSPs are better for retirement or for the home buyers plan. In general, you should not be withdrawing money from either your TFSA or RRSP, except in emergencies, when retiring, or when purchasing a home. I prefer indexed mutual funds or money market accounts for both my RRSP and TFSA rather than individual stocks, but that's up to you.\"" }, { "docid": "59670", "title": "", "text": "\"Lifecycle funds might be a suitable fit for you. Lifecycle funds (aka \"\"target date funds\"\") are a mutual fund that invests your money in other mutual funds based on how much time is left until you need the money-- they follow a \"\"glide-path\"\" of reducing stock holdings in favor of bonds over time to reduce volatility of your final return as you near retirement. The ones I've looked at don't charge a fee of their own for this, but they do direct your portfolio to actively managed funds. That said, the ones I've seen have an \"\"acquired\"\" expense ratio of less than what you're proposing you'd pay a professional. FWIW, my current plan is to invest in a binary portfolio of cheap mutual funds that track S&P500 and AGG and rebalance regularly. This is easy enough that I don't see the point of adding in a 1 percent commission.\"" }, { "docid": "423754", "title": "", "text": "\"I don't think you have your head in the right space - you seem to be thinking of these lifecycle funds like they're an annuity or a pension, but they're not. They're an investment. Specifically, they're a mutual fund that will invest in a collection of other mutual funds, which in turn invest in stock and bonds. Stocks go up, and stocks go down. Bonds go up, and bonds go down. How much you'll have in this fund next year is unknowable, much less 32 years from now. What you can know, is that saving regularly over the next 32 years and investing it in a reasonable, and diversified way in a tax sheltered account like that Roth will mean you have a nice chunk of change sitting there when you retire. The lifecycle funds exist to help you with that \"\"reasonable\"\" and \"\"diversified\"\" bit.They're meant to be one stop shopping for a retirement portfolio. They put your money into a diversified portfolio, then \"\"age\"\" the portfolio allocations over time to make it go from a high risk, (potentially) high reward allocation now to a lower risk, lower reward portfolio as you approach retirement. The idea is is that you want to shoot for making lots of money now, but when you're older, you want to focus more on keeping the money you have. Incidentally, kudos for getting into seriously saving for retirement when you're young. One of the biggest positive effects you can have on how much you retire with is simply time. The more time your money can sit there, the better. At 26, if you're putting away 10 percent into a Roth, you're doing just fine. If that 5k is more than 10 percent, you'll do better than fine. (That's a rule of thumb, but it's based on a lot of things I've read where people have gamed out various scenarios, as well as my own, cruder calculations I've done in the past)\"" }, { "docid": "162916", "title": "", "text": "In the absence of a country designation where the mutual fund is registered, the question cannot be fully answered. For US mutual funds, the N.A.V per share is calculated each day after the close of the stock exchanges and all purchase and redemption requests received that day are transacted at this share price. So, the price of the mutual fund shares for April 2016 is not enough information: you need to specify the date more accurately. Your calculation of what you get from the mutual fund is incorrect because in the US, declared mutual fund dividends are net of the expense ratio. If the declared dividend is US$ 0.0451 per share, you get a cash payout of US$ 0.0451 for each share that you own: the expense ratio has already been subtracted before the declared dividend is calculated. The N.A.V. price of the mutual fund also falls by the amount of the per-share dividend (assuming that the price of all the fund assets (e.g. shares of stocks, bonds etc) does not change that day). Thus. if you have opted to re-invest your dividend in the same fund, your holding has the same value as before, but you own more shares of the mutual fund (which have a lower price per share). For exchange-traded funds, the rules are slightly different. In other jurisdictions, the rules might be different too." }, { "docid": "570990", "title": "", "text": "Mutual funds are collections of investments that other people pay to join. It would be simpler to calculate the value of all these investments at one time each day, and then to deem that any purchases or sales happen at that price. The fund diversifies rather than magnifies risk, looking to hold rather than enjoy a quick turnaround. Nobody really needs hourly updated price information for an investment they intend to hold for decades. They quote their prices on a daily basis and you take the daily price. This makes sense for a vehicle that is a balanced collection of many different assets, most of which will have varying prices over the course a day. That makes pricing complicated. This primer explains mutual fund pricing and the requirements of the Investment Company Act of 1940, which mandates daily price reporting. It also illustrates the complexity: How does the fund pricing process work? Mutual fund pricing is an intensive process that takes place in a short time frame at the end of the day. Generally, a fund’s pricing process begins at the close of the New York Stock Exchange, normally 4 p.m. Eastern time. The fund’s accounting agent, which may be an affiliated entity such as the fund’s adviser, or a third-party servicer such as the fund’s administrator or custodian bank, is usually responsible for calculating the share price. The accounting agent obtains prices for the fund’s securities from pricing services and directly from brokers. Pricing services collect securities prices from exchanges, brokers, and other sources and then transmit them to the fund’s accounting agent. Fund accounting agents internally validate the prices received by subjecting them to various control procedures. For example, depending on the nature and extent of its holdings, a fund may use one or more pricing services to ensure accuracy. Note that under Rule 22c-1 forward pricing, fund shareholders receive the next daily price, not the last daily price. Forward pricing makes sense if you want shareholders to get the most accurate sale or purchase price, but not if you want purchasers and sellers to be able to make precise calculations about gains and losses (how can you be precise if the price won't be known until after you buy or sell?)." }, { "docid": "138383", "title": "", "text": "Bond ETFs are just another way to buy a bond mutual fund. An ETF lets you trade mutual fund shares the way you trade stocks, in small share-size increments. The content of this answer applies equally to both stock and bond funds. If you are intending to buy and hold these securities, your main concerns should be purchase fees and expense ratios. Different brokerages will charge you different amounts to purchase these securities. Some brokerages have their own mutual funds for which they charge no trading fees, but they charge trading fees for ETFs. Brokerage A will let you buy Brokerage A's mutual funds for no trading fee but will charge a fee if you purchase Brokerage B's mutual fund in your Brokerage A account. Some brokerages have multiple classes of the same mutual fund. For example, Vanguard for many of its mutual funds has an Investor class (minimum $3,000 initial investment), Admiral class (minimum $10,000 initial investment), and an ETF (share price as initial investment). Investor class has the highest expense ratio (ER). Admiral class and the ETF generally have much lower ER, usually the same number. For example, Vanguard's Total Bond Market Index mutual fund has Investor class (symbol VBMFX) with 0.16% ER, Admiral (symbol VBTLX) with 0.06% ER, and ETF (symbol BND) with 0.06% ER (same as Admiral). See Vanguard ETF/mutual fund comparison page. Note that you can initially buy Investor class shares with Vanguard and Vanguard will automatically convert them to the lower-ER Admiral class shares when your investment has grown to the Admiral threshold. Choosing your broker and your funds may end up being more important than choosing the form of mutual fund versus ETF. Some brokers charge very high purchase/redemption fees for mutual funds. Many brokers have no ETFs that they will trade for free. Between funds, index funds are passively managed and are just designed to track a certain index; they have lower ERs. Actively managed funds are run by managers who try to beat the market; they have higher ERs and tend to actually fall below the performance of index funds, a double whammy. See also Vanguard's explanation of mutual funds vs. ETFs at Vanguard. See also Investopedia's explanation of mutual funds vs. ETFs in general." }, { "docid": "75270", "title": "", "text": "Risk. Volatility. Liquidity. Etc. All exist on a spectrum, these are all comparative measures. To the general question, is a mutual fund a good alternative to a savings account? No, but that doesn't mean it is a bad idea for your to allocate some of your assets in to one right now. Mutual funds, even low volatility stock/bond blended mutual funds with low fees still experience some volatility which is infinitely more volatility than a savings account. The point of a savings account is knowing for certain that your money will be there. Certainty lets you plan. Very simplistically, you want to set yourself up with a checking account, a savings account, then investments. This is really about near term planning. You need to buy lunch today, you need to pay your electricity bill today etc, that's checking account activity. You want to sock away money for a vacation, you have an unexpected car repair, these are savings account activities. This is your foundation. How much of a foundation you need will scale with your income and spending. Beyond your basic financial foundation you invest. What you invest in will depend on your willingness to pay attention and learn, and your general risk tolerance. Sure, in this day and age, it is easy to get money back out of an investment account, but you don't want to get in the habit of taping investments for every little thing. Checking: No volatility, completely liquid, no risk Savings: No volatility, very liquid, no principal risk Investments: (Pick your poison) The point is you carefully arrange your near term foundation so you can push up the risk and volatility in your investment endeavors. Your savings account might be spread between a vanilla savings account and some CDs or a money market fund, but never stock (including ETF/Mutual Funds and blended Stock/Bond funds). Should you move your savings account to this mutual fund, no. Should you maybe look at your finances and allocate some of your assets to this mutual fund, sure. Just look at where you stand once a year and adjust your checking and savings to your existing spending. Savings accounts aren't sexy and the yields are awful at the moment but that doesn't mean you go chasing yield. The idea is you want to insulate your investing from your day to day life so you can make unemotional deliberate investment decisions." }, { "docid": "346387", "title": "", "text": "There are several things being mixed up in the questions being asked. The expense ratio charged by the mutual fund is built into the NAV per share of the fund, and you do not see the charge explicitly mentioned as a deduction on your 401k statement (or in the statement received from the mutual fund in a non-401k situation). The expense ratio is listed in the fund's prospectus, and should also have been made available to you in the literature about the new 401k plan that your employer is setting up. Mutual fund fees (for things like having a small balance, or for that matter, sales charges if any of the funds in the 401k are load funds, God forbid) are different. Some load mutual funds waive the sales charge load for 401k participants, while some may not. Actually, it all depends on how hard the employer negotiates with the 401k administration company who handles all the paperwork and the mutual fund company with which the 401k administration company negotiates. (In the 1980s, Fidelity Magellan (3% sales load) was a hot fund, but my employer managed to get it as an option in our plan with no sales load: it helped that my employer was large and could twist arms more easily than a mom-and-pop outfit or Solo 401k plan could). A long long time ago in a galaxy far far away, my first ever IRA contribution of $2000 into a no-load mutual fund resulted in a $25 annual maintenance fee, but the law allowed the payment of this fee separately from the $2000 if the IRA owner wished to do so. (If not, the $25 would reduce the IRA balance (and no, this did not count as a premature distribution from the IRA). Plan expenses are what the 401k administration company charges the employer for running the plan (and these expenses are not necessarily peanuts; a 401k plan is not something that needs just a spreadsheet -- there is lots of other paperwork that the employee never gets to see). In some cases, the employer pays the entire expense as a cost of doing business; in other cases, part is paid by the employer and the rest is passed on to the employees. As far as I know, there is no mechanism for the employee to pay these expenses outside the 401k plan (that is, these expenses are (visibly) deducted from the 401k plan balance). Finally, with regard to the question asked: how are plan fees divided among the investment options? I don't believe that anyone other than the 401k plan administrator or the employer can answer this. Even if the employer simply adopts one of the pre-packaged plans offered by a big 401k administrator (many brokerages and mutual fund companies offer these), the exact numbers depend on which pre-packaged plan has been chosen. (I do think the answers the OP has received are rubbish)." }, { "docid": "472663", "title": "", "text": "\"An Exchange-Traded Fund (ETF) is a special type of mutual fund that is traded on the stock exchange like a stock. To invest, you buy it through a stock broker, just as you would if you were buying an individual stock. When looking at a mutual fund based in the U.S., the easiest way to tell whether or not it is an ETF is by looking at the ticker symbol. Traditional mutual funds have ticker symbols that end in \"\"X\"\", and ETFs have ticker symbols that do not end in \"\"X\"\". The JPMorgan Emerging Markets Equity Fund, with ticker symbol JFAMX, is a traditional mutual fund, not an ETF. JPMorgan does have ETFs; the JPMorgan Diversified Return Emerging Markets Equity ETF, with ticker symbol JPEM, is an example. This ETF invests in similar stocks as JFAMX; however, because it is an index-based fund instead of an actively managed fund, it has lower fees. If you aren't sure about the ticker symbol, the advertising/prospectus of any ETF should clearly state that it is an ETF. (In the example of JPEM above, they put \"\"ETF\"\" right in the fund name.) If you don't see ETF mentioned, it is most likely a traditional mutual fund. Another way to tell is by looking at the \"\"investment minimums\"\" of the fund. JFAMX has a minimum initial investment of $1000. ETFs, however, do not have an investment minimum listed; because it is traded like a stock, you simply buy whole shares at whatever the current share price is. So if you look at the \"\"Fees and Investment Minimums\"\" section of the JPEM page, you'll see the fees listed, but not any investment minimums.\"" }, { "docid": "226967", "title": "", "text": "It is not necessary that the mutual fund pays out the dividend. The money would be used to buy more shares of the same stock or of some other stock depending on overall policy goal of the fund and current allocation of funds. This would increase the NAV of the mutual fund and hence its indirectly comes to you once you sell the mutual fund. The dividend would not be taxable as its not directly paid out." }, { "docid": "530631", "title": "", "text": "\"It sounds like this is an entirely unsettled question, unfortunately. In the examples you provide, I think it is safe to say that none of those are 'substantially identical'; a small overlap or no overlap certainly should not be considered such by a reasonable interpretation of the rule. This article on Kitces goes into some detail on the topic. A few specifics. First, Former publication 564 explains: Ordinarily, shares issued by one mutual fund are not considered to be substantially identical to shares issued by another mutual fund. Of course, what \"\"ordinarily\"\" means is unspecified (and this is no longer a current publication, so, who knows). The Kitces article goes on to explain that the IRS hasn't really gone after wash sales for mutual funds: Over the years, the IRS has not pursued wash sale abuses against mutual funds, perhaps because it just wasn’t very feasible to crack down on them, or perhaps because it just wasn’t perceived as that big of an abuse. After all, while the rules might allow you to loss-harvest a particular stock you couldn’t have otherwise, it also limits you from harvesting ANY losses if the overall fund is up in the aggregate, since losses on individual stocks can’t pass through to the mutual fund shareholders. But then goes to explain about ETFs being very different: sell SPY, buy IVV or VTI, and you're basically buying/selling the identical thing (99% or so correlation in stocks owned). The recommendation by the article is to look at the correlation in owned stocks, and stay away from things over 95%; that seems reasonable in my book as well. Ultimately, there will no doubt be a large number of “grey” and murky situations, but I suspect that until the IRS provides better guidance (or Congress rewrites/updates the wash sale rules altogether!), in the near term the easiest “red flag” warning is simply to look at the correlation between the original investment being loss-harvested, and the replacement security; at correlations above 0.95, and especially at 0.99+, it’s difficult to argue that the securities are not ”substantially identical” to each other in performance. Basically - use common sense, and don't do anything you think would be hard to defend in an audit, but otherwise you should be okay.\"" }, { "docid": "370469", "title": "", "text": "Milliondollarjourney.com has a couple of articles on this topic. How Investing Taxes Work part 1 and part 2. The following is a summary of that article. Capital gains and dividends are taxed at a preferred rate, while interest tax is taxed at your regular rate. Interest is taxed at your marginal rate, but capital gains are taxed at only 50% of your marginal rate. That means that it makes sense to place the interest bearing account inside the RRSP but keep stocks outside. Additionally, you can claim your losses on your capital appreciating stocks against your gains if they are outside of your RRSP. Hopefully, your stocks will never go down but that's not very realistic. Dividends from Canadian companies are eligible for a dividend tax credit, but not dividends from foreign companies. [I actually understood that dividends from U.S. companies are treated as a special case] It's not clear to me from reading the article how much of this applies to mutual funds. The summary is as follows:" } ]

[ { "docid": "340329", "title": "", "text": "\"In the United States, many banks aim to receive $ 100 per year per account in fees and interest markup. There are several ways that they can do this on a checking account. These examples assume that there is a 3 % difference between low-interest-rate deposit accounts and low-interest rate loans. Or some combination of these markups that adds up to $ 100 / year. For example: A two dollar monthly fee = $ 24 / year, plus a $ 2,000 average balance at 0.05% = $ 29 / year, plus $ 250 / month in rewards debit card usage = $ 24 / year, plus $ 2 / month in ATM fees = $ 24 / year. Before it was taken over by Chase Manhattan in 2008, Washington Mutual had a business strategy of offering \"\"free\"\" checking with no monthly fees, no annual fees, and no charges (by Washington Mutual) for using ATMs. The catch was that the overdraft fees were not free. If the customers averaged 3 overdraft fees per year at $ 34 each, Washington Mutual reached its markup target for the accounts.\"" } ]

[ { "docid": "475560", "title": "", "text": "\"Recently, I asked about what the company valuation is and how many shares does my 4% represent.CFO told me that there is no point to talk about \"\"shares\"\" or \"\"stock\"\" since the company is not public. Is it right? No, it is wrong. Shares and stocks exist regardless of how they can be traded. Once a company is formed, there are stocks that belong to the owners in the proportion of the ownership. They may not exist physically, but they do exist on paper. As an owner of 5% of the company, you own 5% of the company stocks. I asked if my investor portion equity will be subjected under a vesting schedule, CFO said yes. That doesn't make sense to me, because I bought those 4%? Aren't those supposed to be fully vested? I agree to my employee equity to be vested. Doesn't make sense to me either, since your money is already in their pocket. But I'm not sure if its illegal. If that's what is written in the signed contract - then may be its possible to have that situation. But it doesn't make much sense, because these shares are granted to you in return to your money, not some potential future work (as the 1% employee's portion). You already gave the money, so why wouldn't they be vested? Best to read the contract upon which you gave them your money, I really hope you have at least that and not just gave them a check....\"" }, { "docid": "115141", "title": "", "text": "\"I agree it's an agency problem. This why firms that are astute at making acquisitions properly align the incentives of managers and shareholders, and strive to make negotiating prowess a core competency (see [here](https://www.economist.com/news/finance-and-economics/21708671-two-economists-win-nobel-prize-their-work-theory-contracts-hard) and [here](https://www.economist.com/news/economics-brief/21725542-if-markets-are-so-good-directing-resources-why-do-companies-exist-first-our)). This is easier said than done - there are many more Valeant Pharmaceuticals type companies (making acquisitions for financial engineering and \"\"growth\"\") than Gilead Sciences type companies (making acquisitions based on a keen understanding of the market's demands).\"" }, { "docid": "587778", "title": "", "text": "Freezing your credit should be the default configuration. EDIT: More info on Why. Basically you're adding a password to your credit report access. https://www.privacyrights.org/consumer-guides/identity-theft-monitoring-services 4. Is there a low-cost alternative to monitoring services? The best low-cost alternative to credit monitoring services is a security freeze. A security freeze locks your credit files at the three credit reporting agencies (Equifax, Experian, and TransUnion) until you unlock your file with a password or PIN. The freeze stops new accounts from being established by imposters because potential creditors are not able to check your credit report or credit score, the standard procedure when financial accounts are opened. Any potential creditors’ requests for access to your credit files will be denied. However, a security freeze cannot stop misuse of your existing bank or credit accounts. You still must check the monthly statements on your current accounts for any erroneous charges or debits. Generally, you will pay no more than $30 for a lifetime of security freeze protection. In some circumstances (identity theft victims and senior citizens in some states), this protection may be free. With a security freeze, your credit reports cannot be seen by prospective creditors, insurance companies, landlords, utilities, or for employment screening. However, you may lift the freeze when necessary to allow a company to check your credit report. This is easily done by means of a password. It is important to realize that a security freeze does not prevent existing creditors from seeing your credit report. While a security freeze may be the best available deterrent to new account fraud, it may not be the best solution for everyone. It can be cumbersome for individuals who frequently apply for credit, are contemplating a new mortgage, or who plan to change jobs. On the other hand, a security freeze is particularly well-suited for seniors who are no longer in the market for new credit. And a freeze provides protection for individuals affected by data breaches involving Social Security numbers, as well as victims of identity theft or mail theft. For a more complete discussion of the pros and cons of security freezes, read this report in Consumer Reports. Brian Krebs' post How I Learned to Stop Worrying and Embrace the Security Freeze is a primer on what you can do to avoid becoming a victim of identity theft. Fees, supporting documentation, and procedures for placing a security freeze vary from state to state and among the three credit reporting agencies. The web sites of each of the credit reporting agencies provide state-specific instructions for placing a security freeze. The websites of each of the credit reporting agencies provide state-specific instructions for placing a security freeze. Equifax Experian TransUnion" }, { "docid": "296732", "title": "", "text": "The comparison with tulip mania shows a wilful ignorance of what bitcoin is. Scarcity is one of the things that makes bitcoin good, sure, but it's not the only thing. Could you have transfered millions of dollars worth of tulips around the world in minutes, securely and for pennies on the dollar? &gt;In bitcoin’s case, Dimon said he’s skeptical authorities will allow a currency to exist without state oversight *Allow* Bitcoin to exist? Authorities don't get say whether Bitcoin is *allowed* to exist or not. You'd think the CEO of one of the largest banks in the world would know that. &gt;“If you were in Venezuela or Ecuador or North Korea or a bunch of parts like that Bitcoin is outperforming a lot of currencies, not just in Venezuela, Ecuador or North Korea. &gt; if you were a drug dealer, a murderer, stuff like that, you are better off doing it in bitcoin than U.S. dollars,” Why would Bitcoin be better for *only* those things? He's trying to smear Bitcoin as being only used for illegal activities and that is simply not the case. Besides, the reason that people *do* use it for those things is due to the inherent privacy aspects of Bitcoin (though not perfectly private, they're still useful)." }, { "docid": "592108", "title": "", "text": "\"On the bright side, I love your username... unfortunately, I'm at odds with just about everything else in your post. &gt; Many of the people who under-estimate TV do not realize the amount of money, talent, research, staff and infrastructure needed to produce top-level high-quality shows and programming. &gt;It is easy to stream a TV show or movie AFTER it's been already produced and broadcast, but do you really think the internet will give us a Mad Men, LOST, Walking Dead, Game of Thrones? I highly doubt it, and that's a big reason why TV is here to stay. These production costs do not have to be incurred by traditional TV companies. Anyone with comparable revenue streams can concievably hire talent and produce content, regardless of how it is distributed. &gt;What makes Netflix/Hulu any more right than a Viacom or Comcast? You seem to think a future of Netflix and iTunes is utopia, when in reality it would be an oppressive dystopian closed system with NO competition. At least with TV and Cable, you have networks actively competing with each other- they are literally tripping over themselves working as hard as they can to PLEASE you- the audience. I don't think the argument is that Netflix/iTunes is utopia, and have never heard anyone claim that (here or elsewhere). The internet makes for far **more** competition for content, as anyone with a youtube account can reach millions of viewers. Instead of paying for access to specific channels, the user gains access to **all** content on the internet - created by dedicated content providers, as well as all other users, all competing for viewers. &gt;You talk about how a future without TV is a good thing, but you fail to realize that it would actually be a bad thing for American culture. ... ? &gt;People seem to think that sitting in front of the 20inch computer monitors at a table for one is preferable to a 50 inch LCD screen with dolby surround in the den. I am not surprised because the internet is comprised of people who mainly dwell on the internet, where people who watch TV are probably watching TV right now. While people may 'seem to think' this, anyone who does think this doesn't know much about the technology they're using. You can access the internet on many devices with almost any imaginable screens size (including mobile devices, 20\"\" monitors and the 50\"\" LCD in your den) a number of different ways. &gt;On top of that, many people would lose their jobs. Just because Apple or Netflix can distribute shows and movies cheap does not mean that many thousands of people should lose their jobs . In a capitalist economy (or to remain competitive globally), this is almost exactly what it means. Are you suggesting we hire miners to dig through mountains because dynamite steals jobs ? &gt;(especially if the majority of America still prefers to watch programming on their TV's and not locked in their room on a small computer screen with the tinny-sounding computer speakers). Already explained this one to you. Not an issue. &gt;This is one of the reasons why we're having an unemployment problem, because these jobs are disappearing by the cold mechanical algorithms of a computer program. Think of the many thousands of jobs that have been lost in the music industry, don't you think college kids would have loved to start their careers at a record label promoting music and encouraging growth? Instead we have MP3's and instant gratification, music is arguably dead (read: 90's music). Another misconception you seem to have of why jobs exist, or should exist. People wanting a certain job is not a reason for the job to exist. &gt;And if we think a future without TV is utopia, then I have some bad news for you, it isn't. TV is American, we do it best and we should NOT be turning our backs on it. Once we do that, we lose our culture. If American culture is solely based on outdated distribution technology, then the loss is no great one. &gt;Who do you think will own the internet in 50 years? I can tell you it won't be the US of A. Think very carefully and be careful what you wish for... Own the internet ? I don't care about the nationality of the owners, but I can assure you that no single entity will 'own the internet'. I really think you misunderstand the fundamental ideas behind the debate. Your biggest argument is that people prefer to watch their programming on traditional, large TVs... many different technologies exist to enjoy the internet on this same piece of hardware. You have not made a single compelling argument here, but I felt I should break it down point by point, because you do seem interested in thinking critically about the topic, just slightly misinformed. EDIT: multi line quote formatting\"" }, { "docid": "393733", "title": "", "text": "Wealthsimple lists their prices as follows: Those are the fees you pay over and above what you pay for the underlying ETFs' management fees. But why not just invest in the ETFs yourself? The Canadian Couch Potato website shows some sample portfolios. The ETF option has an average Management Expense Ratio very similar to that of the ETFs used by Wealthsimple, but without the additional management fee. Rebalance once or twice a year and you cut your fees from approximately 0.57% (if investing mid-six-figures) to 0.17%, for very little work. Is it worth it to you? Well, that depends on how much you have to invest, and how much effort you are willing to put in. Wealthsimple isn't particularly unreasonable with their fees, but the fees do look a bit high once you are in to the six figures of investing. On the other hand, I often recommend Tangerine's mutual funds to my friends who are looking at investing for retirement. Those mutual funds, last time I checked, cost 1.09%. That's about twice what Wealthsimple is charging. But they are easy to understand and easy to invest in; a good choice for my friends looking to invest $1,000 - $50,000 in my opinion. So, and understanding this is just my personal opinion, I think Wealthsimple fits in a niche where Tangerine mutual funds carry too high a cost for you, but you don't want to do all the management yourself, even if this is just an hour or so of work, a couple of times a year. I wish they were cheaper, but their pricing makes sense for a lot of people in my opinion. Do they make sense for you? If you are looking at investing less than $10,000, I'd stick with an option like Tangerine, only because that's an easier option. If investing more than $100,000 or $200,000, I think you are paying a bit much for what they offer. But, many people pay much, much, much more for their investments." }, { "docid": "599109", "title": "", "text": "The total limit book is a composite of all the orders on all of the exchanges. While it's uncommon for a limit order posted beyond the NBBO to fill outside of the NBBO, it does occur. For example, the best ask may be on exchange X, but for some reason the smart order routing algorithm may select exchange Y if it judges the net trade to be less costly, malfunctions, etc, and HFTs will immediately arbitrage the order between two exchanges, or the best order on exchange X disappears causing the order to fill above the NBBO. The system isn't perfect because there are multiple exchanges, but that eventuality is extremely rare with equities since nearly every exchange will have orders posted at the NBBO because exchange equity fee and rebate schedules are extremely competitive, nearly identical. It is however more common with options since less exchanges as a percentage of the total will have orders posted at the NBBO because of very wide exchange rebate and fee schedules. How a single exchange handles a new order that crosses an existing limit order is already addressed here: How do exchanges match limit orders?" }, { "docid": "81652", "title": "", "text": "In summary, you are correct that the goal of investing is to maximize returns, while paying low management fees. Index investing has become very popular because of the low fees. There are many actively traded mutual funds out there with very high management fees of 2.5% and up that do not beat the market. This begs the question of why you are paying high management fees and not just investing in index funds. Consider maxing out your tax sheltered accounts (401(k) and ROTH IRA) to avoid even more fees on your returns. Also consider having a growth component of your portfolio which is generally filled with equity, along with a secure component for assets such as bonds. Bonds may not have the exciting returns of equity, but they help to smooth out the volatility of your portfolio, which may help to keep peace of mind when the market dips." }, { "docid": "585661", "title": "", "text": "\"Yes, merchants may charge a fee for using a credit card. For a credit card transaction, interchange fees flow from the merchant to the card issuer. This is why Australians are seeing a boom in \"\"Debit\"\" MasterCard/VISA cards - the issuing banks make income when you select \"\"Credit\"\". These costs can be passed from the merchant to the customer as a \"\"Credit Card Fee\"\". For an EFTPOS transaction, the interchange flows the other way, from the card issuer to the acquiring bank (The merchant's bank). As an aside, the setup of these fees is why some large supermarket chains in Australia restrict you from selecting \"\"Credit\"\" with a scheme debit card (MasterCard and VISA are 'schemes'). They are 'acquirers' in the payments networks and they make interchange fees when you hit \"\"Savings\"\" and pay if you hit \"\"Credit\"\" - therefore where you can hit either \"\"Credit\"\" or \"\"Savings\"\" they prefer (and may force) you to press \"\"Savings\"\".\"" }, { "docid": "470032", "title": "", "text": "\"In my experience working at a currency exchange money service business in the US: Flat fees are the \"\"because we can\"\" fee on average. These can be waived on certain dollar values at some banks or MSBs, and sometimes can even be haggled. If you Google EURUSD, as an example, you also get something like $1.19 at 4pm, 9/18/2017. If you look at the actual conversion that you got, you may find your bank hit you with $1.30 or something close to convert from USD to Euro (in other words, you payed 10% more USD per Euro). And, if you sell your Euro directly back, you might find you only make $1.07. This spread is the real \"\"fee\"\" and covers a number of things including risk or liquidity. You'll see that currencies with more volatility or less liquidity have a much wider spread. Some businesses even go as far as to artificially widen the spread for speculators (see IQD, VND, INR, etc.). Typically if you see a 3% surcharge on international ATM or POS transactions, that's the carrier such as Visa or Mastercard taking their cut for processing. Interestingly enough, you also typically get the carrier-set exchange rate overseas when using your card. In other words, your bank has a cash EURUSD of $1.30 but the conversion you get at the ATM is Visa's rate, hence the Visa fee (but it's typically a nicer spread, or it's sometimes the international spot rate depending on the circumstances, due to the overhead of electronic transactions). You also have to consider the ATM charging you a separate fee for it's own operation. In essence, the fees exist to pad every player involved except you. Some cards do you a solid by advertising $0 foreign exchange fees. Unfortunately these cards only insulate you from the processing/flat fees and you may still fall prey to the fee \"\"hidden\"\" in the spread. In the grander scheme of things, currency exchange is a retail operation. They try to make money on every step that requires them to expend a resource. If you pay 10% on a money transaction, this differs actually very little from the mark-up you pay on your groceries, which varies from 3-5% on dry food, to 20% on alcohol such as wine.\"" }, { "docid": "236531", "title": "", "text": "this post offers great steps you can take to responsibly and effectively manage your existing line of credit. we believe that by carefully observing these guidelines, you will not only succeed in building and maintaining an excellent credit history but you will also avoid incurring pesky fees and charges usually imposed on delinquent unsecured credit cardholders. and do help us promote it by telling your friends to read and share it with their friends too!" }, { "docid": "539317", "title": "", "text": "What's the primary factor keeping a consumer from handing out fees as liberally as corporations or small businesses do? Power. Can an individual, or more appropriately, what keeps an individual from being able to charge, fine or penalize a Business? If it could be accomplished, but at a high cost, let's assume it's based on principal and not monetary gain. And have a legal entitlement to money back? No. You are of course welcome to send your doctor a letter stating that you would like $50 to make up for your two hour wait last time around, but there's no legal obligation for him to pay up, unless he signed a contract stating that he would do so. Corporations also cannot simply send you a fine or fee and expect you to pay it; you must have either agreed to pay it in the past, or now agree to pay it in exchange for something. In these cases, the corporations have the power: you have to agree to their rules to play ball. However, consumers do have a significant power as well, in well-competed markets: the power to do business with someone else. You don't like the restocking fee? Buy from Amazon, which offers free shipping on returns. You don't like paying a no-show fee from the doctor? Find a doctor without one (or with a more forgiving fee), or with a low enough caseload that you don't have to make appointments early. Your ability to fine them exists as your ability to not continue to patronize them. In some markets, though, consumers don't have a lot of power - for example, cable television (or other utilities). The FCC has a list of Customer Service Standards, which cable companies are required to meet, and many states have additional rules requiring penalties for missed or late appointments tougher than that. And, in the case of the doctor, if your doctor is late - find one that is. Or, try sending him a bill. It does, apparently, work from time to time - particularly if the doctor wants to keep your business." }, { "docid": "341562", "title": "", "text": "\"The government as it exists today is still accountable to the people. One of Trumps most popular phrases is \"\"law and order,\"\" and was said in response to this exact issue, that the Obama and Bush white houses were picking and choosing which laws they wanted to follow. Its one of many reasons why he defeated Hillary Clinton by such a wide electoral margin. This a problem people have been foaming at the mouth about since the financial crisis. But if you go out of the way to give the government more and more power out of a false moralistic fantasy of a socialistic future where ego, greed, and hatred don't exist in every human soul, it is inevitable that the government will abuse that power in a big way. Arguably, it already has been. See Patriot Act and NDAA. A bigger, more powerful government is the last thing we need. What we need to do is take back control.\"" }, { "docid": "30324", "title": "", "text": "\"The time value of money is very important in understanding this issue. Money today is worth more than money next year, two years from now, etc. It's a well understood economics concept, and well worth reading about if you have some, well, time. Not only is money literally worth more now than later due to inflation, but there is the simple fact that, assuming you have money for the purpose of doing something, being able to do that thing today is better than doing that same thing tomorrow. \"\"A bird in the hand is worth two in the bush\"\" gets to this rather directly; having it now is better than probably having it later. Would you rather have a nice meal tonight, or eat beans and rice tonight and then have the same nice meal next year? That's why interest exists, in part: you're offered some money now, for more money later; or in the case of buying a bond, you're offered more money later for some money now. The fact that people have different discount rates for money later is why the loan market can exist: people with more money than they can use now have a lower discount for future money than people who really need money right now (to buy a house, to pay their rent, whatever). So when choosing to buy a bond, you look at the money you're going to get, both over the short term (the coupon rate) and the long term (the face value), and you consider whether $80 now is worth $100 in 20 years, plus $2 per year. For some people it is - for some people it isn't, and that's why the price is as it is ($80). Odds are if you have a few thousand USD, you're probably not going to be interested in this - or if you have a very long term outlook; there are better ways to make money over that long term. But, if you're a bank needing a secure investment that won't lose value, or a trust that needs high stability, you might be willing to take that deal.\"" }, { "docid": "511616", "title": "", "text": "\"[There's about 10 trillion in gold](http://en.wikipedia.org/wiki/Gold_reserve) and about [2.8 trillion of US cash](http://visualeconomics.creditloan.com/the-value-of-united-states-currency-in-circulation/) in the world. Neither of these is anywhere large enough to be used for all the transactions in the world. For example, about [4 trillion a **day**](http://en.wikipedia.org/wiki/Foreign_exchange_market) changes hands in the currency markets alone - if that were required to be cash or gold it would be impossible to do so, and you'd suffer from more poorly priced goods since markets could not adjust as quickly, so vendors would charge more premium to handle the risk. Yes, there is not (and has not been) enough cash in circulation to run the world economy. There is also vastly too little gold, unless you want to strangle commerce due to not being enough money to trade. &gt; \"\"posing as the money supply\"\" All money is debt, and always has been. Money is a placeholder that you can trade for goods *later* meaning someone owes you a thing. The value of that money is the debt they (or society) owes you for something you already did to get that money. So there is no posing, just most don't understand money, how it originated, why it exists, or why it works. They never ask the question \"\"how does money come into existance\"\". &gt; Does defaulting on ones debt create inflation since that money is still in the system and not being paid off? Probably not much. Loans are made expecting some default, so the interest others pay on their loans helps offset the defaulted ones. If loans become riskier, the interest demanded increases, so the lender still (if they do their risk analysis well and no external events break their expectations) makes money. When you pay off a debt, that money, as you're paying it, is likely being lent in other loans, so paying it off does not do much. If you could pay off about 100 trillion in debt into the US economy in one payment you might break some things :)\"" }, { "docid": "201415", "title": "", "text": "\"Until you get some financial education, you will be vulnerable to people wanting your money. Once you are educated, you will be able to live a tidy life off this-- which is exactly why this amount was awarded to you, rather than some other amount. They gave you enough money. This is not a lottery win. I mean \"\"financial counselors\"\" who will want to help you with strategies to invest your money. Every one will promise your money will grow. The latter case describes every full-service broker, e.g. what will happen if you walk into EdwardJones. This industry has a long tradition of charmingly selling investments which significantly underperform the market, and making their money by kickbacks (sales commissions) from those investments (which is why they significantly underperform.) They also offer products which are unnecessarily complex meant to confuse customers and hide fees. One mark of trouble is \"\"early exit\"\" fees, which they need to recoup the sales commission they already paid out. Unfortunately, one of those people is you. You are treating this like a windfall, falling into old, often-repeated cliché of \"\"lottery-win thinking\"\". \"\"Gosh, there's so much money there, what could go wrong?\"\" This always ends in disaster and destitution, on top of your other woes. It's not a windfall. They gave you just enough money to live on - barely. Because these lawyers and judges do this all day every day, and they know exactly how much capital will replace a lifelong salary, and if anything you got cheated a bit. Read on. You don't want to feel like greedy Scrooge, hoarding every penny. I get that. But generous spending won't fix that. What will is financial education, and once you have real understanding and certainty about your financial situation, you will be able to both provide for yourself and be giving in a sensible manner. This stuff isn't taught in school. If it was, there'd be a lot more millionaires, because wealth isn't about luck, it's about intelligent management of money. Good advisers do exist. They're hard to find. Good advisors work only one way: for a flat rate or hourly fee. This is called a \"\"Fee-only advisor\"\". S/he never takes commissions. Beware of brokers who normally work on commission but will happily take an upfront fee. Even if they promise to hand you their commission check, they're still recommending you into the same sub-par investments because that's their training! I get the world of finance is extremely confusing and it's hard to know where to start. Just make one leap of faith with me: You can learn this. One place it's not confusing: University endowments. They get windfalls just like you, and they need to manage it to support them for a very long time, just like you. Endowments are very closely watched by the smartest people in finance -- no lottery fever here. It's agreed by all that there is one best way to invest an endowment. And it's mandatory by law. An endowment is a chunk of money (say, $1.2 million) that must fund a purpose (say, a math professorship or \"\"chair\"\") in perpetuity. You're not planning to live quite that long, but when you're in your 20's, the investment strategy is the same. The endowment is designed to generate income of some amount, on average, over the long term. You can draw from the endowment even in \"\"down years\"\". The rule of thumb is 4-6% is a sustainable rate that won't overtax the endowment (usually, but you have to keep an eye on it). On $1.2M, that's $48,000 to $72,000 per year. Not half bad. See, I told you it could work. Read Jane Austen? Mister Darcy, referred to as a gentleman of 10,000 pounds -- meaning his assets were many times that, but they yield income of £10,000 a year. Same idea. Keep in mind that you need to pay taxes. But if you plan your investments so you're holding them more than a year, you're in the much lower 0-10-15% capital gains tax bracket. So, here's where I'd like you to go. I would say more, but this will give you quite an education by itself. Say you gave all your money to me. And said \"\"Your nonprofit needs an executive director. Fund it. In perpetuity.\"\" I'd say \"\"Thank you\"\", \"\"you're right\"\", and I'd create an endowment and invest it about like this. That is fairly close to the standard mix you'll find in most endowments, because that is what's considered \"\"prudent\"\" under endowment law (UPMIFA). I'd carry all that in a Vanguard or Fidelity account and follow Bogle's advice on limiting fees. That said, dollar-cost-averaging is not a suicide pact, and bonds are ugly right now (for reason Suze Orman describes) and real estate seems really bubbly right now... so I'd back out of those for now. I'd aim to draw about $60k/year out of it or 5%, and on average, in the very long term, the capital should grow. I would adjust it downward somewhat if the next few years are a hard recession, to avoid taking too much out of the capital... and resist the urge to take more out in boom years, because that is your hedge against the next recession. Over 7% is not prudent per the law (absent very reasonable reasons). UPMIFA doesn't apply to you, but I'd act as if it did. A very reasonable reason to take more than 7% would be to shift investment into a house for living in. I would aim for a duplex/triplex to also have income from the property, if the numbers made sense, which they often don't in California, but that's another question. At your financial level -- never, never, never give cash to a charity. You will get marked as a \"\"soft target\"\" and every commercial fundraiser on earth will stalk you for the rest of your life. At your level, you open a Donor Advised Fund, and let the Fund do your giving for you. Once you've funded it (which is tax deductible) you later tell them which charities to fund when. They screen out fake charities and protect your identity. I discuss DAFs at length here. Now when \"\"charities\"\" harass you for an immediate handout, just tell them that's not how you support charities.\"" }, { "docid": "535427", "title": "", "text": "The answers you've received already are very good. I truly sympathize with your situation. In general, it makes sense to try to build off of existing relationships. Here are a few ideas: I don't know if you work for a small or large company, or local/state government. But if there is any kind of retirement planning through your workplace, make sure to investigate that. Those people are usually already paid something for their services by your employer, so they should have less of an interest in making money off you directly. One more thought: A no-fee brokerage company e.g. Charles Schwab. They offer a free one hour phone call with an investment adviser if you invest at least $25K. I personally had very good experiences with them. This answer may be too anecdotal and not specifically address the annuity dilemma you mentioned. That annunity dilemma is why you need to find someone you can trust, who is competent (see the credentials for financial advisers mentioned in the other answers), and will work the numbers out with you." }, { "docid": "401792", "title": "", "text": "Why? Because when I play a game, I use every rule to my advantage. It sounds like that's what he's doing. He's also created thousands of jobs that otherwise wouldn't exist. I admire people with the inclination and skills to be a shrewd businessman. I don't know the guy personally, or much of anything about him. I'm mostly defending the practice of playing the game to win, and having the skills to do so." }, { "docid": "147092", "title": "", "text": "All the comments seem to accept the slap on the wrist and move along. The law obviously exists for a reason. If we are allowing it, then why the law? What makes them exempt? First few times, get fined. Anything after, LARGE fines (6+ figures). If you do it again, obviously you don't know how to follow the rules. Lose your license. Honestly, why condone this and other behavior?" } ]

[ { "docid": "152286", "title": "", "text": "I don't want to get involved in trading chasing immediate profit That is the best part. There is an answer in the other question, where a guy only invested in small amounts and had a big sum by the time he retired. There is good logic in the answer. If you put in lump sum in a single stroke you will get at a single price. But if you distribute it over a time, you will get opportunities to buy at favorable prices, because that is an inherent behavior of stocks. They inherently go up and down, don't remain stable. Stock markets are for everybody rich or poor as long as you have money, doesn't matter in millions or hundreds, to invest and you select stocks with proper research and with a long term view. Investment should always start in small amounts before you graduate to investing in bigger amounts. Gives you ample time to learn. Where do I go to do this ? To a bank ? To the company, most probably a brokerage firm. Any place to your liking. Check how much they charge for brokerage, annual charges and what all services they provide. Compare them online on what services you require, not what they provide ? Ask friends and colleagues and get their opinions. It is better to get firsthand knowledge about the products. Can the company I'm investing to be abroad? At the moment stay away from it, unless you are sure about it because you are starting. Can try buying ADRs, like in US. This is an option in UK. But they come with inherent risk. How much do you know about the country where the company does its business ? Will I be subject to some fees I must care about after I buy a stock? Yes, capital gains tax will be levied and stamp duties and all." } ]

[ { "docid": "323944", "title": "", "text": "\"But speculation is absolutely intended to happen, and is considered necessary for healthy a investment environment. What I am saying, however, is that this desire to rid the world of HFT appears to be moral rather than logical. There is very little reason to eliminate HFT as it stands, although there appears to be a propensity for very emotional responses to the basic concept. Ones I can appreciate. However I am suggesting they are misguided as the people who should be upset with HFT are the hedge fund managers and day traders they are outwitting, not you or me who buy and sell shares on a whim every so often. If you want to ban day traders that is a separate argument I don't want to go into. The idea that these computer algorithms are all set to \"\"sell,sell,sell\"\" is provably nonsensical. If that were the case, all of the HFT participants would have gone massively bankrupt during the flash crashes. Also, it is quite patently the case that somebody has to be buying in order for anybody to sell. Saying \"\"this is what caused some of the crashes\"\" is just your desire for a simple explanation. It must have been more complex than this, and to my knowledge none of these crashes have been adequately explained although some poorly designed algorithms have been implicated. Note that in one of these cases IIRC a fund closed its doors due to the losses, and the market was largely unaffected. So it seems like a problem that self corrects in this case, and one that only *harms* the participant that erred. Also, to correct a basic misunderstanding, selling happens all of the time, and does not inherently drive the price down. There are by definition an *equal number of sales to purchases*. What drives the price down is *the people buying being willing to pay less*. EDIT: as another aside, a point I have made elsewhere and seems suitable to make here: flash crashes, whilst causing panic, are again something only the professional intra-day trading community are likely to be affected by. Their very name implies so. The reason being that anybody investing based on the *long term investment potential* of a company will only benefit in the temporary drop in price, as they can purchase more of the company at a bargain price. Any intelligent investor will not be fazed by the drop in price, as price has *no bearing on a company's real value*, and stocks do tend towards this value over time, whatever happens over the short term. The only case in which it could is if the company owns a large portfolio of stock that itself devalues dramatically that they intended to sell and as a result experience cash flow problems. This is so incredibly unlikely with a flash crash as to be ignored.\"" }, { "docid": "113786", "title": "", "text": "\"There are two umbrellas in investing: active management and passive management. Passive management is based on the idea \"\"you can't beat the market.\"\" Passive investors believe in the efficient markets hypothesis: \"\"the market interprets all information about an asset, so price is equal to underlying value\"\". Another idea in this field is that there's a minimum risk associated with any given return. You can't increase your expected return without assuming more risk. To see it graphically: As expected return goes up, so does risk. If we stat with a portfolio of 100 bonds, then remove 30 bonds and add 30 stocks, we'll have a portfolio that's 70% bonds/30% stocks. Turns out that this makes expected return increase and lower risk because of diversification. Markowitz showed that you could reduce the overall portfolio risk by adding a riskier, but uncorrelated, asset! Basically, if your entire portfolio is US stocks, then you'll lose money whenever US stocks fall. But, if you have half US stocks, quarter US bonds, and quarter European stocks, then even if the US market tanks, half your portfolio will be unaffected (theoretically). Adding different types of uncorrelated assets can reduce risk and increase returns. Let's tie this all together. We should get a variety of stocks to reduce our risk, and we can't beat the market by security selection. Ideally, we ought to buy nearly every stock in the market so that So what's our solution? Why, the exchange traded fund (ETF) of course! An ETF is basically a bunch of stocks that trade as a single ticker symbol. For example, consider the SPDR S&P 500 (SPY). You can purchase a unit of \"\"SPY\"\" and it will move up/down proportional to the S&P 500. This gives us diversification among stocks, to prevent any significant downside while limiting our upside. How do we diversify across asset classes? Luckily, we can purchase ETF's for almost anything: Gold ETF's (commodities), US bond ETF's (domestic bonds), International stock ETFs, Intl. bonds ETFs, etc. So, we can buy ETF's to give us exposure to various asset classes, thus diversifying among asset classes and within each asset class. Determining what % of our portfolio to put in any given asset class is known as asset allocation and some people say up to 90% of portfolio returns can be determined by asset allocation. That pretty much sums up passive management. The idea is to buy ETFs across asset classes and just leave them. You can readjust your portfolio holdings periodically, but otherwise there is no rapid trading. Now the other umbrella is active management. The unifying idea is that you can generate superior returns by stock selection. Active investors reject the idea of efficient markets. A classic and time proven strategy is value investing. After the collapse of 07/08, bank stocks greatly fell, but all the other stocks fell with them. Some stocks worth $100 were selling for $50. Value investors quickly snapped up these stocks because they had a margin of safety. Even if the stock didn't go back to 100, it could go up to $80 or $90 eventually, and investors profit. The main ideas in value investing are: have a big margin of safety, look at a company's fundamentals (earnings, book value, etc), and see if it promises adequate return. Coke has tremendous earnings and it's a great company, but it's so large that you're never going to make 20% profits on it annually, because it just can't grow that fast. Another field of active investing is technical analysis. As opposed to the \"\"fundamental analysis\"\" of value investing, technical analysis involves looking at charts for patterns, and looking at stock history to determine future paths. Things like resistance points and trend lines also play a role. Technical analysts believe that stocks are just ticker symbols and that you can use guidelines to predict where they're headed. Another type of active investing is day trading. This basically involves buying and selling stocks every hour or every minute or just at a rapid pace. Day traders don't hold onto investments for very long, and are always trying to predict the market in the short term and take advantage of it. Many individual investors are also day traders. The other question is, how do you choose a strategy? The short answer is: pick whatever works for you. The long answer is: Day trading and technical analysis is a lot of luck. If there are consistent systems for trading , then people are keeping them secret, because there is no book that you can read and become a consistent trader. High frequency trading (HFT) is an area where people basically mint money, but it s more technology and less actual investing, and would not be categorized as day trading. Benjamin Graham once said: In the short run, the market is a voting machine but in the long run it is a weighing machine. Value investing will work because there's evidence for it throughout history, but you need a certain temperament for it and most people don't have that. Furthermore, it takes a lot of time to adequately study stocks, and people with day jobs can't devote that kind of time. So there you have it. This is my opinion and by no means definitive, but I hope you have a starting point to continue your study. I included the theory in the beginning because there are too many monkeys on CNBC and the news who just don't understand fundamental economics and finance, and there's no sense in applying a theory until you can understand why it works and when it doesn't.\"" }, { "docid": "65147", "title": "", "text": "At any given time there are buy orders and there are sell orders. Typically there is a little bit of space between the lowest sell order and the highest buy order, this is known as the bid/ask spread. As an example say person A will sell for $10.10 but person B will only buy at $10.00. If you have a billion shares outstanding just the space between the bid and ask prices represents $100,000,000 of market cap. Now imagine that the CEO is in the news related to some embezzlement investigation. A number of buyers cancel their orders. Now the highest buy order is $7. There isn't money involved, that's just the highest offer to buy at the time; but that's a drop from $10 to $7. That's a change in market cap of $3,000,000,000. Some seller thinks the stock will continue to fall, and some buyer thinks the stock has reached a fair enterprise value at $7 billion ($7 per share). Whether or not the seller lost money depends on where the seller bought the stock. Maybe they bought when it was an IPO for $1. Even at $7 they made $6 per share. Value is changing, not money. Though it would be fun, there's no money bonfire at the NYSE." }, { "docid": "532485", "title": "", "text": "\"How often do investors really lose money? All the time. And it's almost always reason number 1. Let's start with the beginner investor, the person most likely to make some real losses and feel they've \"\"learned\"\" that investing is no better than Vegas. This person typically gets into it because they've been given a hot stock tip, or because they've received a windfall, decided to give this investing lark a try, and bought stock in half a dozen companies whose names they know from their everyday lives (\"\"I own a bit of Google! How cool is that?\"\"). These are people who don't understand the cyclic nature of the market (bear gives way to bull gives way to bear, and on and on), and so when they suddenly see that what was $1000 is now $900 they panic and sell everything. Especially as all the pundits are declaring the end of the world (they always do). Until the moment they sold, they only had paper losses. But they crystallised those losses, made them real, and ended at a loss. Then there's the trend-follower. These are people who don't necessarily hit a bear market, or even a downturn, in their early days, but never really try to learn how the market works in any real sense. They jump into every hot stock, then panic and sell out of anything that starts to go the wrong way. Both of these reactive behaviours seem reasonable in the moment (\"\"It's gone up 15% in the past week? Buy buy buy!\"\" and \"\"I've lost 10% this month on that thing? Get rid of it before I lose any more!\"\"), but they work out over time to lots of buying high and selling low, the very opposite of what you want to do. Then there's the day-trader. These are people who sit in their home office, buying and selling all day to try and make lots of little gains that add up to a lot. The reason these people don't do well in the long run is slightly different to the other examples. First, fees. Yes, most platforms offer a discount for \"\"frequent traders\"\", but it still ain't free. Second, they're peewees playing in the big leagues. Of course there are exceptions who make out like bandits, but day traders are playing a different game than the people I'd call investors. That game, unlike buy-and-hold investing, is much more like gambling, and day-traders are the enthusiastic amateurs sitting down at a table with professional poker players – institutional investors and the computers and research departments that work for them. Even buy-and-hold investors, even the more sophisticated ones, can easily realise losses on a given stock. You say you should just hold on to a stock until it goes back up, but if it goes low enough, it could take a decade or more to even just break even again. More savvy stock-pickers will have a system worked out, something like \"\"ok, if it gets down to 90% of what I bought it for, I cut my losses and sell.\"\" This is actually a sensible precaution, because defining hard rules like that helps​ you eliminate emotion from your investing, which is incredibly important if you want to avoid becoming the trend-follower above. It's still a loss, but it's a calculated one, and hopefully over time the exception rather than the rule. There are probably as many other ways to lose money as there are people investing, but I think I've given you a taste. The key to avoiding such things is understanding the psychology of investing, and defining the rules that you'll follow no matter what (as in that last example). Or just go learn about index investing. That's what I did.\"" }, { "docid": "441139", "title": "", "text": "Too little information to give any kind of advice. What is your age, goals, other monies, other investments etc... You need to look at the whole thing. Are you investing already in tax-deferred IRA. Spend the time to learn to be your own investment advisor. Many investment professionals may disagree with me on this, but since you can't trust many of them better you do your own research first. Same with Stocks or ETF, you try to be the expert. Better you have the time to follow your own investments ideas, do not depend on a human or robot to tell you when to buy or sell. Their job is to part you from your money. If you do not have the time to this yourself, save yourself the money, and just do something else with it. I have been investing in the Stock Market since 1986, I have made more money than I lost. Good runs and bad. Today it is all about trading, you can not trust the financials given by anyone, or know what is going to happen in the markets in general. So unless you want to play the game every day, don't be in it." }, { "docid": "384064", "title": "", "text": "\"So you are off to a really good start. Congratulations on being debt free and having a nice income. Being an IT contractor can be financially rewarding, but also have some risks to it much like investing. With your disposable income I would not shy away from investing in further training through sites like PluralSite or CodeSchool to improve weak skills. They are not terribly expensive for a person in your situation. If you were loaded down with debt and payments, the story would be different. Having an emergency fund will help you be a good IT contractor as it adds stability to your life. I would keep £10K or so in a boring savings account. Think of it not as an investment, but as insurance against life's woes. Having such a fund allows you to go after a high paying job you might fail at, or invest with impunity. I would encourage you to take an intermediary step: Moving out on your own. I would encourage renting before buying even if it is just a room in someone else's home. I would try to be out of the house in less than 3 months. Being on your own helps you mature in ways that can only be accomplished by being on your own. It will also reduce the culture shock of buying your own home or entering into an adult relationship. I would put a minimum of £300/month in growth stock mutual funds. Keeping this around 15% of your income is a good metric. If available you may want to put this in tax favored retirement accounts. (Sorry but I am woefully ignorant of UK retirement savings). This becomes your retire at 60 fund. (Starting now, you can retire well before 68.) For now stick to an index fund, and once it gets to 25K, you may want to look to diversify. For the rest of your disposable income I'd invest in something safe and secure. The amount of your disposable income will change, presumably, as you will have additional expenses for rent and food. This will become your buy a house fund. This is something that should be safe and secure. Something like a bond fund, money market, dividend producing stocks, or preferred stocks. I am currently doing something like this and have 50% in a savings account, 25% in a \"\"Blue chip index fund\"\", and 25% in a preferred stock fund. This way you have some decent stability of principle while also having some ability to grow. Once you have that built up to about 12K and you feel comfortable you can start shopping for a house. You may want to be at the high end of your area, so you should try and save at least 10%; or, you may want to be really weird and save the whole thing and buy your house for cash. If you are still single you may want to rent a room or two so your home can generate income. Here in the US there can be other ways to generate income from your property. One example is a home that has a separate area (and room) to park a boat. A boat owner will pay some decent money to have a place to park their boat and there is very little impact to the owner. Be creative and perhaps find a way where a potential property could also produce income. Good luck, check back in with progress and further questions! Edit: After some reading, ISA seem like a really good deal.\"" }, { "docid": "359131", "title": "", "text": "In a perfect world scenario you would get a car 2-5 years old that has very little mileage. One of the long standing archaic rules of the car world is that age trumps mileage. This was a good rule when any idiot could roll back an odometer. Chances are now that if you rolled your odometer back the car was serviced somewhere, had inspection or whatever and it is on a report. If seller was found to do this they could face jail time and obviously now their car is almost worthless. Why do I mention this? Because you can take a look at 2011 cars. Those with 20K miles go for just a little more than those with 100K miles. As an owner you will start incurring heavy maintenance costs around 100K on most newer cars. By buying cars with lower mileage, keeping them for a year or two, and reselling them before they get up in miles, you can stay in that magic area where you can drive a pretty good car for $200-300 a month. Note that this takes work on both the buying and selling side and you often need cash to get these cars (dealers are good about siphoning really good used cars to employees/friends). This is a great strategy for keeping costs down and car value up but obviously a lot of people try to do this and it takes work and you have to be willing to settle sometimes on a car that is fine, but not exactly what you want. As for leasing this really gets into three main components: If you are going to do EVERYTHING at a dealership and you want something new or newish you might as well lease. At least then you can shop around for apples to apples. The problem with buying a new/used car from the dealers in perpetuity isn't the buying process. It is the fact that they will screw you on the trade-in. A car that books for 20K may trade-in for 17K. Even if the dealer says they are giving you 20K, then they make you pay list price for the car. I have many many times negotiated a price of a car and then wife brought in our car separately and I can count on ZERO fingers how many times that the dealership honored both sides of the negotiations. Not only did they not honor them but most refused to talk with us after they found out. With a lease you don't have to worry about losing this money in the negotiations. You might pay a little extra (or not since you can shop around) but after the lease you wash your hands of the car. The one caveat to this is the high-end market. When you are talking your Acura, Mercedes, Lexus... It is probably better to buy and trade in every couple years. You lose too much equity by leasing, where it won't cover the trade-in gap and cost of your money being elsewhere. I have a friend that does this and gets a slightly better car every 2-3 years with same monthly payment. Another factor to consider is the price of a car. If your car will be worth over $15K at time of sale you are going to have a hard time selling it by owner. When amounts get this high people often need financing. Yes they can get personal financing but most people are too lazy to do this. So the number of used car buyers on let's say craigslist are way way fewer as you start getting over $10-12K and I have found $15K to be kind of that magic amount. The pro-buy-used side is easy. Aim for those cars around $12-18K that are out there (and many still under warranty). These owners will have issues finding cash buyers. They will drop prices somewhere between book price and dealer trade-in. In lucky cases where they need cash maybe below dealer trade-in. And remember these sellers aren't dealing with 100s let alone 10 buyers. You drive the car for 3-4 years. Maybe it is $7-10K. But now you will get much much closer to book price because there will be far more buyers in this range." }, { "docid": "564957", "title": "", "text": "I think you are right. I hear people all the time with horror stories about futures and trading horror stories in general. I want to learn about this market, but I don't want to go in without some education on the matter. I watched their video on options on futures, but the valuation method needs a bit more explaining to be (beta, gamma, etc.). I get the basic idea of options on futures, but I need to formulate a strategy, and that is where study would come in. I have wanted to play around with a few strategies I had in my head for regular options, and by the time I get the grasp of it, I might be able to trade options on futures. I guess my biggest thing with options on futures is not to be sophisticated, but more so I can have access to new markets. On the topic of options though, I do think there is some strategies that could boost my returns a bit on my existing strategies. I think selling various options (selling call options on weak dividend stocks stuck as bulk shipper or mortgage reits and as of late oil trusts or selling put options on some stronger oil reits or other stronger dividend stocks). The only problem is I don't know if the premium would be enough to make it worth while with the weak dividend stocks. So either way, even if you are only earning a conservative 9% on dividends, if you add in another 4% for premium, you could be making 13% off of one trade, and could repeat the process (assuming the target stayed weak or strong)." }, { "docid": "250761", "title": "", "text": "\"Stock prices are set by bidding. In principle, a seller will say, \"\"I want $80.\"\" If he can't find anyone willing to buy at that price, he'll either decide not to sell after all, or he'll lower his price. Likewise, a buyer will say, \"\"I'll pay $70.\"\" If he can't find anyone willing to pay that price, he'll either decide not to buy or he'll increase his price. For most stocks there are many buyers and many sellers all the time, so there's a constant interplay. The typical small investor has VERY little control of the price. You say, \"\"I want to buy 10 shares of XYZ Corporation and my maximum price is $20.\"\" If the current trending price is below $20, your broker will buy it for you. If not, he won't. You normally have some time limit on the order, so if the price falls within your range within that time period, your broker will buy. That is, your choice is basically to buy or not buy, or sell or not sell, at the current price. You have little opportunity to really negotiate a better price. If you have a significant percentage of a company's total stock, different story. In real life, most stocks are being traded constantly, so buyers and sellers both have a pretty good idea of the current price. If the last sale was ten minutes ago for $20, it's unlikely anyone's going to now bid $100. They're going to bid $20.50 or $19.25 or some such. If the last sale was for $20 and your broker really came to the floor and offered to buy for $100, I suppose someone would sell to him very quickly before he realized what an outrageous price this was. I use TD Ameritrade, and on their web site, if I give a price limit on a buy that's more than a small percentage above the last sale, they reject it as an error. I forget the exact number but they won't even accept a bid of $80 if the stock is going for $40. They might accept $41 or $42, something like that.\"" }, { "docid": "466883", "title": "", "text": "\"Note: the answer below is speculative and not based on any first-hand knowledge of pump-and-dump schemes. The explanation with spamming doesn't really makes sense for me. Often you see a stock jump 30% or more in a single day at a particular moment in time. Unlikely that random people read their emails at that time and decide to buy. What I think happens is the pumper does a somewhat risky thing: starts buying a lot of shares of a stock that has declined a lot and had low volumes during the previous days. As the price starts to increase other people start to notice the jump and join the buying spree (also don't forget that some probably use buy-stop orders which are triggered when the price reaches a particular level). Also there should be some automatic trading involved (maybe HFT firms do pump-and-dumps) as you have to trade a big volume in a relatively short time span. I think it is unlikely to be done by human operators. Another explanation would be that there is a group of pumpers (to spread the risk so to speak). Update: As I think more of it, it is not necessary to buy \"\"a lot of shares\"\". You could buy some shares, sell them to another pumper and buy from them again at a higher price in several iterations. I think this could also work if you do it fast enough. These scheme makes sense only you previously bought many shares at the low price, possibly during several weeks. Once the price is pumped high enough you can start selling the shares you previously bought (in the days preceding the pump).\"" }, { "docid": "589088", "title": "", "text": "\"Some of the other answers recommended peer-to-peer lending and property markets. I would not invest in either of these. Firstly, peer-to-peer lending is not a traditional investment and we may not have enough historical data for the risk-to-return ratio. Secondly, property investments have a great risk unless you diversify, which requires a huge portfolio. Crowd-funding for one property is not a traditional investment, and may have drawbacks. For example, what if you disagree with other crowd-funders about the required repairs for the property? If you invest in the property market, I recommend a well-diversified fund that owns many properties. Beware of high debt leverage used to enhance returns (and, at the same time, risk) and high fees when selecting a fund. However, traditionally it has been a better choice to invest in stocks than to invest in property market. Beware of anyone who says that the property market is \"\"too good to not get into\"\" without specifying which part of the world is meant. Note also that many companies invest in properties, so if you invest only in a well-diversified stock index fund, you may already have property investments in your portfolio! However, in your case I would keep the money in risk-free assets, i.e. bank savings or a genuine low-cost money market fund (i.e. one that doesn't invest in corporate debt or in variable-rate loans which have short duration but long maturity). The reason is that you're going to be unemployed soon, and thus, you may need the money soon. If you have an investment horizon of, say, 10 years, then I would throw stocks into the mix, and if you're saving for retirement, then I would go all in to stocks. In the part of the world where I live in, money market funds generally have better return than bank savings, and better diversification too. However, your 2.8% interest sounds rather high (the money market fund I have in the past invested in currently yields at 0.02%, but then again I live in the eurozone), so be sure to get estimates for the yields of different risk-free assets. So, my advice for investing is simple: risk-free assets for short time horizon, a mixture of stocks and risk-free assets for medium time horizon, and only stocks for long time horizon. In any case, you need a small emergency fund, too, which you should consider a thing separate from your investments. My emergency fund is 20 000 EUR. Your 50 000 AUD is bit more than 30 000 EUR, so you don't really have that much money to invest, only a bit more than a reasonably sized emergency fund. But then again, I live in rental property, so my expenses are probably higher than yours. If you can foresee a very long time horizon for part of your investment, you could perhaps invest 50% of your money to stocks (preference being a geographically diversified index fund or a number of index funds), but I wouldn't invest more because of the need for an emergency fund.\"" }, { "docid": "420974", "title": "", "text": "\"Though it seems unintuitive, you should rationally ignore the past performance of this stock (including the fact that it's at its 52-week high) and focus exclusively on factors that you believe should affect it moving forward. If you think it's going to go up even further, more than the return on your other options for where to put the money, keep the stock. If you think it's peaked and will be going down, now's a good time to sell. To put it another way: if you didn't already have this stock, would you buy it today? Your choice is just about the same: you can choose between a sum of cash equal to the present market value of the shares, OR the shares. Which do you think is worth more? You also mentioned that you only have 10 stocks in the portfolio. Some are probably a larger percentage than others, and this distribution may be different than what you want in your portfolio. It may be time to do some rebalancing, which could involve selling some shares where your position is too large (as a % of your portfolio) and using the proceeds toward one or more categories you're not as invested in as you would like to be. This might be a good opportunity to increase the diversity in your portfolio. If part of your reward and motivation for trading is emotional, not purely financial, you could sell now, mark it as a \"\"win,\"\" and move on to another opportunity. Trading based on emotions is not likely to optimize your future balance, but not everybody is into trading or money for money's sake. What's going to help you sleep better at night and help boost your quality of life? If holding the stock will make you stress and regret a missed opportunity if it goes down, and selling it will make you feel happy and confident even if it still goes up more (e.g. you interpret that as further confirming that you made a good pick in the first place), you might decide that the risk of suboptimal financial returns (from emotion-based trading) is acceptable. As CQM points out, you could also set a trailing sell order to activate only when the stock is a certain percentage or dollar amount below whatever it peaks at between the time you set the order and the time it fires/expires; the activation price will rise with the stock and hold as it falls.\"" }, { "docid": "495600", "title": "", "text": "\"Question 1: How do I start? or \"\"the broker\"\" problem Get an online broker. You can do a wire transfer to fund the account from your bank. Question 2: What criticism do you have for my plan? Dividend investing is smart. The only problem is that everyone's currently doing it. There is an insatiable demand for yield, not just individual investors but investment firms and pension funds that need to generate income to fund retirements for their clients. As more investors purchase the shares of dividend paying securities, the share price goes up. As the share price goes up, the dividend yield goes down. Same for bonds. For example, if a stock pays $1 per year in dividends, and you purchase the shares at $20/each, then your yearly return (not including share price fluctuations) would be 1/20 = 5%. But if you end up having to pay $30 per share, then your yearly return would be 1/30 or 3.3% yield. The more money you invest, the bigger this difference becomes; with $100K invested you'd make about $1.6K more at 5%. (BTW, don't put all your money in any small group of stocks, you want to diversify). ETFs work the same way, where new investors buying the shares cause the custodian to purchase more shares of the underlying securities, thus driving up the price up and yield down. Instead of ETFs, I'd have a look at something called closed end funds, or CEFs which also hold an underlying basket of securities but often trade at a discount to their net asset value, unlike ETFs. CEFs usually have higher yields than their ETF counterparts. I can't fully describe the ins and outs here in this space, but you'll definately want to do some research on them to better understand what you're buying, and HOW to successfully buy (ie make sure you're buying at a historically steep discount to NAV [https://seekingalpha.com/article/1116411-the-closed-end-fund-trifecta-how-to-analyze-a-cef] and where to screen [https://www.cefconnect.com/closed-end-funds-screener] Regardless of whether you decide to buy stocks, bonds, ETFs, CEFs, sell puts, or some mix, the best advice I can give is to a) diversify (personally, with a single RARE exception, I never let any one holding account for more than 2% of my total portfolio value), and b) space out your purchases over time. b) is important because we've been in a low interest rate environment since about 2009, and when the risk free rate of return is very low, investors purchase stocks and bonds which results in lower yields. As the risk free rate of return is expected to finally start slowly rising in 2017 and gradually over time, there should be gradual downward pressure (ie selling) on the prices of dividend stocks and especially bonds meaning you'll get better yields if you wait. Then again, we could hit a recession and the central banks actually lower rates which is why I say you want to space your purchases out.\"" }, { "docid": "360059", "title": "", "text": "\"There are people (well, companies) who make money doing roughly what you describe, but not exactly. They're called \"\"market makers\"\". Their value for X% is somewhere on the scale of 1% (that is to say: a scale at which almost everything is \"\"volatile\"\"), but they use leverage, shorting and hedging to complicate things to the point where it's nothing like a simple as making a 1% profit every time they trade. Their actions tend to reduce volatility and increase liquidity. The reason you can't do this is that you don't have enough capital to do what market makers do, and you don't receive any advantages that the exchange might offer to official market makers in return for them contracting to always make both buy bids and sell offers (at different prices, hence the \"\"bid-offer spread\"\"). They have to be able to cover large short-term losses on individual stocks, but when the stock doesn't move too much they do make profits from the spread. The reason you can't just buy a lot of volatile stocks \"\"assuming I don't make too many poor choices\"\", is that the reason the stocks are volatile is that nobody knows which ones are the good choices and which ones are the poor choices. So if you buy volatile stocks then you will buy a bunch of losers, so what's your strategy for ensuring there aren't \"\"too many\"\"? Supposing that you're going to hold 10 stocks, with 10% of your money in each, what do you do the first time all 10 of them fall the day after you bought them? Or maybe not all 10, but suppose 75% of your holdings give no impression that they're going to hit your target any time soon. Do you just sit tight and stop trading until one of them hits your X% target (in which case you start to look a little bit more like a long-term investor after all), or are you tempted to change your strategy as the months and years roll by? If you will eventually sell things at a loss to make cash available for new trades, then you cannot assess your strategy \"\"as if\"\" you always make an X% gain, since that isn't true. If you don't ever sell at a loss, then you'll inevitably sometimes have no cash to trade with through picking losers. The big practical question then is when that state of affairs persists, for how long, and whether it's in force when you want to spend the money on something other than investing. So sure, if you used a short-term time machine to know in advance which volatile stocks are the good ones today, then it would be more profitable to day-trade those than it would be to invest for the long term. Investing on the assumption that you'll only pick short-term winners is basically the same as assuming you have that time machine ;-) There are various strategies for analysing the market and trying to find ways to more modestly do what market makers do, which is to take profit from the inherent volatility of the market. The simple strategy you describe isn't complete and cannot be assessed since you don't say how to decide what to buy, but the selling strategy \"\"sell as soon as I've made X% but not otherwise\"\" can certainly be improved. If you're keen you can test a give strategy for yourself using historical share price data (or current share price data: run an imaginary account and see how you're doing in 12 months). When using historical data you have to be realistic about how you'd choose what stocks to buy each day, or else you're just cheating at solitaire. When using current data you have to beware that there might not be a major market slump in the next 12 months, in which case you won't know how your strategy performs under conditions that it inevitably will meet eventually if you run it for real. You also have to be sure in either case to factor in the transaction costs you'd be paying, and the fact that you're buying at the offer price and selling at the bid price, you can't trade at the headline mid-market price. Finally, you have to consider that to do pure technical analysis as an individual, you are in effect competing against a bank that's camped on top of the exchange to get fastest possible access to trade, it has a supercomputer and a team of whizz-kids, and it's trying to find and extract the same opportunities you are. This is not to say the plucky underdog can't do well, but there are systematic reasons not to just assume you will. So folks investing for their retirement generally prefer a low-risk strategy that plays the averages and settles for taking long-term trends.\"" }, { "docid": "377186", "title": "", "text": "If you want to invest in the stock market, whether over a shorter period of 1 to 2 years or over a longer period of 10 or 20 years or longer you need to take some precautions and have a written investment plan with a risk management strategy incorporated in your plan. Others have said that 1 to 2 years is too short to invest in the stock market as the stock market can have a correction and fall by 50%. But it doesn't matter if you invest for 1 year or if you invest for 50 years, the stock market can still fall by 50% just before you plan to withdraw your funds. What you need to figure out is a way to get out before the market falls by 40% to 50%. A simple way to do this is to use technical indicators to warn you when a market trend is starting to change and that it is time to get out of the market. Two simple indicators you can use on a market index are the Rate of Change (ROC) indicator and the 100 week Moving Average (MA). Below is a 10 year weekly chart of the S&P500 with these two indicators charted. They show good times to get into the market and good times to get out. If you are using the 100 week MA you would buy in when the price crosses above the MA line and sell when the price crosses below the MA line. If you are using the ROC indicator you would buy in when the ROC indicator crosses above the zero line and sell when the ROC indicator crosses below the zero line. So your investment plan could be to buy an Index ETF representing the S&P500 when the ROC moves above zero and sell when it crosses below zero. You can also place a trailing stop loss of 10% to protect you in case of a sudden fall over a couple of days. You can manage your investments in as little as 10 minutes per week by checking the chart once per week and adjusting your stop loss order. If you want to progressively add to your investment each month you could check the charts and only add any new funds if both the ROC is above zero and sloping upwards. Another option for adding new funds could be if the price is above the MA and moving further away from the MA. All these rules should be incorporated into your investment plan so that you are not basing your decisions based on emotions. There are many other Technical Analysis Indicators you could also learn about to make better educated decisions about your stock market investments. However, what I have provided here is enough for anyone to test over different indexes and time frames and do their own paper trading on to gain some confidence before placing any real money on the table." }, { "docid": "83857", "title": "", "text": "\"Yeah.... Colombia is one of the top Emerald mining countries of the world. I recommend you to investigate a little bit about it, check emerald prices in your country, then you'll find out if it's really profitable for you. If so, I recommend you to buy them at the \"\"Emerald Trade Center\"\" located in Bogota, all gemstones there, are certified, sometimes you can find people selling really cheap emeralds on the street, but most of the time it's a scam. Depending on size, color Weight, treatment, etc. Emeralds are less or more expensive. You can buy just the emerald or emerald Jewerly. Once I met a Colombian guy in Aruba, who buys emeralds in his country and then he sells it in Aruba. He said, it was profitable in Aruba. If so, I recommend you to buy them at the \"\"Emerald Trade Center\"\" located in Bogota, all gemstones there are certified, sometimes you can find people selling really cheap emeralds on the street, but most of the time it's a scam. Depending on size, color Weight, treatment, etc. Emeralds are less or more expensive. You can buy just the emerald or emerald Jewerly. Once I met a Colombian guy in Aruba, who buys emeralds in his country and then he sells it in Aruba. He said, it was profitable in Aruba.\"" }, { "docid": "82627", "title": "", "text": "To get rich in a short time, it's more likely what you want to do is go into business. You could go into a non-investment business such as opening a restaurant or starting a tech company, of course. Warren Buffett was working in investing, which is quite a bit different than just buying stocks: The three ways to get rich investing I can think of are: I think the maximum real (after-inflation) return you can really count on over a lot of years is in the 5-6% range at most, maybe less. Here's a post where David Merkel argues 3-4% (assuming cash interest is close to zero real return): http://alephblog.com/2009/07/15/the-equity-premium-is-no-longer-a-puzzle/ At that rate you can double every 10-15 years. Any higher rate is probably risking much lower returns. I often post this argument against that on investment questions: http://blog.ometer.com/2010/11/10/take-risks-in-life-for-savings-choose-a-balanced-fund/ Agree with you that lots of people seem to think they can make up for not saving money by picking a winning investment. Lots of people also use the lottery as a retirement strategy. I'm not sure this is totally irrational, if for some reason someone just can't save. But I'm sure it will fail for almost all the people who try it." }, { "docid": "148632", "title": "", "text": "Also, almost by definition rebalancing involves making more trades than you would have otherwise; wouldn't the additional trading fees you incurred in doing so reduce the benefits of this strategy? You forgot to mention taxes. Rebalancing does or rather can incur costs. One way to minimize the costs is to use the parts of the portfolio that have essentially zero cost of moving. These generally are the funds in your retirement accounts. In the United States they can be in IRAs or 401Ks; they can be regular or Roth. Selling winners withing the structure of the plan doesn't trigger capital gains taxes, and many have funds within them that have zero loads. Another way to reduce trading fees is to only rebalance once a year or once every two years; or by setting a limit on how far out of balance. For example don't rebalance at 61/39 to get back to 60/40 even if it has been two years. Given that the ratio of investments is often rather arbitrary to begin with, how do I know whether I'm selling high and buying low or just obstinately sticking with a losing asset ratio? The ratio used in an example or in an article may be arbitrary, but your desired ratio isn't arbitrary. You selected the ratio of your investments based on several criteria: your age, your time horizon, your goals for the money, how comfortable you are with risk. As these change during your investing career those ratios would also morph. But they aren't arbitrary. These decisions to rebalance are separate from the ones to sell a particular investment. You could sell Computer Company X because of how it is performing, and buy stock in Technology Company Y because you think it has a better chance of growing. That transaction would not be a re-balancing. Selling part of your stock in Domestic Company A to buy stock in international Company B would be part of a re-balancing." }, { "docid": "407505", "title": "", "text": "\"This answer will expand a bit on the theory. :) A company, as an entity, represents a pile of value. Some of that is business value (the revenue stream from their products) and some of that is assets (real estate, manufacturing equipment, a patent portfolio, etc). One of those assets is cash. If you own a share in the company, you own a share of all those assets, including the cash. In a theoretical sense, it doesn't really matter whether the company holds the cash instead of you. If the company adds an extra $1 billion to its assets, then people who buy and sell the company will think \"\"hey, there's an extra $1 billion of cash in that company; I should be willing to pay $1 billion / shares outstanding more per share to own it than I would otherwise.\"\" Granted, you may ultimately want to turn your ownership into cash, but you can do that by selling your shares to someone else. From a practical standpoint, though, the company doesn't benefit from holding that cash for a long time. Cash doesn't do much except sit in bank accounts and earn pathetically small amounts of interest, and if you wanted pathetic amounts of interests from your cash you wouldn't be owning shares in a company, you'd have it in a bank account yourself. Really, the company should do something with their cash. Usually that means investing it in their own business, to grow and expand that business, or to enhance profitability. Sometimes they may also purchase other companies, if they think they can turn a profit from the purchase. Sometimes there aren't a lot of good options for what to do with that money. In that case, the company should say, \"\"I can't effectively use this money in a way which will grow my business. You should go and invest it yourself, in whatever sort of business you think makes sense.\"\" That's when they pay a dividend. You'll see that a lot of the really big global companies are the ones paying dividends - places like Coca-Cola or Exxon-Mobil or what-have-you. They just can't put all their cash to good use, even after their growth plans. Many people who get dividends will invest them in the stock market again - possibly purchasing shares of the same company from someone else, or possibly purchasing shares of another company. It doesn't usually make a lot of sense for the company to invest in the stock market themselves, though. Investment expertise isn't really something most companies are known for, and because a company has multiple owners they may have differing investment needs and risk tolerance. For instance, if I had a bunch of money from the stock market I'd put it in some sort of growth stock because I'm twenty-something with a lot of savings and years to go before retirement. If I were close to retirement, though, I would want it in a more stable stock, or even in bonds. If I were retired I might even spend it directly. So the company should let all its owners choose, unless they have a good business reason not to. Sometimes companies will do share buy-backs instead of dividends, which pays money to people selling the company stock. The remaining owners benefit by reducing the number of shares outstanding, so they own more of what's left. They should only do this if they think the stock is at a fair price, or below a fair price, for the company: otherwise the remaining owners are essentially giving away cash. (This actually happens distressingly often.) On the other hand, if the company's stock is depressed but it subsequently does better than the rest of the market, then it is a very good investment. The one nice thing about share buy-backs in general is that they don't have any immediate tax implications for the company's owners: they simply own a stock which is now more valuable, and can sell it (and pay taxes on that sale) whenever they choose.\"" } ]

[ { "docid": "99943", "title": "", "text": "I'd look into ShareBuilder. You can buy stocks for as low as $2 each, and there is no minimum funding level. You have to be carefull about selling though, as they will charge you $10 each time you want to sell a stock, regardless of how much of it you want to sell." } ]

[ { "docid": "305770", "title": "", "text": "Options can have a negligible time premium. For American1 calls the time premium is never negative. If it had a negative premium it would be profitable to exercise it immediately. A deep in the money call has a delta of exactly one. That is, it's price movements completely mirror the price movements of the underlying stock. That means an option seller can buy stock and completely hedge his short option position. The seller of the option may be in an position to buy with very little margin and take your money and invest it. For example, consider a stock trading at $7.50, with its January 2014 $4 call option trading at $3.50. For one option, representing 100 shares, a trader could take your 350 dollars and invest it, and only use a small portion of the money to buy the stock on margin. Market-makers can typically borrow money at very low interest rates. If you have high borrowing costs, or are unable to buy on margin, then buying deep in the money calls can be a good strategy. Long story short, option sellers are making money off selling these deep in the money calls even with almost zero time premium. So, in general, there's no way to make money by buying them. 1. An American call is a call that can be exercised at any time up to and including its expiration date." }, { "docid": "518721", "title": "", "text": "\"Unless you are buying a significant value of your goods in USD then the relative strength of USD versus your local currency will have little to no effect on what the value of your investments is worth to you. In fact only (de|in)flation will effect your purchasing power. If your investments are in your local currency and your future expenses (usage of the returns on the investments) will be in your local currency FX has no effect. To answer your question, however, since all investments involve flows of money there can be no investment (other than perhaps gold which is really a form of currency) that isn't bound to at least one currency. In general investments are expected to be valued against the investor's home currency (I tend to call it \"\"fund currency\"\" as I work with hedge funds) as the return on the investment will be paid out in the fund currency and returns will be compared on the same basis. If investments are to be made internationally then it is necessary to reduce, or \"\"hedge\"\" the exchange rate risk. This is normally done using FX swaps or futures that allow an exchange rate in the future to be locked in today. Far from being unbound from FX moves these derivatives are closely bound to any moves but crucially are bound in the opposite direction to the hoped for FX move. an example of this would be if I'm investing 100GBP (my local currency) in a US company XYZ corp which I expect to do well. Suppose I get 200USD for my 100GBP and so buy 1 * 200USD shares in XYZ. No matter what happens to XYZ stock any move in GBP/USD will affect my P&L so I buy a future that allows me to exchange 200USD for 100GBP in 6 month's time. If GBP rises I can sell the future and make money on both the higher exchange rate and the increase in XYZ corp. If GBP falls I can keep the future until maturity and exchange the 200USD from XYZ corp for 100GBP so I only take the foreign exchange hit on any profits. If I expect my profits to be 10USD I can even buy futures such that I can lock in the exchange rate for 110USD in 6 months so that I will lose even less of my profit from the exchange rate move.\"" }, { "docid": "499418", "title": "", "text": "\"&gt; Basically, the whole idea of passive/mindless (\"\"set it and forget it\"\") gains from investments being the path to \"\"wealth\"\" has to go bye-bye -- it was never really \"\"real\"\" to begin with (unless you \"\"timed\"\" the market just right), and the vast majority of the gains were nominal anyway. Couldn't have said it much better. &gt; a lucky generation or two got away with it (sheerly by accident in the timing of their birth, something they really had no input into). While I agree a majority was luck to be born at the right time, Boomers are to blame (IMHO) for the loss of \"\"guaranteed retirement.\"\" Pensions were one of the greatest things that came out of the industrialization and unionization of the late 19th-mid 20th century and Boomers allowed government to change regulations that permitted corporations to raid pension funds, monkey around with them, and then cry about them being burdensome after they hollowed them out. The vast majority of people are not smart enough to save sufficiently for their future and pensions were the safeguard for that. Boomers let that go for higher immediate take home and, now, will be reliant on SSI and meager savings. &gt; Instead I think one will ALWAYS need to be \"\"working\"\" in some manner or another -- actively overseeing ones investments and remaining \"\"agile\"\" in response. And of course there is risk involved in that (as if there is really any reason we should expect there NOT to be? Anyone who thinks that way IMO is simply ignorant of the vast scope of human history). For those of us here, that is feasible. However, most people will not have the interest or ability to manage their own investments. Where does this requirement leave them? Still working and, in doing so, keeping those jobs from opening up for new graduates/new people entering the workforce. &gt; The best I think one can do is to TRULY diversify (and that does NOT mean \"\"mutual funds\"\") -- to separate your eggs into various \"\"baskets\"\", holding some major part in solid (as solid as can be) form (even with the possibility of zero return and/or some \"\"loss\"\" -- i.e. owning primary housing clear of debt, some PM's in physical form, etc); having other assets in what are fairly solid \"\"bets\"\" (based on demographic trends, company quality, etc); and then some things (several small bets) that are \"\"long shots\"\" but potentially high-return things (where just one \"\"win\"\" can not only offset a dozen non-performers/losers, but gain you a substantial real profit). I could not agree more. I have done the same thing and used the same argument; even to the point of purchasing a whole life insurance policy. Diversification, in case one or multiple investments tank, is the only way to survive. I have also decided that, for some of my assets, I am just a DCA/DRIP buy and hold guy of 10-20 diversified stocks from different industries. Leave it up to time and compounding over my own ability to time/pick. Anyway, I guess that's the whole answer; there is no right answer. Diversification and continued diligence are key. Good discussing with you. Best of luck.\"" }, { "docid": "41926", "title": "", "text": "I like your enthusiasm and initiative. However, there are a few things you need to consider that you haven't yet thought about. First, it is important to remember that trading with fake money is not the same as trading with real money. In the fake world, you have $100k. With this fake money, you can do reckless things with it, such as put it all on one stock. If you lose, it costs you nothing, so you don't have an emotional attachment to it. With real money, it will feel different, and that is something you haven't experienced yet. Second, you mentioned that you are good at making picks. With all due respect, I suggest that you aren't old enough to make that determination. You haven't been trading for long enough to determine if you are doing well at it. :) That having been said, I don't want to completely discourage you from trying something new. Third, you mentioned long-term investing, but you also said that you need to make your money back quick and mentioned trading daily. Those things aren't really compatible. I wouldn't consider what you are doing as long-term investing. With the type of investing you are doing, picking individual stocks and hoping for the value to go up in a relatively short time-frame, it is similar to gambling. The risk of losing is very much there, and you shouldn't be investing money this way that you aren't prepared to lose. If you need the money for something soon, don't put it in the stock market. Never forget this. What can happen is that you start with small amounts of money, do well, and then, thinking that you are good at this, put in larger amounts of money. You will eventually lose. If you put in money that you need for something else, you have a problem. If you are trying this out for education and entertainment purposes, that is great. But when it starts to get serious, make sure that you are aware of the risks. Educate yourself and be smart. Here is what I would suggest: If you want to try this short-term day-trading type investing, and you understand that the money can easily be lost, I would balance that with investing in a more traditional way: Set aside an amount each month to put in a low-expense index mutual fund. Doing this will have several benefits for you: As for your specific questions about stock trading with small amounts: Yes, you can trade with small amounts; however, every time you trade, you will be paying a commission. Even with a discount broker, if you are trading frequently, the commissions you will be paying will be very significant at the dollar amounts you are talking about. The only way I can see around this would be to try the Robinhood app, which allows you to trade without paying sales commission. I have no experience with that app." }, { "docid": "191688", "title": "", "text": "Assuming you were immersed in math with your CS degree, the book **'A Non-Random Walk Down Wall Street' by Andrew Lo** is a very interesting book about the random walk hypothesis and it's application to financial markets and how efficient markets might not necessarily imply complete randomness. Lots of higher level concepts in the book but it's an interesting topic if you are trying to branch out into the quant world. The book isn't very specific towards algorithmic trading but it's good for concept and ideas. Especially for general finance, that will give you a good run down about markets and the way we tackle modern finance. **A Random Walk Down Wall Street** (which the book above is named after) by **Burton Malkiel** is also supposed to be a good read and many have suggested reading it before the one I listed above, but there really isn't a need to do so. For investing specifically, many mention **'The Intelligent Investor' by Benjamin Graham** who is the role model for the infamous Warren Buffet. It's an older book and really dry and I think kind of out dated but mostly still relevant. It's more specifically about individual trading rather than markets as a whole or general markets. It sounds like you want to learn more about markets and finance rather than simply trading or buying stocks. So I'd stick to the Andrew Lo book first. --- Also, since you might not know, it would be a good idea to understand the capital asset pricing model, free cash flow models, and maybe some dividend discount models, the last of which isn't so much relevant but good foundations for your finance knowledge. They are models using various financial concepts (TVM is almost used in every case) and utilizing them in various ways to model certain concepts. You'd most likely be immersed in many of these topics by reading a math-oriented Finance book. Try to stay away from those penny stock trading books, I don't think I need to tell a math major (who is probably much smarter than I am) that you don't need to be engaging in penny stocks, but do your DD and come to a conclusion yourself if you'd like. I'm not sure what career path you're trying to go down (personal trading, quant firm analyst, regular analyst, etc etc) but it sounds like you have the credentials to be doing quant trading. --- Check out www.quantopian.com. It's a website with a python engine that has all the necessary libraries installed into the website which means you don't have to go through the trouble yourself (and yes, it is fucking trouble--you need a very outdated OS to run one of the libraries). It has a lot of resources to get into algorithmic trading and you can begin coding immediately. You'd need to learn a little bit of python to get into this but most of it will be using matplotlib, pandas, or some other library and its own personal syntax. Learning about alpha factors and the Pipeline API is also moderately difficult to get down but entirely possible within a short amount of dedicated time. Also, if you want to get into algorithmic trading, check out Sentdex on youtube. He's a python programmer who does a lot of videos on this very topic and has his own tool on quantopian called 'Sentiment Analyzer' (or something like that) which basically quantifies sentiment around any given security using web scrapers to scrape various news and media outlets. Crazy cool stuff being developed over there and if you're good, you can even be partnered with investors at quantopian and share in profits. You can also deploy your algorithms through the website onto various trading platforms such as Robinhood and another broker and run your algorithms yourself. Lots of cool stuff being developed in the finance sector right now. Modern corporate finance and investment knowledge is built on quite old theorems and insights so expect a lot of things to change in today's world. --- With a math degree, finance should be like algebra I back in the day. You just gotta get familiar with all of the different rules and ideas and concepts. There isn't that much difficult math until you begin getting into higher level finance and theory, which mostly deals with statistics anyways like covariance and regression and other statistic-related concepts. Any other math is simple arithmetic." }, { "docid": "506078", "title": "", "text": "Forex vs Day Trading: These can be one and the same, as most people who trade forex do it as day trading. Forex is the instrument you are trading and day trading is the time frame you are doing it in. If your meaning from your question was comparing trading forex vs stocks, then it depends on a number of things. Forex is more liquid so most professional traders prefer it as it can be easier to get in and out without being gapped. However, if you are not trading large amounts of money and you stay away from more volatile stocks, this should not matter too much. It may also depend on what you understand more and prefer to trade. You need to be comfortable with what you are trading. If on the other hand you are referring to day trading vs longer term trading and/or investing, then this can depend largely on the instrument you are trading and the time frame you are more comfortable with. Forex is used more for shorter term trading, from day trading to having a position open for a couple of days. Stocks on the other hand can be day traded to traded over days, weeks, months or years. It is much more common to have positions open for longer periods with stocks. Other instruments like commodities, can also be traded over different time frames. The shorter the time frame you trade the higher risk involved as you have to make quick decisions and be happy with making a lot of smaller gains with the potential to make a large loss if things go wrong. It is best once again to chose a time frame you are comfortable with. I tend to trade Australian stocks as I know them well and am comfortable with them. I usually trade in the medium to long term, however I let the market decide how long I am in a position and when I get out of it. I try to follow the trend and stay in a position as long as the trend continues. I put automatic stop losses on all my positions, so if the market turns against me I am automatically taken out. I can be in a position for as little as a day (can happen if I buy one day and the next day the stock falls by 15% or more) to over a year (as long as the trend continues). By doing this I avoid the daily market noise and let my profits run and keep my losses small. No matter what instrument you end up trading and the time frame you choose to trade in, you should always have a tested trading plan and a risk management strategy in place. These are the areas you should first gain knowledge in to further your pursuits in trading." }, { "docid": "365648", "title": "", "text": "\"In addition to Alex B's excellent overview, I'd like to add a few more bits of advice. First of all, one term you should know is \"\"commercial real estate\"\" - which is precisely what this is. There is a business element, but it is strictly (and almost entirely) intertwined to the underlying real estate, which makes this a special category of business which is generally considered simply \"\"commercial real estate\"\" (just like office buildings, shopping malls, etc). All real estate and businesses value are based on alternatives - what other options are there? In appraisal, these are generally called \"\"comparables\"\". A professional appraiser is generally available for commercial real estate of this type. While a full, official commercial appraisal can run into the thousands, many/most (all?) appraisers are willing to sell you a simplified version of their service, which can be called a \"\"letter of opinion\"\" and can help you get an idea for the market price (what other similar commercial properties are running for). A loan company would strictly require this, but if you are thinking of an all cash or form of seller-financing this would technically be optional. Your best bet is to read about some of what is involved in commercial real estate appraisal and evaluation, and you may even want to speak with commercial loan officers - even if you don't know that you want to get a loan to acquire the property! It's their job to help inform you about what is required and what they look for, so they can be a potential resource beyond your own research as well. With this said, the only way to estimate value (and, conveniently, the best way) is to look at other properties! And by \"\"others\"\", I mean that you should really not consider buying absolutely anything until you've viewed at least 6-10 other options in some depth - and you probably want to double or triple that number if you are looking to make this the last big business transaction of your life. If you don't you'll be relying on little more than dumb luck to carry you through - which in this area of business, you don't want to do because the dollar amounts and liabilities involved can bankrupt you in no time flat. With that general advice out of the way, here's a tiny nutshell version of valuation of commercial real estate. There are a few key parts involved in commercial real estate: land, improvements (buildings, docks, stuff like that), income, and wages. Land: the value of the land is based upon what you could sell it for, as-is. That is to say - who else might want it? This alone has many important factors, such as zoning laws, the neighborhood (including your neighbors), water/utilities, pacts on the land (someone may have insisted the land not be paved into a parking lot, or really anything like that), alternative uses (could you put a golf course on it, or is the land suitable for a big building or farming?), etc. And is this in a growing area, where you might hope the value will increase over the next decade, or decrease, or basically stay flat (and possibly cause losses compared to inflation)? Improvements: anything on the land is both an asset and a liability. It's an asset because it could add to the value of the land, but it might also reduce the land value if it interferes with alternate land uses. It's a liability, both in the legal sense and in that it requires maintenance. If you want to rent them out, especially, that means concern about any foundations involved, termites, roofs, sewage/septic tanks, utilities that are your responsibility (pipes, poles, wires), as well as any sort of ac/heating you may have, docks, and so on. These things are rarely free and absolutely can eat you alive. Income: Ah, the best part, the constant influx of cash! But wait, is it a constant influx? Some businesses are purely seasonal (summer only, winter only), some are year-round but have peak times, and others don't really have a \"\"peak\"\" to speak of. If you are renting, are there issues collecting, or with people over-staying? How about damage, making a mess, getting rowdy and disturbing others? Regardless, there is obviously some income, and this is usually the most dangerous part of the equation. I say \"\"dangerous\"\", because people absolutely lie like dogs on this part, all the time. It's easy to cook the books, assuming they even attempt to keep proper books in the first place! Businesses of this form often have a lot of cash business that's easy to hide (from Uncle Sam, or sometimes even the owners themselves if there are employees involved) - and fake! And some people are just shoddy bookkeepers and the info is just wrong. But, there will clearly be some kind of yearly income involved. What does this matter? Well...how much is there? How much is tied to the owners (personal friends do business and they will leave if the ownership/management changes)? In commercial real estate the income will be calculated for a fiscal year, and then there is something called a \"\"multiple\"\", which is market dependent. Let's say the whole place takes in $100k in rent a year. As part of buying this business, you are buying not just assets, but expected future income. In some commercial areas the multiple is as little as .5 to 2 - which means that the going rate is about 6-24 months worth of income, as part of the purchase price. So with 100k rent a year, that means 50k-200k of the purchase price is attributable to the income of the business. And if business is half of what you thought it would be? That means the net value of the whole enterprise decreases by 25k-100k - on top of the reduced income every year you own it! Income provides cash flow, which should pay all the expenses (cleaning up from wind storms, replacing windows that are broken, hauling off trash, replacing a well that ran dry), and then the extra that remains is positive cash flow. If you take out a loan, then ideally the cash flow would also pay that completely so long as you don't have any big unexpected expenses in the year - and still have some left over for yourself. Wages: Well, that money doesn't collect itself! There's sales, keeping the books, collecting the rent, performing maintenance, customer service, cleaning, paying the bills, keeping the insurance people happy, handling emergencies, and everything else involved with running the business. Someone is going to do it, and the biggest error people make here is not to put any value on their time - and to make it so they can never afford to take a vacation again! Pay yourself, and give yourself the flexibility to pay others when you can't (or don't want) to do it all yourselves. So, what's the point of all this? How do you actually make any money? In two ways: 1) selling the whole thing later, and 2) cash flow. For 1, it's important that you not be in a situation where you are betting that in the future there will be a \"\"person richer, and dumber, than I am now\"\". If the current owner wanted 2 million, then 1 mil, then less, over multiple years...this suggests either he is delusional about the value of his place (and most property owners are), or that its actually hard to find a buyer for such a business. You are going to want to make sure you understand why that is, because most of the value of real estate is...well, in the real estate itself! For 2, you need cash coming in that's considerably more than the cost of running the place. Also, cash flow can strongly change the value of the business for resale (depending on the multiple, this can make a huge difference or prevent you from selling the thing at all). You mentioned you want to put in more cabins, more marketing/sales efforts, etc. That's great, but first, that would mean added investment beyond the purchase price. Is it legally and physically practical to add more cabins, and what is their current utilization rate? If they are only renting 10% of their current capacity, increasing capacity may be premature. This will also vary through the year, so you may find there is a problem with being sold out sometimes...but only for a small percentage of the time. Which means you'll be adding buildings only to have them used for a fraction of the year, which will be very hard to make a profit from. If cash flow is good, ideally even being enough to cover a loan payment to help cover the purchase price (and remember that commercial real estate loans are much smaller loan-to-value ratios than in residential real estate), there is one final barrier to making money: the damn non-regular maintenance! Roofs, wells, and wooden walls all have a sad tendency to cost you nothing right up until the point they cost you $30k+ on a single day. Is there enough cash flow to make these sort of certainties (and if you plan to be there for years, they are a certainty) not put you in the poor house? This was rather long, but I hope this overview helps you appreciate all that you'll need to look into and be cautious of during your future en-devour! Commercial real estate is generally costly and high-risk, but also can be high reward. You'll need to compare many opportunities before you can get a \"\"feel\"\" for what is a good deal and what is a terrible one. You'll need to consider many factors, such as resale value and cash flow/income (which they will have to tell you and you can assume is not true, due to ignorance or malice), as well as maintenance and liabilities, before you can begin to really estimate the value of an enterprise of this sort. There are people who can help you, like appraisers and commercial brokers, but ultimately you'll need to do a lot of research and comparisons yourself to help you make a good decision. Finally, there is no very simple method for evaluating commercial real estate value. You need a variety of information, and you must be skeptical of what you are told because of the very large sums of money involved. It is doable (lots of people do it), but you must take care and do your due diligence so you don't get bankrupted by a single bad purchase.\"" }, { "docid": "458730", "title": "", "text": "I assume you are talking about a publicly traded company listed on a major stock exchange and the buyer resides in the US. (Private companies and non-US locations can change the rules really a lot.) The short answer is no, because the company does not own the stock, various investors do. Each investor has to make an individual decision to sell or not sell. But there are complications. If an entity buys more than about 10% of the company they have to file a declaration with the SEC. The limit can be higher if they file an assertion that they are buying it solely for investment and are not seeking control of the company. If they are seeking control of the company then more paperwork must be filed and if they want to buy the whole company they may be required to make a tender offer where they offer to buy any and all shares at a specific price. If the company being bought is a financial institution, then the buyer may have to declare as a bank holding company and more regulations apply. The company can advise shareholders not to take the tender offer, but they cannot forbid it. So the short answer is, below 10% and for investment purposes only, it is cash and carry: Whoever has the cash gets to carry the stock away. Above that various regulations and declarations apply, but the company still does not have the power prevent the purchase in most circumstances." }, { "docid": "537222", "title": "", "text": "If a company's shares trade in multiple exchanges, the prices in every exchange are very near to each other, otherwise you could earn money by doing arbitrage deals (buying in one, selling in the other) - and people do that once it becomes worth it. Which stock exchange you use is more a convenience for the buyer/seller - many investment banks offer only something local/near, and you have to go to specific investment banks to use other exchanges. For example, in Germany, it is easy to deal in Frankfurt, but if you want to trade at the the NASDAQ, you have to run around and find a bank that offers it, and you probably have to pay extra for it. In the USA, most investment banks offer NASDAQ, but if you want to trade in Frankfurt, you will have run around for an international company that offers that. As a stock owner/buyer, you can sell/buy your shares on any stock exchange where the company is listed (again, assuming your investment broker supports it). So you can buy in Frankfurt and sell in Tokyo seconds later, as nothing needs to be physically moved. Companies that are listed in multiple stock exchangs are typically large, and offer this to make trading their shares easier for a larger part of the world. Considering your 'theoretical buy all shares' - the shares are not located in the exchanges, they are in the hands of the owners, and not all are for sale, for various reasons. The owners decide if and when they want them offered for sale, and they also decide which stock exchange they offer them on; so you would need to go to all exchanges to buy them all. However, if you raise your offer price in one exchange only slightly, someone will see the arbitrage and buy them in the other locations and offer them to you in your stock exchange; in other words, for a small fee the shares will come to you. But again, most shares are typically not for sale. It's the same as trying to buy all Chevy Tahoes - even if you had the money, most owners wouldn't know or care about you. You would have to go around and contact every single one and convince them to sell." }, { "docid": "7981", "title": "", "text": "\"Hey, I hear ya on this situation. I also graduated from a good school (Finance/Comp Sci) with a mediocre GPA and had difficulty securing a full time position in finance. My best advice is to network the shit out of alumni you can connect to through LinkedIn or your schools alumni network homepage. People are MUCH more open to talking than you would typically think. Like your friends said, getting into IBD as an analyst is ideal as it gives you a great line on your resume, shows you worked hard, and has amazing training. Now comes the really shitty part of this conversation, if you've already graduated college, it's next to impossible to get into a bulge bracket as an analyst. Your best bet in this case would be to try to get into a mid-cap or boutique IB and work your way from there. Again though, networking means 100x more than anything else. Now the good news, investment research is very different from investment banking. Yes, equity research is within an investment bank (sell-side and buy-side), but it is very different from investment banking (see Chinese Walls). It's easier to make the transition into research without formal recruiting than it is to get into IB directly. Couple things to keep in mind, KNOW THE DIFFERENCE BETWEEN SELL-SIDE AN BUY-SIDE. I'm not talking about just one buys stuff the other tries to get you to buy it. I'm talking about conflicts of interest on the sell-side, personalities, types of research, what your role entails, org structure, etc. SELL-SIDE IS EXTREMELY DIFFERENT THAN BUY-SIDE!! Buy-side is MUCH less flexible than sell-side in recruiting, also. Do you currently own stocks, trade, track stocks all day long, etc.? If the answer is no to any of those, buy-side is really really hard. They want people who live and breath investing, markets, news, companies, because that's what they do. Also, training is effectively non-existent on the buy-side due to the size of the shops (some can have $10b with 10 people including admins). Now lets talk sell-side. This is where I'd recommend you put your resources if you're really passionate about it. They tend to hire people without experience more often into entry-level jobs (b/c most are larger investment banks that use research to promote underwriting/investment business). Also, you need to have a pitch, but not as extensive as on the buy-side (those 1-2 pagers I talked about). The best advice I can offer is to hop on a Bloomberg/TR/CapIQ terminal if you can and just start finding email addresses of sell-side analysts (they publish them in their reports), and start writing the analysts directly expressing your interest in the business and your desire to talk with them. Be frank about where you are in your career, but show a true passion for research, and that you are \"\"hungry.\"\" Attach your resume and keep the email short, a few sentences with maybe some bullets about how you could help that company. Spend the time to personalize it to that person. Follow up with a phone call in 1-2 weeks. They will appreciate the candidness and you'll find them to be very receptive. Even if these analysts don't have a job available right there, if they like you, they will pass you on to someone who might. This is how networking works, that guy might not have a job, but someone is always hiring, and its a tight knit community. The other option is to work for any finance firm in some role for 3-5 years then go back to get an MBA. With an MBA from a top school you can basically transition into anything. PM me if you ever want to talk over IM. I'd be happy to chat.\"" }, { "docid": "323944", "title": "", "text": "\"But speculation is absolutely intended to happen, and is considered necessary for healthy a investment environment. What I am saying, however, is that this desire to rid the world of HFT appears to be moral rather than logical. There is very little reason to eliminate HFT as it stands, although there appears to be a propensity for very emotional responses to the basic concept. Ones I can appreciate. However I am suggesting they are misguided as the people who should be upset with HFT are the hedge fund managers and day traders they are outwitting, not you or me who buy and sell shares on a whim every so often. If you want to ban day traders that is a separate argument I don't want to go into. The idea that these computer algorithms are all set to \"\"sell,sell,sell\"\" is provably nonsensical. If that were the case, all of the HFT participants would have gone massively bankrupt during the flash crashes. Also, it is quite patently the case that somebody has to be buying in order for anybody to sell. Saying \"\"this is what caused some of the crashes\"\" is just your desire for a simple explanation. It must have been more complex than this, and to my knowledge none of these crashes have been adequately explained although some poorly designed algorithms have been implicated. Note that in one of these cases IIRC a fund closed its doors due to the losses, and the market was largely unaffected. So it seems like a problem that self corrects in this case, and one that only *harms* the participant that erred. Also, to correct a basic misunderstanding, selling happens all of the time, and does not inherently drive the price down. There are by definition an *equal number of sales to purchases*. What drives the price down is *the people buying being willing to pay less*. EDIT: as another aside, a point I have made elsewhere and seems suitable to make here: flash crashes, whilst causing panic, are again something only the professional intra-day trading community are likely to be affected by. Their very name implies so. The reason being that anybody investing based on the *long term investment potential* of a company will only benefit in the temporary drop in price, as they can purchase more of the company at a bargain price. Any intelligent investor will not be fazed by the drop in price, as price has *no bearing on a company's real value*, and stocks do tend towards this value over time, whatever happens over the short term. The only case in which it could is if the company owns a large portfolio of stock that itself devalues dramatically that they intended to sell and as a result experience cash flow problems. This is so incredibly unlikely with a flash crash as to be ignored.\"" }, { "docid": "275943", "title": "", "text": "\"There are some useful answers here, but I don't think any of them are quite sufficient. Yes, there are some risks involved in CFD trading, but I will try and give you information so you can make your own decision. Firstly, Cyprus is part of the EU, which gives it a level of credibility. I'm not saying it's the safest or most well regulated market in the world, but that in itself would not particularly scare me away. The far more important issue here is the risk of using CFDs and of eToro themselves. A Contract for Difference is really just a specialization of an Equity Swap. It is in no way like owning a real stock. When you purchase shares of a company you own a real Asset and are usually entitled to dividends and voting rights. With a CFD, what you own is one side of a Swap contract. You have a legal agreement between yourself and eToro to \"\"swap\"\" the return earned on the underlying stock for whatever fees eToro decide to charge. As already mentioned, CFDs are not available to US citizens. Equity swaps have many benefits in financial markets. They can allow access to restricted markets by entering into swaps with banks that have the necessary licenses to trade in places like China. Many \"\"synthetic\"\" ETFs use them in Europe as a way to minimize tracking error as the return is guaranteed by the swap counterparty (for a charge). They also come with one signficant risk: counterparty credit risk. When trading with eToro, for as long as your position is open, you are at risk of eToro going bankrupt. If eToro failed, you do not actually own any stocks, you only own swap contracts which are going to be worthless if eToro ceased to exist. CFDs also have an ongoing cost to maintain the open position. This makes them less suitable for buy and hold strategies as those ongoing costs will eat into your returns. It's also not clear whether you would receive any dividends paid by the stock, which make up a significant proportion of returns for buy and hold investors. eToro's website is fairly non-committal: eToro intends to offer a financial compensation representing the dividends which will be allocated on stocks, to the extent such dividends shall be available to eToro. All of these points expose what CFDs are really for - speculating on the stock market, or as I like to call it: gambling. If you want to invest in stocks for the long term, CFDs are a bad idea - they have high ongoing costs and the counterparty risk becomes significant. Wait until you have enough money and then buy the real thing. Alternatively, consider mutual funds which will allow you to purchase partial shares and will ensure your investment is better diversified across a large number of stocks. If however, you want to gamble and only keep your position open for a short time, these issues may not be of concern to you. There's nothing wrong with gambling, it can be fun, many people gamble in casinos or on football matches - but bear in mind that's what CFDs are for. CFDs were in fact originally created for the UK market as a way to avoid paying capital gains tax when making short term speculative trades. However, if you are going to gamble, make sure you're not putting any more than 1% of your net worth at risk (0.1% may be a better target). There are a few other ways to take a position on stocks using less money than the share price: Fortunately, eToro do not allow leveraged purchase of stocks so you're reasonably safe on this point. They claim this is because of their 'responsible trading policy', although I find that somewhat questionable coming from a broker that offers 400:1 leverage on FX pairs. One final word on eToro's \"\"social trading\"\" feature. A few years ago I was in a casino playing Blackjack. I know nothing about Blackjack, but through sheer luck of the draw I managed to treble my money in a very small amount of time. Seeing this, a person behind me started \"\"following\"\" me by putting his chips down on my seat. Needless to say, I lost everything, but amazingly the person behind me got quite annoyed and started criticizing my strategy. The idea of following other people's trades just because they've been lucky in the past sounds entirely foolish to me. Remember the warning on every mutual fund: Past performance does not guarantee future returns\"" }, { "docid": "408918", "title": "", "text": "\"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.\"" }, { "docid": "65147", "title": "", "text": "At any given time there are buy orders and there are sell orders. Typically there is a little bit of space between the lowest sell order and the highest buy order, this is known as the bid/ask spread. As an example say person A will sell for $10.10 but person B will only buy at $10.00. If you have a billion shares outstanding just the space between the bid and ask prices represents $100,000,000 of market cap. Now imagine that the CEO is in the news related to some embezzlement investigation. A number of buyers cancel their orders. Now the highest buy order is $7. There isn't money involved, that's just the highest offer to buy at the time; but that's a drop from $10 to $7. That's a change in market cap of $3,000,000,000. Some seller thinks the stock will continue to fall, and some buyer thinks the stock has reached a fair enterprise value at $7 billion ($7 per share). Whether or not the seller lost money depends on where the seller bought the stock. Maybe they bought when it was an IPO for $1. Even at $7 they made $6 per share. Value is changing, not money. Though it would be fun, there's no money bonfire at the NYSE." }, { "docid": "24917", "title": "", "text": "Voluntarily assuming a loan is a bad idea, especially for a non-investment purpose. It would be one thing to take on a loan to operate a business or buy a piece of capital equipment, like a machine that would make you money. Borrowing money to have a more luxurious house is foolish. The smart move is to buy a good quality home that will meet your needs for as little as possible. Having $800,000 leaves a quit a bit of leeway in that department. You don't say where you live, but if this occurred in my area (eastern Massachusetts) I would buy a house for $500,000 and then invest the remaining $300,000. If I lived in the California bay area, it might be necessary to spend the whole $800,000. Either way there should be no need to borrow money. Also, if you buy a house for cash, often you can get a substantially better deal than if you have to involve a bank. Not owing anyone money is a huge psychological advantage in business and in life in general. View being debt-free as a springboard to success and happiness." }, { "docid": "135031", "title": "", "text": "Dollar cost averaging can be done in a retirement plan, and can be done for individual stock purchases, as this will increase your returns by reducing your risk, especially if you are buying a particular stock for the first time. How many time have I purchased a stock, bottom fishing, thinking I was buying at the low, only to find out there was a new low. Sitting with a thousand shares that are now down $3-$4K. I have a choice to sell at a loss, hold what I've got or double down. I usually add more shares if I'm thinking I'll recover, but at that time I'd wished I'd eased into my investment. That way I would have owned more shares at a smaller cost basis. Anything can happen in the market, not knowing whether the price will increase or decrease. In the example above a $3,000 loss is equal to the brokerage cost of about 300 trades, so trading cost should not be a factor. Now I'm not saying to slowly get into the market and miss the bull, like we're having today with Trump, but get into individual stocks slowly, being fully invested in the market. Also DCA means you do not buy equal number of shares per period, say monthly, but that you buy with the same amount of money a different number of shares, reducing your total costs. Let's say you spend $2000 on a stock trading at $10 (200 shares), if the stock rose to $20 you would spend $2000 and buy 100 shares, and if the stock dropped to $5 you would spend $2000 and buy 400 shares, by now having amassed 700 shares for $6,000. On the other hand and in contrast to DCA had you purchased 200 shares for $2000 at $10/share, then 200 shares for $4000 at $20/share, and finally 200 more shares for $1000 at $5/share, you would have amassed only 600 shares for $7000 investment." }, { "docid": "420974", "title": "", "text": "\"Though it seems unintuitive, you should rationally ignore the past performance of this stock (including the fact that it's at its 52-week high) and focus exclusively on factors that you believe should affect it moving forward. If you think it's going to go up even further, more than the return on your other options for where to put the money, keep the stock. If you think it's peaked and will be going down, now's a good time to sell. To put it another way: if you didn't already have this stock, would you buy it today? Your choice is just about the same: you can choose between a sum of cash equal to the present market value of the shares, OR the shares. Which do you think is worth more? You also mentioned that you only have 10 stocks in the portfolio. Some are probably a larger percentage than others, and this distribution may be different than what you want in your portfolio. It may be time to do some rebalancing, which could involve selling some shares where your position is too large (as a % of your portfolio) and using the proceeds toward one or more categories you're not as invested in as you would like to be. This might be a good opportunity to increase the diversity in your portfolio. If part of your reward and motivation for trading is emotional, not purely financial, you could sell now, mark it as a \"\"win,\"\" and move on to another opportunity. Trading based on emotions is not likely to optimize your future balance, but not everybody is into trading or money for money's sake. What's going to help you sleep better at night and help boost your quality of life? If holding the stock will make you stress and regret a missed opportunity if it goes down, and selling it will make you feel happy and confident even if it still goes up more (e.g. you interpret that as further confirming that you made a good pick in the first place), you might decide that the risk of suboptimal financial returns (from emotion-based trading) is acceptable. As CQM points out, you could also set a trailing sell order to activate only when the stock is a certain percentage or dollar amount below whatever it peaks at between the time you set the order and the time it fires/expires; the activation price will rise with the stock and hold as it falls.\"" }, { "docid": "84800", "title": "", "text": "\"Your broker, Ameritrade, offers a variety of Exchange Traded Funds (ETFs) that you can buy and sell with zero commission. An ETF is like a mutual fund, but you buy and sell shares the same way you buy and sell shares of stocks. From your point of view, the relevance of this is that you can buy and sell as many or as few shares as you like, even down to a single share. Note that to get the commission-free trades on the available ETFs you have to sign up for it in your account profile. Be sure to do that before you enter any buy orders. You'll want to start by looking at the Ameritrade's list of commission-free ETFs. Notice that they are divided into different categories: stocks, bonds, international, and commodities. Which categories you pick from will depend on your personal investing goals, time horizon, risk tolerance, and so on. There are lots of questions and answers on this site that talk about asset allocation. You should read them, as it is the most important decision you will make with your portfolio. The other thing you want to be aware of is the expense ratio for each fund. These expenses reduce the fund's return (they are included in the calculation of the net asset value of the shares), so lower is definitely better. Personally, I wouldn't even consider paying more than about 0.10% (commonly read \"\"10 basis points\"\" or \"\"10 bp\"\") for a broad-based domestic stock fund. For a sectoral fund you might put up with as much as 20 bp in expenses. Bond funds tend to be a little more expensive, so maybe allow as much as 25 bp, and likewise for international funds. I've never invested in commodity funds, so I'll let someone else opine on appropriate expense ratios for those. Once you've decided what funds you want (and have signed up for commission-free trades), all you have to do is enter the trade orders. The website where you manage your account has tutorials on how to do that. After that you should be all set. Good luck with your investing!\"" }, { "docid": "396657", "title": "", "text": "The study of technical analysis is generally used (sometimes successfully) to time the markets. There are many aspects to technical analysis, but the simplest form is to look for uptrends and downtrends in the charts. Generally higher highs and higher lows is considered an uptrend. And lower lows and lower highs is considered a downtrend. A trend follower would go with the trend, for example see a dip to the trend-line and buy on the rebound. A simple strategy for this is shown in the chart below: I would be buying this stock when the price hits or gets very close to the trendline and then it bounces back above it. I would then have sold this stock once it has broken through below the trendline. This may also be an appropriate time if you were looking to short this stock. Other indicators could also be used in combination for additional confirmation of what is happening to the price. Another type of trader is called a bottom fisher. A bottom fisher would wait until a break above the downtrend line (second chart) and buy after confirmation of a higher high and possibly a higher low (as this could be the start of a new uptrend). There are many more strategies dealing with the study of technical analysis, and if you are interested you would need to find and learn about ones that suit your investment styles, whether you prefer short term trading or longer term investing, and your appetite for risk. You can develop strategies using various indicators and then paper trade or backtest these strategies. You can also manually backtest a strategy in most charting packages. You can go back in time on the chart so that the right side of the chart shows a date in the past (say one year ago or 10 years ago), then you can click forward one day at a time (or one week at a time if using weekly charts). With your indicators on the chart you can do virtual trades to buy or sell whenever a signal is given as you move forward in time. This way you may be able to check years of data in a day to see if your strategy works. Whatever you do, you need to document your strategies in writing in a written trading or investment plan together with a risk management strategy. You should always follow the rules in your written plan to avoid you making decisions based on emotions. By backtesting or paper trading your strategies it will give you confidence that they will work over the long term. There is a lot of work involved at the start, but once you have developed a documented strategy that has been thoroughly backtested, it will take you minimal time to successfully manage your investments. In my shorter term trading (positions held from a couple of days to a few weeks) I spend about half an hour per night to manage my trades and am up about 50% over the last 7 months. For my longer term investing (positions held from months to years) I spend about an hour per week and have been averaging over 25% over the last 4 years. Technical Analysis does work for those who have a documented plan, have approached it in a systematic way and use risk management to protect their existing and future capital. Most people who say that is doesn't work either have not used it themselves or have used it ad-hock without putting in the initial time and work to develop a documented and systematic approach to their trading or investing." } ]

[ { "docid": "307424", "title": "", "text": "There's a few options you may want to look into. First, I'm writing from an US point of view, I do not know if these are available in Russia. First look into DRIPS (Dividend Reinvestment Plans). These seem tailor made for your request. They are plans set up by companies that pay dividends. If you own at least one share (costing no more than say $100 often less), then these companies will take the dividends paid on these shares and automatically buy more shares as the income from the dividends pile up. This is a low cost of entry way of getting in on many high quality stocks. Stalwart stocks such as GE and many utility and real estate stocks (REITs) offer this. Check out these links: Secondly you can look at brokerages that specialize in buying smaller amount of stocks on a regular basis to simulate a DRIP, ShareBuilder will allow you to invest say $50 or $100 a month into one or more stocks. However, at smaller amounts, their commission fees can eat in to your returns. Folio investing does the same thing as Sharebuilder. It's worth looking at them both and comparing their commissions and other features" } ]

[ { "docid": "491183", "title": "", "text": "As somebody working in Equity research for one of the top ranked ER producing firms in NA, i'm a little surprised to see so many people down on sellside ER. It absolutely has value, although it is not as directly tangible as somebody sitting at a desk cold calling and closing sales. Every day we are sending out a huge amount of advisory information to our sales and trading guys, as well as our clients. Our MD and analysts are on the phone constantly with guys on the other end looking to make decisions and wanting clarification. My group in particular works in a sector where differentiating between a huge number or relatively similar firms that all require incredibly high capital investments is the name of the game, and as such finding ER analysts who can really pick out the important subtle details is very important for identifying real value. I'll agree that being able to sell is important, but that's always something you have to be good at no matter what it is you're doing. Even in interviews with a hospital you have to sell yourself. This got a bit long but is SS ER dying? Absolutely not. Is there going to be a concentrating focus on a smaller number of quality analysts? Possibly. I'm a junior guy, so who knows where this industry is going. All I know is that compared to my friends in entry level roles in S&amp;T and IB, the technical knowledge i'm picking up with regards to my sector is leaps and bounds ahead of them and will give me a great deal of optionality going into the future as to where I want to take my career. I really like being in ER, and i respect the people I'm lucky enough to work with and I don't think that the guys who really know how to pick the winners are going anywhere." }, { "docid": "580757", "title": "", "text": "If you do not understand the volatility of the fx market, you need to stop trading it, immediately. There are many reasons that fx is riskier than other types of investing, and you bear those risks whether you understand them or not. Below are a number of reasons why fx trading has high levels of risk: 1) FX trades on the relative exchange rate between currencies. That means it is a zero-sum game. Over time, the global fx market cannot 'grow'. If the US economy doubles in size, and the European economy doubles in size, then the exchange rate between the USD and the EUR will be the same as it is today (in an extreme example, all else being equal, yes I know that value of currency /= value of total economy, but the general point stands). Compare that with the stock market - if the US economy doubles in size, then effectively the value of your stock investments will double in size. That means that stocks, bonds, etc. tied to real world economies generally increase when the global economy increases - it is a positive sum game, where many players can be winners. On the long term, on average, most people earn value, without needing to get into 'timing' of trades. This allows many people to consider long-term equity investing to be lower risk than 'day-trading'. With FX, because the value of a currency is in its relative position compared with another currency, 1 player is a winner, 1 player is a loser. By this token, most fx trading is necessarily short-term 'day-trading', which by itself carries inherent risk. 2) Fx markets are insanely efficient (I will lightly state that this is my opinion, but one that I am not alone in holding firmly). This means that public information about a currency [ie: economic news, political news, etc.] is nearly immediately acted upon by many, many people, so that the revised fx price of that currency will quickly adjust. The more efficient a market is, the harder it is to 'time a trade'. As an example, if you see on a news feed that the head of a central bank authority made an announcement about interest rates in that country [a common driver of fx prices], you have only moments to make a trade before the large institutional investors already factor it into their bid/ask prices. Keep in mind that the large fx players are dealing with millions and billions of dollars; markets can move very quickly because of this. Note that some currencies trade more frequently than others. The main currency 'pairs' are typically between USD and / or other G10 country-currencies [JPY, EUR, etc.]. As you get into currencies of smaller countries, trading of those currencies happens less frequently. This means that there may be some additional time before public information is 'priced in' to the market value of that currency, making that currency 'less efficient'. On the flip side, if something is infrequently traded, pricing can be more volatile, as a few relatively smaller trades can have a big impact on the market. 3) Uncertainty of political news. If you make an fx trade based on what you believe will happen after an expected political event, you are taking risk that the event actually happens. Politics and world events can be very hard to predict, and there is a high element of chance involved [see recent 'expected' election results across the world for evidence of this]. For something like the stock market, a particular industry may get hit every once in a while with unexpected news, but the fx market is inherently tied to politics in a way that may impact exchange rates multiple times a day. 4) Leveraging. It is very common for fx traders to borrow money to invest in fx. This creates additional risk because it amplifies the impact of your (positive or negative) returns. This applies to other investments as well, but I mention it because high degrees of debt leveraging is extremely common in FX. To answer your direct question: There are no single individual traders who spike fx prices - that is the impact you see of a very efficient market, with large value traders, reacting to frequent, surprising news. I reiterate: If you do not understand the risks associated with fx trade, I recommend that you stop this activity immediately, at least until you understand it better [and I would recommend personally that any amateur investor never get involved in fx at all, regardless of how informed you believe you are]." }, { "docid": "408918", "title": "", "text": "\"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.\"" }, { "docid": "377186", "title": "", "text": "If you want to invest in the stock market, whether over a shorter period of 1 to 2 years or over a longer period of 10 or 20 years or longer you need to take some precautions and have a written investment plan with a risk management strategy incorporated in your plan. Others have said that 1 to 2 years is too short to invest in the stock market as the stock market can have a correction and fall by 50%. But it doesn't matter if you invest for 1 year or if you invest for 50 years, the stock market can still fall by 50% just before you plan to withdraw your funds. What you need to figure out is a way to get out before the market falls by 40% to 50%. A simple way to do this is to use technical indicators to warn you when a market trend is starting to change and that it is time to get out of the market. Two simple indicators you can use on a market index are the Rate of Change (ROC) indicator and the 100 week Moving Average (MA). Below is a 10 year weekly chart of the S&P500 with these two indicators charted. They show good times to get into the market and good times to get out. If you are using the 100 week MA you would buy in when the price crosses above the MA line and sell when the price crosses below the MA line. If you are using the ROC indicator you would buy in when the ROC indicator crosses above the zero line and sell when the ROC indicator crosses below the zero line. So your investment plan could be to buy an Index ETF representing the S&P500 when the ROC moves above zero and sell when it crosses below zero. You can also place a trailing stop loss of 10% to protect you in case of a sudden fall over a couple of days. You can manage your investments in as little as 10 minutes per week by checking the chart once per week and adjusting your stop loss order. If you want to progressively add to your investment each month you could check the charts and only add any new funds if both the ROC is above zero and sloping upwards. Another option for adding new funds could be if the price is above the MA and moving further away from the MA. All these rules should be incorporated into your investment plan so that you are not basing your decisions based on emotions. There are many other Technical Analysis Indicators you could also learn about to make better educated decisions about your stock market investments. However, what I have provided here is enough for anyone to test over different indexes and time frames and do their own paper trading on to gain some confidence before placing any real money on the table." }, { "docid": "41926", "title": "", "text": "I like your enthusiasm and initiative. However, there are a few things you need to consider that you haven't yet thought about. First, it is important to remember that trading with fake money is not the same as trading with real money. In the fake world, you have $100k. With this fake money, you can do reckless things with it, such as put it all on one stock. If you lose, it costs you nothing, so you don't have an emotional attachment to it. With real money, it will feel different, and that is something you haven't experienced yet. Second, you mentioned that you are good at making picks. With all due respect, I suggest that you aren't old enough to make that determination. You haven't been trading for long enough to determine if you are doing well at it. :) That having been said, I don't want to completely discourage you from trying something new. Third, you mentioned long-term investing, but you also said that you need to make your money back quick and mentioned trading daily. Those things aren't really compatible. I wouldn't consider what you are doing as long-term investing. With the type of investing you are doing, picking individual stocks and hoping for the value to go up in a relatively short time-frame, it is similar to gambling. The risk of losing is very much there, and you shouldn't be investing money this way that you aren't prepared to lose. If you need the money for something soon, don't put it in the stock market. Never forget this. What can happen is that you start with small amounts of money, do well, and then, thinking that you are good at this, put in larger amounts of money. You will eventually lose. If you put in money that you need for something else, you have a problem. If you are trying this out for education and entertainment purposes, that is great. But when it starts to get serious, make sure that you are aware of the risks. Educate yourself and be smart. Here is what I would suggest: If you want to try this short-term day-trading type investing, and you understand that the money can easily be lost, I would balance that with investing in a more traditional way: Set aside an amount each month to put in a low-expense index mutual fund. Doing this will have several benefits for you: As for your specific questions about stock trading with small amounts: Yes, you can trade with small amounts; however, every time you trade, you will be paying a commission. Even with a discount broker, if you are trading frequently, the commissions you will be paying will be very significant at the dollar amounts you are talking about. The only way I can see around this would be to try the Robinhood app, which allows you to trade without paying sales commission. I have no experience with that app." }, { "docid": "82627", "title": "", "text": "To get rich in a short time, it's more likely what you want to do is go into business. You could go into a non-investment business such as opening a restaurant or starting a tech company, of course. Warren Buffett was working in investing, which is quite a bit different than just buying stocks: The three ways to get rich investing I can think of are: I think the maximum real (after-inflation) return you can really count on over a lot of years is in the 5-6% range at most, maybe less. Here's a post where David Merkel argues 3-4% (assuming cash interest is close to zero real return): http://alephblog.com/2009/07/15/the-equity-premium-is-no-longer-a-puzzle/ At that rate you can double every 10-15 years. Any higher rate is probably risking much lower returns. I often post this argument against that on investment questions: http://blog.ometer.com/2010/11/10/take-risks-in-life-for-savings-choose-a-balanced-fund/ Agree with you that lots of people seem to think they can make up for not saving money by picking a winning investment. Lots of people also use the lottery as a retirement strategy. I'm not sure this is totally irrational, if for some reason someone just can't save. But I'm sure it will fail for almost all the people who try it." }, { "docid": "45970", "title": "", "text": "\"Index funds can be a very good way to get into the stock market. It's a lot easier, and cheaper, to buy a few shares of an index fund than it is to buy a few shares in hundreds of different companies. An index fund will also generally charge lower fees than an \"\"actively managed\"\" mutual fund, where the manager tries to pick which stocks to invest for you. While the actively managed fund might give you better returns (by investing in good companies instead of every company in the index) that doesn't always work out, and the fees can eat away at that advantage. (Stocks, on average, are expected to yield an annual return of 4%, after inflation. Consider that when you see an expense ratio of 1%. Index funds should charge you more like 0.1%-0.3% or so, possibly more if it's an exotic index.) The question is what sort of index you're going to invest in. The Standard and Poor's 500 (S&P 500) is a major index, and if you see someone talking about the performance of a mutual fund or investment strategy, there's a good chance they'll compare it to the return of the S&P 500. Moreover, there are a variety of index funds and exchange-traded funds that offer very good expense ratios (e.g. Vanguard's ETF charges ~0.06%, very cheap!). You can also find some funds which try to get you exposure to the entire world stock market, e.g. Vanguard Total World Stock ETF, NYSE:VT). An index fund is probably the ideal way to start a portfolio - easy, and you get a lot of diversification. Later, when you have more money available, you can consider adding individual stocks or investing in specific sectors or regions. (Someone else suggested Brazil/Russia/Indo-China, or BRICs - having some money invested in that region isn't necessarily a bad idea, but putting all or most of your money in that region would be. If BRICs are more of your portfolio then they are of the world economy, your portfolio isn't balanced. Also, while these countries are experiencing a lot of economic growth, that doesn't always mean that the companies that you own stock in are the ones which will benefit; small businesses and new ventures may make up a significant part of that growth.) Bond funds are useful when you want to diversify your portfolio so that it's not all stocks. There's a bunch of portfolio theory built around asset allocation strategies. The idea is that you should try to maintain a target mix of assets, whatever the market's doing. The basic simplified guideline about investing for retirement says that your portfolio should have (your age)% in bonds (e.g. a 30-year-old should have 30% in bonds, a 50-year-old 50%.) This helps maintain a balance between the volatility of your portfolio (the stock market's ups and downs) and the rate of return: you want to earn money when you can, but when it's almost time to spend it, you don't want a sudden stock market crash to wipe it all out. Bonds help preserve that value (but don't have as nice of a return). The other idea behind asset allocation is that if the market changes - e.g. your stocks go up a lot while your bonds stagnate - you rebalance and buy more bonds. If the stock market subsequently crashes, you move some of your bond money back into stocks. This basically means that you buy low and sell high, just by maintaining your asset allocation. This is generally more reliable than trying to \"\"time the market\"\" and move into an asset class before it goes up (and move out before it goes down). Market-timing is just speculation. You get better returns if you guess right, but you get worse returns if you guess wrong. Commodity funds are useful as another way to diversify your portfolio, and can serve as a little bit of protection in case of crisis or inflation. You can buy gold, silver, platinum and palladium ETFs on the stock exchanges. Having a small amount of money in these funds isn't a bad idea, but commodities can be subject to violent price swings! Moreover, a bar of gold doesn't really earn any money (and owning a share of a precious-metals ETF will incur administrative, storage, and insurance costs to boot). A well-run business does earn money. Assuming you're saving for the long haul (retirement or something several decades off) my suggestion for you would be to start by investing most of your money* in index funds to match the total world stock market (with something like the aforementioned NYSE:VT, for instance), a small portion in bonds, and a smaller portion in commodity funds. (For all the negative stuff I've said about market-timing, it's pretty clear that the bond market is very expensive right now, and so are the commodities!) Then, as you do additional research and determine what sort investments are right for you, add new investment money in the places that you think are appropriate - stock funds, bond funds, commodity funds, individual stocks, sector-specific funds, actively managed mutual funds, et cetera - and try to maintain a reasonable asset allocation. Have fun. *(Most of your investment money. You should have a separate fund for emergencies, and don't invest money in stocks if you know you're going need it within the next few years).\"" }, { "docid": "428141", "title": "", "text": "You don't really have a lot of money, and that isn't a criticism as much as that you are limited to diversification. For example, I would estimate you can only have one or two stocks for a buy-write scheme. Secondly you may be only to buy one fund with a high minimum investment, and a second fund with a smaller minimum investment. Thirdly there is not a whole lot of money to make a large difference. One options might be to look at iShares since your are with Fidelity. Trading those are commission free and the minimum investment is one share. They offer many sector funds. Since you were in a CD ladder you might be looking for stability of principle. If so you can look at USMV and PFF. If you can tolerate a little more volatility DGRO. Having said that you seem interested in doing some buy-writes. Why not mix and match? Pick a stock, like INTC (for example not a recommendation), and buy-write with half the money and some combination of iShares for the rest." }, { "docid": "250761", "title": "", "text": "\"Stock prices are set by bidding. In principle, a seller will say, \"\"I want $80.\"\" If he can't find anyone willing to buy at that price, he'll either decide not to sell after all, or he'll lower his price. Likewise, a buyer will say, \"\"I'll pay $70.\"\" If he can't find anyone willing to pay that price, he'll either decide not to buy or he'll increase his price. For most stocks there are many buyers and many sellers all the time, so there's a constant interplay. The typical small investor has VERY little control of the price. You say, \"\"I want to buy 10 shares of XYZ Corporation and my maximum price is $20.\"\" If the current trending price is below $20, your broker will buy it for you. If not, he won't. You normally have some time limit on the order, so if the price falls within your range within that time period, your broker will buy. That is, your choice is basically to buy or not buy, or sell or not sell, at the current price. You have little opportunity to really negotiate a better price. If you have a significant percentage of a company's total stock, different story. In real life, most stocks are being traded constantly, so buyers and sellers both have a pretty good idea of the current price. If the last sale was ten minutes ago for $20, it's unlikely anyone's going to now bid $100. They're going to bid $20.50 or $19.25 or some such. If the last sale was for $20 and your broker really came to the floor and offered to buy for $100, I suppose someone would sell to him very quickly before he realized what an outrageous price this was. I use TD Ameritrade, and on their web site, if I give a price limit on a buy that's more than a small percentage above the last sale, they reject it as an error. I forget the exact number but they won't even accept a bid of $80 if the stock is going for $40. They might accept $41 or $42, something like that.\"" }, { "docid": "191688", "title": "", "text": "Assuming you were immersed in math with your CS degree, the book **'A Non-Random Walk Down Wall Street' by Andrew Lo** is a very interesting book about the random walk hypothesis and it's application to financial markets and how efficient markets might not necessarily imply complete randomness. Lots of higher level concepts in the book but it's an interesting topic if you are trying to branch out into the quant world. The book isn't very specific towards algorithmic trading but it's good for concept and ideas. Especially for general finance, that will give you a good run down about markets and the way we tackle modern finance. **A Random Walk Down Wall Street** (which the book above is named after) by **Burton Malkiel** is also supposed to be a good read and many have suggested reading it before the one I listed above, but there really isn't a need to do so. For investing specifically, many mention **'The Intelligent Investor' by Benjamin Graham** who is the role model for the infamous Warren Buffet. It's an older book and really dry and I think kind of out dated but mostly still relevant. It's more specifically about individual trading rather than markets as a whole or general markets. It sounds like you want to learn more about markets and finance rather than simply trading or buying stocks. So I'd stick to the Andrew Lo book first. --- Also, since you might not know, it would be a good idea to understand the capital asset pricing model, free cash flow models, and maybe some dividend discount models, the last of which isn't so much relevant but good foundations for your finance knowledge. They are models using various financial concepts (TVM is almost used in every case) and utilizing them in various ways to model certain concepts. You'd most likely be immersed in many of these topics by reading a math-oriented Finance book. Try to stay away from those penny stock trading books, I don't think I need to tell a math major (who is probably much smarter than I am) that you don't need to be engaging in penny stocks, but do your DD and come to a conclusion yourself if you'd like. I'm not sure what career path you're trying to go down (personal trading, quant firm analyst, regular analyst, etc etc) but it sounds like you have the credentials to be doing quant trading. --- Check out www.quantopian.com. It's a website with a python engine that has all the necessary libraries installed into the website which means you don't have to go through the trouble yourself (and yes, it is fucking trouble--you need a very outdated OS to run one of the libraries). It has a lot of resources to get into algorithmic trading and you can begin coding immediately. You'd need to learn a little bit of python to get into this but most of it will be using matplotlib, pandas, or some other library and its own personal syntax. Learning about alpha factors and the Pipeline API is also moderately difficult to get down but entirely possible within a short amount of dedicated time. Also, if you want to get into algorithmic trading, check out Sentdex on youtube. He's a python programmer who does a lot of videos on this very topic and has his own tool on quantopian called 'Sentiment Analyzer' (or something like that) which basically quantifies sentiment around any given security using web scrapers to scrape various news and media outlets. Crazy cool stuff being developed over there and if you're good, you can even be partnered with investors at quantopian and share in profits. You can also deploy your algorithms through the website onto various trading platforms such as Robinhood and another broker and run your algorithms yourself. Lots of cool stuff being developed in the finance sector right now. Modern corporate finance and investment knowledge is built on quite old theorems and insights so expect a lot of things to change in today's world. --- With a math degree, finance should be like algebra I back in the day. You just gotta get familiar with all of the different rules and ideas and concepts. There isn't that much difficult math until you begin getting into higher level finance and theory, which mostly deals with statistics anyways like covariance and regression and other statistic-related concepts. Any other math is simple arithmetic." }, { "docid": "278630", "title": "", "text": "Firstly what are you trading that you could lose more than you put in? If you are simply trading stocks you will not lose more than you put in, unless you are trading on margin. A limit order is basically that, a limit on the maximum price you want your buy order bought at or the minimum price you want your sell order sold at. If you can't be glued to the screen all day when you place a limit order, and the market moves the opposite way, you may miss out on your order being executed. Even if you can be in front of the screen all day, you then have to decide if you want to chase the market of miss out on your purchase or sale. For example, if a stock is trading at $10.10 and you put a limit buy order to buy 1000 shares at or below $10.00 and the price keeps moving up to $10.20, then $10.30 and then $10.50, until it closes the day at $11.00. You then have the choice during the day to miss out on buying the shares or to increase your limit order in order to buy at a higher price. Sometime if the stock is not very liquid, i.e. it does not trade very often and has low volume, the price may hit $10.00 and you may only have part of your order executed, say 500 out of your 1000 shares were bought. This may mean that you may have to increase the price of your remaining order or be happy with only buying 500 shares instead of 1000. The same can happen when you are selling (but in reverse obviously). With market order, however, you are placing a buy order to buy at the next bid price in the depth or a sell order to sell at the next offer price in the depth. See the market depth table below: Note that this price depth table is taken before market open so it seems that the stock is somewhat illiquid with a large gap between the first and second prices in the buyers (bid) prices. When the market opened this gap is closed, as WBC is a major Australian bank and is quite liquid. (the table is for demonstration purposes only). If we pretend that the market was currently open and saw the current market depth for WBC as above, you could decide to place a limit sell order to sell 1000 shares at say $29.91. You would sell 100 shares straight away but your remaining 900 sell order will remain at the top of the Sellers list. If other Buyers come in at $29.91 you may get your whole sale completed, however, if no other Buyers place orders above $29.80 and other Sellers come into the market with sell orders below $29.91, your remaining order may never be executed. If instead you placed a market sell order you would immediately sell 100 shares at $29.91 and the remaining 900 shares at $29.80. (so you would be $99 or just over 0.3% worse off than if you were able to sell the full 1000 shares at $29.91). The question is how low would you have had to lower your limit order price if the price for WBC kept on falling and you had to sell that day? There are risks with whichever type of order you use. You need to determine what the purpose of your order is. Is it to get in or out of the market as soon as possible with the possibility of giving a little bit back to the market? Or is it to get the price you want no matter how long it takes you? That is you are willing to miss out on buying the shares (can miss out on a good buy if the price keeps rising for weeks or months or even years) or you are willing to miss out on selling them right now and can wait for the price to come back up to the price you were willing to sell at (where you may miss out on selling the shares at a good price and they keep on falling and you give back all your profits and more). Just before the onset of the GFC I sold some shares (which I had bought a few years earlier at $3.40) through a market order for $5.96. It had traded just above $6 a few days earlier, but if instead of a market order I had placed a limit order to sell at $6.00 or more I would have missed out on the sale. The price never went back up to $6 or above, and the following week it started dropping very quickly. It is now trading at about $1.30 and has never gone back above $2.00 (5.5 years later). So to me placing a limit order in this case was very risky." }, { "docid": "323944", "title": "", "text": "\"But speculation is absolutely intended to happen, and is considered necessary for healthy a investment environment. What I am saying, however, is that this desire to rid the world of HFT appears to be moral rather than logical. There is very little reason to eliminate HFT as it stands, although there appears to be a propensity for very emotional responses to the basic concept. Ones I can appreciate. However I am suggesting they are misguided as the people who should be upset with HFT are the hedge fund managers and day traders they are outwitting, not you or me who buy and sell shares on a whim every so often. If you want to ban day traders that is a separate argument I don't want to go into. The idea that these computer algorithms are all set to \"\"sell,sell,sell\"\" is provably nonsensical. If that were the case, all of the HFT participants would have gone massively bankrupt during the flash crashes. Also, it is quite patently the case that somebody has to be buying in order for anybody to sell. Saying \"\"this is what caused some of the crashes\"\" is just your desire for a simple explanation. It must have been more complex than this, and to my knowledge none of these crashes have been adequately explained although some poorly designed algorithms have been implicated. Note that in one of these cases IIRC a fund closed its doors due to the losses, and the market was largely unaffected. So it seems like a problem that self corrects in this case, and one that only *harms* the participant that erred. Also, to correct a basic misunderstanding, selling happens all of the time, and does not inherently drive the price down. There are by definition an *equal number of sales to purchases*. What drives the price down is *the people buying being willing to pay less*. EDIT: as another aside, a point I have made elsewhere and seems suitable to make here: flash crashes, whilst causing panic, are again something only the professional intra-day trading community are likely to be affected by. Their very name implies so. The reason being that anybody investing based on the *long term investment potential* of a company will only benefit in the temporary drop in price, as they can purchase more of the company at a bargain price. Any intelligent investor will not be fazed by the drop in price, as price has *no bearing on a company's real value*, and stocks do tend towards this value over time, whatever happens over the short term. The only case in which it could is if the company owns a large portfolio of stock that itself devalues dramatically that they intended to sell and as a result experience cash flow problems. This is so incredibly unlikely with a flash crash as to be ignored.\"" }, { "docid": "275943", "title": "", "text": "\"There are some useful answers here, but I don't think any of them are quite sufficient. Yes, there are some risks involved in CFD trading, but I will try and give you information so you can make your own decision. Firstly, Cyprus is part of the EU, which gives it a level of credibility. I'm not saying it's the safest or most well regulated market in the world, but that in itself would not particularly scare me away. The far more important issue here is the risk of using CFDs and of eToro themselves. A Contract for Difference is really just a specialization of an Equity Swap. It is in no way like owning a real stock. When you purchase shares of a company you own a real Asset and are usually entitled to dividends and voting rights. With a CFD, what you own is one side of a Swap contract. You have a legal agreement between yourself and eToro to \"\"swap\"\" the return earned on the underlying stock for whatever fees eToro decide to charge. As already mentioned, CFDs are not available to US citizens. Equity swaps have many benefits in financial markets. They can allow access to restricted markets by entering into swaps with banks that have the necessary licenses to trade in places like China. Many \"\"synthetic\"\" ETFs use them in Europe as a way to minimize tracking error as the return is guaranteed by the swap counterparty (for a charge). They also come with one signficant risk: counterparty credit risk. When trading with eToro, for as long as your position is open, you are at risk of eToro going bankrupt. If eToro failed, you do not actually own any stocks, you only own swap contracts which are going to be worthless if eToro ceased to exist. CFDs also have an ongoing cost to maintain the open position. This makes them less suitable for buy and hold strategies as those ongoing costs will eat into your returns. It's also not clear whether you would receive any dividends paid by the stock, which make up a significant proportion of returns for buy and hold investors. eToro's website is fairly non-committal: eToro intends to offer a financial compensation representing the dividends which will be allocated on stocks, to the extent such dividends shall be available to eToro. All of these points expose what CFDs are really for - speculating on the stock market, or as I like to call it: gambling. If you want to invest in stocks for the long term, CFDs are a bad idea - they have high ongoing costs and the counterparty risk becomes significant. Wait until you have enough money and then buy the real thing. Alternatively, consider mutual funds which will allow you to purchase partial shares and will ensure your investment is better diversified across a large number of stocks. If however, you want to gamble and only keep your position open for a short time, these issues may not be of concern to you. There's nothing wrong with gambling, it can be fun, many people gamble in casinos or on football matches - but bear in mind that's what CFDs are for. CFDs were in fact originally created for the UK market as a way to avoid paying capital gains tax when making short term speculative trades. However, if you are going to gamble, make sure you're not putting any more than 1% of your net worth at risk (0.1% may be a better target). There are a few other ways to take a position on stocks using less money than the share price: Fortunately, eToro do not allow leveraged purchase of stocks so you're reasonably safe on this point. They claim this is because of their 'responsible trading policy', although I find that somewhat questionable coming from a broker that offers 400:1 leverage on FX pairs. One final word on eToro's \"\"social trading\"\" feature. A few years ago I was in a casino playing Blackjack. I know nothing about Blackjack, but through sheer luck of the draw I managed to treble my money in a very small amount of time. Seeing this, a person behind me started \"\"following\"\" me by putting his chips down on my seat. Needless to say, I lost everything, but amazingly the person behind me got quite annoyed and started criticizing my strategy. The idea of following other people's trades just because they've been lucky in the past sounds entirely foolish to me. Remember the warning on every mutual fund: Past performance does not guarantee future returns\"" }, { "docid": "347651", "title": "", "text": "You are young, and therefore have a very long time horizon for investing. Absolutely nothing you do should involve paying any attention to your investments more than once a year (if that). First off, you can only deposit money in an IRA (of whatever kind) if you have taxable income. If you don't, you can still invest, just without the tax benefits of a Roth. My suggestion would be to open an account with a discount brokerage (Schwab, Fidelity, eTrade, etc). The advantage of a brokerage IRA is that you can invest in whatever you want within the account. Then, either buy an S&P 500 or total market index fund within the account, or buy an index-based ETF (like a mutual fund, but trades like a stock). The latter might be better, since many mutual funds have minimum limits, which ETFs do not. Set the account up to reinvest the dividends automatically--S&P 500 yields will far outstrip current savings account yields--and sit back and do nothing for the next 40 or 50 years. Well, except for continuing to make annual contributions to the account, which you should continue to invest in pretty much the same thing until you have enough money (and experience and knowledge) to diversify into bond funds/international funds/individual stocks, etc. Disclaimer: I am not a financial planner. I just manage my own money, and this strategy has mostly kept me from stressing too badly over the last few years of market turmoil." }, { "docid": "1577", "title": "", "text": "If I buy VUSA from one exchange, can I sell it in a different exchange, assuming my brokerage account lets me trade in both exchanges? Or is it somehow tied to the exchange I bought it from? This doesn't happen for all securities and between all stock exchanges. So that is dependent on broker and country. I checked for VUSA with Selftrade. They categorically refused allowing me to trade in VUSA in different exchanges. I can only buy and sell in same currency only, albeit sell(buy) in the same exchange where I buy(sell) from. Should be the same behaviour for all brokers for us mere mortals, if you are a bank or a millionaire than that might be a different question. The VUSA you quote is quoted in GBP in LSE and in EUR in AEX, and the ETF has been created by an Irish entity and has an Irish ISIN. As Chris mentioned below, happens between US and Canadian exchanges, but not sure it happens across all exchanges. You cannot deal in inter-listed stocks in LSE and NYSE. Since it's the same asset, its value should not vary across exchanges once you compensate for exchange rates, right? Yes, else it opens up itself for arbitrage (profit without any risk) which everybody wants. So even if any such instance occurs, either people will exploit it to make the arbitrage profit zero (security reflects the equilibrium price) or the profit from such transaction is so less, compared with the effort involved, that people will tend to ignore it. Anyways arbitrage profit is very difficult to garner nowadays, considering the super computers at work in the market who exploit these discrepancies, the moment they see them and bring the security right to the zero arbitrage profit point. If there's no currency risk because of #2, what other factors should I consider when choosing an exchange to trade in? Liquidity? Something else? Time difference, by the time you wake up to trade in Japan, the Japanese markets would have closed. Tax implications across multiple continents. Law of the land, providing protection to investors. Finding a broker dealing in markets you want to explore or dealing with multiple brokers. Regulatory headaches." }, { "docid": "441139", "title": "", "text": "Too little information to give any kind of advice. What is your age, goals, other monies, other investments etc... You need to look at the whole thing. Are you investing already in tax-deferred IRA. Spend the time to learn to be your own investment advisor. Many investment professionals may disagree with me on this, but since you can't trust many of them better you do your own research first. Same with Stocks or ETF, you try to be the expert. Better you have the time to follow your own investments ideas, do not depend on a human or robot to tell you when to buy or sell. Their job is to part you from your money. If you do not have the time to this yourself, save yourself the money, and just do something else with it. I have been investing in the Stock Market since 1986, I have made more money than I lost. Good runs and bad. Today it is all about trading, you can not trust the financials given by anyone, or know what is going to happen in the markets in general. So unless you want to play the game every day, don't be in it." }, { "docid": "458730", "title": "", "text": "I assume you are talking about a publicly traded company listed on a major stock exchange and the buyer resides in the US. (Private companies and non-US locations can change the rules really a lot.) The short answer is no, because the company does not own the stock, various investors do. Each investor has to make an individual decision to sell or not sell. But there are complications. If an entity buys more than about 10% of the company they have to file a declaration with the SEC. The limit can be higher if they file an assertion that they are buying it solely for investment and are not seeking control of the company. If they are seeking control of the company then more paperwork must be filed and if they want to buy the whole company they may be required to make a tender offer where they offer to buy any and all shares at a specific price. If the company being bought is a financial institution, then the buyer may have to declare as a bank holding company and more regulations apply. The company can advise shareholders not to take the tender offer, but they cannot forbid it. So the short answer is, below 10% and for investment purposes only, it is cash and carry: Whoever has the cash gets to carry the stock away. Above that various regulations and declarations apply, but the company still does not have the power prevent the purchase in most circumstances." }, { "docid": "127743", "title": "", "text": "As many people here have pointed out, a CFD is a contract for difference. When you invest in stock at eToro, you buy a CFD reflecting a bid on the price movement of the underlying stock, however, you do not actually own the stock or hold any rights shareholders have. The counterparty to the CFD is eToro. When you close your position, eToro shall pay you the amount representing the difference between your buy and sell price for each stock. I suggest you read the following article about CFDs, it explains everything clearly and thoroughly: http://www.investopedia.com/articles/stocks/09/trade-a-cfd.asp#axzz2G9ZsmX3A As some of the responders have pointed out, and as is mentioned in the article, a broker can potentially misquote the prices of underlying assets in order to manipulate CFDs to their advantage. However, eToro is a highly reputable broker, with over 2 million active accounts, and we guarantee accurate stock quotes. Furthermore, eToro is regulated in Europe (Germany, UK, France, etc.) by institutions that exact strict regulations on the CFD trading sector, and we are obligated to comply with these regulations, which include accurate price quoting. And of course, CFD trading at eToro has tremendous benefits. Unlike a direct stock investment, eToro allows you to invest as much or as little as you like in your favorite stocks, even if the amount is less than the relevant stock price (i.e. fraction stocks). For example: if you invest $10 in Microsoft, and on the day of execution eToro’s average aggregated price was $30 after a spread of 0.1%, you will then have a CFD representing 0.33 stocks of Microsoft in your eToro account. In addition, with eToro you can invest in stock in the context of a social trading network, meaning that you can utilize the stock trading expertise of other trader to your advantage by following them, learning their strategies, and even copying their stock investments automatically. To put it briefly, you won’t be facing the stock market alone! Before you make a decision, I suggest that you try stock trading with an eToro demo account. A free demo account grants you access to all our instruments at real market rates, as well as access to our social network where you can view and participate in trader discussions about trading stocks with eToro, all without risking your hard earned money. Bottom line – it’s free, there are no strings attached, and you can get a much firmer idea of what trading stocks with eToro is like. If you have any further questions, please don’t hesitate to contact us through our site: www.etoro.com." }, { "docid": "282483", "title": "", "text": "In general, investors with a long period of time until they would need to withdraw the cash are best off holding mostly equities. While the dividends that equities would return are less than the interest you would get in peer-to-peer lending, over long periods of time not only do you get the dividends from equity investment but the value of the stock will grow faster than interest on loans. The higher returns from stocks, however, comes with more risk of big downturns. Many people pull their investments out of stocks right after crashes which really hurts their long term returns. So, in order to get the benefit of investing in stocks you need to be strong enough to continue to hold the stocks through the crash and into the recovery. As for which stocks to invest in, generally it is best to invest in low-fee index funds/etfs where you own a broad collection of stocks so that if (when) any one stock goes bust that your portfolio does not take much damage. Try to own both international and domestic stocks to get good diversification. The consensus recommends adding just a little bit of REITs and bonds to your investments, but for someone at 25 it might not be worth it yet. Warren Buffett had some good thoughts on index investing." } ]

[ { "docid": "450135", "title": "", "text": "\"Legally speaking, if you do close a limited company, the funds belong to the government (\"\"bona vacantia\"\"). There's some guidance on this at Companies House and there is indeed a substantial amount of administration work to get it undone. Notable excerpts: You should deal with any loose ends, such as closing the company’s bank account, the transfer of any domain names - before you apply. [...] From the date of dissolution, any assets of a dissolved company will belong to the Crown. The company’s bank account will be frozen and any credit balance in the account will pass to the Crown. [...] 4. What happens to the assets of a dissolved company? From the date of dissolution, any assets of a dissolved company will be 'bona vacantia'. Bona vacantia literally means “vacant goods” and is the technical name for property that passes to the Crown because it does not have a legal owner. The company’s bank account will be frozen and any credit balance in the account will be passed to the Crown. [...] Chapter 3 - Restoration by Court Order The registrar can only restore a company if he receives a court order, unless a company is administratively restored to the register (see chapter 4). Anyone who intends to make an application to the court to restore a company is advised to obtain independent legal advice. [...] Chapter 4 - Administrative Restoration 1. What is Administrative Restoration? Under certain conditions, where a company was dissolved because it appeared to be no longer carrying on business or in operation, a former director or member may apply to the registrar to have the company restored. [...]\"" } ]

[ { "docid": "243910", "title": "", "text": "\"Bad plan. This seems like a recipe for having your money taken away from you by CBP. Let me explain the biases which make it so. US banking is reliable enough for the common citizen, that everyone simply uses banks. To elaborate, Americans who are unbanked either can't produce simple identity paperwork; or they got an account but then got blacklisted for overdrawing it. These are problems of the poor, not millionaires. Outside of determined \"\"off the grid\"\" folks with political reasons to not be in the banking and credit systsm, anyone with money uses the banking system. Who's not a criminal, anyway. We also have strong laws against money laundering: turning cash (of questionable origin) into \"\"sanitized\"\" cash on deposit in a bank. The most obvious trick is deposit $5000/day for 200 days. Nope, that's Structuring: yeah, we have a word for that. A guy with $1 million cash, it is presumed he has no choice: he can't convert it into a bank deposit, as in this problem - note where she says she can't launder it. If it's normal for people in your country to haul around cash, due to a defective banking system, you're not the only one with that problem, and nearby there'll be a country with a good banking system who understands your situation. Deposit it there. Then retain a US lawyer who specializes in this, and follow his advice about moving the money to the US via funds transfer. Even then, you may have some explaining to do; but far less than with cash. (And keep in mind for those politically motivated off-the-financial-grid types, they're a bit crazy but definitely not stupid, live a cash life everyday, and know the law better than anybody. They would definitely consider using banks and funds transfers for the border crossing proper, because of Customs. Then they'll turn it into cash domestically and close the accounts.)\"" }, { "docid": "773", "title": "", "text": "For the US government, they've just credited Person B with a Million USD and haven't gained anything (afterall, those digits are intangible and don't really have a value, IMO). Two flaws in this reasoning: The US government didn't do anything. The receiving bank credited the recipient. If the digits are intangible, such that they haven't gained anything, they haven't lost anything either. In practice, the role of governments in the transfer is purely supervisory. The sending bank debits the sender's account and the receiving bank credits the recipient's account. Every intermediary makes some money on this transaction because the cost to the sender exceeds the credit to the recipient. The sending bank typically receives a credit to their account at a correspondent bank. The receiving bank typically receives a debit from their account at a correspondent bank. If a bank sends lots of money, eventually its account at its correspondent will run dry. If a bank receives lots of money, eventually its account at its correspondent will have too much money. This is resolved with domestic payments, sometimes handled by governmental or quasi-governmental agencies. In the US, banks have an account with the federal reserve and adjust balances there. The international component is handled by the correspondent bank(s). They also internally will credit and debit. If they get an imbalance between two currencies they can't easily correct, they will have to sell one currency to buy the other. Fortunately, worldwide currency exchange is extremely efficient." }, { "docid": "397655", "title": "", "text": "I had opened a PPF account with State Bank of India. If you had opened the account before you became NRI its fine. NRI cannot Open a new PPF Account. can I continue depositing money every year to PPF account? If you already have an PPF account, you can deposit funds into this. Best via transfers from NRE/NRO account. living in US for 2 years Incase you have not deposited into PPF for a given year, you need to pay a penalty of Rs 50 every year and a Minimum of Rs 500 every year. So for 2 years your would need to pay Rs 1100/- to regularize the account. Normal contributions can begin after you regularize. continue staying here for few more years The PPF account cannot be closed, you can make deposits as above. On Maturity [15 years] you are expected to close the account and can transfer funds outside of India via the NRO account." }, { "docid": "81139", "title": "", "text": "IMHO: The best scenario where Greece does not leave the euro: In this scenario there is probably no risk, because either the ECB will print more money, or other countries will help Greece in some way. The average scenario where Greece leaves the euro: All Bank accounts will be frozen and slowly turned into NEW DRACHMA, and your poor money after the conversion will be worth 50K euro at best (but probably much less). There is also the worst scenario: The bank defaults too, and you will lose everything. Italy has a fund to protect deposits up to 100K euro (I don't know if you have something similar in Greece). However, a similar fund in Greece would be guaranteed by Greek banks and the Greek government, so you might not get much back regardless." }, { "docid": "311736", "title": "", "text": "You're asking for opinions here, which is kindof against the rules, but I'll give it a try. 1) Does emergency funds and saving money(eg.Money plan to buy a house) should be in same Saving Account? 2) or should each specific saving plan set up in particular Saving Account? No, it doesn't. It's a matter of convenience. I personally find it more convinient to have different stashes for different purposes, but it means extra overhead of keeping an eye on one more account. Fortunately, with on-line access, mint.com and spreadsheets, it's not that big of an overhead. 3) If saved in same Saving Account, how could I manage easily which percentage is planned for which? Excel spreadsheet comes to mind. Banks may have some tools too, for example Wells Fargo (where I'll be closing my account soon), has a nice on-line goals manager that allows you to keep track of your savings per assigned goals (they allow one goal per savings account, but you can have multiple accounts for multiple goals, and it will show the goals and progress pretty nicely). 4) If not saved in same Saving Account, the interest earned would be smaller because they all clutter across multiple Saving Accounts? In some banks interest rates are tiered. But in most on-line savings accounts they're not, and you get the same high rate from the first $1 deposited. So if in the bank where you keep the money they only pay a decent rate if you deposit some big lump of money - just open an account elsewhere. Places to check: American Express FSB, ING Direct, E*Trade savings, Capital One, Ally, and many more." }, { "docid": "12391", "title": "", "text": "\"Accept that the money's gone. It could, as others have mentioned, been a lot more. Learn. Make sure your son (and you!) have learned the lesson (at least try to get something out of the $650). The world isn't always a nice place unfortunately. Don't wire money to strangers - use an escrow service or paypal or similar. As the saying goes: \"\"Fool me once, shame on you. Fool me twice, shame on me\"\". Report it to the authorities. Does have the advantage of the domestic rather than foreign bank account used. The scammer might have closed it by now, but there should be some paper tail. I imagine the id required for opening a bank account in the US is as strict as it is most places these days. They may have used fake Id, but that's not your problem. Assuming contact was made over the internet, bearing in mind IANAL (or American), this could be a crime of Wire Fraud, in which case I believe it's a case for the FBI rather than your local police. The phone calls your son is still receiving could also be construed as attempted extortion and if across state lines could also come under federal jurisdiction. The FBI have a better chance of catching such a scammer, generally having more chance of knowing one end of a computer from the other compared to a local beat cop. If other victims have also contacted the authorities, it will probably be taken more seriously. Give as much information as you can. Not just the bank account details, but all communication, exact time of phone calls, etc. The cops may say there's nothing they can do as it's a civil matter (breach of contract) rather than a criminal one. In which case you have the (probably expensive) option of going the civil route as described by Harper above. Inform Others. Assuming initial contact with the scammer was made through a website or forum or similar. I imagine this must be a niche area for hand made toys. Post your experience to warn other potential victims. Inform the site owner - they may ban the scammers account where applicable. Stop the calls. Block the number. If the number's being withheld, contact the provider - they should have a policy regarding harassment and be able to block it their end. If the calls keep coming, your son will need to change his number. Don’t let it get to you. You may have warm cosy fantasies of removing the guys kneecaps with a 2x4. Don't however dwell on the b*stard for too long and let it get under your skin. You will have to let it go.\"" }, { "docid": "163904", "title": "", "text": "\"The answers here are all correct. This is 100% scam, beyond any reasonable doubt. Don't fall for it. However, I felt it valuable to explain what would happen were you to fall for this. It's not all that hard to understand, but it involves understanding some of the time delays that exist in modern banking today. The most important thing to understand is that depositing a check does not actually put dollars in your account, even though it appears to. A check is not legal tender for debts public and private. It's a piece of paper known as a \"\"bill of exchange.\"\" It's an authorization for a payee (you), to request that their bank pay you the amount on the check. A transaction made with a check does not actually draw to a close until your bank and their bank communicate and cause the actual transfer of funds to take place. This process is called \"\"clearing\"\" the check. Despite living in the modern times, this process is slow. It can take 7-10 days to clear a check (especially if it is an international bank). This is not good for the banking business. You can imagine how difficult it would be to tell a poor client, who is living paycheck to paycheck, that he can't have his pay until the check clears a week later. Banks have an interest in hiding this annoying feature of the modern banking system, so they do. When you deposit a check, the bank will typically advance you the money (an interest free loan, in effect) while the check \"\"floats\"\" (i.e. until it clears). This creates the illusion that the money is actually in your account for most intents and purposes. (presumably a bank would distinguish between the floating check and a cleared check if you tried to close out your account, but otherwise it looks and feels like the money is in your hands). Of course, if the check is dishonored (because the payer had insufficient funds, or the account simply did not exist), your bank will not get the money. At this moment, they will cancel any advances you received and notify you that the check bounced. Again, this happens 7-10 days later. The general pattern of this scam is that they will pay you by a method which clears slowly, like a check. They will then ask you to withdraw the money using a faster clearing method (like a wire transfer or withdrawing the cash). Typically they will be encouraging you to move quickly (they are on a timetable... when their check bounces, the game is up!) At this time, it will appear as though the account has a positive balance, but in fact it has a negative balance plus an advance on the check. This looks great until 7-10 days later, when the check bounces. At that time, the bank will cancel the advance, and reality will set in. You will now have an open bank account, legally opened by you in your own name, which is deeply in debt. Meanwhile, the scammer walks away with all the money that you sent them (which cleared quickly). There are many variants which can hide the details. Some can play games with check kiting to try to make your first check clear (then try to rope you in for a more painful hit). Some will change the instruments they use (checks are the easy ones, so they're simply most common). Don't try to think \"\"maybe this one is legit.\"\" These scammers literally make a living off of making shady transactions look legit. Things I would recommend looking out for:\"" }, { "docid": "422477", "title": "", "text": "\"As you've observed, when you're dealing with that amount of money, you're going to have to give up FDIC guarantees. That means that keeping the money in a bank account carries some risk with it: if that particular bank goes bust, you could lose most of your money. There are a few options to stretch the FDIC limit such as CDARS, but likely can't handle your hypothetical $800 million. So, what's a lucky winner to do? There are a few options, including treasury securities, money market funds, and more general capital investments such as stocks and bonds. Which one(s) are best depend on what your goals are, and what kind of risks you find acceptable. Money in the bank has two defining characteristics: its value is very stable, and it is liquid (meaning you can spend it very easily, whenever you want, without incurring costs). Treasury securities and money market funds each focus on one of these characteristics. A treasury security is a piece of paper (or really, an electronic record) saying that the US Federal Government owes you money and when they will pay it back. They are very secure in that the government has never missed a payment, and will move heaven and earth to make sure they won't miss one in the future (even taking into account recent political history). You can buy and sell them on an open market, either through a broker or directly on the Treasury's website. The major downside of these compared to a bank account is that they're not as liquid as cash: you own specific amounts of specific kinds of securities, not just some number of dollars in an account. The government will pay you guaranteed cash on specified dates; if you need cash on different dates, you will need to sell the securities in the open market and the price will be subject to market fluctuations. The other \"\"cash-like\"\" option is money market funds. These are a type of mutual fund offered by financial companies. These funds take your money and spread it out over a wide variety of very low risk, very short term investments, with the goal of ensuring that the full value will never go down and is available at any time. They are very liquid: you can typically transfer cash quickly and easily to a normal bank account, write checks directly, and sometimes even use \"\"online bill pay\"\"-like features. They have a very good track record for stability, too, but no one is guaranteeing them against something going terribly wrong. They are lower risk than a (non-FDIC-insured) bank account, since the investments are spread out across many institutions. Beyond those two somewhat \"\"cash-like\"\" options, there are of course other, more general investments such as stocks, bonds, and real estate. These other options trade away some degree of stability, liquidity, or both, in exchange for better expected returns.\"" }, { "docid": "37133", "title": "", "text": "\"withdraw in cash - bank reports it to IRS no matter what. Would this affect my tax filing in the coming year? No, and no. The bank doesn't report to the IRS. In the US - the bank will probably report to FinCEN. It has nothing to do with your tax return. withdraw in check - bank does not seem to report it. Is this correct? Doesn't have to. Still might, if they think it is a suspicious/irregular activity. wire-transfer to another person's account - would this always be slapped with a \"\"gift tax\"\"? If this is a gift it would. Regardless of how you transfer the money. Is it? Answers to your follow up questions: In the US, what documents do we need to prepare in case our large sum withdraw from the bank triggers a flag in relevant government (local and/or federal) divisions and they decide to investigate? Depending on what the investigators request. FinCEN would investigate money laundering, the IRS would investigate tax evasion, the FBI would investigate terrorism sponsorship, etc. Depending on who's investigating and what the suspicions are - different documents may be required. But the bottom line is that you should be able to explain the source of the funds and the destination. For example \"\"I found $1M in cash and sent it to some drug lord because he's such a good friend of mine\"\" will probably not fly. Does the (local/federal) government care if we stash our money (in cash or check) under our mattress, if we purchase foreign properties (taxable? documents needed for proof?), or if we give it away (to individuals or organizations - individual: a gift tax, organization: tax waivable) ? The government cares about taxes, and illegal activities. Stashing money under a mattress is not illegal, but earning cash and not paying income tax on it usually is. In many cases money stashed under the mattress was obtained illegally and/or income taxes were not paid. It seems that no matter what we do (except spreading thin our assets to multiple accounts in multiple banks), the government will always be notified of any large bank transaction and we would be forever flagged since. Is this correct ? Yes, reportable transactions will be reported. Also spreading around in multiple accounts/transactions to avoid reporting is called \"\"structuring\"\" and is on its own a crime. This is for cash/cash equivalent transactions only, of course. Not sure about the \"\"forever flagged since\"\", that part is probably sourced in your imagination.\"" }, { "docid": "184303", "title": "", "text": "Its not just Citi and BoFA, even Barclays, HSBC and other large Banks are trading below book value in markets they are listed. Are there particular assets that are causing these two banks to be valued lower relative to their book values than the other banks? There no particular assets. Given the current economic situation most Banks are not making good returns, i.e. expected returns of markets are around 10-12% and the returns getting generated are around 4-6%. The overall slow down in various segments as well as regulations in most countries mean that banks have to relook at the business model in short term and generate more revenue. The market believes that Banks may loose money faster and hence the negative outlook and the trading below the book value. Note Book Value is derived in ideal conditions, i.e. when the company is healthy. If any company were to sell the assets in distress, the actual funds raised would be quite a bit less than Book Value. Its also to be noted that typically Banks would not close out and hence Book Value to an extent is just an indicator. Or is it a residual loathing based on their being the biggest losers of 2008 that are still around today? The 2008 has gone past. This is more recent. If you look most of these banks were doing quite well till last year and had recovered substantially after 2008." }, { "docid": "492028", "title": "", "text": "Savings accounts have limitations in case a bank goes belly up and you have a higher amount in the account (more than the insured amount). Mostly big corporations or pension funds cannot rely on a bank to secure their cash but a government bond is secured (with some fine print) and hence they are willing to take negative interest rates." }, { "docid": "151121", "title": "", "text": "Bank of America is the worst. Once I had a joint account with another individual that I had funded out of my account to make payroll. When I found out that he had screwed two other people by stealing the payroll money I decided to disburse it myself and transferred it back to my corporate account on which I was the only signer. He went back to the bank and effected a withdrawal from my account to the tune of tens of thousands of dollars, put the money in the joint account and removed me as a signer. The bank wouldn't give me my money back and I never collected from him. Another time I tried to close my sons' accounts which were in inactive status. Every day for a week they told me they could not close the account until it was active, but they were working on making it active. Chase could do this in a minute. I finally went to a branch and loudly informed the manager that maybe the bank was insolvent and that I should call the FDIC to see why they won't release my money. He wanted to take me into his office. I told him loudly, I know all about DDAs, Savings and CDs, I have run deposit operations for a major bank and wrote software to process them. Just put a hold on the account, write me two cashiers check and offset them with a suspense voucher. You do know how to write a suspense voucher don't you? It's just a general ledger entry to a suspense account. Well he was so embarassed he would do anything to get me out of the branch and gave me the cashier's checks. Fuck B of A." }, { "docid": "9560", "title": "", "text": "Despite QE, monetary expansion in the US has gone down for the last 10 years. I am not quite sure what you are asking. Yes banks have trillions at the Fed because of the central bank “money printing,” but none of that is leaking into the economy. Are you referring to central banks around the world purchasing US treasuries? Are you asking what assets are closely connected to treasuries that you can avoid?" }, { "docid": "531551", "title": "", "text": "\"These rates are so low because the cost of money is so low. Specifically, two rates are near zero. The Federal Reserve discount rate, which is \"\"the interest rate charged to commercial banks and other depository institutions on loans they receive from their regional Federal Reserve Bank's lending facility--the discount window.\"\" The effective federal funds rate, which is the rate banks pay when they trade balances with each other through the Federal Reserve. Banks want to profit on the loans they make, like mortgage loans. To do so, they try to maximize the difference between the rates they charge on mortgages and other loans (revenue), and the rates they pay savings account holders, the Federal Reserve or other banks to obtain funds (expenses). This means that the rates they offer to pay are as close to these rates as possible. As the charts shows, both rates have been cut significantly since the start of the recession, either through open market operations (the federal funds rate) or directly (the discount rate). The discount rate is set directly by the regional Federal Reserve banks every 14 days. In most cases, the federal funds rate is lower than the discount rate, in order to encourage banks to lend money to each other instead of borrowing it from the Fed. In the past, however, there have been rare instances where the federal funds rate has exceeded the discount rate, and it's been cheaper for banks to borrow money directly from the Fed than from each other.\"" }, { "docid": "181616", "title": "", "text": "Per Md. REAL PROPERTY Code Ann. § 8-203: (d) (1) (i) The landlord shall maintain all security deposits in federally insured financial institutions, as defined in § 1-101 of the Financial Institutions Article, which do business in the State. (ii) Security deposit accounts shall be maintained in branches of the financial institutions which are located within the State and the accounts shall be devoted exclusively to security deposits and bear interest. (iii) A security deposit shall be deposited in an account within 30 days after the landlord receives it. (iv) The aggregate amount of the accounts shall be sufficient in amount to equal all security deposits for which the landlord is liable. (2) (i) In lieu of the accounts described in paragraph (1) of this subsection, the landlord may hold the security deposits in insured certificates of deposit at branches of federally insured financial institutions, as defined in § 1-101 of the Financial Institutions Article, located in the State or in securities issued by the federal government or the State of Maryland. (ii) In the aggregate certificates of deposit or securities shall be sufficient in amount to equal all security deposits for which the landlord is liable. As such, one or more accounts at your preference; it's up to the bank how to treat the account, so it may be a personal account or it may be a 'commercial' account depending on how they treat it (but it must be separate from your personal funds). A CD is perhaps the easiest way to go, as it's not a separate account exactly but it's easily separable from your own funds (and has better interest). You should also note (further down on that page) that you must pay 3% interest, once per six months; so try to get an account that pays as close as possible to that. You likely won't get 3% right now even in a CD, so consider this as an expense (and you'll probably find many people won't take security deposits in many situations as a result)." }, { "docid": "339017", "title": "", "text": "\"Coming from someone who has worked a in the account servicing department of an actual bank in the US, other answers are right, this is probably a scam, the phone number on the letter is probably ringing to a fraudulent call center (these are very well managed and sound professional), and you must independently locate and dial the true contact number to US Bank. NOW. Tell them what happened. Reporting is critical. Securing your money is critical. Every piece of information you provided \"\"the bank\"\" when you called needs to be changed or worked around. Account numbers, passwords, usernames, card numbers get changed. Tax ID numbers get de-prioritized as an authentication mechanism even if the government won't change them. The true bank probably won't transfer you to the branch. If the front-line call center says they will, ask the person on the phone what the branch can do that they cannot. Information is your friend. They will probably transfer you to a special department that handles these reports. Apparently Union Bank's call center transfers you to the branch then has the branch make this transfer. Maybe their front-line call center team is empowered to handle it like I was. Either way, plug your phone in; if the call takes less than 5 minutes they didn't actually do everything. 5 to 8 minutes per department is more likely, plus hold time. There's a lot of forms they're filling out. What if that office is closed because of time differences? Go online and ask for an ATM limit increase. Start doing cash advances at local banks if your card allows it. Just get that money out of that account before it's in a fraudsters account. Keep receipts, even if the machine declines the transaction. Either way, get cash on hand while you wait for a new debit card and checks for the new account you're going to open. What if this was fraud, you draw your US Bank account down to zero $800 at a time, and you don't close it or change passwords? Is it over? No. Then your account WILL get closed, and you will owe EVERYTHING that the fraudsters rack up (these charges can put your account terrifyingly far in the negative) from this point forward. This is called \"\"participation in a scam\"\" in your depository agreement, because you fell victim to it, didn't report, and the info used was voluntarily given. You will also lose any of your money that they spend. What if US Bank really is closing your account? Then they owe you every penny you had in it. (Minus any fees allowed in the depository agreement). This closure can happen several days after the date on the warning, so being able to withdraw doesn't mean you're safe. Banks usually ship an official check shipped to the last known address they had for you. Why would a bank within the United States close my account when it's not below the minimum balance? Probably because your non-resident alien registration from when you were in school has expired and federal law prohibits them from doing business with you now. These need renewed at least every three years. Renewing federally is not enough; the bank must be aware of the updated expiration date. How do I find out why my account is being closed? You ask the real US Bank. They might find that it's not being closed. Good news! Follow the scam reporting procedure, open a new account (with US Bank if you want, or elsewhere) and close the old one. If it IS being closed by the bank, they'll tell you why, and they'll tell you what your next options are. Ask what can be done. Other commenters are right that bitcoin activity may have flagged it. That activity might actually be against your depository agreement. Or it set off a detection system. Or many other reasons. The bank who services your account is the only place that knows for sure. If I offer them $500 per year will they likely keep the account opened? Otherwise I got to go to singapore open another account Legitimate financial institutions in the United States don't work this way. If there is a legal problem with your tax status in the US, money to the bank won't solve it. Let's call the folks you've talked to \"\"FraudBank\"\" and the real USBank \"\"RealBank,\"\" because until RealBank confirms, we have no reason to believe that the letter is real. FraudBank will ask for money. Don't give it. Don't give them any further information. Gather up as much information from them as possible instead. Where to send it, for example. Then report that to RealBank. RealBank won't have a way to charge $500/year to you only. If they offer a type of account to everyone that costs $500, ask for the \"\"Truth in Savings Act disclosures.\"\" Banks are legally required to provide these upon request. Then read them. Don't put or keep your money anywhere you don't understand.\"" }, { "docid": "185403", "title": "", "text": "Believe it or not, this is done as a service to you. The reason for this has to do with a fundamental difference between a credit card account and a checking account. With a credit card account, there is no money in the account; every charge is borrowed money. When you get to your credit limit, your credit transactions will start getting declined, but if the bank does for some reason let one get approved, it's not a big deal for anyone; it just means that you owe a little more than your credit limit. Note that (almost) every credit card transaction today is an electronic transaction. A checking account, however, has real money in it. When it is gone, it is gone. When a balance inquiry is done, the bank has no way of knowing how many checks you've written that have not been cashed yet. It is a customer's responsibility to know exactly how much money is available to spend. If you write more checks than you have money for in your account, technically you have committed a crime. Unfortunately, there are too many people now that are not taking the responsibility of calculating their own checking account balance seriously, and bad checks are written all the time. When a bank allows these transactions to be paid even though you don't have enough money in your account, they are preventing a crime from being committed by you. The fee is a finance charge for loaning you the money, but it is also there to encourage you not to spend more than you have. Even if you use a debit card, it is still tied to a checking account, and the bank doesn't know if you have written enough checks to overdraw your account or not. It is still your responsibility to keep track of your own available balance. Every time this happens to you, thank the bank as you pay this fee, and then commit to keeping your own running balance and always knowing how much you have left in your account." }, { "docid": "448689", "title": "", "text": "\"For the financial year 1 April 2014 to 31 March 2015, as you have [or will be] spent more than 182 days outside India, you would be treated as \"\"Non-Resident\"\" [NRI] for tax purposes. If you are NRI Show my Kuwaiti Income in my Income Tax Return? Pay any tax on the money that I am sending to savings bank accounts in India You need not Pay Tax on your income outside India. i.e. there is no tax obligation created. It cannot be declared in Tax Returns. However any interest you earn on the money deposited in India would be subject to taxes. Will my wife have to show the income and/or pay the income tax on the money that I am sending to her savings bank accounts? There is no Income to you wife [Income is something you earn] and hence its out of scope from Income Tax act. It would fall under gift tax rules. As per Gift Tax one can transfer unlimited funds between close relatives. Hence there is No tax. It would be better if you open an NRO/NRE account and transfer funds into that account\"" }, { "docid": "280204", "title": "", "text": "Putting the money in a bank savings account is a reasonably safe investment. Anything other than that will come with additional risk of various kinds. (That's right; not even a bank account is completely free of risk. Neither is withdrawing cash and storing it somewhere yourself.) And I don't know which country you are from, but you will certainly have access to your country's government bonds and the likes. You may also have access to mutual funds which invest in other countries' government bonds (bond or money-market funds). The question you need to ask yourself really is twofold. One, for how long do you intend to keep the money invested? (Shorter term investing should involve lower risk.) Two, what amount of risk (specifically, price volatility) are you willing to accept? The answers to those questions will determine which asset class(es) are appropriate in your particular case. Beyond that, you need to make a personal call: which asset class(es) do you believe are likely to do better or less bad than others? Low risk usually comes at the price of a lower return. Higher return usually involves taking more risk (specifically price volatility in the investment vehicle) but more risk does not necessarily guarantee a higher return - you may also lose a large fraction of or even the entire capital amount. In extreme cases (leveraged investments) you might even lose more than the capital amount. Gold may be a component of a well-diversified portfolio but I certainly would not recommend putting all of one's money in it. (The same goes for any asset class; a portfolio composed exclusively of stocks is no more well-diversified than a portfolio composed exclusively of precious metals, or government bonds.) For some specifics about investing in precious metals, you may want to see Pros & cons of investing in gold vs. platinum?." } ]

[ { "docid": "246882", "title": "", "text": "I would say generally, the answer is No. There might be some short term relief to people in certain situations, but generally speaking you sign a contract to borrow money and you are responsible to pay. This is why home loans offer better terms then auto loans, and auto loans better than credit cards or things like furniture. The better terms offer less risk to the lender because there are assets that can be repossessed. Homes retain values better than autos, autos better than furniture, and credit cards are not secured at all. People are not as helpless as your question suggests. Sure a person might lose their high paying job, but could they still make a mortgage payment if they worked really hard at it? This might mean taking several part time jobs. Now if a person buys a home that has a very large mortgage payment this might not be possible. However, wise people don't buy every bit of house they can afford. People should also be wise about the kinds of mortgages they use to buy a home. Many people lost their homes due to missing a payment on their interest only loan. Penalty rates and fees jacked up their payment, that was way beyond their means. If they had a fixed rate loan the chance to catch up would have not been impossible. Perhaps an injury might prevent a person from working. This is why long term disability insurance is a must for most people. You can buy quite a bit of coverage for not very much money. Typical US households have quite a bit of debt. Car payments, phone payments, and either a mortgage or rent, and of course credit cards. If income is drastically reduced making all of those payments becomes next to impossible. Which one gets paid first. Just this last week, I attempted to help a client in just this situation. They foolishly chose to pay the credit card first, and were going to pay the house payment last (if there was anything left over). There wasn't, and they are risking eviction (renters). People finding themselves in crisis, generally do a poor job of paying the most important things first. Basic food first, housing and utilities second, etc... Let the credit card slip if need be no matter how often one is threatened by creditors. They do this to maintain their credit score, how foolish. I feel like you have a sense of bondage associated with debt. It is there and real despite many people noticing it. There is also the fact that compounding interest is working against you and with your labor you are enriching the bank. This is a great reason to have the goal of living a debt free life. I can tell you it is quite liberating." } ]

[ { "docid": "383238", "title": "", "text": "What are the consequences if I ignore the emails? If you ignore the emails they will try harder to collect the money from you until they give up. Unlike what some other people here say, defaulting on a loan is NOT a crime and is NOT the same as stealing. There is a large number of reasons that can make someone unable to pay off a loan. Lenders are aware of the risk associated with default; they will try to collect the debt but at the end of the day if you don't have money/assets there is not much they can do. As far as immigration goes, there is nothing on a DS-160 form that asks you about bankruptcies or unpaid obligations. I doubt the consular officer will know of this situation, but it is possible. It is not grounds for visa ineligibility however, so you will be fine if everything else is fine. The only scenario in which unpaid student loans can come up relevant in immigration to the US is if and when you apply for US Citizenship. One of the requirements for Citizenship is having good moral character. Having a large amount of unpaid debt constitutes evidence of a poor moral character. But it is very unlikely you'd be denied Citizenship on grounds of that alone. I got a social security number when I took up on campus jobs at the school and I do have a credit score. Can they get a hold of this and report to the credit bureaus even though I don't live in America? Yes, they probably already have. How would this affect me if I visit America often? Does this mean I would not ever be able to live in America? No. See above. You will have a hard time borrowing again. Will they know when I come to America and arrest me at the border or can they take away my passport? No. Unpaid debt is no grounds for inadmissibility, so even if the CBP agent knows of it he will not do anything. And again, unpaid debt is not a crime so you will not be arrested." }, { "docid": "6363", "title": "", "text": "\"This might sound harsh, but the first thing I would suggest is to stop making excuses. I wasn't able to continue due to pressure from college and family The college I went to was horrible. Employers can very easily hire foreign work-force for very cheap; for example as a citizen if I work $10 an hour, they can get someone from outside to work for $5 per hour There's no guarantee that the project will succeed. I cannot really work and at the same time develop software on my free time. Despite my failures in the past, I was not the main person that's responsible for those failures. Even if all of this is true, it's not helping you move forward and it seems to be getting in the way of creating a good action plan and motivating yourself to succeed. If you believe (based on past experiences) that you are doomed to fail, then you are indeed doomed to fail. You need to take a step back and re-evaluate your current circumstances and what you can do to reach your goals. You have a couple of things working in your favor here. It's great that you are debt free. That already puts you ahead of a lot of your peers. You have the option of living with your parents. Presumably for no rent, or at least much lower rent than you would have to pay if you move out. This is worth literally thousands of $/£/€ for every year you stay. Now, onto your questions: 1) Should I quit regular programming for a normal job because I never monetized programming so I can move out of my parents' home? Are you being paid for this \"\"regular programming\"\"? If so, are you being paid more than minimum wage? If not, it's perfectly acceptable to consider alternative ways to spend your time and generate income. However, this doesn't have to be at the expense of living with your parents. Have you thought about getting a new or second job while still living with them? If you absolutely must move out of your parent's home, consider renting a room in a house with other people to keep the rent costs to a minimum. That way, even if your main job is low paying, you should be able to put aside some money each month for future endeavors. 2) Should I monetize programming and gamble with the future? What does this mean? Are you thinking you'll write a mobile app and sell thousands of copies for 99¢ each? That would indeed be a big gamble, but maybe that's not what you meant, so you'll need to clarify. 3) Would it be wise to essentially quit programming for the sake of a minimum wage job? I'm not sure how this is different from question 1. So I'll reiterate what I said there - moving out is going to be expensive. You can still do it, but you're asking on a Personal Finance site where the focus is usually how to minimize living costs and maximize income. Without knowing more about where you live (employment opportunities, cost of living) the default recommendation is usually to save money by staying in your parents house. TLDR: Don't focus on anyone else. They are not preventing you from getting the job you want. Look at your own skills and qualifications (not just programming, consider all of your abilities). What are you good at? Who might need those skills? What is the cost of reaching those people (commute time, moving nearer)? What is the reward? If the reward exceeds the cost, start approaching those people. Show them what you can do.\"" }, { "docid": "374543", "title": "", "text": "Being underwater a little is not all that scary, but those who talk of being underwater are typically underwater by quite a lot. The amount of money they owe is large compared to their yearly income. Consider a metaphor. I put you in a hole. Its only 1 foot deep. You're not too concerned. If you want to leave, you can step out of it. Now we look at a deeper hole, 3 feet. Now you're still not too concerned. You can't just walk out, but if you need to get out you can wiggle your way up. 6 feet. Now you start getting nervous. Climbing out is getting trickier and trickier. You may not be able to move in response to a changing enviornment around you, because you're stuck in a hole. Now make the hole 10 feet. Now you can't reach the edges. Now you're in trouble. You have lost all mobility. You can't get out under your own power. Now if something bad happens (such as losing your job or a sudden health issue), you can't move around to solve the problem. This is the issue that arise from underwater mortgages. Say you lose your job because the job market in your area dried up (think Detroit in the big auto manufacturer crash). You need to move. You are legally endebted to a lender for your existing underwater house by more than you can sell it for. You need to pay for the privilege to sell it. You still owe payments on it, so if you just buy a new house (or rent) in the new state, you're paying for twice as much property. You can't just shuffle the underwaterness from your old house to your new house because the new lender has no interest in giving a loan for more than the value of the new home. The only options you have to play with is renting the old house, which many underwater families did, or bankrupcy. If the area you were in is depressed, you may not be able to rent the house for enough to cover your mortgage. This is the fear of being underwater. You have a piece of paper which claims some lender can take money from you that you may or may not have, and that the US government will allow them to take your assets, if need be, to settle the score. If you're underwater by a few thousand, it's typically not a big deal. If you're underwater by 80 or 90 thousand dollars, which some people were, that's a lot of money to be endebted for without the assets to recover them. If you subscribe to the realtor story that the market will recover, all you have to do is scrape by, holding on, until the market rises again. However, those who are underwater recognize that the reason much of this occurred is that we entered a bubble because realtors kept saying the market could only go up. Fool me once...." }, { "docid": "263867", "title": "", "text": "\"I took a second mortgage when I moved house because I had a long-term fixed rate mortgage that would have incurred punitive fees if I had cancelled it. Rather than doing that I took a second mortgage over the same term for the difference. As my second mortgage was with the same lender, they still had \"\"First Charge\"\" on the property (This means that in the event of default they have first call on the property to recoup their losses), so the interest rate was not higher (actually it was slightly less than my first mortgage). My case is not that usual, normally a 'second mortgage' is with a separate provider that takes a \"\"Second Charge\"\" on the property. The interest rates are normally higher as a result as there is more chance that the lender will not recoup their money in case of a default as the first charge has priority. The second mortgage may still be cheaper than an unsecured loan, as the second charge provides some collateral, this might make it attractive if a sudden expense needs to be covered.\"" }, { "docid": "30623", "title": "", "text": "From my understanding by paying your bills more than 5 days late will not lead you into bankruptcy or stop you from getting a new loan in the future, however it may mean that lenders offer you credit at a higher interest rate. This of course would not help you as you are already struggling with your finances. However, no matter how bad you think things might be for you financially, there are always things you can do to improve your situation. Set a Budget The first thing you must do is to set a budget. List down all sources of income you receive each month, including any allowances. Then list all your sources of expenses and spending. List all your bills such as rent, telephone, electricity, car maintenance, credit card and other loans. Keep a diary for a month for all your discretionary spending - including coffees, lunches, and other odd bits and ends. You can also talk with your existing lenders and come to some agreement on reducing you interest rates on your debts and the repayments. But remember any reduction in repayments may increase your repayment period and the total interest you have to pay in the long term. If you need help setting up your budget here are some links to resources you can download to help you get started: Once you set up your budget you want your total income to be more than your total expenses. If it isn't you will be getting further and further behind each month. Some things you can do are to increase your income - get a job/second job, sell some unwanted items, or start a small home business. Some things you can do to reduce your expenses - make coffees and lunches at home before going out and buying these, pay off higher interest debts first, consolidate all your debts into a lower interest rate loan, reduce discretionary spending to an absolute minimum, cancel all unnecessary services, etc. Debt Consolidation In regards to a Debt Consolidation for your existing personal loans and credit cards into a single lower interest rate loan can be a good idea, but there are some pitfalls you should consider. Manly, if you are taking out a loan with a lower interest rate but a longer term to pay it off, you may end up paying less in monthly repayments but will end up paying more interest in the long run. If you do take this course of action try to keep your term to no longer than your current debt's terms, and try to keep your repayments as high as possible to pay the debt off as soon as possible and reduce any interest you have to pay. Again be wary of the fine print and read the PDS of any products you are thinking of getting. Refer to ASIC - Money Smart website for more valuable information you should consider before taking out any debt consolidation. Assistance improving your skills and getting a higher paid job If you are finding it hard to get a job, especially one that pays a bit more, look into your options of doing a course and improving your skills. There is plenty of assistance available for those wanting to improve their skills in order to improve their chances of getting a better job. Check out Centrelink's website for more information on Payments for students and trainees. Other Action You Can Take If you are finding that the repayments are really getting out of hand and no one will help you with any debt consolidation or reducing your interest rates on your debts, as a last resort you can apply for a Part 9 debt agreement. But be very careful as this is an alternative to bankruptcy, and like bankruptcy a debt agreement will appear on your credit file for seven years and your name will be listed on the National Personal Insolvency Index forever. Further Assistance and Help If you have trouble reading any PDS, or want further information or help regarding any issues I have raised or any other part of your financial situation you can contact Centrelink's Financial Information Service. They provide a free and confidential service that provides education and information on financial and lifestyle issues to all Australians. Learn how to manage your money so you can get out of your debt and can lead a much more comfortable and less stressful life into the future." }, { "docid": "443014", "title": "", "text": "There are still ways that the default values on the W4 can lead you to get a refund or owe the IRS. If there was a big delta in your paychecks, it can lead to problems. If you make 260,000 and get 26 paychecks that means each check had a gross of 10,000. Your company will withhold the same amount from each check. But If you earned a big bonus then the smaller regular paychecks may not have been withholding enough. When bonus checks are involved the payroll office has to treat them as irregular pay to be able to make it work out. Some companies don't do this, so you may under or over pay during the year. If you changed companies during the year, this can lead to under or over payment. The lower paying company would not know about the higher rate of pay at the other company. so at one you would under pay, and the other you would over pay. There are also social security issues with more than one employer." }, { "docid": "482183", "title": "", "text": "It looks like the rate on that first loan is 6-2/3%? When I look at $72000 principal and a $500 payment, I'm seeing a long term, 24 years. Not 60, but not good either. Yes, as you pay a bit of principal, the next payment has less interest and even more principal. I hope your degree is in a field that's lucrative. Or that you're able to get a job that qualifies you for loan forgiveness over time. I'm sorry that advice might seem weak, but aside from that, the best I can offer is to live well beneath your means, i.e. continue to live like a student, and make additional payments. As far as bi-weekly goes, the lender may not accept partial payments. Set aside the money every two weeks and when you have extra money just make an extra payment amount toward principal. To pay this off as fast as possible, I'd make as high an extra payment as I could each month to the loan with the higher rate. If the rates are the same, pay it off to the one with the lower balance. With respect to the debt snowballers, followers of The David, say the rates are simply close, say .25% apart, with the lower balance having the lower rate. If you were to pay this one first, it would occur sooner, of course, and free up that monthly payment, helping your cash flow. But, it comes at a cost. Note - if, as Noah suggests, the rates are the same, I'd advise to make all extra payments toward the lower balance. That will get you to the point where you've freed up that cash flow for other purposes, whether it's to focus on the higher loan, or anything else you need this for." }, { "docid": "465256", "title": "", "text": "I used to own a few investment properties, so I'm pretty familiar with this. As MrChrister mentions, lenders see investment mortgages as higher risk. People who fall into financial trouble are much more likely to let their investment properties go than their personal residence. Consequently, the interest rates and downpayment requirements are generally higher. Typically a mortgage for an investment property will require 20% down, vs. as low as 3-5% down for a personal residence. With excellent credit and some shopping around, you could probably do 10% down. Interest rates are typically about a half-percent higher as well. You'll also find that the more investment properties you have, the harder it becomes to finance new ones. Banks look at debt-to-income ratios to determine if you are over extended. Typically banks like to see that your housing payments are less than 20% or so of your income. However, with rental properties, housing payments generally account for far more than 20% of your rental income. Other income you have can offset that, but after buying 2-3 houses or so, your DTI generally creeps into the range where lenders are uncomfortable lending to you anymore. This is why you'll find that many rental properties are bought on land contracts with owner financing rather than with mortgages." }, { "docid": "391819", "title": "", "text": "Besides the reason in @rhaskett's answer, it is important to consider that paying off a 30-year mortgage as if it was a 15-year is much more inconvenient than just paying the regular payments of a 15-year mortgage. When you pay extra on your mortgage, some lenders do not know what to do with the extra payment, and need to be told explicitly that the extra needs to be applied toward the principal. You might need to do this every month with every payment. In addition, some lenders won't allow you to set up an automatic payment for more than the mortgage payment, so you might need to explicitly submit your payment with instructions for the lender each month, and then follow up each month to make sure that your payment was credited properly. Some lenders are better about this type of thing than others, and you won't really know how much of a hassle it will be with your lender until you start making payments. If you intend to pay it off in 15 years, then just get the 15-year mortgage." }, { "docid": "336217", "title": "", "text": "We've been in this situation for about 10 years now. We don't have to send money back to Canada very often, but when we do, we typically just write a US$ check/cheque and send it to a relative back home to cash for us. We've found that the Canadian banks are much more familiar with US currency than vice versa, and typically have better exchange rates than many of the other options. That said, we haven't done an exhaustive search for the best deal. If you haven't left Canada yet, you might consider opening up a US funds account at the same bank as your Canadian funds account if the bank will allow you to transfer money between the accounts. I haven't priced out that option, so I don't know what the exchange rate would look like there. Also, you didn't ask about this, but if you have any RRSP accounts in Canada, make sure they're with a broker that is licensed to accept trades from US-based customers. Otherwise, you won't be able to move your money around to different investments within the RRSP. Once you're resident in the US, you will no longer be able to open any new accounts in Canada, but you will be able to maintain the ones you already have." }, { "docid": "569207", "title": "", "text": "\"&gt;We also have the highest expenditures as a percent of GDP than any other nation. Needless to say we spend a LOT on health care also. That is in large part do to insane healthcare costs passed on to the consumers by the aca. Healthcare spending has increased on average 1.5% annually since 2009 where as the highest growth in spending from 1991 until 2006 was 1.3% (im willing to admit my research may be incomplete or inaccurate here as the available rescources are pretty limited in my short time researching) &gt;we do have arguably the best health care services in the world... that is mostly only true if you are very wealthy. Thats a dumb statement leftists make. There is no excuse to not put yourself in debt for the best healthcare possible. Idk about you but I'd rather be in a lot of debt getting first rate healthcare than get affordable care from a 2nd rate community college doctor. Did you also know that medical debt doesnt effect your credit score so even if you \"\"default\"\" on medical debts it doesnt effect any part of your life. so why wouldnt you go in debt and then slowly pay off that debt with no fear of negative repercussions for not paying? &gt;When you break it down on results per dollar spent, the US doesn't even break the top 20. When you break it down on infant mortality, and life expectancy, we have been on a backward slide for a while now (although those rates improved for the short while that the ACA has been in effect, as have the net increase in costs). At the end of the day, the cost of health care has grown 3X faster than inflation, and 20X faster than the average income for over 30 years now. So, no, health care in this country is not the best to the average person. I dont have health insurance and an ER visit with xrays costs me less out of pocket than 90% of the country why is that? Do you think it has to do with the fact that with the aca hospitals know they are getting paid with 0 questioning on pricing so charge whatever they want and with me they think \"\"shit this guy might not ever pay us lets just give him a decent price and get some money from him because all we can do is send his bill to collections\"\" you clearly dont know how the system works especially because you think its my responsibility to provide you with health insurance. You keep saying i need to travel and experience the world when all you need to do is go to google and look at what a wonderful job Switzerland does with their healthcare. The swiss do everything better, They have some of the best services in the world and a very affordable healthcare plan with many options that is affordable to the tax payers unlike the ACA. You have a very clear Scandinavian bias as im assuming you're a bernie supporter who loves democratic socialism despite all of its short comings. &gt;And yes, Space X has been able to estimate a savings of $300M less... Commercial does a great job of expanding on the research and knowledge that has come from government sponsored R&amp;D. You see that in every modern technological advancement - from the internet, cellular phones, GPS, medical procedures, etc. There are so many modern inventions that have sprung from government patents and government research programs. This is the dumbest statement youve made this entire time. The notion that inventions that were made on the governments dime (my dime) is somehow the product of the government is asinine at best. Youre operating under the assumption that these inventions wouldnt have been made without government funding which is false. They all would have been made on a smaller budget granted maybe a little bit further down the road but not by much considering technology has expanded (with no help from any government) more in the last 20 years than in the prior 200 because thats what technology does it makes life easier for everyone and almost innovates itself. Take apple for instance where is all the government funding they recieved to be one of the most innovative companies in human history or microsoft? Yiou can max 10 things government funding invented when i can walk into your house and point out 10000 things the government had no hand in at all.\"" }, { "docid": "92888", "title": "", "text": "The advice above is generally good, but the one catch I haven't seen addressed is which specific laws apply. You said that you are in Arkansas, but the dealer is in Texas. This means that the laws of at least two different states are in play, possibly three if the contract contains a clause stating that disputes will be handled in a certain jurisdiction, and you are going to have to do some research to figure out what actually applies. One thing that may significantly impact this issue is whether you were in TX or AR when you signed the contracts. If you borrowed the money in TX, and the lender is in TX, then it is almost certain that the laws of Texas will govern. However, if you were living in AR at the time you acquired the loan, particularly if you were in AR when you signed the papers, you have a decent case for claiming that the laws of Arkansas govern. I don't know enough about either state to know if one is more favorable to the consumer than the other, but it is a question you really want to have answered. That said, I would be shocked if any state did not have provisions requiring the lender to provide a copy of the terms and a detailed statement of the account and transaction history upon request. Spend some time on the web site of the Texas attorney general and/or legislator (because that is where the lender is, they are more likely to respect Texas law) to see if you can track down any specific laws or codes that you can reference. You might also look into the federal consumer protection laws, though I can't think of one off hand that would apply in the scenario you have described. Then work on putting together a letter asking them to provide a copy of the contract and a full history of the account. As others noted, make sure you send it certified/return receipt, or better yet use a private carrier such as fedex, and check the box about requiring a signature. Above all you need to get the dialog transferred to a written form. I can not stress this point enough. Everything you tell them or ask for from here out needs to be done in a written format. If they call you about anything, tell them you want to see their issue/offer in writing before you will consider it. You do not necessarily need a lawyer to do any of this, but you do need to know the applicable laws. Do the research to know what your legal standing is. Involve a lawyer if you feel you need to, but I have successfully battled several large utility companies and collection agencies into behaving without needing one." }, { "docid": "113822", "title": "", "text": "\"Typically you can use credit card balance transfers to consolidate some, or all, of your other loan balances in one place. The interest rate might be lower. Some prefer to make one payment rather than multiple payments. There is typically a fee that is imposed by the card that is originating or creating the loan. This would be the credit card you are transferring the balances. That fee is typically in the 3% to 5% range. While tempting and attractive on the surface, this plan typically leads to a worse situation then you are now. It's a \"\"tough pill to swallow\"\", but your problem is that you spend too much money. Transferring money will not change this problem, it is your behavior that has to change in order to not accumulate more debt. It has to change further if you want to get rid of the debt in a timely fashion. You would be far better served to forget about this transfer and get your life into control. Spend a lot less, earn more. Pay off the cards you have now and cut them up. Make a goal to be done in a year and figure out how to earn enough money to make that happen. BTW I am a reformed over-spender that now owes nothing. Yep my house, cars, and rental property are all paid for. You can get there too.\"" }, { "docid": "260075", "title": "", "text": "Take some of the commentary on home buying forums with a grain of salt. I too have read some of the commentary on these forums such as myFICO, Trulia, or Zillow and rarely is the right advice given or proper followup done. Typical 401k withdrawals for home purchase would not be considered a hardship. However, most employer 401k plans will allow you to take a loan for 401k as long as you provide suitable documentation: HUD-1 statement, Real Estate Contract, Good Faith Estimate, or some other form of suitable documentation as described by the plan administrator. For instance, I just took a 401k loan to pay for closing costs and I had to provide only the real estate contract. Could I not follow through with the contract? Sure, but what if I am found out for fraud? Then the plan administrator would probably end up turning the distribution into a taxable distribution. I wouldn't go to jail in this hypothetical situation - I am only stealing from myself. But the law states that certain loan situations are not liable for tax as long as that situation still exists. In the home loan situation, my employer allows for a low interest, 10 year loan. My employer also allows for a pre-approved loan for any purpose. This would be a low interest, 5 year loan. There is also the option to not do a loan at all. But normally that is only allowed after you have exhausted all your loan options and the government makes it intentionally harsh (30% penalty at least) to discourage people from dumping their tax free haven 401k accounts. That all being said, many plans offer no prepayment penalty. So like my employer has for us, I can pay it all back in full whenever I want or make micropayments every month. Otherwise, it comes out of my pay stub biweekly. So if it were to fall through, I could just put it all back like it never happened. Though with my plan, there is a cooling off period of 7 days before I can take another loan. Keep in mind that if you leave your employer then the full amount becomes a taxable distribution unless you pay it back within a certain period of time after leaving the employer. Whether this fits your financial situation is up to you, but a loan is definitely preferred over a partial or full withdrawal since you are paying yourself back for your rightly earned retirement which is just as important." }, { "docid": "313623", "title": "", "text": "\"It depends on the deal: and you didn't give any details. That said, there are some things that stand out regardless, and some more specific answers to your questions. First, Mortgage rates (at the bank) are absurdly low right now. Like 4%-5%; less than 4% for excellent credit. You say your credit is ok, so unless your landlord is willing to do a deal where they get no benefit (beyond the price of the house), the bank is the way to go. If you don't have much for a down payment, go with an FHA loan, where you need only 3.5% down. Second, there is another option in between bank mortgage and rent-to-own. And that is that where your landlord \"\"carries the note\"\". Basically, there is a mortgage, and it works like a bank mortgage, but instead of the bank owning the mortgage, your landlord does. Now, in terms of them carrying all of it, this isn't really helpful. Who wants to make 3-4% interest? But, there is an interesting opportunity here. With your ok credit, you can probably get pretty close to 4% interest at the bank IF the loan is for 80% LTV (loan to value; that is, 20% equity). At 80% LTV you also won't have PMI, so between the two that loan will be very cheap. Then, your accommodating landlord can \"\"carry\"\" the rest at, say, 6-7% interest, junior to the bank mortgage (meaning if you default, the bank gets first dibs on the value of the house). Under that scenario, your over all interest payment is very reasonable, and you wouldn't have to put any money down. Now for your other questions: If we rent to own are we building equity? Not usually. Like the other posters said, rent-to-own is whatever both parties agree on. But objectively, most rent-to-own agreements, whether for a TV or a house, are set up to screw the buyer. Sorry to be blunt, and I'm not saying your landlord would do that, this is just generally how it is with rent to own. You don't own it till you make the last payment, and if you miss a payment they repo the property. There is no recourse because, hey, it was a rental agreement! Of course the agreements vary, and people who offer rent to own aren't necessarily bad people, but it's like one of those payday loan places: They provide a valid service but no one with other options uses them. If we rent to own, can we escape if we have to (read: can't pay anymore). Usually, sure! Think about what you're saying: \"\"Here's the house back, and all that money I paid you? Keep it!\"\" It's a great deal if you're on the selling side. How does rent to own affect (or not) our credit? It all depends on how it's structured. But really, it comes down to are they going to do reporting to the credit bureaus? In a rent-to-own agreement between individuals, the answer is no. (individuals can't report to a credit bureau. it's kind of a big deal to be set up to be able to do that)\"" }, { "docid": "148270", "title": "", "text": "The Art of Short Selling by Kathryn Stanley providers for many case studies about what kind of opportunities to look for from a fundamental analysis perspective. Typically things you can look for are financing terms that are not very favorable (expensive interest payments) as well as other constrictions on cash flow, arbitrary decisions by management (poor management), and dilution that doesn't make sense (usually another product of poor management). From a quantitative analysis perspective, you can gain insight by looking at the credit default swap rate history, if the company is listed in that market. The things that affect a CDS spread are different than what immediately affects share prices. Some market participants trade DOOMs over Credit Default Swaps, when they are betting on a company's insolvency. But looking at large trades in the options market isn't indicative of anything on its own, but you can use that information to help confirm your opinion. You can certainly jump on a trend using bad headlines, but typically by the time it is headline news, the majority of the downward move in the share price has already happened, or the stock opened lower because the news came outside of market hours. You have to factor in the short interest of the company, if the short interest is high then it will be very easy to squeeze the shorts resulting in a rally of share prices, the opposite of what you want. A short squeeze doesn't change the fundamental or quantitative reasons you wanted to short. The technical analysis should only be used to help you decide your entry and exit price ranges amongst an otherwise random walk. The technical rules you created sound like something a very basic program or stock screener might be able to follow, but it doesn't tell you anything, you will have to do research in the company's public filings yourself." }, { "docid": "170511", "title": "", "text": "FHA insured loans must 'go hand in hand' with PMI, because the FHA element is the insurance itself. The FHA isn't actually giving you a loan, that's coming from a lender; instead, the FHA is insuring the loan, at some cost to you - but allowing a loan to folks who may not be able to afford it normally (lower down payment requirements and a somewhat cheaper PMI). FHA-insured loans may be lower rates in some cases than non-FHA insured loans because of this backing; that's because they make it easier for people of poorer credit histories with smaller down payments to get a house in the first place. Those people would tend to have a harder time getting a loan, and be charged sometimes usurious rates to get it. Low down payment and mediocre credit history (think 580-620) mean higher risk, even beyond the risk directly coming from the poor loan to value ratio. Comparing this table of Freddie Mac rates to this table of FHA-backed loan rates, the loan rates seem comparable (though somewhat lagging in changes in some cases). FHA loans are not nearly the size or complexity of loan population as Freddie Mac, so be wary of making direct comparisons. Looking into this in more detail, pre-collapse (before 12/07), FHA rates were a bit lower - average rate was about .5 points lower - but starting with 12/07, FHA average rates were usually higher than Freddie Mac rates for 30 year fixed loans: in 1/2009 for example they were almost a point higher. As of the last data I see (5/13) the rates were within 0.1 points most months. This may be in part because Freddie Mac had looser requirements to get a loan pre-collapse, then tightened significantly, then started to loosen some (also around June 2013, rates climbed significantly due to some signals from the Fed, although they're almost back to their lows thanks to the Fed again). These are averages across all loans, so you get some noise as a result. Loan interest rates are very personal, in general: they depend on your credit, your house and down payment, and your bank (which varies by your location). The best thing to do is to shop around yourself and just see what you get, and ask your lender any questions you have: if you pick a local lender with a good service history and who is willing to talk to you in person (ie, has a direct phone number), you'll have no trouble getting answers." }, { "docid": "230297", "title": "", "text": "\"tl;dr: Your best course of action is probably to do a soft pull (check your own credit) and provide that to the lender for an unofficial pre-approval to get the ball rolling. The long of it: The loan officer is mostly correct, and I have recent personal evidence that corroborates that. A few months ago I looked into refinancing a mortgage on a rental property, and I allowed 3 different lenders to do a hard inquiry within 1 week of each other. I saw all 3 inquires appear on reports from each of the 3 credit bureaus (EQ/TU/EX), but it was only counted as a single inquiry in my score factors. But as you have suggested, this breaks down when you know that you won't be purchasing right away, because then you will have multiple hard inquiries at least a few months apart which could possibly have a (minor) negative impact on your score. However minor it is, you might as well try to avoid it if you can. I have played around with the simulator on myfico.com, and have found inquiries to have the following effect on your credit score using the FICO Score 8 model: With one inquiry, your scores will adjust as such: Two inquiries: Three inquiries: Here's a helpful quote from the simulator notes: \"\"Credit inquiries remain on your credit report for 2 years, but FICO Scores only consider credit inquiries from the past 12 months.\"\" Of course, take that with a grain of salt, as myfico provides the following disclaimer: The Simulator is provided for informational purposes only and should not be expected to provide accurate predictions in all situations. Consequently, we make no promise or guarantee with regard to the Simulator. Having said all that, in your situation, if you know with certainty that you will not be purchasing right away, then I would recommend doing a soft pull to get your scores now (check your credit yourself), and see if the lender will use those numbers to estimate your pre-approval. One possible downside of this is the lender may not be able to give you an official pre-approval letter based on your soft pull. I wouldn't worry too much about that though since if you are suddenly ready to purchase you could just tell them to go ahead with the hard pull so they can furnish an official pre-approval letter. Interesting Side Note: Last month I applied for a new mortgage and my score was about 40 points lower than it was 3 months ago. At first I thought this was due to my recent refinancing of property and the credit inquiries that came along with it, but then I noticed that one of my business credit cards had recently accrued a high balance. It just so happens that this particular business CC reports to my personal credit report (most likely in error but I never bothered to do anything about it). I immediately paid that CC off in full, and checked my credit 20 days later after it had reported, and my score shot back up by over 30 points. I called my lender and instructed them to re-pull my credit (hard inquiry), which they did, and this pushed me back up into the best mortgage rate category. Yes, I purposely requested another hard pull, but it shouldn't affect my score since it was within 45 days, and that maneuver will save me thousands in the long run.\"" }, { "docid": "321490", "title": "", "text": "A few years ago I had a 5 year car loan. I wanted to prepay it after 2 years and I asked this question to the lender. I expected a reduction in the interest attached to the car loan since it didn't go the full 5 years. They basically told me I was crazy and the balance owed was the full amount of the 5 year car loan. This sounds like you either got a bad car loan (i.e. pay all the interest first before paying any principal), a crooked lender, or you were misunderstood. Most consumer loans (both car loans and mortgages) reduce the amount of interest you pay (not the _percentage) as you pay down principal. The amount of interest of each payment is computed by multiplying the balance owed by the periodic interest rate (e.g. if your loan is at 12% annual interest you'll pay 1% of the remaining principal each month). Although that's the most common loan structure, there are others that are more complex and less friendly to the consumer. Typically those are used when credit is an issue and the lender wants to make sure they get as much interest up front as they can, and can recover the principal through a repossession or foreclosure. It sounds like you got a precomputed interest loan. With these loans, the amount of interest you'd pay if you paid through the life of the loan is computed and added to the principal to get a total loan balance. You are required to pay back that entire amount, regardless of whether you pay early or not. You could still pay it early just to get that monkey off your back, but you may not save any interest. You are not crazy to think that you should be able to save on interest, though, as that's how normal loans work. Next time you need to borrow money, make sure you understand the terms of the loan (and if you don't, ask someone else to help you). Or just save up cash and don't borrow money ;)" } ]

[ { "docid": "554171", "title": "", "text": "For insight on what will happen, I suggest looking at the situation from the lender's perspective: If your setbacks are temporary, and you are likely to get back on your feet again, they will protect their investment by making accommodations, and probably charging you extra fees along the way. If your financial hardship seems irredeemable, they probably try to squeeze you for as much as possible, and then eventually take your house, protecting their investment as best they can. If they are going to foreclose, they may be reluctant to do it quickly, as foreclosure is expensive, takes man power, and looks bad on their books. So it may get pushed off for a Quarter, or a fiscal year. But if you are asking if they'll help you out from the goodness of their heart, well, a bank has no heart, and creditors are interested in ROI. They'll take the easiest path to profit, or failing that, the path to minimum financial losses. The personal consequences to you are not their concern. Once you realize this, it may change your thinking about your own situation. If you think you have a path to financial recovery, then you need to make that clear to them, in writing, with details. Make a business case that working with you is in their own best interests. If you cannot make such a case, recognize that they'll likely squeeze you for as much as possible in penalties, fees, interest payments, etc, before eventually foreclosing on you anyway. Don't play that game. If your home is a lost cause financially, plan how to get out from it with the smallest losses possible. Don't pay more than you need to, and don't throw good money after bad." } ]

[ { "docid": "526106", "title": "", "text": "\"It is called \"\"Credit card installments\"\" or \"\"Equal pay installments\"\", and I am not aware of them being widely used in the USA. While in other countries they are supported by banks directly (right?), in US you may find this option only in some big stores like home improvement stores, car dealerships, cell phone operators (so that you can buy a new phone) etc. Some stores allow 0% financing for, say, 12 months which is not exactly the same as installments but close, if you have discipline to pay $250 each month and not wait for 12 months to end. Splitting the big payment in parts means that the seller gets money in parts as well, and it adds risks of customer default, introduces debt collection possibility etc. That's why it's usually up to the merchants to support it - bank does not care in this case, from the bank point of view the store just charges the same card another $250 every month. In other countries banks support this option directly, I think, taking over or dividing the risk with the merchants. This has not happened in US. There is a company SplitIt which automates installments if stores want to support it but again, it means stores need to agree to it. Here is a simple article describing how credit cards work: https://www.usbank.com/credit-cards/how-credit-cards-work.html In general, if you move to US, you are unlikely to be able to get a regular credit card because you will not have any \"\"credit history\"\" which is a system designed to track each customer ability to get & pay off debt. The easiest way to build the history - request \"\"secured credit card\"\", which means you have to give the bank money up front and then they will give you a credit card with a credit limit equal to that amount. It's like a \"\"practice credit card\"\". You use it for 6-12 months and the bank will report your usage to credit bureaus, establishing your \"\"credit score\"\". After that you should be able to get your money back and convert your secured card into a regular credit card. Credit history can be also built by paying rent and utilities but that requires companies who collect money to report the payments to credit bureaus and very few do that. As anything else in US, there are some businesses which help to solve this problem for extra money.\"" }, { "docid": "597376", "title": "", "text": "\"When you say \"\"apartment\"\" I take it you mean \"\"condo\"\", as you're talking about buying. Right or no? A condo is generally cheaper to buy than a house of equal size and coondition, but they you have to pay condo fees forever. So you're paying less up front but you have an ongoing expense. With a condo, the condo association normally does exterior maintenance, so it's not your problem. Find out exactly what's your responsibility and what's theirs, but you typically don't have to worry about maintaining the parking areas, you have less if any grass to mow, you don't have to deal with roof or outside walls, etc. Of course you're paying for all this through your condo fees. There are two advantages to getting a shorter term loan: Because you owe the money for less time, each percentage point of interest is less total cash. 1% time 15 years versus 1% times 30 years or whatever. Also, you can usually get a lower rate on a shorter term loan because there's less risk to the bank: they only have to worry about where interest rates might go for 15 years instead of 30 years. So even if you know that you will sell the house and pay off the loan in 10 years, you'll usually pay less with a 15 year loan than a 30 year loan because of the lower rate. The catch to a shorter-term loan is that the monthly payments are higher. If you can't afford the monthly payment, then any advantages are just hypothetical. Typically if you have less than a 20% down payment, you have to pay mortgage insurance. So if you can manage 20% down, do it, it saves you a bundle. Every extra dollar of down payment is that much less that you're paying in interest. You want to keep an emergency fund so I wouldn't put every spare dime I had into a down payment if I could avoid it, but you want the biggest down payment you can manage. (Well, one can debate whether its better to use spare cash to invest in the stock market or some other investment rather than paying down the mortgage. Whole different question.) \"\"I dont think its a good idea to make any principal payments as I would probably loose them when I would want to sell the house and pay off the mortgage\"\" I'm not sure what you're thinking there. Any extra principle payments that you make, you'll get back when you sell the house. I mean, suppose you buy a house for $100,000, over the time you own it you pay $30,000 in principle (between regular payments and any extra payments), and then you sell it for $120,000. So out of that $120,000 you'll have to pay off the $70,000 balance remaining on the loan, leaving $50,000 to pay other expenses and whatever is left goes in your pocket. Scenario 2, you buy the house for $100,000, pay $40,000 in principle, and sell for $120,000. So now you subtract $60,000 from the $120,000 leaving $60,000. You put in an extra $10,000, but you get it back when you sell. Whether you make or lose money on the house, whatever extra principle you put in, you'll get back at sale time in terms of less money that will have to go to pay the remaining principle on the mortgage.\"" }, { "docid": "321490", "title": "", "text": "A few years ago I had a 5 year car loan. I wanted to prepay it after 2 years and I asked this question to the lender. I expected a reduction in the interest attached to the car loan since it didn't go the full 5 years. They basically told me I was crazy and the balance owed was the full amount of the 5 year car loan. This sounds like you either got a bad car loan (i.e. pay all the interest first before paying any principal), a crooked lender, or you were misunderstood. Most consumer loans (both car loans and mortgages) reduce the amount of interest you pay (not the _percentage) as you pay down principal. The amount of interest of each payment is computed by multiplying the balance owed by the periodic interest rate (e.g. if your loan is at 12% annual interest you'll pay 1% of the remaining principal each month). Although that's the most common loan structure, there are others that are more complex and less friendly to the consumer. Typically those are used when credit is an issue and the lender wants to make sure they get as much interest up front as they can, and can recover the principal through a repossession or foreclosure. It sounds like you got a precomputed interest loan. With these loans, the amount of interest you'd pay if you paid through the life of the loan is computed and added to the principal to get a total loan balance. You are required to pay back that entire amount, regardless of whether you pay early or not. You could still pay it early just to get that monkey off your back, but you may not save any interest. You are not crazy to think that you should be able to save on interest, though, as that's how normal loans work. Next time you need to borrow money, make sure you understand the terms of the loan (and if you don't, ask someone else to help you). Or just save up cash and don't borrow money ;)" }, { "docid": "266649", "title": "", "text": "The simple answer is that you are correct. You should not purchase a house until you are financially stable enough to do so. A house is an asset that you must maintain, and it can be expensive to do so. Over the long term, you will generally save money by purchasing. However, in any given year you may spend much more money than a similar rental situation - even if the rent is higher than your mortgage payment. If you are financially stable with good cash savings or investments plus a 20% down payment, then anytime is a good time to buy if that is part of your financial plan. As of now in 2016, is is safe to assume that mortgage rates would/should not get back to 10%? Does this mean that one should always buy a house ONLy when mortgage rates are low? Is it worth the wait IF the rates are high right now? The mortgage rates are not the primary driver for your purchase decision. That might be like saying you should buy everything on sale at Target... because it's on sale. Don't speculate on future rates. Also, keep in mind that back when rates were high, banks were also giving much better savings/CD rates. That is all connected. Is refinancing an option on the table, if I made a deal at a bad time when rates are high? You need to make sure you get a loan that allows it. Always do a break-even analysis, looking at the money up-front you spend to refi vs the savings-per-year you will get. This should give you how many years until the refi pays for itself. If you don't plan on being in the house that long, don't do it. How can people afford 10% mortgage? Buying a house they can afford, taking into consideration the entire payment+interest. It should be a reasonable amount of your monthly income - generally 25% or less. Note that this is much less than you will be 'approved' for by most lenders. Don't let good rates suck you into a deal you will regret. Make sure you have the margin to purchase and maintain a home. Consider where you want to be living in 5 years. Don't leave so little financial breathing room that any bump will place you at risk of foreclosure. That said, home ownership is great! I highly recommend it." }, { "docid": "389916", "title": "", "text": "\"First, let me mention that the reasons mentioned this far for renting are excellent ones. But, I disagree. Second, I would like to mention that I'm just a regular Joe, not an accountant, or a realtor. That said, I was in a similar situation not that long ago. I ended up renting, but I wish I hadn't. You should check out the \"\"offers\"\" in your area. You seem like you're willing to compromise on a more standard, or older home. If that is the case and you are willing to \"\"settle\"\" for an older town-home, or something similar, it might be in your best interest to do so. In my area for instance, the urban areas are becoming a bit crowded. This is good news for the people who already own homes in those urban areas, but bad news for people who are looking to rent an apartment (which tend to be located in urban areas) or buy a house in these urban areas. The reason I say that is simple; there is only one thing there will never be more of: land. If people are moving into these areas, and there is limited room to build structures, the demand is going up while the supply is unable to keep up. This means an increase in prices. BUT, this can also be used to your advantage. As the demand for those urban areas goes up, the rural areas around the urban areas are likely to be subsidized. For instance, near me, if you're willing to be 20 minutes from the nearest Walmart and you have a 550+ credit score and a stable income, you're able to acquire a government subsidized loan with 0% down. (I would recommend dropping at least SOMETHING, however, if possible.) Apartments of the size your family is going to require are going to be expensive. People who own apartment buildings are looking to make the most money per square foot. This means most apartment complexes are going to be filled with 1-2 bedroom apartments, but have very few if any 3+ bedroom apartments. (Again, this is my general experience, but it may be different where you're living.) I suspect the apartment your family is going to need is going to end up being very expensive, especially if people are moving into your town. You might consider trying to get a lower-quality house as apposed to a rare and large apartment for a few pretty obvious reasons: Don't misunderstand me, though. A lot of people get infatuated with the idea of being a home owner, and end up getting into something they will never be able to maintain, and if that happens it's something that's going to follow you for the rest of your life. As for your student loans, if you NEED to and you qualify you can apply for hardship. This would mean that you don't have to pay anything, or pay a reduced rate for some arbitrary approved amount of time, or until some arbitrary circumstance is met. However, do not take this lightly. While doing this might not necessarily accrue interest (depending on whether or not your loans were subsidized or unsubsidized and a host of other factors it might actually halt interest) these loans will follow you even into bankruptcy. Meaning if you get your student loans postponed and end up losing the house anyway, you have to make a fresh start with a bankruptcy AND student loans on your back. Furthermore, you can't count your chickens before they hatch, and neither will the banks. A big part of qualifying for a loan is your proof of income. If you haven't had that steady job for 6 months to a year or more, you're going to have a tough time getting a loan. Suppose your wife-to-be DOES start making that income...it's still not going to make a difference to the banks until they can say that it's not just a month long fling. Last, after reading all this I want to tell you that I am BIAS. I happened to miss the opportunity I'm explaining to you now, and that affects what I think you should do in this situation. Weigh the options carefully and objectively. Talk to your fiance. Talk to your friends, parents, anyone who is close with you. Come to an educated decision, rather than the decision that might be more exciting, or the one you WISH you could take. Good luck.\"" }, { "docid": "63649", "title": "", "text": "You say My work is steady; even if I lost my job it'd be easy to get another. Location has been static for a few years now, but I'm not sure that'll extrapolate to the future; I'm lazy, so I don't want to move, but for a significantly better job opportunity I wouldn't mind. The general rule of thumb is that you'll come out ahead if you buy a house (with a mortgage) and live there for five years. What you lose in interest, you make up in rent. And living there for five years, you make back your closing costs in equity. If you're there less than five years though, you don't make back the closing costs. You'd have been better off renting. Historically (up to about twenty years ago), your mortgage payment and rent payment for the same basic property would be about the same. I.e. if your current landlord sold you what you are renting, your mortgage payment would be roughly the same as your rent. Maybe a little lower or a little higher but about the same. More recently, it hasn't been strange to see a divergence in those. Now it is not uncommon for a mortgage payment to be 50% higher than rent on the same property. This has some consequences. First, your $1000 rent probably won't stretch as far as a $1000 mortgage payment. So you'll be buying something that you'd only pay $650 or $700 rent. Second, if you move and can't sell immediately, you'll get less in rent than you'd pay in mortgage. Rather than contributing to your income, the property will require subsidy just to maintain the mortgage. And in the early years of the mortgage, this means that you're paying all of the principal (equity) and some of the interest. Buying a duplex makes this worse. You have your side and their side. You can substitute your $1000 rent for half of the mortgage payment. Meanwhile, they are paying $700 in rent. You have to subsidize the mortgage by $300. Plus, you are talking about hiring a property management company to do things like lawn maintenance. There goes another $100 a month. So you are subsidizing the mortgage by $400. I don't know real estate prices in Utah, but a quick search finds a median house price over $200,000. So it seems unlikely that you are buying new construction with new appliances. More likely you are buying an existing duplex with existing appliances. What happens when they fail? The renter doesn't pay for that. The property management company doesn't pay for that (although they'll likely arrange for it to happen). You pay for it. Also, it often takes a bit of time to clean up the apartment after one tenant leaves before the new tenant starts paying rent. That's a dead weight loss. If this happens during a local recession, you could be carrying the mortgage on a property with no offsetting rental income for months. There are some countervailing forces. For example, if house prices in your area are increasing, the rent will increase with them (not necessarily at the same pace). But your mortgage payment stays the same. So eventually the rent may catch up with the mortgage payment. If you wait long enough in a strong enough market, the rent on the other half of the duplex may cover the entire mortgage payment. If you currently have an urban apartment within walking distance of work and switch to a suburban apartment with a commute, you have a better chance of finding a duplex where the entire mortgage payment is only the $1000 that you pay in rent. Your half of the duplex won't be as nice as your apartment is, and you'll have a half hour or hour long commute every morning (and the same to get home in the evening). But on strictly fiscal terms you'll be doing about as well. Plus you have the income from the other half. So even if your mortgage payment is more than your rent payment, you can still break even if the rent covers it. Consider a $1400 mortgage and $400 in rent from the other half (after property management fees). So long as nothing goes wrong, you break even. Perhaps the agreement is that your parents take care of things going wrong (broken appliances, troublesome tenants, time between tenants). Or perhaps you drain your emergency fund and adjust your 401(k) payment down to the minimum when that happens. Once your emergency fund is replenished, restore the 401(k). If you're willing to live in what's essentially a $500 apartment, you can do better this way. Of course, you can also do better by living in a $500 apartment and banking the other $500 that you spend on rent. Plus you now have the expenses of a commute and five hours less free time a week. You describe yourself as essentially living paycheck to paycheck. You have adequate savings but no building excess. Whatever you get paid, you immediately turn around and spend. Your parents may view you as profligate. Your apartment is nicer than their early apartments were. You go out more often. You're not putting anything aside for later (except retirement). It didn't use to be at all strange for people to move out of the city because they needed more space. For the same rent they were paying in the city, they could buy a house in the suburbs. Then they'd build up equity. So long as they stayed in roughly the same work location, they didn't need to move until they were ready to upgrade their house. The duplex plan leads to one of two things. Either you sell the duplex and use the equity to buy a nicer regular house, or you move out of the duplex and rent your half. Now you have a rental property providing income. And if you saved enough for a down payment, you can still buy a regular house. From your parents' perspective, encouraging you to buy a duplex may be the equivalent of asking you to cut back on spending. Rather than reducing your 401(k) deposits, they may be envisioning you trading in your car for a cheaper one and trading in your nice but expensive apartment for something more reasonable in a cheaper neighborhood. Rather than working with a property management company, you'll be out doing yardwork rather than cavorting with your friends. And maybe the new place would have more space to share when you meet someone--you aren't going to provide many grandkids alone. If you get a mortgage on a duplex, you are responsible for paying the mortgage. You are responsible even if something happens to the house. For example, if a fire burns it down or a tornado takes it away. Or you just find that the house isn't solid enough to support that party where all of your friends are jumping up and down to the latest pop sensation. So beyond losing whatever you invest in the property, you may also lose what you borrowed. Now consider what happens if you invest the same amount of money in General Motors as in the house. Let's call that $10,000 and give the house a value of $200,000. With General Motors, even if they go bankrupt tomorrow, you're only out $10,000. With the house, you're out $200,000. Admittedly it's much hard to lose the entire $200,000 value of the house. But even if the house loses $80,000 in value, you are still $70,000 in the hole. You don't need a disaster for the house to lose $80,000 in value. That's pretty much what happened in the 2006-2010 period. People were losing all of what they invested in houses plus having to declare bankruptcy to get out of the excess debt. Of course, if they had been able to hold on until 2015 markets mostly recovered. But if you lost your job in 2008, they wouldn't let you not make mortgage payments until you got a new one in 2012. When you declare bankruptcy, you don't just lose the house. You also lose all your emergency savings and may lose some of your belongings. There are some pretty prosaic disasters too. For example, you and your tenant both go away for a weekend. It rains heavily and your roof starts to leak due to weak maintenance (so not covered by insurance). The house floods, destroying all the electronics and damaging various other things. Bad enough if it's just you, but you're also responsible for the tenant's belongings. They sue you for $20,000 and they move out. So no rent and big expenses. To get the house livable again is going to take $160,000. Plus you have a $190,000 mortgage on a property that is only worth about $40,000. That's at the extreme end." }, { "docid": "366869", "title": "", "text": "There is no interest outstanding, per se. There is only principal outstanding. Initially, principal outstanding is simply your initial loan amount. The first two sections discuss the math needed - just some arithmetic. The interest that you owe is typically calculated on a monthly basis. The interested owed formula is simply (p*I)/12, where p is the principal outstanding, I is your annual interest, and you're dividing by 12 to turn annual to monthly. With a monthly payment, take out interest owed. What you have left gets applied into lowering your principal outstanding. If your actual monthly payment is less than the interest owed, then you have negative amortization where your principal outstanding goes up instead of down. Regardless of how the monthly payment comes about (eg prepay, underpay, no payment), you just apply these two calculations above and you're set. The sections below will discuss these cases in differing payments in detail. For a standard 30 year fixed rate loan, the monthly payment is calculated to pay-off the entire loan in 30 years. If you pay exactly this amount every month, your loan will be paid off, including the principal, in 30 years. The breakdown of the initial payment will be almost all interest, as you have noticed. Of course, there is a little bit of principal in that payment or your principal outstanding would not decrease and you would never pay off the loan. If you pay any amount less than the monthly payment, you extend the duration of your loan to longer than 30 years. How much less than the monthly payment will determine how much longer you extend your loan. If it's a little less, you may extend your loan to 40 years. It's possible to extend the loan to any duration you like by paying less. Mathematically, this makes sense, but legally, the loan department will say you're in breach of your contract. Let's pay a little less and see what happens. If you pay exactly the interest owed = (p*I)/12, you would have an infinite duration loan where your principal outstanding would always be the same as your initial principal or the initial amount of your loan. If you pay less than the interest owed, you will actually owe more every month. In other words, your principal outstanding will increase every month!!! This is called negative amortization. Of course, this includes the case where you make zero payment. You will owe more money every month. Of course, for most loans, you cannot pay less than the required monthly payments. If you do, you are in default of the loan terms. If you pay more than the required monthly payment, you shorten the duration of your loan. Your principal outstanding will be less by the amount that you overpaid the required monthly payment by. For example, if your required monthly payment is $200 and you paid $300, $100 will go into reducing your principal outstanding (in addition to the bit in the $200 used to pay down your principal outstanding). Of course, if you hit the lottery and overpay by the entire principal outstanding amount, then you will have paid off the entire loan in one shot! When you get to non-standard contracts, a loan can be structured to have any kind of required monthly payments. They don't have to be fixed. For example, there are Balloon Loans where you have small monthly payments in the beginning and large monthly payments in the last year. Is the math any different? Not really - you still apply the one important formula, interest owed = (p*I)/12, on a monthly basis. Then you break down the amount you paid for the month into the interest owed you just calculated and principal. You apply that principal amount to lowering your principal outstanding for the next month. Supposing that what you have posted is accurate, the most likely scenario is that you have a structured 5 year car loan where your monthly payments are smaller than the required fixed monthly payment for a 5 year loan, so even after 2 years, you owe as much or more than you did in the beginning! That means you have some large balloon payments towards the end of your loan. All of this is just part of the contract and has nothing to do with your prepay. Maybe I'm incorrect in my thinking, but I have a question about prepaying a loan. When you take out a mortgage on a home or a car loan, it is my understanding that for the first years of payment you are paying mostly interest. Correct. So, let's take a mortgage loan that allows prepayment without penalty. If I have a 30 year mortgage and I have paid it for 15 years, by the 16th year almost all the interest on the 30 year loan has been paid to the bank and I'm only paying primarily principle for the remainder of the loan. Incorrect. It seems counter-intuitive, but even in year 16, about 53% of your monthly payment still goes to interest!!! It is hard to see this unless you try to do the calculations yourself in a spreadsheet. If suddenly I come into a large sum of money and decide I want to pay off the mortgage in the 16th year, but the bank has already received all the interest computed for 30 years, shouldn't the bank recompute the interest for 16 years and then recalculate what's actually owed in effect on a 16 year loan not a 30 year loan? It is my understanding that the bank doesn't do this. What they do is just tell you the balance owed under the 30 year agreement and that's your payoff amount. Your last sentence is correct. The payoff amount is simply the principal outstanding plus any interest from (p*I)/12 that you owe. In your example of trying to payoff the rest of your 30 year loan in year 16, you will owe around 68% of your original loan amount. That seems unfair. Shouldn't the loan be recalculated as a 16 year loan, which it actually has become? In fact, you do have the equivalent of a 15 year loan (30-15=15) at about 68% of your initial loan amount. If you refinanced, that's exactly what you would see. In other words, for a 30y loan at 5% for $10,000, you have monthly payments of $53.68, which is exactly the same as a 15y loan at 5% for $6,788.39 (your principal outstanding after 15 years of payments), which would also have monthly payments of $53.68. A few years ago I had a 5 year car loan. I wanted to prepay it after 2 years and I asked this question to the lender. I expected a reduction in the interest attached to the car loan since it didn't go the full 5 years. They basically told me I was crazy and the balance owed was the full amount of the 5 year car loan. I didn't prepay it because of this. That is the wrong reason for not prepaying. I suspect you have misunderstood the terms of the loan - look at the Variable Monthly Payments section above for a discussion. The best thing to do with all loans is to read the terms carefully and do the calculations yourself in a spreadsheet. If you are able to get the cashflows spelled out in the contract, then you have understood the loan." }, { "docid": "577735", "title": "", "text": "* Yes, you should incorporate if you plan on seriously investing in real estate. This not only limits liability in terms of paying back the debt but also in case your tenants sue you. * Pass-through entities. Typically an LLC but it depends on the state if they have good or bad LLC laws. Pennsylvania is a state where you would not want to incorporate as an LLC. Other options include S-corps and LPs. * Loans are taken out by corporations against the property. Typically mortgage loans are non-recourse. If you set up a company for each property, this further insulates you against the bank capturing other properties within the pool. However, recourse carveouts can still end up getting you on the hook personally for the loans. These typically include voluntary bankruptcy. You would very rarely have to file for bankruptcy anyway for your real estate investments. At worst, it will end in foreclosure but banks typically would prefer deed-in-lieu just because it is faster and easier for them too. You just turn over the keys and walk away. It will have very little impact on your personal finances or record. Everyone in real estate walks away from properties and leaves them with the bank. It's a fact of doing business and your lender should have been comfortable owning your property at the basis they lent money to you. If they weren't, they were just stupid. * Yes, every real estate investment requires equity in the property. Typically it's a 20% equity check but if the lender underwrites the property to a lower value than what you purchased it for, you may have to line up more expensive financing." }, { "docid": "166522", "title": "", "text": "\"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.\"" }, { "docid": "589256", "title": "", "text": "\"For some people, it should be a top priority. For others, there are higher priorities. What it should be for you depends on a number of things, including your overall financial situation (both your current finances and how stable you expect them to be over time), your level of financial \"\"education\"\", the costs of your mortgage, the alternative investments available to you, your investing goals, and your tolerance for risk. Your #1 priority should be to ensure that your basic needs (including making the required monthly payment on your mortgage) are met, both now and in the near future, which includes paying off high-interest (i.e. credit card) debt and building up an emergency fund in a savings or money-market account or some other low-risk and liquid account. If you haven't done those things, do not pass Go, do not collect $200, and do not consider making advance payments on your mortgage. Mason Wheeler's statements that the bank can't take your house if you've paid it off are correct, but it's going to be a long time till you get there and they can take it if you're partway to paying it off early and then something bad happens to you and you start missing payments. (If you're not underwater, you should be able to get some of your money back by selling - possibly at a loss - before it gets to the point of foreclosure, but you'll still have to move, which can be costly and unappealing.) So make sure you've got what you need to handle your basic needs even if you hit a rough patch, and make sure you're not financing the paying off of your house by taking a loan from Visa at 27% annually. Once you've gotten through all of those more-important things, you finally get to decide what else to invest your extra money in. Different investments will provide different rewards, both financial and emotional (and Mason Wheeler has clearly demonstrated that he gets a strong emotional payoff from not having a mortgage, which may or may not be how you feel about it). On the financial side of any potential investment, you'll want to consider things like the expected rate of return, the risk it carries (both on its own and whether it balances out or unbalances the overall risk profile of all your investments in total), its expected costs (including its - and your - tax rate and any preferred tax treatment), and any other potential factors (such as an employer match on 401(k) contributions, which are basically free money to you). Then you weigh the pros and cons (financial and emotional) of each option against your imperfect forecast of what the future holds, take your best guess, and then keep adjusting as you go through life and things change. But I want to come back to one of the factors I mentioned in the first paragraph. Which options you should even be considering is in part influenced by the degree to which you understand your finances and the wide variety of options available to you as well as all the subtleties of how different things can make them more or less advantageous than one another. The fact that you're posting this question here indicates that you're still early in the process of learning those things, and although it's great that you're educating yourself on them (and keep doing it!), it means that you're probably not ready to worry about some of the things other posters have talked about, such as Cost of Capital and ROI. So keep reading blog posts and articles online (there's no shortage of them), and keep developing your understanding of the options available to you and their pros and cons, and wait to tackle the full suite of investment options till you fully understand them. However, there's still the question of what to do between now and then. Paying the mortgage down isn't an unreasonable thing for you to do for now, since it's a guaranteed rate of return that also provides some degree of emotional payoff. But I'd say the higher priority should be getting money into a tax-advantaged retirement account (a 401(k)/403(b)/IRA), because the tax-advantaged growth of those accounts makes their long-term return far greater than whatever you're paying on your mortgage, and they provide more benefit (tax-advantaged growth) the earlier you invest in them, so doing that now instead of paying off the house quicker is probably going to be better for you financially, even if it doesn't provide the emotional payoff. If your employer will match your contributions into that account, then it's a no-brainer, but it's probably still a better idea than the mortgage unless the emotional payoff is very very important to you or unless you're nearing retirement age (so the tax-free growth period is small). If you're not sure what to invest in, just choose something that's broad-market and low-cost (total-market index funds are a great choice), and you can diversify into other things as you gain more savvy as an investor; what matters more is that you start investing in something now, not exactly what it is. Disclaimer: I'm not a personal advisor, and this does not constitute investing advice. Understand your choices and make your own decisions.\"" }, { "docid": "17827", "title": "", "text": "\"The general answer to any \"\"is it worth it\"\" insurance question is \"\"no,\"\" because the insurance company is making a profit on the insurance.* To decide if you want the insurance, you need to figure out how much you can afford to pay if something happens, how much they cover, and how badly you want to transfer your risk to them. If you won't have trouble coming up with the $4000 deductible should you need to, then don't get this extra insurance. * I did not mean to imply that insurance is always a bad idea or that insurance companies are cheating their customers. Please let me explain further. When you buy any product from a business, that business is making a profit. And there is nothing wrong with that at all. They are providing a service and should be compensated for their efforts. Insurance companies also provide a service, but unlike other types of businesses, their product is monetary. You pay them money now, and they might pay you money later. If they pay you more money then you spent, you came out ahead, and if you spend more money then they give you, it was a loss for you. In order for the insurance company to make a profit, they need to bring in more money than they pay out. In fact, they need to bring in a lot more money then they pay out, because in addition to their profit, they have all the overhead of running a business. As a result, on average, you will come out behind when you purchase insurance. This means that when you are on the fence about whether or not to purchase any insurance product, the default choice should be \"\"no.\"\" On average, you are financially better off without insurance. Now, that doesn't mean you should never buy insurance. As mentioned by commenter @xiaomy, insurance companies spread risk across all of their customers. If I am in a situation where I have a risk of financial ruin in a certain circumstance, I can eliminate that risk by purchasing insurance. For example, I have term life insurance, because if I were to pass away, it would be financially catastrophic for my family. (I'm hoping that the insurance company makes 100% profit on that deal!) I also continue to buy expensive health insurance because an unexpected medical event would be financially devastating. However, I always decline the extended warranty when I buy a $300 appliance, because I don't have any trouble coming up with another $300 in the unlikely event that it breaks, and I would rather keep the money than contribute to the profits of an insurance company unnecessarily. In my original answer above, I pointed out how you would determine whether or not to purchase this particular insurance product. This product pays out a bunch of relatively small amounts for certain events, up to a limit of $4000. Would this $4000 be hard for you to come up with if you needed to? If so, get the insurance. But if you are like me and have an emergency fund in place to handle things like this, then you are financially better off declining this policy.\"" }, { "docid": "60981", "title": "", "text": "So if I understand your plan right, this will be your situation after the house is bought: Total Debt: 645,000 Here's what I would do: Wait until your house sells before buying a new one. That way you can take the equity from that sale and apply it towards the down payment rather than taking a loan on your retirement account. If something happens and your house doesn't sell for as mush as you think it will, you'll lose out on the gains from the amount you borrow, which will more than offset the interest you are paying yourself. AT WORST, pay off the 401(k) loan the instant your sale closes. Take as much of the remaining equity as you can and start paying down student loans. There are several reasons why they are a higher priority than a mortgage - some are mathematical, some are not. Should I look to pay off student loans sooner (even if I refi at a lower rate of 3.5% or so), or the mortgage earlier ... My thoughts are that the student loans follow me for life, but I can always sell and buy another home So you want this baggage for the rest of your life? How liberating will it be when you get that off your back? How much investing are you missing out on because of student loan payments? What happens if you get lose your license? What if you become disabled? Student loans are not bankruptable, but you can always sell the asset behind a mortgage or car loan. They are worse than credit card debt in that sense. You have no tangible asset behind it and no option for forgiveness (unless you decide to practice in a high-need area, but I don't get the sense that that's your path). The difference in interest is generally only a few payment' worth over 15 years. Is the interest amortized the same as a 15 year if I pay a 30 year mortgage in 15 years? Yes, however the temptation to just pay it off over 30 years is still there. How often will you decide that a bigger car payment, or a vacation, or something else is more important? With a 15-year note you lock in a plan and stick to it. Some other options:" }, { "docid": "47979", "title": "", "text": "\"I always hesitate to provide an answer to \"\"how does this affect my credit score?\"\" questions, because the credit agencies do not publish their formulas and the formulas do change over time. And many others have done more reverse engineering than I to figure out what factors do affect the scores. To some extent, there is no way to know other than to get your credit score and track it over time. (The credit report will tell you what the largest negative factors are.) However, let me make my prediction. You have credit, you aren't using a large percentage of it, and don't have defaults/late payments. So, yes, I think it would help your credit score and would build a history of credit. Since this is so unusual, this is just an educated guess.\"" }, { "docid": "136315", "title": "", "text": "\"Also within Germany the tax offices usually determine which tax office is responsible for you by asking where you were more than 180 days of the year (if e.g. you have a second flat where you work). That's a default value, though: in my experience you can ask to be handled by another tax office. E.g. I hand my tax declaration to my \"\"home\"\" tax office (where also my freelancing adress is), even though my day-job is 300 km away. So if you work mostly from Poland and just visit the German customer a few times, you are fine anyways. Difficulties start if you move to Germany to do the work at your customer's place. I'm going to assume that this is the situation as otherwise I don't think the question would have come up. Close by the link you provided is a kind of FAQ on this EU regulation About the question of permanent vs. temporary they say: The temporary nature of the service is assessed on a case-by-case basis. Here's my German-Italian experience with this. Background: I had a work contract plus contracts for services and I moved for a while to Italy. Taxes and social insurance on the Italian contracts had to be paid to Italy. Including tax on the contract for services. Due to the German-Italian tax treaty, there is no double taxation. Same for Poland: this is part of EU contracts. By the way: The temporary time frame for Italy seemed to be 3 months, then I had to provide an Italian residence etc. and was registered in the Italian health care etc. system. Due to the German-Italian tax treaty, there is no double taxation. Same for Poland: this is part of EU contracts. Besides that, the German tax office nevertheless decided that my \"\"primary center of life\"\" stayed in Germany. So everything but the stuff related to the Italian contracts (which would probably have counted as normal work contracts in Germany, though they is no exact equivalent to those contract types) was handled by the German tax office. I think this is the relevant part for your question (or: argumentation with the German tax office) of temporary vs. permanent residence. Here are some points they asked: There is one point you absolutely need to know about the German social insurance law: Scheinselbständigkeit (pretended self-employment). Scheinselbständigkeit means contracts that claim to be service contracts with a self-employed provider who is doing the work in a way that is typical for employees. This law closes a loophole so employer + employee cannot avoid paying income tax and social insurance fees (pension contributions and unemployment insurance on both sides - health insurance would have to be paid in full by the self-employed instead of partially by the employer. Employer also avoids accident insurance, and several regulations from labour law are avoided as well). Legally, this is a form of black labour which means that the employer commits a criminal offense and is liable basically for all those fees. There is a list of criteria that count towards Scheinselbständigkeit. Particularly relevant for you could be\"" }, { "docid": "234286", "title": "", "text": "\"If you are investing in a mortgage strictly to avoid taxes, the answer is \"\"pay cash now.\"\" A mortgage buys you flexibility, but at the cost of long term security, and in most cases, an overall decrease in wealth too. At a very basic level, I have to ask anyone why they would pay a bank a dollar in order to avoid paying the government 28 - 36 cents depending on your tax rate. After all, one can only deduct interest- not principal. Interest is like rent, it accrues strictly to the lender, not equity. In theory the recipient should be irrelevant. If you have a need to stiff the government, go ahead. Just realize you making a banker three times as happy. Additionally the peace of mind that comes from having a house that no banker can take away from you is, at least for me, compelling. If I have a $300,000 house with no mortgage, no payments, etc. I feel quite safe. Even if my money is tied up in equity, if a serious situation came along (say a huge doctors bill) I always have the option of a reverse mortgage later on. So, to directly counter other claims, yes, I'd rather have $300k in equity then $50k in equity and $225k in liquid assets. (Did you notice that the total net worth is $25k less? And that's even before one considers the cash flow implication of a continuing mortgage. I have no mortgage, and I'm 41. I have a lot of net worth, but the thing that I really like is that I have a roof over my head that no on e can take away from me, and sufficient savings to weather most crises). That said, a mortgage is not about total cost. It is about cash flow. To the extent that a mortgage makes your cash flow situation better, it provides a benefit- just not one that is quantifiable in dollars and cents. Rather, it is a risk/reward situation. By taking a mortgage even when you have the cash, you pay a premium (the interest rate) in order to have your funds available when you need it. A very simple strategy to calculate and/or minimize this risk would be to invest the funds in another investment. If your rate of return exceeds the interest rate minus any tax preference (e.g. 4% minus say a 25% deduction = 3%), your money is better off there, obviously. And, indeed, when interest rates are only 4%, it may may be possible to find that. That said, in most instances, a CD or an inflation protected bond or so won't give you that rate of return. There, you'd need to look at stocks- slightly more risky. When interest rates are back to normal- say 5 or 6%, it gets even harder. If you could, however, find a better return than the effective interest rate, it makes the most sense to do that investment, hold it as a hedge to pay off the mortgage (see, you get your security back if you decide not to work!), and pocket the difference. If you can't do that, your only real reason to hold the cash should be the cash flow situation.\"" }, { "docid": "447845", "title": "", "text": "\"No one can really answer this for you. It is a matter of personal preference and the details of your situation. There are some really smart people on here, when placed in your exact situation, would do completely different things. Personal finance is overall, personal. If it was me, I'd never borrow money in retirement. If I had the cash, I'd use it to help fund the purchase. If I didn't, I simply wouldn't. For me wealth retention (in your case) is surprisingly more about behavior than math (even though I am a math guy). You are simply creating a great deal of risk at a season in your life with a diminished ability to recover from negative events. In my opinion you are inviting \"\"tales of woe\"\" to be part of your future if you borrow. Others would disagree with me. They would point to the math and show how you would be much better off on borrowing instead of pulling out of investments provided a sufficient return on your nest egg. They may even have a case as you might have to pay taxes on money pulled out magnifying the difference in net income on borrowing versus pulling out in a lump sum. Here in the US, the money you pulled out would be taxed at the highest marginal rate. To help with a down payment of 50K, you might have to pull out 66,500 to pay the taxes and have enough for the down payment. The third option is to not help with a down payment or to help them in a different way. Perhaps giving them a few hundred per month for two years to help with their mortgage payment. Maybe watch their kids some to reduce day care costs or help with home improvements so they can buy a lower price home. Those are all viable options. Perhaps the child is not ready to buy a home. Having said all that it really depends on your situation. Say your sitting on 5 million in investments, your pensions is sufficient to have some disposable income, and they are asking for a relatively small amount. Then pull the money out and don't be concerned. You nest egg will quickly recover the money.\"" }, { "docid": "598030", "title": "", "text": "In theory, anything can happen, and the world could end tomorrow. However, with a reasonably sane financial plan you should be able to ride this out. If the government cannot or won't immediately pay its debt in full, the most immediate consequence is that people are going to be unwilling to lend any more money in future, except at very high rates to reflect the high risk of future default. Presumably the government has got into this state by running a deficit (spending more than they collect in tax) and that is going to have to come to an abrupt end. That means: higher taxes, public service retrenchments and restrictions of service, perhaps cuts to social benefits, etc. Countries that get into this state typically also have banks that have lent too much money to risky customers. So you should also expect to see some banks get into trouble, which may mean customers who have money on deposit will have trouble getting it back. In many cases governments will guarantee deposits, but perhaps only up to a particular ceiling like $100k. It would be very possible to lose everything if you have speculative investments geared by substantial loans. If you have zero or moderate debt, your net wealth may decrease substantially (50%?) but there should be little prospect of it going to zero. It is possible governments will simply confiscate your property, but I think in a first-world EU country this is fairly unlikely to happen to bank accounts, houses, shares, etc. Typically, a default has led to a fall in the value of the country's currency. In the eurozone that is more complex because the same currency is used by countries that are doing fairly well, and because there is also turbulence in other major currency regions (JPY, USD and GBP). In some ways this makes the adjustment harder, because debts can't be inflated down. All of this obviously causes a lot of economic turbulence so you can expect house prices to fall, share prices to gyrate, unemployment to rise. If you can afford it and come stomach the risk, it may turn out to be a good time to buy assets for the long term. If you're reasonably young the largest impact on you won't be losing your current savings, but rather the impact on your future job prospects from this adjustment period. You never know, but I don't think the Weimar Republic wheelbarrows-of-banknotes situation is likely to recur; people are at least a bit smarter now and there is an inflation-targeting independent central bank. I think gold can have some room in a portfolio, but now is not the time to make a sudden drastic move into it. Most middle class people cannot afford to have enough gold to support them for the rest of their life, though they may have enough for a rainy day or to act as a balancing component. So what I would do to cope with this is: be well diversified, be sufficiently conservatively positioned that I would sleep at night, and beyond that just ride it out and try not to worry too much." }, { "docid": "185156", "title": "", "text": "\"All bonds carry a risk of default, which means that it's possible that you can lose your principal investment in addition to potentially not getting the interest payments that you expect. Bonds (in the US anyway) are graded, so you can manage this risk somewhat by taking higher quality bonds, i.e. in companies or governments that are considered more creditworthy. Regular bank savings (again specific to the US) are insured by FDIC, so even if your bank goes bust, the US Government is backing them up to some limit. That makes such accounts less risky. There's generally no insurance on a bond, even if it is issued by a government entity. If you do your homework on the bond rating system and choose bonds in a rating band where you're comfortable, this could be a good option for you. You'll find, however, that the bond market also \"\"knows\"\" that the interest rates are generally low, so be ware that higher interest issues are usually coming from less creditworthy (and therefore more risky) issuers. EDIT Here's some additional information based on the follow-up question in the comment. When you buy a bond you are actually making a loan to the issuer. They will pay you interest over the lifetime of the bond and then return your principal at the end of the term. (Verify this payment schedule - This is typical, but you should be sure that whatever you're buying works like this.) This is not an investment in the value of the issuer itself like you would be making if you bought stock. With stock you are taking an ownership share in the company. This might entitle you to dividends if the company pays them, but otherwise your investment value on a stock will be tied to the performance of the company. With the bond, the company might be in decline but the bond still a good investment so long as the company doesn't decline so much that they cannot pay their debts. Also, bonds can be issued by governments, but governments do not sell stock. (An \"\"ownership share of the government\"\" would not make sense.) This may be the so-called sovereign debt if issued by a sovereign government or it may be local (we call it municipal here in the US) debt issued by a subordinate level of government. Bonds are a little bit like stock in the sense that there's a secondary market for them. That means that if you get partway through the length of the bond and don't want to hold it, you can sell the bond to someone else. Of course, it will be harder to sell a bond later if the company becomes insolvent or if the interest rates go up between when you buy and when you sell. Depending on these market factors, you might end up with a capital gain or capital loss (meaning you get more or less than the principal that you put into the bond) at the time of a sale.\"" }, { "docid": "322825", "title": "", "text": "\"Here in the UK, the rule of thumb is to keep a lot of equity in your home if you can. I assume here that you have a lot of savings you're considering using. If you only have say 10% of the house price you wouldn't actually have a lot of choice in the matter, the mortgage lender will penalise you heavily for low deposits. The practical minimum is 5%, but for most people a 95% mortgage is just silly (albeit not as silly as the 100% or greater mortgages you could get pre-2008), and you should take serious individual advice before considering it. According to Which, the average in the UK for first-time buyers is 20% (not the best source for that data I confess, but a convenient one). Above 20% is not at all unusual. You'll do an affordability calculation to figure out how much you can borrow, which isn't at all the same as how much you should borrow, but does get you started. Basically you, decide how much a month you can spend on mortgage payments. The calculation will let you put every penny into this if you choose to, but in practice you'll want some discretionary income so don't do that. decide the term of the mortgage. For a young first-time buyer in the UK I think you'd typically take a 25-year term and consider early repayment options rather than committing to a shorter term, but you don't have to. Mortgage lenders will offer shorter terms as long as you can afford the payments. decide how much you're putting into a deposit make subtractions for cost of moving (stamp duty if applicable, fees, removals aka \"\"people to lug your stuff\"\"). receive back a number which is the house price you can pay under these constraints (and of course a breakdown of what the mortgage principle would be, and the interest rate you'll pay). This step requires access to lender information, since their rates depend on personal details, deposit percentage, phase of the moon, etc. Our mortgage advisor did multiple runs of the calculation for us for different scenarios, since we hadn't made up our minds entirely. Since you have not yet decided how much deposit to make, you can use multiple calculations to see the effect of different deposits you might make, up to a limit of your total savings. Putting up more deposit both increases the amount you can borrow for a given monthly payment (since mortgage rates are lower when the loan is a lower proportion of house value), and of course increases the house price you can afford. So unless you're getting a very high return on your savings, £1 of deposit gets you somewhat more than £1 of house, and the calculation will tell you how much more. Once you've chosen the house you want, the matter is even simpler: do you prefer to put your savings in the house and borrow less and make lower payments, or prefer to put your savings elsewhere and borrow more and make higher payments but perhaps have some additional income from the savings. Assuming you maintain a contingency fund, a lower mortgage is generally considered a good investment in the UK, but you need to check what's right for you and compare it to other investments you could make. The issue is complicated by the fact that residential property prices are rising quite quickly in most areas of the UK, and have been for a long time, meaning that highly-leveraged property investment appears to be a really good idea. This leads to the imprudent, but tempting, conclusion that you should buy the biggest house you can possibly afford and watch its value rises. I do not endorse this advice personally, but it's certainly true that in a sharply rising house market it's easier to get away with buying a bigger house than you need, than it is to get away with it in a flat or falling market. As Stephen says, an offset mortgage is a no-brainer good idea if the rate is the same. Unfortunately in the UK, the rate isn't the same (or anyway, it wasn't a couple of years ago). Offset mortgages are especially good for those who make a lot of savings from income and for any reason don't want to commit all of those savings to a traditional mortgage payment. Good reasons for not wanting to do that include uncertainty about your future income and a desire to have the flexibility to actually spend some of it if you fancy :-)\"" } ]

[ { "docid": "525247", "title": "", "text": "The answer is generally yes. Depending on your circumstances and where you live, you may be able to get help through a federal, state, or lender program that:" } ]

[ { "docid": "147806", "title": "", "text": "\"This model would work fine under a couple of assumptions: that market interest rates never change, and that the borrower will surely make all the payments as agreed. But neither of those assumptions are realistic. Suppose Alice loans $1,000,000 to Bob at 4% under the terms you describe. Bob chooses to make interest-only payments of $40,000 per year. Some time later, prevailing interest rates go up to 10%. Now Alice would really like Bob to repay the entire principal as quickly as possible, because that money could be earning her $100,000 per year instead of only $40,000, but under the contract she has no way to force Bob to do so. And Bob has no incentive to repay any of the principal, because he can earn more interest on it than he has to pay to Alice. So Alice is not going to be very happy about this. You might say, but at least Alice is only losing \"\"potential\"\" money; she's still turning a profit of $10,000 per year, since her bank only charges her 3% interest. Ah, but you're assuming that Alice can get a bank loan with a rate of 3% fixed forever. The bank doesn't want to make such a loan either, for exactly the same reasons. So in practice, any loan like this would be expected to have a variable interest rate. There's a flip side, too. Suppose instead that market rates drop to 1%. Now Alice would like Bob to repay the principal as slowly as possible, because she's earning 4% on that money, which is better than any other options available to her. But Bob now has every incentive to repay it as fast as he can - or even to refinance by taking out another loan at, say, 2%, and using the proceeds to repay the entire principal to Alice. (This risk still applies with most traditional loans, since the borrower usually always has the right to pay early, but some loans include a \"\"prepayment penalty\"\" in such cases to help compensate the lender.) Thus, when Bob has all the power to decide when to pay, Alice is sure to lose no matter which way interest rates move. A loan with a fixed term helps insulate Alice against this risk. She may be able to make a guess about the likelihood of interest rates going up to 10% in the next 15 or 30 years, and increase Bob's fixed rate to account for this; that's much easier than trying to account for the possibility of interest rates going up to 10% ever. (And if she does have to try to account for this, she's probably going to have to set the interest rate extremely high; so Bob might accept a fixed term of repayment in exchange for a more reasonable rate.) Even if we suppose that Alice has done the best possible credit check and that Bob is a perfectly trustworthy fellow who would never dream of defaulting on his loan, catastrophes do happen. Maybe Bob is robbed of all his money by an evil accountant, or has a mid-life crisis and spends it all on opera tickets. Whatever, Bob is now bankrupt and Alice is never going to get her principal back, nor any further interest payments either. Even if the loan is secured by some collateral, there's still a risk since the collateral might lose value. Alice has some chance of estimating the risk of this happening in the next 15 or 30 years, and can set the interest rate to compensate for it. But it is harder for her to estimate the risk of this happening ever, and if she tries, she'll have to set the rate so high that Bob might prefer a fixed term and a lower rate. (There's a side issue as to what happens if Bob dies with the loan still outstanding. If it's an unsecured loan, typically Alice can try to collect the principal from Bob's estate, but if there isn't enough, too bad for Alice; she can't force Bob's heirs to continue making payments. If it's a secured loan, Alice may be able to have Bob's heirs continue paying or else she seizes the collateral; but she still has the risk of the collateral losing value.)\"" }, { "docid": "396567", "title": "", "text": "I don't really like to refer to being an expert cause it is all relative really. I know Excel better than anyone in my office but I don't consider myself an expert because my skills don't touch many of the people on Excel-related forums. Anyway, the initiative you are showing wanting to learn this on your own is great. So if you told me that you were in expert in Excel but it is clear you know less than me I'd peg you as someone with overconfidence bias. What I would want to see is that you are familiar with functions common with finance-related Excel work, that you understand under which situations certain functions are more efficient for completing a task. Like math, there are many ways to solve a problem but some are more efficient than others (in Excel the most efficient is not always the most elegant, we are talking about using the least amount of processing power and memory). That if you don't know how to do something in Excel you'll be able to figure it out without help. There are so many resources on the web and you should know how to be able to look at other examples and apply it to your situation. You should be familiar with VBA, not just using the macro recorder. Know what situations when it is better to use VBA than excel functions (in most situations you want to avoid VBA because 1. It makes it difficult for other users to follow your spreadsheet and 2. Excel functions are much more optimized and generally perform tasks much faster). Know how to build spreadsheets that are easy for others to follow you work; write comments etc.... Nothing is worse than trying to figure out a cluster fuck of a spreadsheet. I would not expect you to be an expert in VBA and to be able to write something in depth from scratch but rather be able to figure it out using outside resources. Since I am not writing in VBA on daily basis I forget shit all the time but if there is something that needs to be done I can guarantee you I will figure out how. Knowledge of how to integrate Excel with a database via VBA is good (for both pulling in data and updating a database). Tl;dr 1. Don't downplay your Excel knowledge but don't make yourself out to be an Excel God, you never know how much knowledge the other person has 2. Demonstrate that you have experience with commonly used Excel-related functions; efficient construction of workbooks 3. Demonstrate that if you don't know how to do something in Excel you will be able to figure it out; provide an example 4. Knowledge of VBA is good, especially integrating with outside databases. Provide example of a time you used VBA and why you did. Best way to learn this stuff is through experience; If you want me to critique your Excel work I would happy to. The following project would give you good experience: Download data for 20 countries (just choose at random, make sure you include U.S. though) on GDP in US dollar current prices and PPP basis for all years. from IMF http://www.imf.org/external/pubs/ft/weo/2012/01/weodata/index.aspx 1. Build a dash board that calculates the year-over-year growth of both GDP $, and GDP PPP 2. Set it so you can dynamically select which country to display 3. Set it up so you dynamically change start and end date 3. The chart should automatically adjust its range based on the date selected 4. Create three aggregates, developing countries, developed countries and world EX US 5. With these aggregates have an option to show the y/y growth using either the average (mean) or on a GDP weighted basis. This is just an idea that would give you some good experience. It is not anything I need so only do it if you want to build your skills." }, { "docid": "447845", "title": "", "text": "\"No one can really answer this for you. It is a matter of personal preference and the details of your situation. There are some really smart people on here, when placed in your exact situation, would do completely different things. Personal finance is overall, personal. If it was me, I'd never borrow money in retirement. If I had the cash, I'd use it to help fund the purchase. If I didn't, I simply wouldn't. For me wealth retention (in your case) is surprisingly more about behavior than math (even though I am a math guy). You are simply creating a great deal of risk at a season in your life with a diminished ability to recover from negative events. In my opinion you are inviting \"\"tales of woe\"\" to be part of your future if you borrow. Others would disagree with me. They would point to the math and show how you would be much better off on borrowing instead of pulling out of investments provided a sufficient return on your nest egg. They may even have a case as you might have to pay taxes on money pulled out magnifying the difference in net income on borrowing versus pulling out in a lump sum. Here in the US, the money you pulled out would be taxed at the highest marginal rate. To help with a down payment of 50K, you might have to pull out 66,500 to pay the taxes and have enough for the down payment. The third option is to not help with a down payment or to help them in a different way. Perhaps giving them a few hundred per month for two years to help with their mortgage payment. Maybe watch their kids some to reduce day care costs or help with home improvements so they can buy a lower price home. Those are all viable options. Perhaps the child is not ready to buy a home. Having said all that it really depends on your situation. Say your sitting on 5 million in investments, your pensions is sufficient to have some disposable income, and they are asking for a relatively small amount. Then pull the money out and don't be concerned. You nest egg will quickly recover the money.\"" }, { "docid": "60981", "title": "", "text": "So if I understand your plan right, this will be your situation after the house is bought: Total Debt: 645,000 Here's what I would do: Wait until your house sells before buying a new one. That way you can take the equity from that sale and apply it towards the down payment rather than taking a loan on your retirement account. If something happens and your house doesn't sell for as mush as you think it will, you'll lose out on the gains from the amount you borrow, which will more than offset the interest you are paying yourself. AT WORST, pay off the 401(k) loan the instant your sale closes. Take as much of the remaining equity as you can and start paying down student loans. There are several reasons why they are a higher priority than a mortgage - some are mathematical, some are not. Should I look to pay off student loans sooner (even if I refi at a lower rate of 3.5% or so), or the mortgage earlier ... My thoughts are that the student loans follow me for life, but I can always sell and buy another home So you want this baggage for the rest of your life? How liberating will it be when you get that off your back? How much investing are you missing out on because of student loan payments? What happens if you get lose your license? What if you become disabled? Student loans are not bankruptable, but you can always sell the asset behind a mortgage or car loan. They are worse than credit card debt in that sense. You have no tangible asset behind it and no option for forgiveness (unless you decide to practice in a high-need area, but I don't get the sense that that's your path). The difference in interest is generally only a few payment' worth over 15 years. Is the interest amortized the same as a 15 year if I pay a 30 year mortgage in 15 years? Yes, however the temptation to just pay it off over 30 years is still there. How often will you decide that a bigger car payment, or a vacation, or something else is more important? With a 15-year note you lock in a plan and stick to it. Some other options:" }, { "docid": "323601", "title": "", "text": "\"&gt;My father and my grandfather and my great grandfather could all sustain their families on a single middle class income Well, depends on what you define as \"\"middle class income\"\". Some of it is a **rising expected standard of living**: What size house did they have? How many automobiles did they have? If you go back to your great grandfather's time, he probably had far fewer sets of clothing. They probably didn't have the television, telephone, and air conditioning services that I expect most middle-class people expect. My dad ate fruits and vegetables only in season; you didn't get to have strawberries in the middle of winter or avocadoes shipped in from Chile. I expect to be able to travel via air to visit relatives; go back to the 1960s or even into the 1970s, and it was considered something that only the well-to-do would expect to be doing. My father didn't have video game consoles available to him. Some of these are driven purely by technology, of course, and someone can manage to pay no larger a chunk of change than they did before. We eat more meat, if I remember a lecture on this correctly. My parents had a lot more casserole and spaghetti (inexpensive foods) than I do. But some of it is also adjusting norms. Reading about the sort of house that a farmer lived in a few hundred years back would make me think of horrible poverty by modern standards... Most women seem not to have wanted to remain housewives when women started going out and doing men's historical work. So if they go out into the workforce, then keeping up with the Joneses, doing what's considered middle-class requires doubling income, and downwards pressure on some fixed costs (like, say, utility costs or gas costs) is lessened; that makes things tough on the few holdout families who want to have a single-income standard. Sure, maybe a small percentage of people out there want less-expensive beef, but its the bulk of people who get catered to... **Automation** has greatly decreased demand for some types of jobs; performing a repetitive, pre-defined task on an assembly line has fallen dramatically in value as the need for more people to do this sort of work has fallen off. Wages for a particular job are a function of how many people are available to do them relative to how many are needed. Every ATM is one less bank teller, every e-commerce website fewer retail workers. That increases the productive capacity of society, but whereas before there might be tremendous demand for someone to perform a repeated task on an assembly line (which it was easy to train people to do), many of the types of labor that are currently under-supplied are things that take longer to train people to do and require more specialization. **Debt Service**. Any debt that someone has that doesn't have a positive return-on-investment (an engineering degree would probably have a positive ROI, a large television probably a negative) winds up making them poorer in the long run. Any debt at *all* (barring investors making bad pricing decisions and hitting default or unexpectedly low returns) means transfer of wealth from people without money to people with money. The more (non-defaulted-upon) debt, the more people with more wealth make more wealth from lending. People have vastly more *personal debt* than they once did. Compare the amount of debt that someone has today with the amount of debt that they typically had in your great-grandfather's time, in the 1930s. There's a constant *drain* of wealth towards the lenders. This is one of Elizabeth Warren's favorite grousing points — people take out a *lot* more debt, particularly on housing, than they ever did in the past, and so a lot of their income is eaten year-by-year on debt service. There are lots of factors that make it easier to take out more debt. The biggest source of personal debt is [by far mortgages](http://www.utahfoundation.org/img/pdfs/rr689summary.pdf), and this is where the largest increases have taken place; policies to try to encourage people to go into debt to take out larger and larger mortgages have been steadily ramped up over this time, with the government subsidizing and taking on risk for insurance liability on mortgages to keep encouraging ever-larger amounts of debt. Lenders have computers and much more information and sophisticated systems for evaluating risk of default, which permits lending out more wealth. So there are technological changes driving this. The government has more *public debt* which means more such payments, even if they don't show up on your personal checkbook and are only seen by an increasing disparity between what you pay in taxes and the services you get back. Here's a chart of [inflation-adjusted debt per capita](http://www.theatlantic.com/business/archive/2011/07/chart-of-the-day-americans-income-and-the-us-debt/241463/) in the United States. That means that there's a constant increasing in the siphoning off of taxes as well to pay for the government having purchased a good or service without having actually paid for it at the time it was ordered. That decreasing green line means not that personal debt is falling (well, most of the time) but that the government is taking out debt on your behalf even faster than private debt has been going up. **The rest of the world catching up and breaking a temporary limited monopoly on certain goods**. China and India were not industrialized (and the former stuck under Maoism and not trading much with the rest of the world), so there were fewer people available to do this sort of work. Europe rebuilt from World War II, so it didn't have to purchase from the overseas US manufacturing industry. What could change? Well, standard-of-living is a cultural thing; that seems hard to manipulate. I'm sure that it's possible to change that, but I have a hard time suggesting how. Automation would be an across-the-board good thing if workers could be efficiently shifted into fields which currently have more demand; it's only an issue for workers if they stay in a field that has falling demand. I'm sure that our mechanisms for re-educating workers are not terribly good. Today, our education system still involves having a person stand up in front of a lot of other people and talk at them, then have those other people go and repeat some rote tasks to try and hammer something into their brain; it's the same mechanism that the wealthy used hundreds of years ago to tutor their children, but ramped up on a larger scale. If it were cheaper and easier to learn a new trade, it'd be easier to enter lucrative fields. College costs in particular are ridiculous. When you take college classes, you're basically getting a reading list, a very few limited slots to ask questions, and a set of predefined tasks plus some grading. That can be done far less-expensively than it is provided today. I personally have high hopes for online courses as a start here, though I'm sure that there will be stumbling blocks. Ditto for things like Wikipedia; using hypertext means that I can skip over things I already know and focus on what I don't understand, and electronic, automatic distribution means that it can be done far less-expensively than having some guy with a PhD stand up in front of a room and read some lecture notes aloud. Instead of answering questions generation after generation, *those* people should be polishing databases of *answers* to questions so that every subsequent human being can quickly and easily refer to their answer, and so that we can direct people to the best explanation easily. It's possible to adopt some measures that would reduce debt service by reducing public debt, but the public debt has been growing for a long time, and it seems very clear that people are much more willing to take out debt than to cut into *their* favorite concern (low taxes or lots of services) in the immediate future. As for reducing debt service via reducing private debt, most of the policy and technological factors that drive private debt seem unlikely to change to me. Maybe if we see some sort of cultural change, an aversion to taking out debt with a negative ROI, but all of the information I'm giving here has been public for a long time and people haven't changed, so I doubt that we'll see any kind of a reversal or social movement against taking out lots of debt. You'd have to have the equivalent of a [Great Awakening](https://en.wikipedia.org/wiki/Great_awakening) with respect to debt...and given that attempts to excite interest in the matter have generally not gone anywhere thus far, I suspect that this is human nature and doubt that things will change. You can always change *your* personal debt decisions, but society as a whole? As for the temporary monopoly...well, I think that it's pretty much inevitable that the rest of the world catches up to a great degree. Asia will catch up, even Africa will eventually get there. I think that that would be a pretty difficult thing to stop, and I think that most of the world would object to someone attempting to stop it.\"" }, { "docid": "443014", "title": "", "text": "There are still ways that the default values on the W4 can lead you to get a refund or owe the IRS. If there was a big delta in your paychecks, it can lead to problems. If you make 260,000 and get 26 paychecks that means each check had a gross of 10,000. Your company will withhold the same amount from each check. But If you earned a big bonus then the smaller regular paychecks may not have been withholding enough. When bonus checks are involved the payroll office has to treat them as irregular pay to be able to make it work out. Some companies don't do this, so you may under or over pay during the year. If you changed companies during the year, this can lead to under or over payment. The lower paying company would not know about the higher rate of pay at the other company. so at one you would under pay, and the other you would over pay. There are also social security issues with more than one employer." }, { "docid": "113167", "title": "", "text": "\"The following is based on my Experian credit scoring feedback and experience here in the UK over many years. (And for further information I currently hold a credit score of 999, the highest possible, with 6 credit cards.) Now I'm assuming that while there may be some differences in particulars in your case due to the difference in locality nevertheless the below should hopefully provide some broad guidelines and reasonable conclusion in your situation: Having a large number of active credit accounts may be seen as a negative. However having a large number of settled accounts should on the contrary have a positive effect on your score. As you keep your accounts mostly settled, I think having another card will not be to your detriment and should in time be beneficial. A large total credit balance outstanding may count against you. (But see the next point.) Having your total outstanding debt on all credit accounts be a smaller proportion of your total available credit, counts in your favour. This means having more cards for the same amount of credit in use, is net-net in your favour. It also has the effect of making even larger outstanding credit balances (as in point 2) to be a lower percentage of your total available credit, and consequently will indicate lower risk to lenders. It appears from my experience the higher the highest credit limit on a single card you are issued (and are managing responsibly e.g. either paid off or used responsibly) the better. Needless to say, any late payments count against you. The best thing to do then is to set up a direct debit for the minimum amount to be paid like clockwork every month. Lenders really like consistent payers. :) New credit accounts initially will count against you for a while. But as the accounts age and are managed responsibly or settled they will eventually count in your favour and increase your score. Making many credit applications in a short space of time may count against you as you may be seen to be credit reliant. Conclusion: On balance I would say get the other card. Your credit score might be slightly lower for a couple of months but eventually it will be to your benefit as per the above. Having another card also means more flexibility and more more options if you do end up with a credit balance that you want to finance and pay off over a period as cheaply as possible. In the UK the credit card companies are falling over themselves trying to offer one \"\"interest free\"\" or 0% \"\"balance transfer\"\" offers. Of course they're not truly 0% since you typically have to pay a \"\"transfer fee\"\" of a couple of percent. Still, this can be quite cheap credit, much much cheaper than the headline APR rates actually associated with the cards. The catch is that any additional spending on such cards are paid off first (and attract interest at the normal rate until paid off). Usually also if you miss a payment the interest rate reverts to the normal rate. But these pitfalls are easily avoided (pay by direct debit and don't use card you've got a special deal on for day to day expenses.) So, having more cards available is then very useful because you then have choice. You can roll expensive debts to the cheapest lender at your disposal for as long as they'll offer, and then simply not use that card for any purchases (while paying off the balance as cheaply as possible), meanwhile using another card for day to day expenses.\"" }, { "docid": "375537", "title": "", "text": "\"Your post has some assumptions that are not, or may not be true. For one the assumption is that you have to wait 7 years after you settle your debts to buy a home. That is not the case. For some people (me included) settling an charged off debt was part of my mortgage application process. It was a small debt that a doctor's office claimed I owed, but I didn't. The mortgage company told me, settling the debt was \"\"the cost of doing business\"\". Settling your debts can be looked as favorable. Option 1, in my opinion is akin to stealing. You borrowed the money and you are seeking to game the system by not paying your debts. Would you want someone to do that to you? IIRC the debt can be sold to another company, and the time period is refreshed and can stay on your credit report for beyond the 7 years. I could be wrong, but I feel like there is a way for potential lenders to see unresolved accounts well beyond specified time periods. After all, the lenders are the credit reporting agencies customers and they seek to provide the most accurate view of a potential lender. With 20K of unresolved CC debt they should point that out to their customers. Option 2: Do you have 20K? I'd still seek to settle, you do not have to wait 7 years. Your home may not appreciate in 2 years. In my own case my home has appricated very little in the 11 years that I have owned it. Many people have learned the hard way that homes do not necessarily increase in value. It is very possible that you may have a net loss in equity in two years. Repairs or improvements can evaporate the small amount of equity that is achieved over two years with a 30 year mortgage. I would hope that you pause a bit at the fact that you defaulted on 20K in debt. That is a lot of money. Although it is a lot, it is a small amount in comparison to the cost and maintenance of a home. Are you prepared to handle such a responsibility? What has changed in your personality since the 20K default? The tone of your posts suggests you are headed for the same sort of calamity. This is far more than a numbers game it is behavioral.\"" }, { "docid": "479527", "title": "", "text": "\"Sovereigns cannot go bankrupt. Basically, when a sovereign government (this includes nations and US States, probably political subdivisions in other countries as well) becomes insolvent, they default. Sovereigns with the ability to issue new currency have the option to do so because it is politically expedient. Sovereigns in default will negotiate with creditor committees to reduce payments. Creditors with debt backed by the \"\"full faith and credit\"\" of the sovereign are generally first in line. Creditors with debt secured by revenue may be entitled to the underlying assets that provide the revenue. The value of your money in the bank in a deposit account may be at risk due to currency devaluation or bank failure. A default by a major country would likely lock up the credit markets, and you may see yourself in a situation where money market accounts actually fall in value.\"" }, { "docid": "170511", "title": "", "text": "FHA insured loans must 'go hand in hand' with PMI, because the FHA element is the insurance itself. The FHA isn't actually giving you a loan, that's coming from a lender; instead, the FHA is insuring the loan, at some cost to you - but allowing a loan to folks who may not be able to afford it normally (lower down payment requirements and a somewhat cheaper PMI). FHA-insured loans may be lower rates in some cases than non-FHA insured loans because of this backing; that's because they make it easier for people of poorer credit histories with smaller down payments to get a house in the first place. Those people would tend to have a harder time getting a loan, and be charged sometimes usurious rates to get it. Low down payment and mediocre credit history (think 580-620) mean higher risk, even beyond the risk directly coming from the poor loan to value ratio. Comparing this table of Freddie Mac rates to this table of FHA-backed loan rates, the loan rates seem comparable (though somewhat lagging in changes in some cases). FHA loans are not nearly the size or complexity of loan population as Freddie Mac, so be wary of making direct comparisons. Looking into this in more detail, pre-collapse (before 12/07), FHA rates were a bit lower - average rate was about .5 points lower - but starting with 12/07, FHA average rates were usually higher than Freddie Mac rates for 30 year fixed loans: in 1/2009 for example they were almost a point higher. As of the last data I see (5/13) the rates were within 0.1 points most months. This may be in part because Freddie Mac had looser requirements to get a loan pre-collapse, then tightened significantly, then started to loosen some (also around June 2013, rates climbed significantly due to some signals from the Fed, although they're almost back to their lows thanks to the Fed again). These are averages across all loans, so you get some noise as a result. Loan interest rates are very personal, in general: they depend on your credit, your house and down payment, and your bank (which varies by your location). The best thing to do is to shop around yourself and just see what you get, and ask your lender any questions you have: if you pick a local lender with a good service history and who is willing to talk to you in person (ie, has a direct phone number), you'll have no trouble getting answers." }, { "docid": "542678", "title": "", "text": "Could it be done? Yes, it could, subject to local law. A variant of such an approach has been suggested for those countries experiencing collapse of demand. One might consider whether whether it applied to secured loans (such as mortgages), unsecured loans, or both; whether it would be capped at a certain absolute (say £100k) or proportional (first 50%) of each mortgage; whether it would cover first homes only, or all homes; and so on. These details would radically change the feasibility and consequences of any such intervention. See the related question: https://economics.stackexchange.com/q/146/104 Such a policy of debt cancellation would have several consequences beyond initial stimulation of demand, that would need additional policies to deal with them. Inflation The resultant surge in demand would, in the absence of any other intervention, result in a massive surge in inflation. There are some interesting questions about whether this burst of inflation would be a one-off, or not. One could make an argument that as housing has become much more affordable (at least for home-owners), it would increase the downward pressure on wages, which would be in itself counter-inflationary in the medium-long term. Nevertheless, it would be injecting much more money into the economy than has been seen in QE to date, so the risks would be of extraordinarily high inflation, which might or might not get entrenched. In order to manage the short-term risk, and long-term inflation expectations, it might be necessary to incorporate a lot of tightening, either fiscal (higher taxes and/or lower public spending), or monetary: (higher interest rates, unwinding QE, new requirements for higher core capital for banks) Moral hazard There are risks of moral hazard for individuals: however, as a society, we were prepared to accept the moral hazard for financial institutions and their staff, so that may or may not be an issue: it is likely to be a question of long-term expectations. If the expectation is that this is at most a once-in-a-lifetime occurrence, then the consequential risk from moral hazard ought to be lower. Excess profits to lenders Lenders will typically work on the basis of a certain proportion of defaults, so paying off all loans effectively gives them an artificial boost to their profits. Worsening balance of payments There is to a degree a prisoners' dilemma facing nations here. Pressing the reset-button on personal debt across many of the countries experiencing demand-collapse would benefit all of them. However, if just one such country were to do it alone, they alone would increase domestic demand, resulting in a large increase in imports, but no significant increase in exports." }, { "docid": "113822", "title": "", "text": "\"Typically you can use credit card balance transfers to consolidate some, or all, of your other loan balances in one place. The interest rate might be lower. Some prefer to make one payment rather than multiple payments. There is typically a fee that is imposed by the card that is originating or creating the loan. This would be the credit card you are transferring the balances. That fee is typically in the 3% to 5% range. While tempting and attractive on the surface, this plan typically leads to a worse situation then you are now. It's a \"\"tough pill to swallow\"\", but your problem is that you spend too much money. Transferring money will not change this problem, it is your behavior that has to change in order to not accumulate more debt. It has to change further if you want to get rid of the debt in a timely fashion. You would be far better served to forget about this transfer and get your life into control. Spend a lot less, earn more. Pay off the cards you have now and cut them up. Make a goal to be done in a year and figure out how to earn enough money to make that happen. BTW I am a reformed over-spender that now owes nothing. Yep my house, cars, and rental property are all paid for. You can get there too.\"" }, { "docid": "313623", "title": "", "text": "\"It depends on the deal: and you didn't give any details. That said, there are some things that stand out regardless, and some more specific answers to your questions. First, Mortgage rates (at the bank) are absurdly low right now. Like 4%-5%; less than 4% for excellent credit. You say your credit is ok, so unless your landlord is willing to do a deal where they get no benefit (beyond the price of the house), the bank is the way to go. If you don't have much for a down payment, go with an FHA loan, where you need only 3.5% down. Second, there is another option in between bank mortgage and rent-to-own. And that is that where your landlord \"\"carries the note\"\". Basically, there is a mortgage, and it works like a bank mortgage, but instead of the bank owning the mortgage, your landlord does. Now, in terms of them carrying all of it, this isn't really helpful. Who wants to make 3-4% interest? But, there is an interesting opportunity here. With your ok credit, you can probably get pretty close to 4% interest at the bank IF the loan is for 80% LTV (loan to value; that is, 20% equity). At 80% LTV you also won't have PMI, so between the two that loan will be very cheap. Then, your accommodating landlord can \"\"carry\"\" the rest at, say, 6-7% interest, junior to the bank mortgage (meaning if you default, the bank gets first dibs on the value of the house). Under that scenario, your over all interest payment is very reasonable, and you wouldn't have to put any money down. Now for your other questions: If we rent to own are we building equity? Not usually. Like the other posters said, rent-to-own is whatever both parties agree on. But objectively, most rent-to-own agreements, whether for a TV or a house, are set up to screw the buyer. Sorry to be blunt, and I'm not saying your landlord would do that, this is just generally how it is with rent to own. You don't own it till you make the last payment, and if you miss a payment they repo the property. There is no recourse because, hey, it was a rental agreement! Of course the agreements vary, and people who offer rent to own aren't necessarily bad people, but it's like one of those payday loan places: They provide a valid service but no one with other options uses them. If we rent to own, can we escape if we have to (read: can't pay anymore). Usually, sure! Think about what you're saying: \"\"Here's the house back, and all that money I paid you? Keep it!\"\" It's a great deal if you're on the selling side. How does rent to own affect (or not) our credit? It all depends on how it's structured. But really, it comes down to are they going to do reporting to the credit bureaus? In a rent-to-own agreement between individuals, the answer is no. (individuals can't report to a credit bureau. it's kind of a big deal to be set up to be able to do that)\"" }, { "docid": "383238", "title": "", "text": "What are the consequences if I ignore the emails? If you ignore the emails they will try harder to collect the money from you until they give up. Unlike what some other people here say, defaulting on a loan is NOT a crime and is NOT the same as stealing. There is a large number of reasons that can make someone unable to pay off a loan. Lenders are aware of the risk associated with default; they will try to collect the debt but at the end of the day if you don't have money/assets there is not much they can do. As far as immigration goes, there is nothing on a DS-160 form that asks you about bankruptcies or unpaid obligations. I doubt the consular officer will know of this situation, but it is possible. It is not grounds for visa ineligibility however, so you will be fine if everything else is fine. The only scenario in which unpaid student loans can come up relevant in immigration to the US is if and when you apply for US Citizenship. One of the requirements for Citizenship is having good moral character. Having a large amount of unpaid debt constitutes evidence of a poor moral character. But it is very unlikely you'd be denied Citizenship on grounds of that alone. I got a social security number when I took up on campus jobs at the school and I do have a credit score. Can they get a hold of this and report to the credit bureaus even though I don't live in America? Yes, they probably already have. How would this affect me if I visit America often? Does this mean I would not ever be able to live in America? No. See above. You will have a hard time borrowing again. Will they know when I come to America and arrest me at the border or can they take away my passport? No. Unpaid debt is no grounds for inadmissibility, so even if the CBP agent knows of it he will not do anything. And again, unpaid debt is not a crime so you will not be arrested." }, { "docid": "136315", "title": "", "text": "\"Also within Germany the tax offices usually determine which tax office is responsible for you by asking where you were more than 180 days of the year (if e.g. you have a second flat where you work). That's a default value, though: in my experience you can ask to be handled by another tax office. E.g. I hand my tax declaration to my \"\"home\"\" tax office (where also my freelancing adress is), even though my day-job is 300 km away. So if you work mostly from Poland and just visit the German customer a few times, you are fine anyways. Difficulties start if you move to Germany to do the work at your customer's place. I'm going to assume that this is the situation as otherwise I don't think the question would have come up. Close by the link you provided is a kind of FAQ on this EU regulation About the question of permanent vs. temporary they say: The temporary nature of the service is assessed on a case-by-case basis. Here's my German-Italian experience with this. Background: I had a work contract plus contracts for services and I moved for a while to Italy. Taxes and social insurance on the Italian contracts had to be paid to Italy. Including tax on the contract for services. Due to the German-Italian tax treaty, there is no double taxation. Same for Poland: this is part of EU contracts. By the way: The temporary time frame for Italy seemed to be 3 months, then I had to provide an Italian residence etc. and was registered in the Italian health care etc. system. Due to the German-Italian tax treaty, there is no double taxation. Same for Poland: this is part of EU contracts. Besides that, the German tax office nevertheless decided that my \"\"primary center of life\"\" stayed in Germany. So everything but the stuff related to the Italian contracts (which would probably have counted as normal work contracts in Germany, though they is no exact equivalent to those contract types) was handled by the German tax office. I think this is the relevant part for your question (or: argumentation with the German tax office) of temporary vs. permanent residence. Here are some points they asked: There is one point you absolutely need to know about the German social insurance law: Scheinselbständigkeit (pretended self-employment). Scheinselbständigkeit means contracts that claim to be service contracts with a self-employed provider who is doing the work in a way that is typical for employees. This law closes a loophole so employer + employee cannot avoid paying income tax and social insurance fees (pension contributions and unemployment insurance on both sides - health insurance would have to be paid in full by the self-employed instead of partially by the employer. Employer also avoids accident insurance, and several regulations from labour law are avoided as well). Legally, this is a form of black labour which means that the employer commits a criminal offense and is liable basically for all those fees. There is a list of criteria that count towards Scheinselbständigkeit. Particularly relevant for you could be\"" }, { "docid": "559618", "title": "", "text": "\"Somehow I just stumbled onto this thread... &gt; You essentially robbed the person holding the debt (since you promised to pay it off). Depends on leverage, with fractional reserve lending. Banks are permitted to loan out 30x their actual assets, or more. If I have $1 but can loan out $30, and anything more than $1 gets paid back, I haven't lost any money. In addition, I can write off the amount defaulted, *and the government will pay me back* for certain types of loans. With student loans, since they are almost impossible to discharge, gov't will pursue the borrower for years and decades, and ultimately collect more interest. Here is an article on it: http://online.wsj.com/article/SB10001424052748704723104576061953842079760.html &gt; According to Kantrowitz, the government stands to earn $2,010.44 more in interest from a $10,000 loan that defaulted than if it had been paid in full over a 20-year term, and $6,522.00 more than if it had been paid back in 10 years. Alan Collinge, founder of borrowers' rights advocacy Student Loan Justice, said the high recovery rates provide a \"\"perverted incentive\"\" for the government to allow loans to go into default. Kantrowitz estimates the recovery rate would need to fall to below 50% in order for default prevention efforts to become more lucrative than defaults themselves. Not to mention: http://studentloanjustice.org/defaults-making-money.html &gt; So essentially, the Department is given a choice: Either do nothing and get nothing, or outlay cash with the knowledge that this outlay will realize a 22 percent return, ultimately (minus the governments cost of money and collection costs). From this perspective, it is clear that based solely on financial motivations, and without specific detailed knowledge of the loan (i.e. borrower characteristics, etc.), the chooser would clearly favor the default scenario, for not only the return, but perhaps the potential savings in subsidy payment as well, And don't forget the penalties accruing to the person defaulting; they will probably have to move out of the country in order to escape collection. And let's factor in the huge ROI the lender sees by creating an indentured servant class. Plus, the gov't will issue as much currency as it wants, to make *itself* whole. And how much of a loss IS the loss, when the whole of the loan amount went right back into the local economy, paying professors, janitors, landlords, grocery stores, etc.? And don't forget all THOSE taxes (income and sale) that the gov't collects. Government will collect ~30%-50% of the loan immediately as income and sales tax, plus a portion of it every time the money changes hands (I pay income tax, then use some of my after-tax money to pay you for a product or service, and you still have to pay tax on that money, and so on). So it's more complicated than having \"\"robbed the person holding the debt\"\". Banks at 30x leverage don't lose money as long as they get back 1/30th of the total amount lent out, including interest, fees, and penalties, before considering write-offs and government repayment. In fact, the point of over-leverage is so you CAN make loans that have risk attached. If you could only lend what you actually had, you would have to stay away from anything risky because it would be too easy to lose money. Having virtual $ to bet means you can serve market segments that have higher risk. This makes MORE money for the banks, that's why they do it. They are already playing with funny money, so they don't lose any even if you default and move to another country. And the money you \"\"spent\"\" has also made its way back to them in various amounts, such as your professor's mortgage payments, auto loan, etc. Your taking on debt already helped the bank get its OTHER loans repaid. So, roughly speaking, if you took out $90,000 and $3,000 of that made its way back to the bank through various means, they haven't lost any money, because it only cost them $3,000 actual dollars in the first place.\"" }, { "docid": "425559", "title": "", "text": "\"It's a little unusual, but I don't think the financial terms are completely unreasonable on their face. What you describe is similar to an interest-only loan, where you make payments that only cover the interest due each month, and the entire principal is due as a single \"\"balloon payment\"\" on a specified date (in this case, the date on which the condo is sold). Your monthly payment of $500 on a principal of $115K is equivalent to an annual interest rate of 5.22%, which at least is not completely usurious. With a traditional mortgage you might pay a rate as low as 3%, if you had sufficient income and excellent credit - but I don't know, from what you've said, whether that's the case. Did you make the current arrangement because you were unable to get a loan from a bank? The main difference here is that instead of the balloon payment being a fixed $115K, it's \"\"75% of the gross proceeds of the sale\"\". If the condo eventually sells for $155K, that would be $116,250, so that's slightly advantageous to them (assuming that \"\"gross proceeds\"\" means \"\"before deducting commissions for either the buyers' or sellers' realtors or any other costs of the sale\"\"), and thus slightly disadvantageous to you. If the condo appreciates in value, that's more of a win for them and more of a relative loss for you. But it's also possible that the value of the condo goes down, in which case this arrangement is better for you than a fixed balloon payment. So this deal does prevent you from getting a larger share of any gains in the value of the property, but it also helps insulate you from any losses. That's important to keep in mind. There's also the issue of needing their consent to sell. That's potentially problematic - usually in a joint ownership scheme, either owner has the right to demand to be bought out or to force a sale. I guess it depends on whether you think your parents would be likely to consent under reasonable circumstances, or to insist on holding the property against your best interests. It's true that you aren't building equity with this arrangement, and if you thought you were, you are mistaken or misled. But let's compare it with other options. If you would qualify for a traditional 30-year fixed mortgage at 3%, your monthly payment would be slightly lower ($484), and you would be building some equity because your payments would reduce the principal as well as paying the interest. But a 30-year loan builds equity very slowly at first - after 7 years you'd have only about $20,000 in principal paid down. If we assume that 5.2% represents the interest rate you'd otherwise pay based on your creditworthiness, then your monthly payment would be $631. So compared to that, you have an extra $130 per month that you can save or invest in whatever you want - you're not forced to invest it in your house. Note that in either case you'd still be paying the condo fees, property taxes, insurance, and maintenance yourself. So we might as well eliminate those from consideration. It might be a good idea to find out what other options you would have - perhaps try to get an interest rate quote on a traditional mortgage from a bank, based on your income and credit history. Then you can decide what to do, taking into account: your financial situation; how much of a monthly payment could you afford? your relationship with your parents; are they likely to be reasonable about renegotiating? Do they in general tend to respect your wishes? Would it harm your relationship if you tried to get out of the deal, and how important is that to you? To what extent do you actually want to pay for equity in this property? Do you really believe it's a good investment, and have evidence to support that? Your options include: Try to renegotiate the terms of the loan from your parents Try to \"\"refinance\"\" the loan, by getting a loan from a bank and paying off some agreed-upon amount of principal to your parents Try to force the sale of the condo and move to another house, financing it some other way Consult a lawyer as to whether your agreement with your parents is legally enforceable. For instance, do they have a lien on the property?\"" }, { "docid": "501433", "title": "", "text": "I would contact your loan servicing company explain the situation and see if you can renegotiate terms. They may be able to drop the interest rate or lengthen the schedule to reduce the payment amount. I wouldn't default on the loan as that would likely hinder coming to/working in the US in the future. Not knowing your financial situation or country, could you attempt to obtain financing in your own country in order to pay off the US based loan? I would at least attempt to make some sort of payment while you attempt renegotiation, refinancing or pursue a job in the US, even if it technically puts or keeps you in default of the loan. Making any payment at least shows the willingness to pay back the loan, and you're not intentionally defaulting on your obligation." }, { "docid": "337286", "title": "", "text": "\"We’re buying the home right over $200,000 so that means he will only need to put down (as a ‘gift’) roughly $7000. I'm with the others, don't call this a gift unless it is a gift. I'd have him check with the bank that previously refused him a mortgage if putting both of you on a mortgage would allay their concerns. Your cash flow would be paying the mortgage payment and if you failed to do so, then they could fall back on his. That may make more sense to them, even if they would deny each of you a loan on your own. This works for them because either of you is responsible for the whole loan. It works for him because he was already willing to be responsible for the whole loan. And your alternative plan makes you responsible for the whole loan, so this is just as good for you. At what percentage would you suggest splitting ownership and future expenses? Typically a cash/financing partnership would be 50/50, but since it’s only a 3.5% down-payment instead of 20% is that still fair? Surprisingly enough, a 3.5% down-payment that accumulates is about half the equity of a 20% down-payment. So your suggestion of a 25%-75% split makes sense if 20% would give a 50%-50% split. I expected it to be considerably lower. The way that I calculated it was to have his share increase by his equity share of the \"\"rent\"\" which I set to the principal plus interest payment for a thirty year loan. With a 20% down-payment, this would give him 84% equity. With 3.5%, about 40% equity. I'm not sure why 84% equity should be the equivalent of a 50% share, but it may be a side effect of other expenses. Perhaps taking property taxes out would reduce the equity share. Note that if you increase the down-payment to 20%, your mortgage payment will drop substantially. The difference in interest between 3.5% and 20% equity is a couple hundred dollars. Also, you'll be able to eliminate any PMI payment at 20%. It could be argued that if he pays a third of the monthly mortgage payment, that that would give him the same 50% equity stake on a 3.5% down-payment as he would get with a 20% down-payment. The problem there is that then he is effectively subsidizing your monthly payment. If he were to stop doing that for some reason, you'd have what is effectively a 50% increase in your rent. It would be safer for you to handle the monthly payment while he handles the down-payment. If you couldn't pay the mortgage, it sounds like he is in a position to buy out your equity, rent the property, and take over the mortgage payment. If he stopped being able to pay his third of the mortgage, it's not evident that you'd be able to pick up the slack from him much less buy him out. And it's unlikely that you'd find someone else willing to replace him under those terms. But your brother could construct things such that in the face of tragedy, you'd inherit his equity in the house. If you're making the entire mortgage payment, that's a stable situation. He's not at risk because he could take over the mortgage if necessary. You're not at risk because you inherit his equity share and can afford the monthly payment. So even in the face of tragedy, things can go on. And that's important, as otherwise you could lose your equity in the house.\"" } ]

[ { "docid": "490294", "title": "", "text": "Some lenders will work with you if you contact them early and openly discuss your situation. They are not required to do so. The larger and more corporate the lender, the less likely you'll find one that will work with you. My experience is that your success in working out repayment plan for missed payments depends on the duration of your reduced income. If this is a period of unemployment and you will be able to pay again in a number of months, you may be able to work out a plan on some debts. If you're permanently unable to pay in full, or the duration is too long, you may have to file bankruptcy to save your domicile and transportation. The ethics of this go beyond this forum, as do the specifics of when it is advisable to file bankruptcy. Research your area, find debt counselling. They can really help with specifics. Speak with your lenders, they may be able to refer you to local non-profit services. Be sure that you find one of those, not one of the predatory lenders posing as credit counselling services. There's even some that take the money you can afford to pay, divide it up over your creditors, allowing you to keep accruing late/partial payment fees, and charge you a fee on top of it. To me this is fraudulent and should be cause for criminal charges. The key is open communication with your lenders with disclosure to the level that they need to know. If you're disabled, long term, they need to know that. They do not need to know the specific symptoms or causes or discomforts. They need to know whether the Social Security Administration has declared you disabled and are paying you a disability check. (If this is the case, you probably have a case worker who can find you resources to help negotiate with your creditors)." } ]

[ { "docid": "170511", "title": "", "text": "FHA insured loans must 'go hand in hand' with PMI, because the FHA element is the insurance itself. The FHA isn't actually giving you a loan, that's coming from a lender; instead, the FHA is insuring the loan, at some cost to you - but allowing a loan to folks who may not be able to afford it normally (lower down payment requirements and a somewhat cheaper PMI). FHA-insured loans may be lower rates in some cases than non-FHA insured loans because of this backing; that's because they make it easier for people of poorer credit histories with smaller down payments to get a house in the first place. Those people would tend to have a harder time getting a loan, and be charged sometimes usurious rates to get it. Low down payment and mediocre credit history (think 580-620) mean higher risk, even beyond the risk directly coming from the poor loan to value ratio. Comparing this table of Freddie Mac rates to this table of FHA-backed loan rates, the loan rates seem comparable (though somewhat lagging in changes in some cases). FHA loans are not nearly the size or complexity of loan population as Freddie Mac, so be wary of making direct comparisons. Looking into this in more detail, pre-collapse (before 12/07), FHA rates were a bit lower - average rate was about .5 points lower - but starting with 12/07, FHA average rates were usually higher than Freddie Mac rates for 30 year fixed loans: in 1/2009 for example they were almost a point higher. As of the last data I see (5/13) the rates were within 0.1 points most months. This may be in part because Freddie Mac had looser requirements to get a loan pre-collapse, then tightened significantly, then started to loosen some (also around June 2013, rates climbed significantly due to some signals from the Fed, although they're almost back to their lows thanks to the Fed again). These are averages across all loans, so you get some noise as a result. Loan interest rates are very personal, in general: they depend on your credit, your house and down payment, and your bank (which varies by your location). The best thing to do is to shop around yourself and just see what you get, and ask your lender any questions you have: if you pick a local lender with a good service history and who is willing to talk to you in person (ie, has a direct phone number), you'll have no trouble getting answers." }, { "docid": "406340", "title": "", "text": "\"Tough spot. I'm guessing the credit cards are a personal line of credit in their name and not the company's (the fact that the business can be liquidated separately from your parents means they did at least set up an LLC or similar business entity). Using personal debt to save a company that could have just been dissolved at little cost to their personal credit and finances was, indeed, a very bad move. The best possible end to this scenario for you and your parents would be if your parents could get the debt transferred to the LLC before dissolving it. At this point, with the company in such a long-standing negative situation, I would doubt that any creditor would give the business a loan (which was probably why your parents threw their own good money after bad with personal CCs). They might, in the right circumstances, be able to convince a judge to effectively transfer the debt to the corporate entity before liquidating it. That puts the debt where it should have been in the first place, and the CC companies will have to get in line. That means, in turn, that the card issuers will fight any such motion or decision tooth and nail, as long as there's any other option that gives them more hope of recovering their money. Your parents' only prayer for this to happen is if the CCs were used for the sole purpose of business expenses. If they were living off the CCs as well as using them to pay business debts, a judge, best-case, would only relieve the debts directly related to keeping the business afloat, and they'd be on the hook for what they had been living on. Bankruptcy is definitely an option. They will \"\"re-affirm\"\" their commitment to paying the mortgage and any other debts they can, and under a Chapter 13 the judge will then remand negotiations over what total portion of each card's balance is paid, over what time, and at what rate, to a mediator. Chapter 13 bankruptcy is the less damaging form to your parent's credit; they are at least attempting to make good on the debt. A Chapter 7 would wipe it away completely, but your parents would have to prove that they cannot pay the debt, by any means, and have no hope of ever paying the debt by any means. If they have any retirement savings, anything in their name for grandchildren's college funds, etc, the judge and CC issuers will point to it like a bird dog. Apart from that, their house is safe due to Florida's \"\"homestead\"\" laws, but furniture, appliances, clothing, jewelry, cars and other vehicles, pretty much anything of value that your parents cannot defend as being necessary for life, health, or the performance of whatever jobs they end up taking to dig themselves out of this, are all subject to seizure and auction. They may end up just selling the house anyway because it's too big for what they have left (or will ever have again). I do not, under any circumstance, recommend you putting your own finances at risk in this. You may gift money to help, or provide them a place to live while they get back on their feet, but do not \"\"give till it hurts\"\" for this. It sounds heartless, but if you remove your safety net to save your parents, then what happens if you need it? Your parents aren't going to be able to bail you out, and as a contractor, if you're effectively \"\"doing business as\"\" Reverend Gonzo Contracting, you don't have the debt shield your parents had. It looks like housing's faltering again due to the news that the Fed's going to start backing off; you could need that money to weather a \"\"double-dip\"\" in the housing sector over the next few months, and you may need it soon.\"" }, { "docid": "14035", "title": "", "text": "\"For political reasons, almost all governments (including the US) spend more money than they get from taxes etc. There are a number of things a government can do to cover the difference: Most governments opt for selling bonds. The \"\"National Debt\"\" of a country can be thought of as being the sum of all the \"\"Bonds\"\" that are still paying interest, and that the Government hasn't Redeemed. It can all go horribly wrong. If the Government gets into a situation where it cannot pay the interest, or it cannot Redeem the Bonds it has promised to, then it may have to break its promise (\"\"Default\"\" on its payments). This makes the owners of the Bonds unhappy and means potential buyers of future Bond sales are less likely to want to buy the Governments new Bonds - effectively meaning the Government has to promise to pay more interest in the future. Recent examples of this include Argentina; and may include Greece soon. The US is in the fortunate position that not many people believe it will Default. Therefore the new Bonds it sells (which it does on a regular basis) are still in demand, even though its interest payments, and promises to Redeem Bonds are huge.\"" }, { "docid": "482183", "title": "", "text": "It looks like the rate on that first loan is 6-2/3%? When I look at $72000 principal and a $500 payment, I'm seeing a long term, 24 years. Not 60, but not good either. Yes, as you pay a bit of principal, the next payment has less interest and even more principal. I hope your degree is in a field that's lucrative. Or that you're able to get a job that qualifies you for loan forgiveness over time. I'm sorry that advice might seem weak, but aside from that, the best I can offer is to live well beneath your means, i.e. continue to live like a student, and make additional payments. As far as bi-weekly goes, the lender may not accept partial payments. Set aside the money every two weeks and when you have extra money just make an extra payment amount toward principal. To pay this off as fast as possible, I'd make as high an extra payment as I could each month to the loan with the higher rate. If the rates are the same, pay it off to the one with the lower balance. With respect to the debt snowballers, followers of The David, say the rates are simply close, say .25% apart, with the lower balance having the lower rate. If you were to pay this one first, it would occur sooner, of course, and free up that monthly payment, helping your cash flow. But, it comes at a cost. Note - if, as Noah suggests, the rates are the same, I'd advise to make all extra payments toward the lower balance. That will get you to the point where you've freed up that cash flow for other purposes, whether it's to focus on the higher loan, or anything else you need this for." }, { "docid": "408124", "title": "", "text": "When you start at a new job here in the U.S., the default means of payment is usually a paper check. Most folks will quickly set up direct deposit so that their employer deposits their paycheck directly into their personal bank account - the incentive to do so is that you receive your funds faster than if you deposit a paper check. Even if you set up direct deposit on your first day on the job, you may still receive your first paycheck as a paper check simply because the wheels of payroll processing turn slowly at some (large) companies. A counter example is a self-employed contractor - perhaps a carpenter or house painter. These folks are paid by their customers, homeowners and such. Many larger, well established contracters now accept credit card payments from customers, but smaller independents may be reluctant to set up a credit card merchant account to accept payment by card because of all the fees that are associated with accepting credit card payments. 3% transaction fees and monthly service fees can be scary to any businessman who already has very thin profit margins. In such cases, these contractors prefer to be paid by check or in cash for the simple reason that there are no fees deducted from cash payments. There are a few folks here who don't trust direct deposit, or more specifically, don't trust their employer to perform the deposit correctly and on time. Some feel uncomfortable giving their bank info to their employer, fearing someone at the company could steal money from their account. In my experience, the folks who prefer a paper paycheck are often the same folks who rush to the bank on payday to redeem their paychecks for cash. They may have a bank account (helps with check cashing) but they prefer to carry cash. I operate in a manner similar to you - I use a debit card or credit card (I only have one of each) for nearly all transactions in daily life, I use electronic payments through my bank to pay my regular bills and mortgage, and I receive my paycheck by direct deposit. There have been periods where I haven't written or received paper checks for so long that I have to hunt for where I put my checkbook! Even though I use a debit card for most store purchases, the bank account behind that debit card is actually a checking account according to the bank. Again, the system defaults to paper checks and you have the option of going electronic as well. Before we judge anyone who doesn't use direct deposit or who prefers to be paid in cold hard cash, consider that direct deposit is a luxury of stability. Steady job, home, etc. Direct deposit doesn't make sense for a contractor or day laborer who expect to work for a different person each day or week. I don't think this is all that unique to the US. There are people in every city and country who don't have long-term employment with a single employer and therefore prefer cash or paper check over electronic payments. I'd be willing to bet that this applies to the majority of people on the planet, actually." }, { "docid": "598030", "title": "", "text": "In theory, anything can happen, and the world could end tomorrow. However, with a reasonably sane financial plan you should be able to ride this out. If the government cannot or won't immediately pay its debt in full, the most immediate consequence is that people are going to be unwilling to lend any more money in future, except at very high rates to reflect the high risk of future default. Presumably the government has got into this state by running a deficit (spending more than they collect in tax) and that is going to have to come to an abrupt end. That means: higher taxes, public service retrenchments and restrictions of service, perhaps cuts to social benefits, etc. Countries that get into this state typically also have banks that have lent too much money to risky customers. So you should also expect to see some banks get into trouble, which may mean customers who have money on deposit will have trouble getting it back. In many cases governments will guarantee deposits, but perhaps only up to a particular ceiling like $100k. It would be very possible to lose everything if you have speculative investments geared by substantial loans. If you have zero or moderate debt, your net wealth may decrease substantially (50%?) but there should be little prospect of it going to zero. It is possible governments will simply confiscate your property, but I think in a first-world EU country this is fairly unlikely to happen to bank accounts, houses, shares, etc. Typically, a default has led to a fall in the value of the country's currency. In the eurozone that is more complex because the same currency is used by countries that are doing fairly well, and because there is also turbulence in other major currency regions (JPY, USD and GBP). In some ways this makes the adjustment harder, because debts can't be inflated down. All of this obviously causes a lot of economic turbulence so you can expect house prices to fall, share prices to gyrate, unemployment to rise. If you can afford it and come stomach the risk, it may turn out to be a good time to buy assets for the long term. If you're reasonably young the largest impact on you won't be losing your current savings, but rather the impact on your future job prospects from this adjustment period. You never know, but I don't think the Weimar Republic wheelbarrows-of-banknotes situation is likely to recur; people are at least a bit smarter now and there is an inflation-targeting independent central bank. I think gold can have some room in a portfolio, but now is not the time to make a sudden drastic move into it. Most middle class people cannot afford to have enough gold to support them for the rest of their life, though they may have enough for a rainy day or to act as a balancing component. So what I would do to cope with this is: be well diversified, be sufficiently conservatively positioned that I would sleep at night, and beyond that just ride it out and try not to worry too much." }, { "docid": "147806", "title": "", "text": "\"This model would work fine under a couple of assumptions: that market interest rates never change, and that the borrower will surely make all the payments as agreed. But neither of those assumptions are realistic. Suppose Alice loans $1,000,000 to Bob at 4% under the terms you describe. Bob chooses to make interest-only payments of $40,000 per year. Some time later, prevailing interest rates go up to 10%. Now Alice would really like Bob to repay the entire principal as quickly as possible, because that money could be earning her $100,000 per year instead of only $40,000, but under the contract she has no way to force Bob to do so. And Bob has no incentive to repay any of the principal, because he can earn more interest on it than he has to pay to Alice. So Alice is not going to be very happy about this. You might say, but at least Alice is only losing \"\"potential\"\" money; she's still turning a profit of $10,000 per year, since her bank only charges her 3% interest. Ah, but you're assuming that Alice can get a bank loan with a rate of 3% fixed forever. The bank doesn't want to make such a loan either, for exactly the same reasons. So in practice, any loan like this would be expected to have a variable interest rate. There's a flip side, too. Suppose instead that market rates drop to 1%. Now Alice would like Bob to repay the principal as slowly as possible, because she's earning 4% on that money, which is better than any other options available to her. But Bob now has every incentive to repay it as fast as he can - or even to refinance by taking out another loan at, say, 2%, and using the proceeds to repay the entire principal to Alice. (This risk still applies with most traditional loans, since the borrower usually always has the right to pay early, but some loans include a \"\"prepayment penalty\"\" in such cases to help compensate the lender.) Thus, when Bob has all the power to decide when to pay, Alice is sure to lose no matter which way interest rates move. A loan with a fixed term helps insulate Alice against this risk. She may be able to make a guess about the likelihood of interest rates going up to 10% in the next 15 or 30 years, and increase Bob's fixed rate to account for this; that's much easier than trying to account for the possibility of interest rates going up to 10% ever. (And if she does have to try to account for this, she's probably going to have to set the interest rate extremely high; so Bob might accept a fixed term of repayment in exchange for a more reasonable rate.) Even if we suppose that Alice has done the best possible credit check and that Bob is a perfectly trustworthy fellow who would never dream of defaulting on his loan, catastrophes do happen. Maybe Bob is robbed of all his money by an evil accountant, or has a mid-life crisis and spends it all on opera tickets. Whatever, Bob is now bankrupt and Alice is never going to get her principal back, nor any further interest payments either. Even if the loan is secured by some collateral, there's still a risk since the collateral might lose value. Alice has some chance of estimating the risk of this happening in the next 15 or 30 years, and can set the interest rate to compensate for it. But it is harder for her to estimate the risk of this happening ever, and if she tries, she'll have to set the rate so high that Bob might prefer a fixed term and a lower rate. (There's a side issue as to what happens if Bob dies with the loan still outstanding. If it's an unsecured loan, typically Alice can try to collect the principal from Bob's estate, but if there isn't enough, too bad for Alice; she can't force Bob's heirs to continue making payments. If it's a secured loan, Alice may be able to have Bob's heirs continue paying or else she seizes the collateral; but she still has the risk of the collateral losing value.)\"" }, { "docid": "63649", "title": "", "text": "You say My work is steady; even if I lost my job it'd be easy to get another. Location has been static for a few years now, but I'm not sure that'll extrapolate to the future; I'm lazy, so I don't want to move, but for a significantly better job opportunity I wouldn't mind. The general rule of thumb is that you'll come out ahead if you buy a house (with a mortgage) and live there for five years. What you lose in interest, you make up in rent. And living there for five years, you make back your closing costs in equity. If you're there less than five years though, you don't make back the closing costs. You'd have been better off renting. Historically (up to about twenty years ago), your mortgage payment and rent payment for the same basic property would be about the same. I.e. if your current landlord sold you what you are renting, your mortgage payment would be roughly the same as your rent. Maybe a little lower or a little higher but about the same. More recently, it hasn't been strange to see a divergence in those. Now it is not uncommon for a mortgage payment to be 50% higher than rent on the same property. This has some consequences. First, your $1000 rent probably won't stretch as far as a $1000 mortgage payment. So you'll be buying something that you'd only pay $650 or $700 rent. Second, if you move and can't sell immediately, you'll get less in rent than you'd pay in mortgage. Rather than contributing to your income, the property will require subsidy just to maintain the mortgage. And in the early years of the mortgage, this means that you're paying all of the principal (equity) and some of the interest. Buying a duplex makes this worse. You have your side and their side. You can substitute your $1000 rent for half of the mortgage payment. Meanwhile, they are paying $700 in rent. You have to subsidize the mortgage by $300. Plus, you are talking about hiring a property management company to do things like lawn maintenance. There goes another $100 a month. So you are subsidizing the mortgage by $400. I don't know real estate prices in Utah, but a quick search finds a median house price over $200,000. So it seems unlikely that you are buying new construction with new appliances. More likely you are buying an existing duplex with existing appliances. What happens when they fail? The renter doesn't pay for that. The property management company doesn't pay for that (although they'll likely arrange for it to happen). You pay for it. Also, it often takes a bit of time to clean up the apartment after one tenant leaves before the new tenant starts paying rent. That's a dead weight loss. If this happens during a local recession, you could be carrying the mortgage on a property with no offsetting rental income for months. There are some countervailing forces. For example, if house prices in your area are increasing, the rent will increase with them (not necessarily at the same pace). But your mortgage payment stays the same. So eventually the rent may catch up with the mortgage payment. If you wait long enough in a strong enough market, the rent on the other half of the duplex may cover the entire mortgage payment. If you currently have an urban apartment within walking distance of work and switch to a suburban apartment with a commute, you have a better chance of finding a duplex where the entire mortgage payment is only the $1000 that you pay in rent. Your half of the duplex won't be as nice as your apartment is, and you'll have a half hour or hour long commute every morning (and the same to get home in the evening). But on strictly fiscal terms you'll be doing about as well. Plus you have the income from the other half. So even if your mortgage payment is more than your rent payment, you can still break even if the rent covers it. Consider a $1400 mortgage and $400 in rent from the other half (after property management fees). So long as nothing goes wrong, you break even. Perhaps the agreement is that your parents take care of things going wrong (broken appliances, troublesome tenants, time between tenants). Or perhaps you drain your emergency fund and adjust your 401(k) payment down to the minimum when that happens. Once your emergency fund is replenished, restore the 401(k). If you're willing to live in what's essentially a $500 apartment, you can do better this way. Of course, you can also do better by living in a $500 apartment and banking the other $500 that you spend on rent. Plus you now have the expenses of a commute and five hours less free time a week. You describe yourself as essentially living paycheck to paycheck. You have adequate savings but no building excess. Whatever you get paid, you immediately turn around and spend. Your parents may view you as profligate. Your apartment is nicer than their early apartments were. You go out more often. You're not putting anything aside for later (except retirement). It didn't use to be at all strange for people to move out of the city because they needed more space. For the same rent they were paying in the city, they could buy a house in the suburbs. Then they'd build up equity. So long as they stayed in roughly the same work location, they didn't need to move until they were ready to upgrade their house. The duplex plan leads to one of two things. Either you sell the duplex and use the equity to buy a nicer regular house, or you move out of the duplex and rent your half. Now you have a rental property providing income. And if you saved enough for a down payment, you can still buy a regular house. From your parents' perspective, encouraging you to buy a duplex may be the equivalent of asking you to cut back on spending. Rather than reducing your 401(k) deposits, they may be envisioning you trading in your car for a cheaper one and trading in your nice but expensive apartment for something more reasonable in a cheaper neighborhood. Rather than working with a property management company, you'll be out doing yardwork rather than cavorting with your friends. And maybe the new place would have more space to share when you meet someone--you aren't going to provide many grandkids alone. If you get a mortgage on a duplex, you are responsible for paying the mortgage. You are responsible even if something happens to the house. For example, if a fire burns it down or a tornado takes it away. Or you just find that the house isn't solid enough to support that party where all of your friends are jumping up and down to the latest pop sensation. So beyond losing whatever you invest in the property, you may also lose what you borrowed. Now consider what happens if you invest the same amount of money in General Motors as in the house. Let's call that $10,000 and give the house a value of $200,000. With General Motors, even if they go bankrupt tomorrow, you're only out $10,000. With the house, you're out $200,000. Admittedly it's much hard to lose the entire $200,000 value of the house. But even if the house loses $80,000 in value, you are still $70,000 in the hole. You don't need a disaster for the house to lose $80,000 in value. That's pretty much what happened in the 2006-2010 period. People were losing all of what they invested in houses plus having to declare bankruptcy to get out of the excess debt. Of course, if they had been able to hold on until 2015 markets mostly recovered. But if you lost your job in 2008, they wouldn't let you not make mortgage payments until you got a new one in 2012. When you declare bankruptcy, you don't just lose the house. You also lose all your emergency savings and may lose some of your belongings. There are some pretty prosaic disasters too. For example, you and your tenant both go away for a weekend. It rains heavily and your roof starts to leak due to weak maintenance (so not covered by insurance). The house floods, destroying all the electronics and damaging various other things. Bad enough if it's just you, but you're also responsible for the tenant's belongings. They sue you for $20,000 and they move out. So no rent and big expenses. To get the house livable again is going to take $160,000. Plus you have a $190,000 mortgage on a property that is only worth about $40,000. That's at the extreme end." }, { "docid": "30623", "title": "", "text": "From my understanding by paying your bills more than 5 days late will not lead you into bankruptcy or stop you from getting a new loan in the future, however it may mean that lenders offer you credit at a higher interest rate. This of course would not help you as you are already struggling with your finances. However, no matter how bad you think things might be for you financially, there are always things you can do to improve your situation. Set a Budget The first thing you must do is to set a budget. List down all sources of income you receive each month, including any allowances. Then list all your sources of expenses and spending. List all your bills such as rent, telephone, electricity, car maintenance, credit card and other loans. Keep a diary for a month for all your discretionary spending - including coffees, lunches, and other odd bits and ends. You can also talk with your existing lenders and come to some agreement on reducing you interest rates on your debts and the repayments. But remember any reduction in repayments may increase your repayment period and the total interest you have to pay in the long term. If you need help setting up your budget here are some links to resources you can download to help you get started: Once you set up your budget you want your total income to be more than your total expenses. If it isn't you will be getting further and further behind each month. Some things you can do are to increase your income - get a job/second job, sell some unwanted items, or start a small home business. Some things you can do to reduce your expenses - make coffees and lunches at home before going out and buying these, pay off higher interest debts first, consolidate all your debts into a lower interest rate loan, reduce discretionary spending to an absolute minimum, cancel all unnecessary services, etc. Debt Consolidation In regards to a Debt Consolidation for your existing personal loans and credit cards into a single lower interest rate loan can be a good idea, but there are some pitfalls you should consider. Manly, if you are taking out a loan with a lower interest rate but a longer term to pay it off, you may end up paying less in monthly repayments but will end up paying more interest in the long run. If you do take this course of action try to keep your term to no longer than your current debt's terms, and try to keep your repayments as high as possible to pay the debt off as soon as possible and reduce any interest you have to pay. Again be wary of the fine print and read the PDS of any products you are thinking of getting. Refer to ASIC - Money Smart website for more valuable information you should consider before taking out any debt consolidation. Assistance improving your skills and getting a higher paid job If you are finding it hard to get a job, especially one that pays a bit more, look into your options of doing a course and improving your skills. There is plenty of assistance available for those wanting to improve their skills in order to improve their chances of getting a better job. Check out Centrelink's website for more information on Payments for students and trainees. Other Action You Can Take If you are finding that the repayments are really getting out of hand and no one will help you with any debt consolidation or reducing your interest rates on your debts, as a last resort you can apply for a Part 9 debt agreement. But be very careful as this is an alternative to bankruptcy, and like bankruptcy a debt agreement will appear on your credit file for seven years and your name will be listed on the National Personal Insolvency Index forever. Further Assistance and Help If you have trouble reading any PDS, or want further information or help regarding any issues I have raised or any other part of your financial situation you can contact Centrelink's Financial Information Service. They provide a free and confidential service that provides education and information on financial and lifestyle issues to all Australians. Learn how to manage your money so you can get out of your debt and can lead a much more comfortable and less stressful life into the future." }, { "docid": "488127", "title": "", "text": "I would like to offer a different perspective here. The standard fee for a credit card transaction is typically on the order of 30 cents + 2.5% of the amount (the actual numbers vary, but this is the ballpark). This makes small charges frequently unprofitable for small merchants. Because of this they will often have minimum purchase requirements for credit/debit card payments. The situation changes for large retailers (think Wal-mart, Target, Safeway, Home Depot). I cannot find a citation for this right now, but large retailers are able to negotiate volume discounts from credit card companies (a guy who used to work in finance at Home Depot told me this once). Their transaction fees are MUCH lower than 30 cents + 2.5%. But you get the same reward points on your credit card/debit card regardless of where you swipe it. So my personal philosophy is: large chain - swipe away without guilt for any amount. Small merchant - use cash unless it's hundreds of dollars (and then they may give you a cash discount in that case). And make sure to carry enough cash for such situations. When I was a student, that was about $20 (enough for coffee or lunch at a small place)." }, { "docid": "234286", "title": "", "text": "\"If you are investing in a mortgage strictly to avoid taxes, the answer is \"\"pay cash now.\"\" A mortgage buys you flexibility, but at the cost of long term security, and in most cases, an overall decrease in wealth too. At a very basic level, I have to ask anyone why they would pay a bank a dollar in order to avoid paying the government 28 - 36 cents depending on your tax rate. After all, one can only deduct interest- not principal. Interest is like rent, it accrues strictly to the lender, not equity. In theory the recipient should be irrelevant. If you have a need to stiff the government, go ahead. Just realize you making a banker three times as happy. Additionally the peace of mind that comes from having a house that no banker can take away from you is, at least for me, compelling. If I have a $300,000 house with no mortgage, no payments, etc. I feel quite safe. Even if my money is tied up in equity, if a serious situation came along (say a huge doctors bill) I always have the option of a reverse mortgage later on. So, to directly counter other claims, yes, I'd rather have $300k in equity then $50k in equity and $225k in liquid assets. (Did you notice that the total net worth is $25k less? And that's even before one considers the cash flow implication of a continuing mortgage. I have no mortgage, and I'm 41. I have a lot of net worth, but the thing that I really like is that I have a roof over my head that no on e can take away from me, and sufficient savings to weather most crises). That said, a mortgage is not about total cost. It is about cash flow. To the extent that a mortgage makes your cash flow situation better, it provides a benefit- just not one that is quantifiable in dollars and cents. Rather, it is a risk/reward situation. By taking a mortgage even when you have the cash, you pay a premium (the interest rate) in order to have your funds available when you need it. A very simple strategy to calculate and/or minimize this risk would be to invest the funds in another investment. If your rate of return exceeds the interest rate minus any tax preference (e.g. 4% minus say a 25% deduction = 3%), your money is better off there, obviously. And, indeed, when interest rates are only 4%, it may may be possible to find that. That said, in most instances, a CD or an inflation protected bond or so won't give you that rate of return. There, you'd need to look at stocks- slightly more risky. When interest rates are back to normal- say 5 or 6%, it gets even harder. If you could, however, find a better return than the effective interest rate, it makes the most sense to do that investment, hold it as a hedge to pay off the mortgage (see, you get your security back if you decide not to work!), and pocket the difference. If you can't do that, your only real reason to hold the cash should be the cash flow situation.\"" }, { "docid": "375537", "title": "", "text": "\"Your post has some assumptions that are not, or may not be true. For one the assumption is that you have to wait 7 years after you settle your debts to buy a home. That is not the case. For some people (me included) settling an charged off debt was part of my mortgage application process. It was a small debt that a doctor's office claimed I owed, but I didn't. The mortgage company told me, settling the debt was \"\"the cost of doing business\"\". Settling your debts can be looked as favorable. Option 1, in my opinion is akin to stealing. You borrowed the money and you are seeking to game the system by not paying your debts. Would you want someone to do that to you? IIRC the debt can be sold to another company, and the time period is refreshed and can stay on your credit report for beyond the 7 years. I could be wrong, but I feel like there is a way for potential lenders to see unresolved accounts well beyond specified time periods. After all, the lenders are the credit reporting agencies customers and they seek to provide the most accurate view of a potential lender. With 20K of unresolved CC debt they should point that out to their customers. Option 2: Do you have 20K? I'd still seek to settle, you do not have to wait 7 years. Your home may not appreciate in 2 years. In my own case my home has appricated very little in the 11 years that I have owned it. Many people have learned the hard way that homes do not necessarily increase in value. It is very possible that you may have a net loss in equity in two years. Repairs or improvements can evaporate the small amount of equity that is achieved over two years with a 30 year mortgage. I would hope that you pause a bit at the fact that you defaulted on 20K in debt. That is a lot of money. Although it is a lot, it is a small amount in comparison to the cost and maintenance of a home. Are you prepared to handle such a responsibility? What has changed in your personality since the 20K default? The tone of your posts suggests you are headed for the same sort of calamity. This is far more than a numbers game it is behavioral.\"" }, { "docid": "526106", "title": "", "text": "\"It is called \"\"Credit card installments\"\" or \"\"Equal pay installments\"\", and I am not aware of them being widely used in the USA. While in other countries they are supported by banks directly (right?), in US you may find this option only in some big stores like home improvement stores, car dealerships, cell phone operators (so that you can buy a new phone) etc. Some stores allow 0% financing for, say, 12 months which is not exactly the same as installments but close, if you have discipline to pay $250 each month and not wait for 12 months to end. Splitting the big payment in parts means that the seller gets money in parts as well, and it adds risks of customer default, introduces debt collection possibility etc. That's why it's usually up to the merchants to support it - bank does not care in this case, from the bank point of view the store just charges the same card another $250 every month. In other countries banks support this option directly, I think, taking over or dividing the risk with the merchants. This has not happened in US. There is a company SplitIt which automates installments if stores want to support it but again, it means stores need to agree to it. Here is a simple article describing how credit cards work: https://www.usbank.com/credit-cards/how-credit-cards-work.html In general, if you move to US, you are unlikely to be able to get a regular credit card because you will not have any \"\"credit history\"\" which is a system designed to track each customer ability to get & pay off debt. The easiest way to build the history - request \"\"secured credit card\"\", which means you have to give the bank money up front and then they will give you a credit card with a credit limit equal to that amount. It's like a \"\"practice credit card\"\". You use it for 6-12 months and the bank will report your usage to credit bureaus, establishing your \"\"credit score\"\". After that you should be able to get your money back and convert your secured card into a regular credit card. Credit history can be also built by paying rent and utilities but that requires companies who collect money to report the payments to credit bureaus and very few do that. As anything else in US, there are some businesses which help to solve this problem for extra money.\"" }, { "docid": "60981", "title": "", "text": "So if I understand your plan right, this will be your situation after the house is bought: Total Debt: 645,000 Here's what I would do: Wait until your house sells before buying a new one. That way you can take the equity from that sale and apply it towards the down payment rather than taking a loan on your retirement account. If something happens and your house doesn't sell for as mush as you think it will, you'll lose out on the gains from the amount you borrow, which will more than offset the interest you are paying yourself. AT WORST, pay off the 401(k) loan the instant your sale closes. Take as much of the remaining equity as you can and start paying down student loans. There are several reasons why they are a higher priority than a mortgage - some are mathematical, some are not. Should I look to pay off student loans sooner (even if I refi at a lower rate of 3.5% or so), or the mortgage earlier ... My thoughts are that the student loans follow me for life, but I can always sell and buy another home So you want this baggage for the rest of your life? How liberating will it be when you get that off your back? How much investing are you missing out on because of student loan payments? What happens if you get lose your license? What if you become disabled? Student loans are not bankruptable, but you can always sell the asset behind a mortgage or car loan. They are worse than credit card debt in that sense. You have no tangible asset behind it and no option for forgiveness (unless you decide to practice in a high-need area, but I don't get the sense that that's your path). The difference in interest is generally only a few payment' worth over 15 years. Is the interest amortized the same as a 15 year if I pay a 30 year mortgage in 15 years? Yes, however the temptation to just pay it off over 30 years is still there. How often will you decide that a bigger car payment, or a vacation, or something else is more important? With a 15-year note you lock in a plan and stick to it. Some other options:" }, { "docid": "275852", "title": "", "text": "A Home Equity Line Of Credit (HELOC) is simply a special type of secured credit. Secured credit is credit provided to you, where the lender has some rights to an associated asset in the event that you default. In the case of a HELOC, much like a mortgage, if you default on the payment terms, the bank may be legally able to foreclose on your house, sell the foreclosed property, and take the money owed to it from the proceeds, leaving you with any net remainder. Whether your friend will be able to have a bank offer her credit secured against her business assets would depend on a variety of factors. She should talk to her bank to see whether it would be possible in her case." }, { "docid": "573754", "title": "", "text": "\"As a former consumer credit counselor, who worked with struggling homeowners and first time homebuyers I would argue that it is a mistake for lenders to rely on gross income and assumptions on what an applicant spends their income on. I think lenders do this because they believe it is efficient and may not understand the long term ramifications for the stakeholders, e.g. the borrower, the lender, the servicer, the investor, the broker, the taxpayer, the marshall, the foreclosure lawyers etc. Or lenders do know the impact of a superficial mortgage screening, and intentionally want to enrich themselves in the short term while harming other stakeholders in the long term. Developing a budget that reflects what a person can realistically spend on their mortgage takes much longer than signing up for a Rocket mortgage. I would say an hour minimum for the first appointment to get a baseline, and at least two follow up appointments to make adustments soon after or whenever a borrower's financial situation changes dramatically. Credit counselors factor in all of the factors mentioned above, i.e. take home pay, future pay vs current pay, the ability to adjust deductions, seasonal expenses, multiple sources of income and their frequency, debt load etc. Budgets are always fluctuating, but when it is done right by a qualified professional the result is a much more accurate financial picture. The consequences for not doing this type of old-school due diligence, or for willfully choosing to skip it, are varied. First off, mortgages will be given to homeowners who should never have qualified in the first place, and likewise denied to homeowners who should qualify. This will result in market distortion and this distortion was a primary contributor to the 2008 subprime mortgage crisis and the wave of foreclosures that came with it. Another consequence is the stripping of wealth from minority communities since they are often targeted by the most unscrupulous of lenders. Additionally, the securitization of mortgages based on poor diligence at the loan officer level means loan portfolio ratings are questionable, investors will lose money, and small banks who are heavily invested will fail as they did in the past. Depending on the federal enforcement of Dodd Frank Act, the taxpayers may or may not have to pick up the bill from a bailout of a big mortgage bank that was \"\"too big to fail,\"\" via higher taxes, lost jobs, lost homes, and other negative externalities that were not accounted for by the loan officer, or willfully ignored. Lastly, borrowers also have a responsibility to provide accurate financial information, which they don't always do. Unfortunately, in a capitalistic society where property is commoditized instead of communal, there is always mistrust, competition, the fear that you will be left behind, or the desire to get ahead. This could incentivize cheating by either the, borrower, the broker/lender, or both in this example e.g. no-doc negative amatorizing loans. This is just one of many other negative externalities. So the only true fix would be a switch to communal land ownership. In the interim, I would push for universal borrower access to low cost consumer credit counselors and a change in loan officer training and incentive structure.\"" }, { "docid": "65313", "title": "", "text": "\"Let's face it: most people pay more in insurance premiums than they \"\"get back\"\" in claims. I put \"\"get back\"\" in quotes because, with very few exceptions, the money paid out in claims does not go to the insured, but to others, such as doctors and hospitals. But even if you ignore the question who does the money actually go to, it's a losing proposition for most people. The exceptions are those who have a major loss, greater than what they put in over the years. But never forget: these are exceptions. The return on your money, on the average, is only a little better than playing the lottery. The usual counter-argument to the above is, but what if you are one of the exceptions? I for one refuse to let my life be dictated by worries of unlikely events that might happen. If you're the sort who obsesses on what could (but probably won't) happen, then maybe you should have insurance. Just don't tell me I need to do the same. When I lived in California, they had a program where you could deposit $25,000 with the State, and then you could drive, legally, without insurance. I did this for a while, didn't have any accidents, and exited the system (when I moved out of state) a few years later with more money (interest) than I put in. You don't accomplish that with insurance. But let's get back to rich people. Unless you get into an accident with you at fault and the other guy needing a head transplant as a result (joke), you could probably absorb the cost of an accident without blinking an eye. Those in the upper-middle-class might do well with high-deductible insurance that only pays out if there's an extreme accident. Then again if you have to borrow to buy something expensive (making monthly payments), they will usually demand you buy insurance with it. This is a way for the lender to protect himself at your expense, and if you refuse, good luck getting a loan somewhere else. I hate the idea of insurance so much I would make an act of insurance punishable by law.\"" }, { "docid": "233394", "title": "", "text": "\"Paying someone to look after your money always costs something - it doesn't matter whether you're inside a pension or not. Fees are highest for \"\"actively managed\"\" funds and lowest for passively managed funds or things where you choose the investments directly - but in the latter case you might pay out a lot in dealing fees. Typically pensions will have some small additional costs on top of that, but those are hugely outweighed by the tax advantages - payments into a pension are made from gross salary (subject to an annual limit), and growth inside the pension is tax free. You do pay income tax when you take the money out though - but by then your marginal tax rate may well have dropped. If you want to control your own investments within a pension you can do this, subject to choosing the right provider - you don't have to be invested in the stockmarket at all (my own pension isn't at the moment). I wrote an answer to another question a while ago which briefly summarises the options As far as an annuity goes, it's not as simple as the company taking the money you saved when you die. The point of an annuity is that you can't predict when you'll die. Simplifying massively, suppose the average life expectancy when you retire is 20 years and you have 100K saved, and ignore inflation and interest for now. Then on average you should have 5K/year available - but since you don't know when you'll die if you just spend your money at that rate you might run out after 20 years but still be alive needing money. Annuities provide a way of pooling that risk - in exchange for losing what's left if you die \"\"early\"\", you keep getting paid beyond what you put in if you die \"\"late\"\". Your suggestion of taking the dividends from an index tracker fund - or indeed the income from any other investment - is fine, but the income will be substantially less than an annuity bought with the same money because you won't be using up any capital, whereas an annuity implicitly does that. Depending on the type of investment, it might also be substantially more risky. Overall, you only need to secure the income you actually need/want to live on. Beyond that level, keeping your money outside the pension system makes some sense, though this might change with the new rules referred to in other answers that mean you don't have to buy an annuity if you have enough guaranteed income anyway. In any case, I strongly suggest you focus first on ensuring you have enough to live on in retirement before you worry about leaving an inheritance. As far as setting up a trust goes, you might be able to do that, but it would be quite expensive and the government tends to view trusts as tax avoidance schemes so you may well fall foul of future changes in the rules.\"" }, { "docid": "322825", "title": "", "text": "\"Here in the UK, the rule of thumb is to keep a lot of equity in your home if you can. I assume here that you have a lot of savings you're considering using. If you only have say 10% of the house price you wouldn't actually have a lot of choice in the matter, the mortgage lender will penalise you heavily for low deposits. The practical minimum is 5%, but for most people a 95% mortgage is just silly (albeit not as silly as the 100% or greater mortgages you could get pre-2008), and you should take serious individual advice before considering it. According to Which, the average in the UK for first-time buyers is 20% (not the best source for that data I confess, but a convenient one). Above 20% is not at all unusual. You'll do an affordability calculation to figure out how much you can borrow, which isn't at all the same as how much you should borrow, but does get you started. Basically you, decide how much a month you can spend on mortgage payments. The calculation will let you put every penny into this if you choose to, but in practice you'll want some discretionary income so don't do that. decide the term of the mortgage. For a young first-time buyer in the UK I think you'd typically take a 25-year term and consider early repayment options rather than committing to a shorter term, but you don't have to. Mortgage lenders will offer shorter terms as long as you can afford the payments. decide how much you're putting into a deposit make subtractions for cost of moving (stamp duty if applicable, fees, removals aka \"\"people to lug your stuff\"\"). receive back a number which is the house price you can pay under these constraints (and of course a breakdown of what the mortgage principle would be, and the interest rate you'll pay). This step requires access to lender information, since their rates depend on personal details, deposit percentage, phase of the moon, etc. Our mortgage advisor did multiple runs of the calculation for us for different scenarios, since we hadn't made up our minds entirely. Since you have not yet decided how much deposit to make, you can use multiple calculations to see the effect of different deposits you might make, up to a limit of your total savings. Putting up more deposit both increases the amount you can borrow for a given monthly payment (since mortgage rates are lower when the loan is a lower proportion of house value), and of course increases the house price you can afford. So unless you're getting a very high return on your savings, £1 of deposit gets you somewhat more than £1 of house, and the calculation will tell you how much more. Once you've chosen the house you want, the matter is even simpler: do you prefer to put your savings in the house and borrow less and make lower payments, or prefer to put your savings elsewhere and borrow more and make higher payments but perhaps have some additional income from the savings. Assuming you maintain a contingency fund, a lower mortgage is generally considered a good investment in the UK, but you need to check what's right for you and compare it to other investments you could make. The issue is complicated by the fact that residential property prices are rising quite quickly in most areas of the UK, and have been for a long time, meaning that highly-leveraged property investment appears to be a really good idea. This leads to the imprudent, but tempting, conclusion that you should buy the biggest house you can possibly afford and watch its value rises. I do not endorse this advice personally, but it's certainly true that in a sharply rising house market it's easier to get away with buying a bigger house than you need, than it is to get away with it in a flat or falling market. As Stephen says, an offset mortgage is a no-brainer good idea if the rate is the same. Unfortunately in the UK, the rate isn't the same (or anyway, it wasn't a couple of years ago). Offset mortgages are especially good for those who make a lot of savings from income and for any reason don't want to commit all of those savings to a traditional mortgage payment. Good reasons for not wanting to do that include uncertainty about your future income and a desire to have the flexibility to actually spend some of it if you fancy :-)\"" } ]

[ { "docid": "402726", "title": "", "text": "\"Because it takes 3 business days for the actual transfer of stock to occur after you buy or sell to the next owner, your cash is tied up until that happens. This is called the settlement period. Therefore, brokers offer \"\"margin\"\", which is a form of credit, or loan, to allow you to keep trading while the settlement period occurs, and in other situations unrelated to the presented question. To do this you need a \"\"margin account\"\", you currently have a \"\"cash account\"\". The caveat of having a retail margin account (distinct from a professional margin account) is that there is a limited amount of same-day trades you can make if you have less than $25,000 in the account. This is called the Pattern Day Trader (PDT) rule. You don't need $25k to day trade, you will just wish you had it, as it is easy to get your account frozen or downgraded to a cash account. The way around THAT is to have multiple margin accounts at different brokerages. This will greatly increase the number of same day trades you can make. Many brokers that offer a \"\"solution\"\" to PDT to people that don't have 25k to invest, are offering professional trading accounts, which have additional fees for data, which is free for retail trading accounts. This problem has nothing to do with: So be careful of the advice you get on the internet. It is mostly white noise. Feel free to verify\"" } ]

[ { "docid": "300139", "title": "", "text": "\"In summary: In long form: Spreads and shorts are not allowed in cash accounts, except for covered options. Brokers will allow clients to roll option positions in a single transaction, which look like spreads, but these are not actually \"\"sell to open\"\" transactions. \"\"Sell to open\"\" is forbidden in cash accounts. Short positions from closing the long half of a covered trade are verboten. Day-trading is allowed in both margin and cash accounts. However, \"\"pattern day-trading\"\" only applies to margin accounts, and requires a minimum account balance of $25,000. Cash accounts are free to buy and sell the same security on the same day over and over, provided that there is sufficient buying power to pay for opening a new position. Since proceeds are held for both stock and option sales in a cash account, that means buying power available at the start of the day will drop with each purchase and not rise again until settlement. Unsettled funds are available immediately within margin accounts, without restriction. In cash accounts, using unsettled funds to purchase securities will require you to hold the new position until funds settle -- otherwise your account will be blocked for \"\"free-riding\"\". Legally, you can buy securities in a cash account without available cash on deposit with the broker, but most brokers don't allow this, and some will aggressively liquidate any position that you are somehow able to enter for which you didn't have available cash already on deposit. In a margin account, margin can help gloss over the few days between purchase and deposit, allowing you to be somewhat more aggressive in investing funds. A margin account will allow you to make an investment if you feel the opportunity is right before requiring you to deposit the funds. See a great opportunity? With sufficient margin, you can open the trade immediately and then run to the bank to deposit funds, rather than being stuck waiting for funds to be credited to your account. Margin accounts might show up on your credit report. The possibility of losing more than you invested, having positions liquidated when you least expect it, your broker doing possibly stupid things in order to close out an over-margined account, and other consequences are all very serious risks of margin accounts. Although you mentioned awareness of this issue, any answer is not complete with mentioning those risks.\"" }, { "docid": "577585", "title": "", "text": "Pivots Points are significant levels technical analysts can use to determine directional movement, support and resistance. Pivot Points use the prior period's high, low and close to formulate future support and resistance. In this regard, Pivot Points are predictive or leading indicators. There are at least five different versions of Pivot Points. I will focus on Standard Pivot Points here as they are the simplest. If you are looking to trade off daily charts you would work out your Pivot Points from the prior month's data. For example, Pivot Points for first trading day of February would be based on the high, low and close for January. They remain the same for the entire month of February. New Pivot Points would then be calculated on the first trading day of March using the high, low and close for February. To work out the Standard Pivot Points you use the High, Low and Close from the previous period (i.e. for daily charts it would be from the previous month) in the following formulas: You will now have 5 horizontal lines: P, R1, R2, S1 and S2 which will set the general tone for price action over the next month. A move above the Pivot Point P suggests strength with a target to the first resistance R1. A break above first resistance shows even more strength with a target to the second resistance level R2. The converse is true on the downside. A move below the Pivot Point P suggests weakness with a target to the first support level S1. A break below the first support level shows even more weakness with a target to the second support level S2. The second resistance and support levels (R2 & S2) can also be used to identify potentially overbought and oversold situations. A move above the second resistance level R2 would show strength, but it would also indicate an overbought situation that could give way to a pullback. Similarly, a move below the second support level S2 would show weakness, but would also suggest a short-term oversold condition that could give way to a bounce. This could be used together with a momentum indicator such as RSI or Stochastic to confirm overbought or oversold conditions. Pivot Points offer a methodology to determine price direction and then set support and resistance levels, however, it is important to confirm Pivot Point signals with other technical analysis indicators, such as candle stick reversal patterns, stochastic and general Support and Resistance Levels in the price action. These pivot points can be handy but I actually haven’t used them for trade setups and entries myself. I prefer to use candle sticks together with stochastic to determine potential turning points and then take out trades based on these. You can then use the Pivot Points Resistance and Support levels to help you estimate profit targets or areas to start becoming cautious and start tightening your stops. Say, for example, you have gone long from a signal you got a few days ago, you are now in profit and the price is now approaching R2 whilst the Stochastic is approaching overbought, you might want to start tightening your stop loss as you might expect some weakness in the price in the near future. If prices continue up you keep increasing your profits, if prices do reverse then you keep the majority of your existing profits. This would become part of your trade management. If you are after finding potential market turning points and take out trades based on these, then I would suggest using candlestick charting reversal patterns for your trade setups. The patterns I like to use most in my trading can be described as either the Hammer or One White Soldier for Bullish reversals and Shooting Star or One Black Crow for Bearish reversals. Below are diagrams of where to place your entries and exits on both Bullish and Bearish reversal patterns. Bullish Reversal Pattern So after some period of weakness in the price you would look for a bullish day where the price closes above the previous day’s high, you place your buy order here just before market close and place your initial stop just below the low of the day. You would apply this either for an uptrending stock where the price has retracted from or near the trendline or Moving Average, or a ranging stock where price is bouncing off the support line. The trade is reinforced if the Stochastic is in or near the oversold and crossing back upwards, volume on the up day is higher than volume on the down days, and the market as a whole is moving up as well. The benefit with this entry is that you are in early so you capture any bullish move up at the open of the next day, such as gaps. The drawbacks are that you need to be in front of your screen before market close to get your price close to the market close and you may get whipsawed if prices reverse at the open of the next day, thus being stopped out with a small loss. As the price moves up you would move your stop loss to just below the low of each day. Alternative Bullish Reversal Entry An alternative, entry would be to wait for after market close and then start your analysis (easier to do after market close than whilst the market is open and less emotions involved). Place a stop buy order to buy at the open of next trading day just above the high of the bullish green candle. Your stop is placed exactly the same, just below the low of the green bullish candle. The benefits of this alternative entry include you avoid the trade if the price reverses at the open of next day, thus avoiding a potential small loss (in other words you wait for further confirmation on the next trading day), and you avoid trading during market open hours where your emotions can get the better of you. I prefer to do my trading after market close so prefer this alternative. The drawback with this alternative is that you may miss out on bullish news prior to and at the next open, so miss out on some potential profits if prices do gap up at the open. This may also increase your loss on the trade if the prices gaps up then reverses and hits your stop on the same day. However, if you choose this method, then you will just need to incorporate this into your trading plan as potential slippage. Bearish Reversal Pattern So after some short period of strength in the price you would look for a bearish day where the price closes below the previous day’s low, you place your sell short order here just before market close and place your initial stop just above the high of the day. You would apply this either for an downtrending stock where the price has retracted from or near the trendline or Moving Average, or a ranging stock where price is bouncing off the resistance line. The trade is reinforced if the Stochastic is in or near the overbought and crossing back downwards, volume on the up day is higher than volume on the up days, and the market as a whole is moving down as well. The benefit with this entry is that you are in early so you capture any bearish move down at the open of the next day, such as gaps. The drawbacks are that you need to be in front of your screen before market close to get your price close to the market close and you may get whipsawed if prices reverse at the open of the next day, thus being stopped out with a small loss. As the price moves down you would move your stop loss to just above the high of each day. Alternative Bearish Reversal Entry An alternative, entry would be to wait for after market close and then start your analysis (easier to do after market close than whilst the market is open and less emotions involved). Place a stop sell short order to sell at the open of next trading day just below the low of the bearish red candle. Your stop is placed exactly the same, just above the high of the red bearish candle. The benefits of this alternative entry include you avoid the trade if the price reverses at the open of next day, thus avoiding a potential small loss (in other words you wait for further confirmation on the next trading day), and you avoid trading during market open hours where your emotions can get the better of you. I prefer to do my trading after market close so prefer this alternative. The drawback with this alternative is that you may miss out on bearish news prior to and at the next open, so miss out on some potential profits if prices do gap down at the open. This may also increase your loss on the trade if the prices gaps down then reverses and hits your stop on the same day. However, if you choose this method, then you will just need to incorporate this into your trading plan as potential slippage. You could also trade other candle stick patterns is similar ways. And with the long entries you can also use them to get into the market with longer term trend following strategies, you would usually just use a larger stop for longer term trading. To determine the size of your order you would use the price difference between your entry and your stop. You should not be risking more than 1% of your trading capital on any one trade. So if your trading capital is $20,000 your risk per trade should be $200. If you were looking to place your buy at 5.00 and had your initial stop at $4.60, you would divide $200 by $0.40 to get 500 stocks to buy. Using this form of money management you keep your losses down to a maximum of $200 (some trades may be a bit higher due to some slippage which you should allow for in your trading plan), which becomes your R-multiple. Your aim is to have your average win at 3R or higher (3 x your average loss), which will give you a positive expectancy even with a win ratio under 50%. Once you have written down your trading rules you can search stock charts for potential setups. When you find one you can backtest the chart for similar setup over the past few years. For each setup in the past jot down the prices you would have entered at, where you would have set your stop, work out your R, and go day by day, moving your stop as you go, and see where you would have been stopped out. Work out your profit or loss in terms of R for each setup and then add them up. If you get a positive R multiple, then this may be a good stock to trade on this setup. If you get a negative R multiple, then maybe give this stock a miss and look for the next setup. You can setup watch-lists of stocks that perform well for both long setups and short setups, and then trade these stocks when you get a new signal. It can take some time starting off, but once you have got your watch-lists for a particular setup, you just need to keep monitoring those stocks. You can create other watch-lists for other type of setups you have backtested as well." }, { "docid": "71713", "title": "", "text": "I agree with the other comments that you should not buy/hold your company stock even if given at a discount. If equity is provided as part of the compensation package (Options/Restrictive Stock Units RSU)then this rule does not apply. As a matter of diversification, you should not have majority equity stake of other companies in the same sector (e.g. technology) as your employer. Asset allocation and diversification if done in the right way, takes care of the returns. Buying and selling on the same day is generally not allowed for ESPP. Taxation headaches. This is from personal experience (Cisco Systems). I had options issued in Sept 2008 at 18$ which vested regularly. I exited at various points - 19$,20$,21$,23$ My friend held on to all of it hoping for 30$ is stuck. Options expire if you leave your employment. ESPP shares though remain." }, { "docid": "292159", "title": "", "text": "\"Scenario 1 - When you sell the shares in a margin account, you will see your buying power go up, but your \"\"amount available to withdraw\"\" stays the same until settlement. Yes, you can reallocate the same day, no need to wait until settlement. There is no margin interest for this scenario. Scenario 2 - If that stock is marginable to 50%, and all you have is $10,000 in that stock, you can buy another $10,000. Once done, you are at 50% margin, exactly.\"" }, { "docid": "575213", "title": "", "text": "You're talking about ESPP? For ESPP it makes sense to utilize the most the company allows, i.e.: in your case - 15% of the paycheck (if you can afford deferring that much, I assume you can). When the stocks are purchased, I would sell them immediately, not hold. This way you have ~10% premium as your income (pretty much guaranteed, unless the stock falls significantly on the very same day), and almost no exposure. This sums up to be a nice 1.5% yearly guaranteed bonus, on top of any other compensation. As to keeping the stocks, this depends on how much you believe in your company and expect the stocks to appreciate. Being employed and dependent on the company with your salary, I'd avoid investing in your company, as you're invested in it deeply as it is." }, { "docid": "146632", "title": "", "text": "\"Yes. There are several downsides to this strategy: You aren't taking into account commissions. If you pay $5 each time you buy or sell a stock, you may greatly reduce or even eliminate any possible gains you would make from trading such small amounts. This next point sounds obvious, but remember that you pay a commission on every trade regardless of profit, so every trade you make that you make at a loss also costs you commissions. Even if you make trades that are profitable more often than not, if you make quite a few trades with small amounts like this, your commissions may eat away all of your profits. Commissions represent a fixed cost, so their effect on your gains decreases proportionally with the amount of money you place at risk in each trade. Since you're in the US, you're required to follow the SEC rules on pattern day trading. From that link, \"\"FINRA rules define a “pattern day trader” as any customer who executes four or more “day trades” within five business days, provided that the number of day trades represents more than six percent of the customer’s total trades in the margin account for that same five business day period.\"\" If you trip this rule, you'll be required to maintain $25,000 in a margin brokerage account. If you can't maintain the balance, your account will be locked. Don't forget about capital gains taxes. Since you're holding these securities for less than a year, your gains will be taxed at your ordinary income tax rates. You can deduct your capital losses too (assuming you don't repurchase the same security within 30 days, because in that case, the wash sale rule prevents you from deducting the loss), but it's important to think about gains and losses in real terms, not nominal terms. The story is different if you make these trades in a tax-sheltered account like an IRA, but the other problems still apply. You're implicitly assuming that the stock's prices are skewed in the positive direction. Remember that you have limit orders placed at the upper and lower bounds of the range, so if the stock price decreases before it increases, your limit order at the lower bound will be triggered and you'll trade at a loss. If you're hoping to make a profit through buying low and selling high, you want a stock that hits its upper bound before hitting the lower bound the majority of the time. Unless you have data analysis (not just your intuition or a pattern you've talked yourself into from looking at a chart) to back this up, you're essentially gambling that more often than not, the stock price will increase before it decreases. It's dangerous to use any strategy that you haven't backtested extensively. Find several months or years of historical data, either intra-day or daily data, depending on the time frame you're using to trade, and simulate your strategy exactly. This helps you determine the potential profitability of your strategy, and it also forces you to decide on a plan for precisely when you want to invest. Do you invest as soon as the stock trades in a range (which algorithms can determine far better than intuition)? It also helps you figure out how to manage your risk and how much loss you're willing to accept. For risk management, using limit orders is a start, but see my point above about positively skewed prices. Limit orders aren't enough. In general, if an active investment strategy seems like a \"\"no-brainer\"\" or too good to be true, it's probably not viable. In general, as a retail investor, it's foolish to assume that no one else has thought of your simple active strategy to make easy money. I can promise you that someone has thought of it. Trading firms have quantitative researchers that are paid to think of and implement trading strategies all the time. If it's viable at any scale, they'll probably already have utilized it and arbitraged away the potential for small traders to make significant gains. Trust me, you're not the first person who thought of using limit orders to make \"\"easy money\"\" off volatile stocks. The fact that you're asking here and doing research before implementing this strategy, however, means that you're on the right track. It's always wise to research a strategy extensively before deploying it in the wild. To answer the question in your title, since it could be interpreted a little differently than the body of the question: No, there's nothing wrong with investing in volatile stocks, indexes, etc. I certainly do, and I'm sure many others on this site do as well. It's not the investing that gets you into trouble and costs you a lot of money; it's the rapid buying and selling and attempting to time the market that proves costly, which is what you're doing when you implicitly bet that the distribution of the stock's prices is positively skewed. To address the commission fee problem, assuming a fee of $8 per trade ... and a minimum of $100 profit per sale Commissions aren't your only problem, and counting on $100 profit per sale is a significant assumption. Look at point #4 above. Through your use of limit orders, you're making the implicit assumption that, more often than not, the price will trigger your upper limit order before your lower limit order. Here's a simple example; let's assume you have limit orders placed at +2 and -2 of your purchase price, and that triggering the limit order at +2 earns you $100 profit, while triggering the limit order at -2 incurs a loss of $100. Assume your commission is $5 on each trade. If your upper limit order is triggered, you earn a profit of 100 - 10 = 90, then set up the same set of limit orders again. If your lower limit order is triggered this time, you incur a loss of 100 + 10 = 110, so your net gain is 90 - 110 = -20. This is a perfect example of why, when taking into account transaction costs, even strategies that at first glance seem profitable mathematically can actually fail. If you set up the same situation again and incur a loss again (100 + 10 = 110), you're now down -20 - 110 = -130. To make a profit, you need to make two profitable trades, without incurring further losses. This is why point #4 is so important. Whenever you trade, it's critical to completely understand the risk you're taking and the bet you're actually making, not just the bet you think you're making. Also, according to my \"\"algorithm\"\" a sale only takes place once the stock rises by 1 or 2 points; otherwise the stock is held until it does. Does this mean you've removed the lower limit order? If yes, then you expose yourself to downside risk. What if the stock has traded within a range, then suddenly starts declining because of bad earnings reports or systemic risks (to name a few)? If you haven't removed the lower limit order, then point #4 still stands. However, I never specified that the trades have to be done within the same day. Let the investor open up 5 brokerage accounts at 5 different firms (for safeguarding against being labeled a \"\"Pattern Day Trader\"\"). Each account may only hold 1 security at any time, for the span of 1 business week. How do you control how long the security is held? You're using limit orders, which will be triggered when the stock price hits a certain level, regardless of when that happens. Maybe that will happen within a week, or maybe it will happen within the same day. Once again, the bet you're actually making is different from the bet you think you're making. Can you provide some algorithms or methods that do work for generating some extra cash on the side, aside from purchasing S&P 500 type index funds and waiting? When I purchase index funds, it's not to generate extra liquid cash on the side. I don't invest nearly enough to be able to purchase an index fund and earn substantial dividends. I don't want to get into any specific strategies because I'm not in the business of making investment recommendations, and I don't want to start. Furthermore, I don't think explicit investment recommendations are welcome here (unless it's describing why something is a bad idea), and I agree with that policy. I will make a couple of points, however. Understand your goals. Are you investing for retirement or a shorter horizon, e.g. some side income? You seem to know this already, but I include it for future readers. If a strategy seems too good to be true, it probably is. Educate yourself before designing a strategy. Research fundamental analysis, different types of orders (e.g., so you fully understand that you don't have control over when limit orders are executed), different sectors of the market if that's where your interests lie, etc. Personally, I find some sectors fascinating, so researching them thoroughly allows me to make informed investment decisions as well as learn about something that interests me. Understand your limits. How much money are you willing to risk and possibly lose? Do you have a risk management strategy in place to prevent unexpected losses? What are the costs of the risk management itself? Backtest, backtest, backtest. Ideally your backtesting and simulating should be identical to actual market conditions and incorporate all transaction costs and a wide range of historical data. Get other opinions. Evaluate those opinions with the same critical eye as I and others have evaluated your proposed strategy.\"" }, { "docid": "506238", "title": "", "text": "1) You ignore dividends. You can hold your 10 million shares and never sell them and still get cash to live on if the security pays dividends. McDonalds stock pays 3% in dividends (a year). If you owned 10 million shares of McDonalds you would get 75,000 every three months. I am sure you could live on 25,000 a month. 2) Enron was an energy company. They sold energy and made a profit (or rather were supposed to). Enron didn't make their money by selling stock. McDonalds makes their money by selling hamburgers (and other food). The income of a company comes from their customers, not from selling stock. 3) IF you sold all of your 10 million shares within a short time frame it, likely, would drive the price of the stock down. But you do not need a billion dollars to live on. If you sold 1000 shares each month you would have plenty for buying cars and pizza. Selling 1000 shares may drive the price of the stock down for a minute or two. But the rest of the transactions, for that security made the same day, would quickly obscure the effect you had on the stock. 4) When you buy stock your money does not (usualy) go to the company. If I were to buy 100 shares of McDonalds, McDonalds would not get $11670.That money is (usually) paid to a 'Market Maker' who, in turn, will use the cash to buy MCD from other individual shareholders (presumably for less than 116.70 a share)." }, { "docid": "372417", "title": "", "text": "\"Here are some things to consider if you want to employ a covered call strategy for consistent returns. The discussion also applies to written puts, as they're functionally equivalent. Write covered calls only on fairly valued stock. If the stock is distinctly undervalued, just buy it. By writing the call, you cap the gains that it will achieve as the stock price gravitates to intrinsic value. If the stock is overvalued, sell it, or just stay away. As the owner of a covered call position, you have full exposure to the downside of the stock. The premium received is normally way too small to protect against much of a drop in price. The ideal candidate doesn't change in price much over the life of the position. Yes, this is low volatility, which brings low option premiums. As a seller you want high premiums. But this can't be judged in a vacuum. No matter how high the volatility in absolute terms, as a seller you're betting the market has overpriced volatility. If volatility is high, so premiums are fat, but the market is correct, then the very real risk of the stock dropping over the life of the position offsets the premium received. One thing to look at is current implied volatility for the at-the-money (ATM), near-month call. Compare it to the two-year historical volatility (Morningstar has this conveniently displayed). Moving away from pure volatility, consider writing calls about three months out, just slightly out of the money. The premium is all time value, and the time value decay accelerates in the final few months. (In theory, a series of one-month options would be higher time value, but there are frictional costs, and no guarantee that today's \"\"good deal\"\" will be repeatable twelve time per year.) When comparing various strikes and expirations, compare time value per day. To compare the same statistic across multiple companies, use time value per day as a percent of capital at risk. CaR is the price of the stock less the premium received. If you already own the stock, track it as if you just bought it for this strategy, so use the price on the day you wrote the call. Along with time value per day, compare the simple annualized percent return, again, on capital at risk, measuring the return if a) the stock is called away, and b) the stock remains unchanged. I usually concentrate more on the second scenario, as we get the capital gain on the stock regardless, without the option strategy. Ideally, you can also calculate the probability (based on implied volatility) of the stock achieving these price points by expiration. Measuring returns at many possible stock prices, you can develop an overall expected return. I won't go into further detail, as it seems outside the scope here. Finally, I usually target a minimum of 25% annualized if the stock remains unchanged. You can, of course, adjust this up or down depending on your risk tolerance. I consider this to be conservative.\"" }, { "docid": "362473", "title": "", "text": "\"Seems like you are concerned with something called assignment risk. It's an inherent risk of selling options: you are giving somebody the right, but not the obligation, to sell to you 100 shares of GOOGL. Option buyers pay a premium to have that right - the extrinsic value. When they exercise the option, the option immediately disappears. Together with it, all the extrinsic value disappears. So, the lower the extrinsic value, the higher the assignment risk. Usually, option contracts that are very close to expiration (let's say, around 2 to 3 weeks to expiration or less) have significantly lower extrinsic value than longer option contracts. Also, generally speaking, the deeper ITM an option contract is, the lower extrinsic value it will have. So, to reduce assignment risk, I usually close out my option positions 1-2 weeks before expiration, especially the contracts that are deep in the money. edit: to make sure this is clear, based on a comment I've just seen on your question. To \"\"close out an options position\"\", you just have to create the \"\"opposite\"\" trade. So, if you sell a Put, you close that by buying back that exact same put. Just like stock: if you buy stock, you have a position; you close that position by selling the exact same stock, in the exact same amount. That's a very common thing to do with options. A post in Tradeking's forums, very old post, but with an interesting piece of data from the OCC, states that 35% of the options expire worthless, and 48% are bought or sold before expiration to close the position - only 17% of the contracts are actually exercised! (http://community.tradeking.com/members/optionsguy/blogs/11260-what-percentage-of-options-get-exercised) A few other things to keep in mind: certain stocks have \"\"mini options contracts\"\", that would correspond to a lot of 10 shares of stock. These contracts are usually not very liquid, though, so you might not get great prices when opening/closing positions you said in a comment, \"\"I cannot use this strategy to buy stocks like GOOGL\"\"; if the reason is because 100*GOOGL is too much to fit in your buying power, that's a pretty big risk - the assignment could result in a margin call! if margin call is not really your concern, but your concern is more like the risk of holding 100 shares of GOOGL, you can help manage that by buying some lower strike Puts (that have smaller absolute delta than your Put), or selling some calls against your short put. Both strategies, while very different, will effectively reduce your delta exposure. You'd get 100 deltas from the 100 shares of GOOGL, but you'd get some negative deltas by holding the lower strike Put, or by writing the higher strike Call. So as the stock moves around, your account value would move less than the exposure equivalent to 100 shares of stock.\"" }, { "docid": "352346", "title": "", "text": "What are Pivot Points? Pivot Points indicate price levels that are of significance in technical analysis of securities. Pivot Points are used to provide clarity for a trader as they are a predictive indicator of where a security might go. There are at least 6 different types of Pivot Points (Woodie Pivot Point, Fibonacci Pivot, Demark etc..) and they are different based on their formulas but generally serve the same concept. I will be answering your question using the Camarilla Pivot Point formula. Camarilla Pivot Point Formula Generally any Pivot Point formula uses a combination of the Open, High, Low and Close of the previous timeframe. Since you are technically a swing trader indicated by say between a couple of days to a couple of weeks, as I don't want to do day trading you should use a weekly 5 to 30 minute chart but you can also use a daily chart as well. So for example if you use a daily chart, you would use the Open, High, Low and Close of the previous day. Example of fictitious stock: MOSEX (Money Stack Exchange) 01/14/16: Open: 10.25, High: 12.55, Low: 9.65, Close: 11.50 On 01/15/16: R4 Level: 13.10, R3 Level: 12.30, R2 Level: 12.03, R1 Level: 11.77, Pivot Point: 11.23, S1 Level: 11.23, S2 Level: 10.97, S3 Level: 10.70, S4 Level: 9.91 R = Resistance, S = Support How to identify these Pivot Points? Most charting software already have built in overlays that will identify the pivot points for you but you can always find and draw them yourself with an annotation tool. Since we are using the Camarilla Pivot Point formula, the important Pivot Point levels are the R4 which is considered as the Breakout Pivot, the S4 which is considered as the Breakdown Pivot. R3 and S3 are Reversal Pivot Points. Once identify the Pivot Points how should you proceed in a trade? This is the million dollar question and without spoon feeding you requires you to come up with your own strategy. To distinguish yourself from being a novice and pro trader is to have a strategy in a trade. Now I don't really have the time to look for actual charts to provide examples with but generally this is what you should look for to proceed in a trade: Potential Buy/Short Signals: Potential Sell Signals: If a stock moves above the R3 Level but then crosses below it, this would be a sell signal. This is confirmed when their is a lower lower then the candle that first crosses below it. Sell a stock when S4 Level is confirmed. See above for the confirmation. Other Useful Tips: Use the Pivot Point as your support or resistance. The Pivot Point levels can be used for your stop loss. For example, with an S3 reversal buy signal, the S4 should be used as a stop loss. Conversely, the Pivot Point levels can also be used for your target prices. For example, with an S3 reversal buy signal, you should take some profits at R3 level. You should also use a combination of other indicators to give you more information to confirm if a signal is correct. Examples of a good combination is the RSI, MACD and Moving Averages. Read that book in my comment above!!" }, { "docid": "106324", "title": "", "text": "I don't know why stocks in some industries tend to have lower prices per share than others. It doesn't really matter much. Whether a company has 1,000,0000 shares selling for $100 each, or 10,000,000 shares selling for $10 each, either way the total value is the same. Companies generally like to keep the share price relatively low so that if someone wants to buy a small amount, they can. Like if the price was $10,000 per share, than an investor with less than $10,000 to put in that one stock would be priced out of the market. If it's $10, then if someone wants $10 they can buy one share, and if someone wants $10,000 they can buy 1000 shares. As to why energy stocks are volatile, I can think of several reasons. One, in our current world, energy is highly susceptible to politics. A lot of the world's energy comes from the Middle East, which is a notoriously unstable region. Any time there's conflict there, energy supplies from the region become uncertain. Oil-producing countries may embargo countries that they don't like. A war will, at the very least, interfere with transportation and shipping, and may result in oil wells being destroyed. Etc. Two, energy is consumed when you use it, and most consumers have very limited ability to stockpile. So you're constantly buying the energy you need as you need it. So if demand goes down, it is reflected immediately. Compare this to, say, clothing. Most people expect to keep the same clothes for years, wearing them repeatedly. (Hopefully washing them now and then!) So if for some reason you decided today that you only need three red shirts instead of four, this might not have any immediate impact on your buying. It could be months before you would have bought a new red shirt anyway. There is a tendency for the market to react rather slowly to changes in demand for shirts. But with energy, if you decide you only need to burn 3 gallons of gas per week instead of 4, your consumption goes down immediately, within days. Three, really adding to number two, energy is highly perishable, especially some forms of energy. If a solar power station is capable of producing 10 megawatts but today there is only demand for 9 megawatts, you can't save the unused megawatt for some future time when demand is higher. It's gone. (You can charge a battery with it, but that's pretty limited.) You can pile up coal or store natural gas in a tank until you need it, but you can't save the output of a power plant. Note numbers two and three also apply to food, which is why food production is also very volatile." }, { "docid": "367960", "title": "", "text": "\"I think you are asking about actively managed funds vs. indexes and possibly also vs. diversified funds like target date funds. This is also related to the question of mutual fund vs. ETF. First, a fund can be either actively managed or it can attempt to track an index. An actively managed fund has a fund manager who tries to find the best stocks to invest in within some constraints, like \"\"this fund invests in large cap US companies\"\". An index fund tries to match as closely as possible the performance of an index like the S&P 500. A fund may also try to offer a portfolio that is suitable for someone to put their entire account into. For example, a target date fund is a fund that may invest in a mix of stocks, bonds and foreign stock in a proportion that would be appropriate to someone expecting to retire in a certain year. These are not what people tend to think of as the canonical examples of mutual funds, even though they share the same legal structure and investment mechanisms. Secondly, a fund can either be a traditional mutual fund or it can be an exchange traded fund (ETF). To invest in a traditional mutual fund, you send money to the fund, and they give you a number of shares equal to what that money would have bought of the net asset value (NAV) of the fund at the end of trading on the day they receive your deposit, possibly minus a sales charge. To invest in an ETF, you buy shares of the ETF on the stock market like any other stock. Under the covers, an ETF does have something similar to the mechanism of depositing money to get shares, but only big traders can use that, and it's not used for investing, but only for people who are making a market in the stock (if lots of people are buying VTI, Big Dealer Co will get 100,000 shares from Vanguard so that they can sell them on the market the next day). Historically and traditionally, ETFs are associated with an indexing strategy, while if not specifically mentioned, people assume that traditional mutual funds are actively managed. Many ETFs, notably all the Vanguard ETFs, are actually just a different way to hold the same underlying fund. The best way to understand this is to read the prospectus for a mutual fund and an ETF. It's all there in reasonably plain English.\"" }, { "docid": "334849", "title": "", "text": "In a simple statement, no doesn't matter. Checked on my trade portal, everything lines up. Same ISIN, same price(after factoring in FX conversions, if you were thinking about arbitrage those days are long gone). But a unusual phenomenon I have observed is, if you aren't allowed to buy/sell a stock in one market and try to do that in a different market for the same stock you will still not be allowed to do it. Tried it on French stocks as my current provider doesn't allow me to deal in French stocks." }, { "docid": "395506", "title": "", "text": "No, at least not noticeably so. The majority of what HFT does is to take advantage of the fact that there is a spread between buy and sell orders on the exchange, and to instantly fill both orders, gaining relatively risk-free profit from some inherent inefficiencies in how the market prices stocks. The end result is that intraday trading of the non-HFT nature, as well as speculative short-term trading will be less profitable, since HFT will cause the buy/sell spread to be closer than it would otherwise be. Buying and holding will be (largely) unaffected since the spread that HFT takes advantage of is miniscule compared to the gains a stock will experience over time. For example, when you go to buy shares intending to hold them for a long time, the HFT might cost you say, 1 to 2 cents per share. When you go to sell the share, HFT might cost you the same again. But, if you held it for a long time, the share might have doubled or tripled in value over the time you held it, so the overall effect of that 2-4 cents per share lost from HFT is negligible. However, since the HFT is doing this millions of times per day, that 1 cent (or more commonly a fraction of a cent) adds up to HFTs making millions. Individually it doesn't affect anyone that much, but collectively it represents a huge loss of value, and whether this is acceptable or not is still a subject of much debate!" }, { "docid": "597401", "title": "", "text": "\"FINRA Description of Day Trading rules The rules adopt a new term \"\"pattern day trader,\"\" which includes any margin customer that day trades (buys then sells or sells short then buys the same security on the same day) four or more times in five business days, provided the number of day trades are more than six percent of the customer's total trading activity for that same five-day period. So, there's several ways to avoid being labeled a pattern day trader:\"" }, { "docid": "306688", "title": "", "text": "Note that you're asking about withholding, not about taxing. Withholding doesn't mean this is exactly the tax you'll pay: it means they're withholding a certain amount to make sure you pay taxes on it, but the tax bill at the end of the year is the same regardless of how you choose to do the withholding. Your tax bill may be higher or lower than the withholding amount. As far as tax rate, that will be the same regardless - you're just moving the money from one place to the other. The only difference would be that your tax is based on total shares under the plan - meaning that if you buy 1k shares, for example, at $10, so $1,500 discounted income, if you go the payroll route you get (say) $375 withheld. If you go the share route, you either get $375 worth of stock (so 38 shares) withheld (and then you would lose out on selling that stock, meaning you don't get quite as much out of it at the end) or you would ask them to actually buy rather more shares to make up for it, meaning you'd have a slightly higher total gain. That would involve a slightly higher tax at the end of it, of course. Option 1: Buy and then sell $10000 worth, share-based withholding. Assuming 15% profit, and $10/share at both points, then buy/sell 1000 shares, $1500 in profit to take into account, 38 shares' worth (=$380) withheld. You put in $8500, you get back $9620, net $1120. Option 2: Buy and then sell $13500 worth, share based withholding. Same assumptions. You make about $2000 in pre-tax profit, meaning you owe about $500 in tax withholding. Put in $11475, get back $13000, net $1525. Owe 35% more tax at the end of the year, but you have the full $1500 to spend on whatever you are doing with it. Option 3: Buy and then sell $1000 worth, paycheck withholding. You get the full $10000-$8500 = $1500 up front, but your next paycheck is $375 lighter. Same taxes as Option 1 at the end of the year." }, { "docid": "11311", "title": "", "text": "\"Why only long term investments? What do they care if I buy and sell shares in a company in the same year? Simple, your actually investing when you hold it for a long term. If you hold a stock for a week or a month there is very little that can happen to change the price, in a perfect market the value of a company should stay the same from yesterday to today so long as there is no news(a perfect market cannot exist). When you hold a stock for a long term you really are investing in the company and saying \"\"this company will grow\"\". Short term investing is mostly speculation and speculation causes securities to be incorrectly valued. So when a retail investor puts money into something like Facebook for example they can easily be burned by speculation whether its to the upside or downside. If the goal is to get me to invest my money, then why not give apply capital gains tax to my savings account at my local bank? Or a CD account? I believe your gains on these accounts are taxed... Not sure at what rate. If the goal is to help the overall health of business, how does it do that? During an IPO, the business certainly raises money, but after that I'm just buying and selling shares with other private shareholders. Why does the government give me an incentive to do this (and then hold onto it for at least a year)? There are many reasons why a company cares about its market price: A companies market cap is calculated by price * shares outstanding. A market cap is basically what the market is saying your company is worth. A company can offer more shares or sell shares they currently hold in order to raise even more capital. A company can offer shares instead of cash when buying out another company. It can pay for many things with shares. Many executives and top level employees are payed with stock options, so they defiantly want to see there price higher. these are some basic reasons but there are more and they can be more complex.\"" }, { "docid": "303754", "title": "", "text": "If anyone could reliably pick winners, they could make more money by investing in those winners than by selling their advice. Generally, when someone sends you unsolicited hype about stocks, that's because they're trying to pump the price up so they can dump their own shares before it collapses again. Also note that, these days, it's remarkably easy to run the scam where you sell half your customers buy advice and the other half sell advice on the same stock. Each time, some of the customers drop out in disgust (half, minus whoever decides to give you another chance) and the rest pay you for the next iteration. You can make a lot of money before you run out of suckers. That, all by itself, is good reason to be skeptical about anyone who doesn't publish their full history so it can be audited for such shenanigans." }, { "docid": "195152", "title": "", "text": "Put options are contracts to sell. You pay me a fee for the right to put the stock (or other underlying security) in my hands if you want to. That happens on a specific date (the strike date) and a specified price (the strike price). You can decide not to exercise that right, but I must follow through and let you sell it to me if you want to. Put options can be used by the purchaser to cap losses. For example: You purchase a PUT option for GE Oct19 13.00 from me. On October 19th, you can make me let you sell your GE stock to me for $13.00 a share. If the price for GE has fallen to $12.00, that would be a good idea. If its now at $15.00 a share, you will probably keep the GE or sell it at the current market price. Call options are contracts to buy. The same idea only in the other direction: You pay me a fee for the right to call the stock away from me. Calls also have a strike date and strike price. Like a put, you can choose not to exercises it. You can choose to buy the stock from me (on the strike date for the strike price), but I have to let you buy it from me if you want to. For example: You purchase a CALL option for GE Oct19 16.00 option from me. On October 19th, you can buy my GE stock from me for $16.00 a share. If the current price is $17.50, you should make me let you buy if from me for $16.00. If its less than $16.00, you could by it at the current market price for less. Commonly, options are for a block of 100 shares of the underlying security. Note: this is a general description. Options can be very complicated. The fee you pay for the option and the transaction fees associated with the shares affects whether or not exercising is financially beneficial. Options can be VERY RISKY. You can loose all your money as there is no innate value in the option, only how it relates to the underlying security. Before your brokerage will let you trade, there are disclosures you must read and affirm that you understand the risk." } ]

[ { "docid": "584291", "title": "", "text": "You should not have to wait 3 days to sell the stock after purchase. If you are trading with a cash account you will have to wait for the sale to settle (3 business days) before you can use those funds to purchase other stock. If you meet the definition of a pattern day trader which is 4 or more day trades in 5 business days then your brokerage will require you to have a minimum of $25,000 in funds and a margin account." } ]

[ { "docid": "542765", "title": "", "text": "Using Fundamental and Technical Analysis together is actually a good idea for longer term trading of up to 6 months or longer. The whole idea behind trading with Technical Analysis is to increase the probabilities of a trade going in the desired direction by using uncorrelated indicators that produce the same signal to buy or sell at the same time. For example, you might use a Moving Average (MA) as a buy signal when the price falls for a few days, hits the MA and then reverses and starts moving back up. If however, you also include a Stochastic Oscillator (SO) to indicate when the stock is oversold (under 20%), and if the price rebounds from the MA average at the same time as the Stochastic is crossing over in the oversold position, then this may be a higher probability trade. If you also only trade stocks that are Fundamentally healthy (as fundamentally good stocks are more likely to go up than fundamentally bad stocks) then this might increase the probabilities again. Then if you only buy when the market as a whole is moving up, then this will increase your chances again. A few weeks ago at a seminar, the presenter totalled the men in the room to be 76 and the women in the room to be 8. He then asked what will most likely be the next person to walk in the room - a man or a woman? The statistics are on the side of a wan walking in next. This is what we try to do with Technical Analysis, increase our chances when we take a trade. Of course a woman could be the next person to walk in the room, just like any trade can go against you, and this is why we use money management and risk management and take a small loss when a trade does go against you. Lets look at an example where you could incorporate FA with TA to increase your chances of profits: Above is a candlestick chart of Select Harvest (SHV), the green line above the price is the perceived value, the pink line is the 40 day MA, the blue line is the EPS, and the white lines is the Stochastic Oscillator (above 80% being overbought and below 20% is oversold). From Feb 2015 to start of Aug 2015 the stock was uptrending, since then the price reversed and started to downtrend. The stock was determined to be fundamentally good early in 2015 with the perceived value gradually increasing and greater than the share price, and the EPS starting to increase regularly from mid April. Thus, as the stock is seen as fundamentally healthy any price reversal in the vicinity of the MA could be seen as a buy opportunity. In fact there where 2 such opportunities on 31st March and 11th June where price had reversed and rebounded off the MA whist the SO crossed over in or near the oversold area. The price did reverse and then rebounded off the MA again on 9th July, however the SO was not in or near the oversold area on this occasion, so not as high in probability terms. The price still rebounded and went up again, however another momentum indicator (not shown here) shows some bearish divergence in this case - so another reason to possibly keep away at this point in time. A good signal to get out of the trade, that is your stop loss has not already taken you out, is when the price breaks and closes below the MA line. This occurred on 7th August. So if we had bought on the first signal on 31st March for $7.41 and sold when the priced broke through the MA on 7th August for $11.76, we would have made a profit of approx. 59% in just over 4 months. If bought on the second signal on 11th June for $9.98 and again sold on 7th August for $11.76, we would have made about 18% in under 2 months. So the fundamentals, the Price (in relation to MA) and the SO where all lining up to provide two high probability trades. Of course you would need to incorporate you risk management (including stops) in case the price did not continue upwards after you bought. If the market is also moving up on the day of the signal this will further increase your chances. Unless you day trade, which I would avoid, a good way to enter your trades after a signal is to enter a stop buy order after market close to buy if the price moves above the high of the signal day. That way if the market and the stock open and move lower during the day after the signal you avoid entering the trade altogether. This can be incorporated as part of your risk management and trading rules. After the price broke down through the MA we can see that a downtrend commenced which is still current today (in fact I just took a short trade on this stock yesterday). We can also see that the perceived value, whilst still above the price, has reached a peak and is currently moving downwards and the EPS after being flat for a few months has just moved down for the first time in 10 months. So maybe the fundamentals are starting to waver a bit on this stock. It may be a good stock to continue shorting into the future. So basically you can continue using Fundamental Analysis to select which stocks to buy, place them in a watch-list, and then use Technical Analysis to determine when these stocks are starting to uptrend and use a combination of uncorrelated indicators to produce higher probability signals for when to enter your trades." }, { "docid": "259560", "title": "", "text": "\"I'm in the US, so there may be idiosyncrasies with UK taxes that I'm not familiar with, but here's how I've always treated stock I get as compensation. Suppose the vested shares are worth X. If I had X in cash, would I buy my company's stock as an investment? Usually the answer is no, not because I think the stock will tank, but because there's better things I can do with that cash (pay off debt, unfortunately). Therefore I sell the shares and use the cash for something else. You have stock options. So suppose the stock value is X but you can buy it for Y. You can either: Therefore, the math is the same. If you had X in cash, would you buy your company's stock as an investment? If so, then option 2 is best, because you can get X in stock for a lower cost. (Option 3 might be better if the gain on the stock will be taxed higher, but they're pretty much equivalent if there's no chance that the stock will drop below Y) If not, then option 4 is best since you will likely get more than X-Y from selling the options that by exercising them and selling the stock (since options have time value). If option 4 is not a possibility, then option 1 is best - you pocket X-Y as \"\"income\"\" and invest it however you see fit.\"" }, { "docid": "78053", "title": "", "text": "\"Joke warning: These days, it seems that rogue trading programs are the big market makers (this concludes the joke) Historically, exchange members were market makers. One or more members guaranteed a market in a particular stock, and would buy whatever you wanted to sell (or vice-versa). In a balanced market -- one where there were an equal number of buyers and sellers -- the spread was indeed profit for them. To make this work, market makers need an enormous amount of liquidity (ability to hold an inventory of stocks) to deal with temporary imbalances. And a day like October 29, 1929, can make that liquidity evaporate. I say \"\"historically,\"\" because I don't think that any stock market works this way today (I was discussing this very topic with a colleague last week, went to Wikipedia to look at the structure of the NYSE, and saw no mention of exchange members as market makers -- in fact, it appears that the NYSE is no longer a member-based exchange). Instead, today most (all?) trading happens on \"\"electronic crossing networks,\"\" where the spread is simply the difference between the highest bid and lowest ask. In a liquid stock, there will be hundreds if not thousands of orders clustered around the \"\"current\"\" price, usually diverging by fractions of a cent. In an illiquid stock, there may be a spread, but eventually one bid will move up or one ask will move down (or new bids will come in). You could claim that an entity with a large block of stock to move takes the role of market maker, but it doesn't have the same meaning as an exchange market maker. Since there's no entity between the bidder and asker, there's no profit in the spread, just a fee taken by the ECN. Edit: I think you have a misconception of what the \"\"spread\"\" is. It's simply the difference between the highest bid and the lowest offer. At the instant a trade takes place, the spread is 0: the highest bid equals the lowest offer, and the bidder and seller exchange shares for money. As soon as that trade is completed, the spread re-appears. The only way that a trade happens is if buyer and seller agree on price. The traditional market maker is simply an entity that has the ability to buy or sell an effectively unlimited number of shares. However, if the market maker sets a price and there are no buyers, then no trade takes place. And if there's another entity willing to sell shares below the market maker's price, then the buyers will go to that entity unless the market's rules forbid it.\"" }, { "docid": "79777", "title": "", "text": "\"It's simply supply and demand. First, demand: If you're an importer trying to buy from overseas, you'll need foreign currency, maybe Euros. Or if you want to make a trip to Europe you'll need to buy Euros. Or if you're a speculator and think the USD will fall in value, you'll probably buy Euros. Unless there's someone willing to sell you Euros for dollars, you can't get any. There are millions of people trying to exchange currency all over the world. If more want to buy USD, than that demand will positively influence the price of the USD (as measured in Euros). If more people want to buy Euros, well, vice versa. There are so many of these transactions globally, and the number of people and the nature of these transactions change so continuously, that the prices (exchange rates) for these currencies fluctuate continuously and smoothly. Demand is also impacted by what people want to buy and how much they want to buy it. If people generally want to invest their savings in stocks instead of dollars, i.e., if lots of people are attempting to buy stocks (by exchanging their dollars for stock), then the demand for the dollar is lower and the demand for stocks is higher. When the stock market crashes, you'll often see a spike in the exchange rate for the dollar, because people are trying to exchange stocks for dollars (this represents a lot of demand for dollars). Then there's \"\"Supply:\"\" It may seem like there are a fixed number of bills out there, or that supply only changes when Bernanke prints money, but there's actually a lot more to it than that. If you're coming from Europe and want to buy some USD from the bank, well, how much USD does the bank \"\"have\"\" and what does it mean for them to have money? The bank gets money from depositors, or from lenders. If one person puts money in a deposit account, and then the bank borrows that money from the account and lends it to a home buyer in the form of a mortgage, the same dollar is being used by two people. The home buyer might use that money to hire a carpenter, and the carpenter might put the dollar back into a bank account, and the same dollar might get lent out again. In economics this is called the \"\"multiplier effect.\"\" The full supply of money being used ends up becoming harder to calculate with this kind of debt and re-lending. Since money is something used and needed for conducting of transactions, the number of transactions being conducted (sometimes on credit) affects the \"\"supply\"\" of money. Demand and supply blur a bit when you consider people who hoard cash. If I fear the stock market, I might keep all my money in dollars. This takes cash away from companies who could invest it, takes the cash out of the pool of money being used for transactions, and leaves it waiting under my mattress. You could think of my hoarding as a type of demand for currency, or you could think of it as a reduction in the supply of currency available to conduct transactions. The full picture can be a bit more complicated, if you look at every way currencies are used globally, with swaps and various exchange contracts and futures, but this gives the basic story of where prices come from, that they are not set by some price fixer but are driven by market forces. The bank just facilitates transactions. If the last price (exchange rate) is 1.2 Dollars per Euro, and the bank gets more requests to buy USD for Euros than Euros for USD, it adjusts the rate downwards until the buying pressure is even. If the USD gets more expensive, at some point fewer people will want to buy it (or want to buy products from the US that cost USD). The bank maintains a spread (like buy for 1.19 and sell for 1.21) so it can take a profit. You should think of currency like any other commodity, and consider purchases for currency as a form of barter. The value of currency is merely a convention, but it works. The currency is needed in transactions, so it maintains value in this global market of bartering goods/services and other currencies. As supply and demand for this and other commodities/goods/services fluctuate, so does the quantity of any particular currency necessary to conduct any of these transactions. A official \"\"basket of goods\"\" and the price of those goods is used to determine consumer price indexes / inflation etc. The official price of this particular basket of goods is not a fundamental driver of exchange rates on a day to day basis.\"" }, { "docid": "300139", "title": "", "text": "\"In summary: In long form: Spreads and shorts are not allowed in cash accounts, except for covered options. Brokers will allow clients to roll option positions in a single transaction, which look like spreads, but these are not actually \"\"sell to open\"\" transactions. \"\"Sell to open\"\" is forbidden in cash accounts. Short positions from closing the long half of a covered trade are verboten. Day-trading is allowed in both margin and cash accounts. However, \"\"pattern day-trading\"\" only applies to margin accounts, and requires a minimum account balance of $25,000. Cash accounts are free to buy and sell the same security on the same day over and over, provided that there is sufficient buying power to pay for opening a new position. Since proceeds are held for both stock and option sales in a cash account, that means buying power available at the start of the day will drop with each purchase and not rise again until settlement. Unsettled funds are available immediately within margin accounts, without restriction. In cash accounts, using unsettled funds to purchase securities will require you to hold the new position until funds settle -- otherwise your account will be blocked for \"\"free-riding\"\". Legally, you can buy securities in a cash account without available cash on deposit with the broker, but most brokers don't allow this, and some will aggressively liquidate any position that you are somehow able to enter for which you didn't have available cash already on deposit. In a margin account, margin can help gloss over the few days between purchase and deposit, allowing you to be somewhat more aggressive in investing funds. A margin account will allow you to make an investment if you feel the opportunity is right before requiring you to deposit the funds. See a great opportunity? With sufficient margin, you can open the trade immediately and then run to the bank to deposit funds, rather than being stuck waiting for funds to be credited to your account. Margin accounts might show up on your credit report. The possibility of losing more than you invested, having positions liquidated when you least expect it, your broker doing possibly stupid things in order to close out an over-margined account, and other consequences are all very serious risks of margin accounts. Although you mentioned awareness of this issue, any answer is not complete with mentioning those risks.\"" }, { "docid": "98510", "title": "", "text": "There's a possibility to lose money in exchange rate shifts, but just as much chance to gain money (Efficient Market Hypothesis and all that). If you're worried about it, you should buy a stock in Canada and short sell the US version at the same time. Then journal the Canadian stock over to the US stock exchange and use it to settle your short sell. Or you can use derivatives to accomplish the same thing." }, { "docid": "288848", "title": "", "text": "\"From what I have read from O'Neil to Van Tharp, etc, etc, no one can pick winners more than 75% of the time regardless of the system they use and most traders consider themselves successful if 60% of the trades are winners and 40% are losers. So I am on the side that the chart is only a reflection of the past and cannot tell you reliably what will happen in the future. It is difficult to realize this but here is a simple way for you to realize it. If you look at a daily chart and let's say it is 9:30 am at the open and you ask a person to look at the technical indicators, look at the fundamentals and decide the direction of the market by drawing the graph, just for the next hour. He will realize in just a few seconds that he will say to him or her self \"\"How on earth do you expect me to be able to do that?\"\" He will realize very quickly that it is impossible to tell the direction of the market and he realizes it would be foolhardy to even try. Because Mickey Mantle hit over 250 every year of his career for the first 15 years it would be a prudent bet to bet that he could do it again over the span of a season, but you would be a fool to try to guess if the next pitch would be a ball or a strike. You would be correct about 50% of the time and wrong about 50% of the time. You can rely on LARGER PATTERNS OF BEHAVIOR OVER YEARS, but short hourly or even minute by minute prediction is foolish. That is why to be a trader you have to keep on trading and if you keep on trading and cut your losses to 1/2 of your wins you will eventually have a wonderful profit. But you have to limit your risk on any one trade to 1% of your portfolio. In that way you will be able to trade at least 100 times. do the math. trade a hundred times. lose 5% and the next bet gain 10%. Keep on doing it. You will have losses sometimes of 3 or 4 in a row and also wins sometimes of 3 or 4 in a row but overall if you keep on trading even the best traders are generally only \"\"right\"\" 60% of the time. So lets do the math. If you took 100 dollars and make 100 trades and the first trade you made 10% and reinvested the total and the second trade you lost 5% of that and continue that win/loss sequence for 100 trades you would have 1284 dollars minus commissions. That is a 1200% return in one hundred trades. If you do it in a roth IRA you pay no taxes on the short term gains. It is not difficult to realize that the stock market DOES TREND. And the easiest way to make 10% quickly is to in general trade 3x leveraged funds or stocks that have at least 3 beta from the general index. Take any trend up and count the number of days the stock is up and it is usually 66-75% and take any down trend and it is down 66-75% of the days. So if you bet on the the beginning of a day when the stock was up and if you buy the next day about 66-75% of the time the stock will also be up. So the idea is to realize that 1/3 of the time at least you will cut your losses but 2/3 of the time you will be up then next day as well. So keep holding the position based on the low of the previous day and as the stock rises to your trend line then tighten the stock to the low of the same day or just take your profit and buy something else. But losing 1/3 times is just part of \"\"the unpredictable\"\" nature of the stock market which is causes simply because there are three types of traders all betting at the same time on the same stock. Day traders who are trading from 1 to 10 times a day, swing traders trading from 1 day to several weeks and buy and hold investors holding out for long term capital gains. They each have different price targets and time horizons and THAT DIFFERENCE is what makes the market move. ONE PERSON'S SHORT TERM EXIT PRICE AT A PROFIT IS ANOTHER PERSONS LONG TERM ENTRY POINT and because so many are playing at the same time with different time horizons, stop losses and exit targets it is impossible to draw the price action or volume. But it is possible to cut your losses and ride your winners and if you keep on doing that you have a very fine return indeed.\"" }, { "docid": "333425", "title": "", "text": "As mentioned by Dilip, you need to provide more details. In general for transacting on stocks; Long Term: If you hold the stock for more than one year then its long term and not taxable. There is a STT [Securities Transaction Tax] that is already deducted/paid during buying and selling of a stock. Short Term: If you hold the stock for less than one year, it's short term gain. This can be adjusted against the short term loss for the financial year. The tax rate is 10%. Day Trading: Is same as short term from tax point of view. Unless you are doing it as a full time business. If you have purchased multiple quantities of same stock in different quantities and time, then when you selling you have to arrive at profit or loss on FIFO basis, ie First in First Out" }, { "docid": "532485", "title": "", "text": "\"How often do investors really lose money? All the time. And it's almost always reason number 1. Let's start with the beginner investor, the person most likely to make some real losses and feel they've \"\"learned\"\" that investing is no better than Vegas. This person typically gets into it because they've been given a hot stock tip, or because they've received a windfall, decided to give this investing lark a try, and bought stock in half a dozen companies whose names they know from their everyday lives (\"\"I own a bit of Google! How cool is that?\"\"). These are people who don't understand the cyclic nature of the market (bear gives way to bull gives way to bear, and on and on), and so when they suddenly see that what was $1000 is now $900 they panic and sell everything. Especially as all the pundits are declaring the end of the world (they always do). Until the moment they sold, they only had paper losses. But they crystallised those losses, made them real, and ended at a loss. Then there's the trend-follower. These are people who don't necessarily hit a bear market, or even a downturn, in their early days, but never really try to learn how the market works in any real sense. They jump into every hot stock, then panic and sell out of anything that starts to go the wrong way. Both of these reactive behaviours seem reasonable in the moment (\"\"It's gone up 15% in the past week? Buy buy buy!\"\" and \"\"I've lost 10% this month on that thing? Get rid of it before I lose any more!\"\"), but they work out over time to lots of buying high and selling low, the very opposite of what you want to do. Then there's the day-trader. These are people who sit in their home office, buying and selling all day to try and make lots of little gains that add up to a lot. The reason these people don't do well in the long run is slightly different to the other examples. First, fees. Yes, most platforms offer a discount for \"\"frequent traders\"\", but it still ain't free. Second, they're peewees playing in the big leagues. Of course there are exceptions who make out like bandits, but day traders are playing a different game than the people I'd call investors. That game, unlike buy-and-hold investing, is much more like gambling, and day-traders are the enthusiastic amateurs sitting down at a table with professional poker players – institutional investors and the computers and research departments that work for them. Even buy-and-hold investors, even the more sophisticated ones, can easily realise losses on a given stock. You say you should just hold on to a stock until it goes back up, but if it goes low enough, it could take a decade or more to even just break even again. More savvy stock-pickers will have a system worked out, something like \"\"ok, if it gets down to 90% of what I bought it for, I cut my losses and sell.\"\" This is actually a sensible precaution, because defining hard rules like that helps​ you eliminate emotion from your investing, which is incredibly important if you want to avoid becoming the trend-follower above. It's still a loss, but it's a calculated one, and hopefully over time the exception rather than the rule. There are probably as many other ways to lose money as there are people investing, but I think I've given you a taste. The key to avoiding such things is understanding the psychology of investing, and defining the rules that you'll follow no matter what (as in that last example). Or just go learn about index investing. That's what I did.\"" }, { "docid": "106324", "title": "", "text": "I don't know why stocks in some industries tend to have lower prices per share than others. It doesn't really matter much. Whether a company has 1,000,0000 shares selling for $100 each, or 10,000,000 shares selling for $10 each, either way the total value is the same. Companies generally like to keep the share price relatively low so that if someone wants to buy a small amount, they can. Like if the price was $10,000 per share, than an investor with less than $10,000 to put in that one stock would be priced out of the market. If it's $10, then if someone wants $10 they can buy one share, and if someone wants $10,000 they can buy 1000 shares. As to why energy stocks are volatile, I can think of several reasons. One, in our current world, energy is highly susceptible to politics. A lot of the world's energy comes from the Middle East, which is a notoriously unstable region. Any time there's conflict there, energy supplies from the region become uncertain. Oil-producing countries may embargo countries that they don't like. A war will, at the very least, interfere with transportation and shipping, and may result in oil wells being destroyed. Etc. Two, energy is consumed when you use it, and most consumers have very limited ability to stockpile. So you're constantly buying the energy you need as you need it. So if demand goes down, it is reflected immediately. Compare this to, say, clothing. Most people expect to keep the same clothes for years, wearing them repeatedly. (Hopefully washing them now and then!) So if for some reason you decided today that you only need three red shirts instead of four, this might not have any immediate impact on your buying. It could be months before you would have bought a new red shirt anyway. There is a tendency for the market to react rather slowly to changes in demand for shirts. But with energy, if you decide you only need to burn 3 gallons of gas per week instead of 4, your consumption goes down immediately, within days. Three, really adding to number two, energy is highly perishable, especially some forms of energy. If a solar power station is capable of producing 10 megawatts but today there is only demand for 9 megawatts, you can't save the unused megawatt for some future time when demand is higher. It's gone. (You can charge a battery with it, but that's pretty limited.) You can pile up coal or store natural gas in a tank until you need it, but you can't save the output of a power plant. Note numbers two and three also apply to food, which is why food production is also very volatile." }, { "docid": "139699", "title": "", "text": "\"Institutional investors are the \"\"elephant\"\" in the room. When they \"\"sneeze,\"\" everyone else \"\"catches cold.\"\" They're fine, if they're buying after YOU do. They're not bad, if you want to buy after they sell en masse. But when you read about moves of 10 percent, 15 percent or more in a single day, it's because a bunch of institutional investors all decided to do the same thing on the same day. That's more volatility than most people can stomach. Fewer institutional investors in a stock mean fewer chances of those things happening.\"" }, { "docid": "11311", "title": "", "text": "\"Why only long term investments? What do they care if I buy and sell shares in a company in the same year? Simple, your actually investing when you hold it for a long term. If you hold a stock for a week or a month there is very little that can happen to change the price, in a perfect market the value of a company should stay the same from yesterday to today so long as there is no news(a perfect market cannot exist). When you hold a stock for a long term you really are investing in the company and saying \"\"this company will grow\"\". Short term investing is mostly speculation and speculation causes securities to be incorrectly valued. So when a retail investor puts money into something like Facebook for example they can easily be burned by speculation whether its to the upside or downside. If the goal is to get me to invest my money, then why not give apply capital gains tax to my savings account at my local bank? Or a CD account? I believe your gains on these accounts are taxed... Not sure at what rate. If the goal is to help the overall health of business, how does it do that? During an IPO, the business certainly raises money, but after that I'm just buying and selling shares with other private shareholders. Why does the government give me an incentive to do this (and then hold onto it for at least a year)? There are many reasons why a company cares about its market price: A companies market cap is calculated by price * shares outstanding. A market cap is basically what the market is saying your company is worth. A company can offer more shares or sell shares they currently hold in order to raise even more capital. A company can offer shares instead of cash when buying out another company. It can pay for many things with shares. Many executives and top level employees are payed with stock options, so they defiantly want to see there price higher. these are some basic reasons but there are more and they can be more complex.\"" }, { "docid": "235772", "title": "", "text": "Don't ever, ever, ever let someone else handle your money, unless you want somebody else have your money. Nobody can guarantee a return on stocks. That's utter bullshit. Stock go up and down according to market emotions. How can your guru predict the market's future emotions? Keep your head cool with stocks. Only buy when you are 'sure' you are not going to need the money in the next 10 years. Buy obligations before stocks, invest in 'defensive' stocks before investing in 'aggressive' stocks. Keep more money in obligations and defensive stock than in aggressive stocks. See how you can do by yourself. Before buying (or selling) anything, think about the risks, the market, the expert's opinion about this investment, etc. Set a target for selling (and adjust the target according to the performance of the stock). Before investing, try to learn about investing, really. I've made my mistakes, you'll make yours, let's hope they're not the same :)" }, { "docid": "466143", "title": "", "text": "Will there be a scenario in which I want to sell, but nobody wants to buy from me and I'm stuck at the brokerage website? Similarly, if nobody wants to sell their stocks, I will not be able to buy at all? You're thinking of this as a normal purchase, but that's not really how US stock markets operate. First, just because there are shares of stock purchased, it doesn't mean that there was real investor buyer and seller demand for that instrument (at that point in time). Markets have dedicated middlemen called Market Makers (NASDAQ) or Specialists (NYSE), who are responsible to make sure that there is always someone to buy or sell; this ensures that all instruments have sufficient liquidity. Market Makers and specialists may decide to lower their bid on a stock based on a high number of sellers, or raise their ask for a high number of buyers. During an investor rush to buy or sell an instrument (perhaps in response to a news release), it's possible for the Market Maker / specialist to accumulate or distribute a large number of shares, without end-investors like you or I being involved on both sides of the same transaction." }, { "docid": "450184", "title": "", "text": "\"Depends. The short answer is yes; HSBC, for instance, based in New York, is listed on both the LSE and NYSE. Toyota's listed on the TSE and NYSE. There are many ways to do this; both of the above examples are the result of a corporation owning a subsidiary in a foreign country by the same name (a holding company), which sells its own stock on the local market. The home corporation owns the majority holdings of the subsidiary, and issues its own stock on its \"\"home country's\"\" exchange. It is also possible for the same company to list shares of the same \"\"pool\"\" of stock on two different exchanges (the foreign exchange usually lists the stock in the corporation's home currency and the share prices are near-identical), or for a company to sell different portions of itself on different exchanges. However, these are much rarer; for tax liability and other cost purposes it's usually easier to keep American monies in America and Japanese monies in Japan by setting up two \"\"copies\"\" of yourself with one owning the other, and move money around between companies as necessary. Shares of one issue of one company's stock, on one exchange, are the same price regardless of where in the world you place a buy order from. However, that doesn't necessarily mean you'll pay the same actual value of currency for the stock. First off, you buy the stock in the listed currency, which means buying dollars (or Yen or Euros or GBP) with both a fluctuating exchange rate between currencies and a broker's fee (one of those cost savings that make it a good idea to charter subsidiaries; could you imagine millions a day in car sales moving from American dealers to Toyota of Japan, converted from USD to Yen, with a FOREX commission to be paid?). Second, you'll pay the stock broker a commission, and he may charge different rates for different exchanges that are cheaper or more costly for him to do business in (he might need a trader on the floor at each exchange or contract with a foreign broker for a cut of the commission).\"" }, { "docid": "464810", "title": "", "text": "In general, liquidity is a good thing, because it means it is easy for you to buy or sell a stock. Since high liquidity stocks have a lot of trading, the bid-ask spreads tend to be pretty low. That means you can go into the market and trade easily and cheaply at just about any time. For low liquidity stocks, the bid-ask spreads can get pretty high, so it can make it hard or expensive to get into or out of your trades. On the flip side, everyone pays attention to high liquidity stocks, so it's harder to get an edge in your trading. For a company like Microsoft there are 30-50 full time analysts that cover them, thousands of professional traders and millions of investors in general all reading the same new articles and looking through the same financials as you. But in low liquidity stocks, there probably aren't any analysts, a few professional traders and maybe a few thousand total investors, so it can be easier to find a good buy (or sell). In general, high liquidity doesn't mean that everyone is selling or everyone is buy, it just means everyone is trading." }, { "docid": "391156", "title": "", "text": "\"I can see two possibilities. Either a deal is struck that someone (the company itself, or a large owner) buys out the remaining shares. This is the scenario @mbhunter is talking about, so I won't go too deeply into it, but it simply means that you get money in your bank account for the shares in question the same as if you were to sell them for that price (in turn possibly triggering tax effects, etc.). I imagine that this is by far the most common approach. The other possibility is that the stock is simply de-listed from a public stock exchange, and not re-listed elsewhere. In this case, you will still have the stock, and it will represent the same thing (a portion of the company), but you will lose out on most of the \"\"market\"\" part of \"\"stock market\"\". That is, the shares will still represent a monetary value, you will have the same right to a portion of the company's profits as you do now, etc., but you will not have the benefit of the market setting a price per share so current valuation will be harder. Should you wish to buy or sell stock, you will have to find someone yourself who is interested in striking a deal with you at a price point that you feel comfortable with.\"" }, { "docid": "55920", "title": "", "text": "You have plenty of good answers, but I want to add something that might help you grow your intuition on stocks. There are a lot of differences between the example I am going to give and how the stock market actually runs, but the basic concepts are the same. Lets say your friend asks you if he can borrow some money to start up a company, in exchange you will have some ownership in this company. You have essentially just bought yourself some stock. Now as your friend starts to grow, he is doing well, but he needs more cash to buy assets in order to grow the company more. He is forced with an option, either give you some of the profits, or buy these assets sooner. You decide you don't really need the money right now, and think he can do a lot better with spending the money to buy stuff. This is essentially the same as a company electing to not pay dividends, but instead invest into the future. You as a stock holder are fine with it since you know the money is going toward investing in the future. Even if you never get paid a dividend, as a company grows, you can then turn around and sell the stock to someone else for more money then you gave originally. Of course you always take the risk of having the company failing and loosing some if not all of your investment, but that is just the risk of the market." }, { "docid": "395650", "title": "", "text": "A moving average will act as support or resistance to a stock only when the stock is trending. The way it acts as support for instance is similar to a trend-line. Take the daily chart of CBA over the last 6 months: The first chart shows CBA with an uptrend support line. The second chart shows CBA during the same period with 50 day EMA as a support. Both can be used as support for the uptrend. Generally you can used these types of support (or resistance in a downtrend) to determine when to buy a stock and when to sell a stock. If I was looking to buy CBA whilst it was uptrending, one strategy I could use was to wait until it hit or got very close to the support trend-line and then buy as it re-bounces back up. If I already held the stock I could use a break down below the uptrend support line as a stop to exit out of the stock." } ]

[ { "docid": "259625", "title": "", "text": "\"If you're going to be a day trader, you really need to know your stuff. It's risky, to say the least. One of the most important elements to being successful is having access to very fast data streams so that you can make moves quickly as trends stat to develop in the markets. If you're planning on doing this using consumer-grade sites like eTrade, that's not a good idea. The web systems of many of the retail brokerage firms are not good enough to give you data fast enough for you to make good, timely decisions or to be able to execute trades way that day traders do in order to make their money. Many of those guys are living on very thin margins, sometimes just a few cents of movement one way or the other, so they make up for it with a large volume of trades. One of the reasons you were told you need a big chunk of money to day trade is that some firms will rent you out a \"\"desk\"\" and computer access to day trade through their systems if you're really serious about it. They will require you to put up at least a minimum amount of money for this privilege, and $25k may not be too far out of the ballpark. If you've never done day trading before, be careful. It doesn't take much to get caught looking the wrong way on a trade that you can't get out of without losing your shirt unless you're willing to hold on to the stock, which could be longer than a day. Day trading sounds very simple and easy, but it isn't. You need to learn about how it works (a good book to read to understand this market is \"\"Flash Boys\"\" by Michael Lewis, besides being very entertaining), because it is a space filled with very sophisticated, well-funded firms and individuals who spend huge sums of money to gain miniscule advantages in the markets. Be careful, whatever you do. And don't play in day trading with your retirement money or any other money you can't afford to walk away from. I hope this helps. Good luck!\"" } ]

[ { "docid": "229573", "title": "", "text": "What does it mean when some one says that today there was a lot of net selling or buying in a stock. What does it mean because for every selling there is also a buying going on then how can you determine a selling or buying ? Generally if the price of stock has gone down compared to previous day, the trend is of selling. As the price can be volatile, there maybe few trades that are above close price of previous day, or below close price of previous day. How can you calculate average trade price for a stock It is simple {sum of all [price*quantity]}/quantity. Related question Equity market inflow meaning" }, { "docid": "30220", "title": "", "text": "\"fennec has a very good answer but i feel it provides too much information. So i'll just try to explain what that sentence says. Put option is the right to sell a stock. \"\"16 puts on Cisco at 71 cents\"\", means John comes to Jim and says, i'll give you 71 cent now, if you allow me to sell one share of Cisco to you at $16 at some point in the future ( on expiration date). NYT quote says 1000 puts that means 1000 contracts - he bought a right to sell 100,000 shares of Cisco on some day at $16/share. Call option - same idea: right to buy a stock.\"" }, { "docid": "11311", "title": "", "text": "\"Why only long term investments? What do they care if I buy and sell shares in a company in the same year? Simple, your actually investing when you hold it for a long term. If you hold a stock for a week or a month there is very little that can happen to change the price, in a perfect market the value of a company should stay the same from yesterday to today so long as there is no news(a perfect market cannot exist). When you hold a stock for a long term you really are investing in the company and saying \"\"this company will grow\"\". Short term investing is mostly speculation and speculation causes securities to be incorrectly valued. So when a retail investor puts money into something like Facebook for example they can easily be burned by speculation whether its to the upside or downside. If the goal is to get me to invest my money, then why not give apply capital gains tax to my savings account at my local bank? Or a CD account? I believe your gains on these accounts are taxed... Not sure at what rate. If the goal is to help the overall health of business, how does it do that? During an IPO, the business certainly raises money, but after that I'm just buying and selling shares with other private shareholders. Why does the government give me an incentive to do this (and then hold onto it for at least a year)? There are many reasons why a company cares about its market price: A companies market cap is calculated by price * shares outstanding. A market cap is basically what the market is saying your company is worth. A company can offer more shares or sell shares they currently hold in order to raise even more capital. A company can offer shares instead of cash when buying out another company. It can pay for many things with shares. Many executives and top level employees are payed with stock options, so they defiantly want to see there price higher. these are some basic reasons but there are more and they can be more complex.\"" }, { "docid": "495600", "title": "", "text": "\"Question 1: How do I start? or \"\"the broker\"\" problem Get an online broker. You can do a wire transfer to fund the account from your bank. Question 2: What criticism do you have for my plan? Dividend investing is smart. The only problem is that everyone's currently doing it. There is an insatiable demand for yield, not just individual investors but investment firms and pension funds that need to generate income to fund retirements for their clients. As more investors purchase the shares of dividend paying securities, the share price goes up. As the share price goes up, the dividend yield goes down. Same for bonds. For example, if a stock pays $1 per year in dividends, and you purchase the shares at $20/each, then your yearly return (not including share price fluctuations) would be 1/20 = 5%. But if you end up having to pay $30 per share, then your yearly return would be 1/30 or 3.3% yield. The more money you invest, the bigger this difference becomes; with $100K invested you'd make about $1.6K more at 5%. (BTW, don't put all your money in any small group of stocks, you want to diversify). ETFs work the same way, where new investors buying the shares cause the custodian to purchase more shares of the underlying securities, thus driving up the price up and yield down. Instead of ETFs, I'd have a look at something called closed end funds, or CEFs which also hold an underlying basket of securities but often trade at a discount to their net asset value, unlike ETFs. CEFs usually have higher yields than their ETF counterparts. I can't fully describe the ins and outs here in this space, but you'll definately want to do some research on them to better understand what you're buying, and HOW to successfully buy (ie make sure you're buying at a historically steep discount to NAV [https://seekingalpha.com/article/1116411-the-closed-end-fund-trifecta-how-to-analyze-a-cef] and where to screen [https://www.cefconnect.com/closed-end-funds-screener] Regardless of whether you decide to buy stocks, bonds, ETFs, CEFs, sell puts, or some mix, the best advice I can give is to a) diversify (personally, with a single RARE exception, I never let any one holding account for more than 2% of my total portfolio value), and b) space out your purchases over time. b) is important because we've been in a low interest rate environment since about 2009, and when the risk free rate of return is very low, investors purchase stocks and bonds which results in lower yields. As the risk free rate of return is expected to finally start slowly rising in 2017 and gradually over time, there should be gradual downward pressure (ie selling) on the prices of dividend stocks and especially bonds meaning you'll get better yields if you wait. Then again, we could hit a recession and the central banks actually lower rates which is why I say you want to space your purchases out.\"" }, { "docid": "195767", "title": "", "text": "@BlackJack does a good answer of addressing the gains and when you are taxed on them and at what kind of rate. Money held in a brokerage account will usually be in a money-market fund, so you would own taxes on the interest it earned. There is one important consideration that must be understood for capitol Losses. This is called the Wash Sale Rule. This rule comes into affect if you sell a stock at a LOSS, and buy shares of the same stock within 30 days (before or after) the sale. A common tactic used to minimize taxes paid is to 'capture losses' when they occur, since these can be used to offset gains and lower your taxes. This is normally done by selling a stock in which you have a LOSS, and then either buying another similar stock, or waiting and buying back the stock you sold. However, if you are intending to buy back the same stock, you must not 'trigger' the Wash Sale Rule or you are forbidden to take the loss. Examples. Lets presume you own 1000 shares of a stock and it's trading 25% below where you bought it, and you want to capture the loss to use on your taxes. This can be a very important consideration if trading index ETF's if you have a loss in something like a S&P500 ETF, you would likely incur a wash sale if you sold it and bought a different S&P500 ETF from another company since they are effectively the same thing. OTOH, if you sold an S&P500 ETF and bought something like a 'viper''total stock market' ETF it should be different enough to not trigger the wash sale rule. If you are trying to minimize the taxes you pay on stocks, there are basically two rules to follow. 1) When a gain is involved, hold things at least a year before selling, if at all possible. 2) Capture losses when they occur and use to offset gains, but be sure not to trigger the wash sale rule when doing so." }, { "docid": "1577", "title": "", "text": "If I buy VUSA from one exchange, can I sell it in a different exchange, assuming my brokerage account lets me trade in both exchanges? Or is it somehow tied to the exchange I bought it from? This doesn't happen for all securities and between all stock exchanges. So that is dependent on broker and country. I checked for VUSA with Selftrade. They categorically refused allowing me to trade in VUSA in different exchanges. I can only buy and sell in same currency only, albeit sell(buy) in the same exchange where I buy(sell) from. Should be the same behaviour for all brokers for us mere mortals, if you are a bank or a millionaire than that might be a different question. The VUSA you quote is quoted in GBP in LSE and in EUR in AEX, and the ETF has been created by an Irish entity and has an Irish ISIN. As Chris mentioned below, happens between US and Canadian exchanges, but not sure it happens across all exchanges. You cannot deal in inter-listed stocks in LSE and NYSE. Since it's the same asset, its value should not vary across exchanges once you compensate for exchange rates, right? Yes, else it opens up itself for arbitrage (profit without any risk) which everybody wants. So even if any such instance occurs, either people will exploit it to make the arbitrage profit zero (security reflects the equilibrium price) or the profit from such transaction is so less, compared with the effort involved, that people will tend to ignore it. Anyways arbitrage profit is very difficult to garner nowadays, considering the super computers at work in the market who exploit these discrepancies, the moment they see them and bring the security right to the zero arbitrage profit point. If there's no currency risk because of #2, what other factors should I consider when choosing an exchange to trade in? Liquidity? Something else? Time difference, by the time you wake up to trade in Japan, the Japanese markets would have closed. Tax implications across multiple continents. Law of the land, providing protection to investors. Finding a broker dealing in markets you want to explore or dealing with multiple brokers. Regulatory headaches." }, { "docid": "395506", "title": "", "text": "No, at least not noticeably so. The majority of what HFT does is to take advantage of the fact that there is a spread between buy and sell orders on the exchange, and to instantly fill both orders, gaining relatively risk-free profit from some inherent inefficiencies in how the market prices stocks. The end result is that intraday trading of the non-HFT nature, as well as speculative short-term trading will be less profitable, since HFT will cause the buy/sell spread to be closer than it would otherwise be. Buying and holding will be (largely) unaffected since the spread that HFT takes advantage of is miniscule compared to the gains a stock will experience over time. For example, when you go to buy shares intending to hold them for a long time, the HFT might cost you say, 1 to 2 cents per share. When you go to sell the share, HFT might cost you the same again. But, if you held it for a long time, the share might have doubled or tripled in value over the time you held it, so the overall effect of that 2-4 cents per share lost from HFT is negligible. However, since the HFT is doing this millions of times per day, that 1 cent (or more commonly a fraction of a cent) adds up to HFTs making millions. Individually it doesn't affect anyone that much, but collectively it represents a huge loss of value, and whether this is acceptable or not is still a subject of much debate!" }, { "docid": "333425", "title": "", "text": "As mentioned by Dilip, you need to provide more details. In general for transacting on stocks; Long Term: If you hold the stock for more than one year then its long term and not taxable. There is a STT [Securities Transaction Tax] that is already deducted/paid during buying and selling of a stock. Short Term: If you hold the stock for less than one year, it's short term gain. This can be adjusted against the short term loss for the financial year. The tax rate is 10%. Day Trading: Is same as short term from tax point of view. Unless you are doing it as a full time business. If you have purchased multiple quantities of same stock in different quantities and time, then when you selling you have to arrive at profit or loss on FIFO basis, ie First in First Out" }, { "docid": "391156", "title": "", "text": "\"I can see two possibilities. Either a deal is struck that someone (the company itself, or a large owner) buys out the remaining shares. This is the scenario @mbhunter is talking about, so I won't go too deeply into it, but it simply means that you get money in your bank account for the shares in question the same as if you were to sell them for that price (in turn possibly triggering tax effects, etc.). I imagine that this is by far the most common approach. The other possibility is that the stock is simply de-listed from a public stock exchange, and not re-listed elsewhere. In this case, you will still have the stock, and it will represent the same thing (a portion of the company), but you will lose out on most of the \"\"market\"\" part of \"\"stock market\"\". That is, the shares will still represent a monetary value, you will have the same right to a portion of the company's profits as you do now, etc., but you will not have the benefit of the market setting a price per share so current valuation will be harder. Should you wish to buy or sell stock, you will have to find someone yourself who is interested in striking a deal with you at a price point that you feel comfortable with.\"" }, { "docid": "79777", "title": "", "text": "\"It's simply supply and demand. First, demand: If you're an importer trying to buy from overseas, you'll need foreign currency, maybe Euros. Or if you want to make a trip to Europe you'll need to buy Euros. Or if you're a speculator and think the USD will fall in value, you'll probably buy Euros. Unless there's someone willing to sell you Euros for dollars, you can't get any. There are millions of people trying to exchange currency all over the world. If more want to buy USD, than that demand will positively influence the price of the USD (as measured in Euros). If more people want to buy Euros, well, vice versa. There are so many of these transactions globally, and the number of people and the nature of these transactions change so continuously, that the prices (exchange rates) for these currencies fluctuate continuously and smoothly. Demand is also impacted by what people want to buy and how much they want to buy it. If people generally want to invest their savings in stocks instead of dollars, i.e., if lots of people are attempting to buy stocks (by exchanging their dollars for stock), then the demand for the dollar is lower and the demand for stocks is higher. When the stock market crashes, you'll often see a spike in the exchange rate for the dollar, because people are trying to exchange stocks for dollars (this represents a lot of demand for dollars). Then there's \"\"Supply:\"\" It may seem like there are a fixed number of bills out there, or that supply only changes when Bernanke prints money, but there's actually a lot more to it than that. If you're coming from Europe and want to buy some USD from the bank, well, how much USD does the bank \"\"have\"\" and what does it mean for them to have money? The bank gets money from depositors, or from lenders. If one person puts money in a deposit account, and then the bank borrows that money from the account and lends it to a home buyer in the form of a mortgage, the same dollar is being used by two people. The home buyer might use that money to hire a carpenter, and the carpenter might put the dollar back into a bank account, and the same dollar might get lent out again. In economics this is called the \"\"multiplier effect.\"\" The full supply of money being used ends up becoming harder to calculate with this kind of debt and re-lending. Since money is something used and needed for conducting of transactions, the number of transactions being conducted (sometimes on credit) affects the \"\"supply\"\" of money. Demand and supply blur a bit when you consider people who hoard cash. If I fear the stock market, I might keep all my money in dollars. This takes cash away from companies who could invest it, takes the cash out of the pool of money being used for transactions, and leaves it waiting under my mattress. You could think of my hoarding as a type of demand for currency, or you could think of it as a reduction in the supply of currency available to conduct transactions. The full picture can be a bit more complicated, if you look at every way currencies are used globally, with swaps and various exchange contracts and futures, but this gives the basic story of where prices come from, that they are not set by some price fixer but are driven by market forces. The bank just facilitates transactions. If the last price (exchange rate) is 1.2 Dollars per Euro, and the bank gets more requests to buy USD for Euros than Euros for USD, it adjusts the rate downwards until the buying pressure is even. If the USD gets more expensive, at some point fewer people will want to buy it (or want to buy products from the US that cost USD). The bank maintains a spread (like buy for 1.19 and sell for 1.21) so it can take a profit. You should think of currency like any other commodity, and consider purchases for currency as a form of barter. The value of currency is merely a convention, but it works. The currency is needed in transactions, so it maintains value in this global market of bartering goods/services and other currencies. As supply and demand for this and other commodities/goods/services fluctuate, so does the quantity of any particular currency necessary to conduct any of these transactions. A official \"\"basket of goods\"\" and the price of those goods is used to determine consumer price indexes / inflation etc. The official price of this particular basket of goods is not a fundamental driver of exchange rates on a day to day basis.\"" }, { "docid": "300139", "title": "", "text": "\"In summary: In long form: Spreads and shorts are not allowed in cash accounts, except for covered options. Brokers will allow clients to roll option positions in a single transaction, which look like spreads, but these are not actually \"\"sell to open\"\" transactions. \"\"Sell to open\"\" is forbidden in cash accounts. Short positions from closing the long half of a covered trade are verboten. Day-trading is allowed in both margin and cash accounts. However, \"\"pattern day-trading\"\" only applies to margin accounts, and requires a minimum account balance of $25,000. Cash accounts are free to buy and sell the same security on the same day over and over, provided that there is sufficient buying power to pay for opening a new position. Since proceeds are held for both stock and option sales in a cash account, that means buying power available at the start of the day will drop with each purchase and not rise again until settlement. Unsettled funds are available immediately within margin accounts, without restriction. In cash accounts, using unsettled funds to purchase securities will require you to hold the new position until funds settle -- otherwise your account will be blocked for \"\"free-riding\"\". Legally, you can buy securities in a cash account without available cash on deposit with the broker, but most brokers don't allow this, and some will aggressively liquidate any position that you are somehow able to enter for which you didn't have available cash already on deposit. In a margin account, margin can help gloss over the few days between purchase and deposit, allowing you to be somewhat more aggressive in investing funds. A margin account will allow you to make an investment if you feel the opportunity is right before requiring you to deposit the funds. See a great opportunity? With sufficient margin, you can open the trade immediately and then run to the bank to deposit funds, rather than being stuck waiting for funds to be credited to your account. Margin accounts might show up on your credit report. The possibility of losing more than you invested, having positions liquidated when you least expect it, your broker doing possibly stupid things in order to close out an over-margined account, and other consequences are all very serious risks of margin accounts. Although you mentioned awareness of this issue, any answer is not complete with mentioning those risks.\"" }, { "docid": "450760", "title": "", "text": "\"I know its not legal to have open long and short position on specific security (on two stock exchanges - NSE/BSE) There is nothing illegal about it. There are prescribed ways on how this is addressed. In Cash Segment / Intra Day trades: One can short sell a security. If by end of day he does not buy the security; it goes into Auction. The said security is purchased on your behalf. Any profit or loss arising out of this is charged to you. Similarly one can buy a security; if one does not pay the amount by end of day; it would go into auction and sold. Any profit or loss arising out of this is charged to you. If you short sell a security on one exchange; you have to buy it on same exchange. If you buy on other exchange; it will not be adjusted against this short position. Also is it legal to have long position on stock and short its derivative (future/option)? There are no restrictions. Edit: @yety Party A shorts 10 shares of HDFC today in Intra-Day Cash Segment purchased by Party B. Rather than buying back 10 shares or allowing it to go into auction... Party A borrows 10 HDFC Shares from \"\"X\"\" via SLB for a period of say 6 months [1 month to 1 year]. This is recorded as Party A obligation to \"\"X\"\". These 10 borrowed shares are transferred to Party B. So Party \"\"X\"\" doesn't have any HDFC shares at this point in time. However in exchange, Party X receives fees for borrowing from Party A. If there is dividend, are declared, Company pays Party B. However SLB recovers identical amount from Party A and pays Party X. If there is 1:1 split, now party A owes Party X 20 HDFC Shares. On maturity [after 6 months], Party A has to buy these from market and given back the borrowed shares to Party X. If there are some other corporate actions, i.e. mergers / amalgamations ... the obligation of Party A to Party X is closed immediately and position settled. Of course there are provisions whereby party A can pay back the shares earlier or party X can ask for shares earlier and there are rules/trades/mechanisms to facilitate this.\"" }, { "docid": "55920", "title": "", "text": "You have plenty of good answers, but I want to add something that might help you grow your intuition on stocks. There are a lot of differences between the example I am going to give and how the stock market actually runs, but the basic concepts are the same. Lets say your friend asks you if he can borrow some money to start up a company, in exchange you will have some ownership in this company. You have essentially just bought yourself some stock. Now as your friend starts to grow, he is doing well, but he needs more cash to buy assets in order to grow the company more. He is forced with an option, either give you some of the profits, or buy these assets sooner. You decide you don't really need the money right now, and think he can do a lot better with spending the money to buy stuff. This is essentially the same as a company electing to not pay dividends, but instead invest into the future. You as a stock holder are fine with it since you know the money is going toward investing in the future. Even if you never get paid a dividend, as a company grows, you can then turn around and sell the stock to someone else for more money then you gave originally. Of course you always take the risk of having the company failing and loosing some if not all of your investment, but that is just the risk of the market." }, { "docid": "490584", "title": "", "text": "There are multiple factors at play that drive stock price movements, but one that can be visualized is that stocks can be priced relative to other (similar stocks). When one stock price goes up without fundamental changes (i.e. daily market noise/movements), it becomes slightly more expensive relative to it's peers. Opportunists will sell the now slightly more expensive stock, while others may buying the slightly cheaper (relatively) peer stock. Imagine millions of transactions like this happening throughout each hour, downward selling pressure on a stock that rises too fast in value relative to it's peers or the market, and upward buying pressure on stocks that are relatively cheaper than it's peers. It pushes two stocks towards an equilibrium that is directionally the same. Another way to think of it is lets say tomorrow there is $10B in net new dollars moved into buy orders for stocks that comes from net selling of bonds (this is also partly why bonds/stocks are generally inversely related). That money goes to buys stocks ABC, XYZ, EFG. As the price of those goes up with more buying pressure, stocks JKL, MNO, PQR are relatively a tad cheaper, so some money starts to flow into there. Repeat until you get a large majority of the stocks that buyers are willing to buy and you can see why stocks move in the same direction a lot of times." }, { "docid": "87331", "title": "", "text": "As far as I know, the AMT implications are the same for a privately held company as for one that is publicly traded. When I was given my ISO package, it came with a big package of articles on AMT to encourage me to exercise as close to the strike price as possible. Remember that the further the actual price at the time of purchase is from the strike price, the more the likely liability for AMT. That is an argument for buying early. Your company should have a common metric for determining the price of the stock that is vetted by outside sources and stable from year to year that is used in a similar way to the publicly traded value when determining AMT liability. During acquisitions stock options often, from what I know of my industry, at least, become options in the new company's stock. This won't always happen, but its possible that your options will simply translate. This can be valuable, because the price of stock during acquisition may triple or quadruple (unless the acquisition is helping out a very troubled company). As long as you are confident that the company will one day be acquired rather than fold and you are able to hold the stock until that one day comes, or you'll be able to sell it back at a likely gain, other than tying up the money I don't see much of a downside to investing now." }, { "docid": "567383", "title": "", "text": "I would suggest following your quote and having a read of the web page supplied, that buys then sells or sells short then buys (the same security on the same day) four or more times in five business days, ... So it is a two way transaction that counts as 'one'." }, { "docid": "389329", "title": "", "text": "Consider the mechanic which actually drives the 'price' of a stock. In simplest terms, the 'price' of a stock is the price at which the most recent trade occurred. ie: if the price of IBM is $100/share, that means the last time someone bought IBM stock, they paid $100. Above and below the 'spot price', are dozens/hundreds/thousands of buyers and sellers who have placed orders that no one is yet willing to match. ie: if IBM's spot price is at $100, there could still be 10,000 people willing to sell for $101 (called the 'ask' price, for the lowest price someone is currently willing to sell at), and 15,000 willing to buy for $99 (called the 'bid' price, for the highest price someone is currently willing to buy for). Until someone is willing to buy for $101, then no one will be able to sell at $101. Until someone is willing to sell for $99, no one will be able to buy for $99. Typically orders are placed in the market at a particular limit. Meaning that those orders to buy at $99/sell at $101 are already in the 'system', and will be matched immediately as soon as someone is willing to meet the price on the other side. Now consider general market economics: high demand drives up price, and high supply drives down price. If the details above for IBM were yesterday, and today some news came out that IBM was laying off employees, imagine that another 10,000 people who held shares wanted to sell. Now there would be 20,000 sellers and only 15,000 buyers. If those new sellers were aggressive about wanting to sell, they would have to drop their price to $99, to match the highest buyers in the market. Put together, this means that as more sellers enter the market, supply of shares increases, driving down price. Conversely, as more buyers enter the market, demand for shares increases, driving up share price. As a result of the above, you can say that (all else being equal) if price for a stock goes up, there were more buyers that day, and if price goes down, there were more sellers that day. On the face of it, that is not necessarily true, because you could have the same number of buyers and sellers, one side could have simply decreased/increased their acceptable price to match the other side." }, { "docid": "310636", "title": "", "text": "You can*, if the market is open, in a normal trading phase (no auction phase), works, and there is an existing bid or offer on the product you want to trade, at the time the market learns of your order. Keep in mind there are 2 prices: bid and offer. If the current bid and current offer were the same, it would immediately result in a trade, and thus the bid and offer are no longer the same. Market Makers are paid / given lower fees in order to maintain buy and sell prices (called quotes) at most times. These conditions are usually all true, but commonly fail for these reasons: Most markets have an order type of market order that says buy/sell at any price. There are still sanity checks put in place on the price, with the exact rules for valid prices depending on the stock, so unless it's a penny stock you won't suddenly pay ten times a stock's value. *The amount you can buy sell is limited by the quantity that exists on the bid and offer. If there is a bid or offer, the quantity is always at least 1." }, { "docid": "71713", "title": "", "text": "I agree with the other comments that you should not buy/hold your company stock even if given at a discount. If equity is provided as part of the compensation package (Options/Restrictive Stock Units RSU)then this rule does not apply. As a matter of diversification, you should not have majority equity stake of other companies in the same sector (e.g. technology) as your employer. Asset allocation and diversification if done in the right way, takes care of the returns. Buying and selling on the same day is generally not allowed for ESPP. Taxation headaches. This is from personal experience (Cisco Systems). I had options issued in Sept 2008 at 18$ which vested regularly. I exited at various points - 19$,20$,21$,23$ My friend held on to all of it hoping for 30$ is stuck. Options expire if you leave your employment. ESPP shares though remain." } ]

[ { "docid": "212687", "title": "", "text": "you need minimum of 25k otherwise youll reach a limit. you have to wait 3 days for the sale to clear unless youre on margin. dont buy anything based on idiots on twitter or the internet. however, theres some good people to follow though that know what theyre doing. dont listen to this guy saying that etrade or those platforms arent fast enough. they all offer level 2 prices so i dont know what hes talking about. successful day traders arent buying and selling a stock every single day. theres not always something to buy and sell...unless youre just gambling, and in that case just go to the casino and lose your money there." } ]

[ { "docid": "48718", "title": "", "text": "\"You can hold a wide variety of investments in your TFSA account, including stocks such as SLF. But if the stocks are being purchased via a company stock purchase plan, they are typically deposited in a regular margin account with a brokerage firm (a few companies may issue physical stock certificates but that is very rare these days). That account would not be a TFSA but you can perform what's called an \"\"in-kind\"\" transfer to move them into a TFSA that you open with either the same brokerage firm, or a different one. There will be a fee for the transfer - check with the brokerage that currently holds the stock to find out how costly that will be. Assuming the stock gained in value while you held it outside the TFSA, this transfer will result in capital gains tax that you'll have to pay when you file your taxes for the year in which the transfer occurs. The tax would be calculated by taking the value at time of transfer, minus the purchase price (or the market value at time of purchase, if your plan allowed you to buy it at a discounted price; the discounted amount will be automatically taxed by your employer). 50% of the capital gain is added to your annual income when calculating taxes owed. Normally when you sell a stock that has lost value, you can actually get a \"\"capital loss\"\" deduction that is used to offset gains that you made in other stocks, or redeemed against capital gains tax paid in previous years, or carried forward to apply against gains in future years. However, if the stock decreased in value and you transfer it, you are not eligible to claim a capital loss. I'm not sure why you said \"\"TFSA for a family member\"\", as you cannot directly contribute to someone else's TFSA account. You can give them a gift of money or stocks, which they can deposit in their TFSA account, but that involves that extra step of gifting, and the money/stocks become their property to do with as they please. Now that I've (hopefully) answered all your questions, let me offer you some advice, as someone who also participates in an employee stock purchase plan. Holding stock in the company that you work for is a bad idea. The reason is simple: if something terrible happens to the company, their stock will plummet and at the same time they may be forced to lay off many employees. So just at the time when you lose your job and might want to sell your stock, suddenly the value of your stocks has gone way down! So you really should sell your company shares at least once a year, and then use that money to invest in your TFSA account. You also don't want to put all your eggs in one basket - you should be spreading your investment among many companies, or better yet, buy index mutual funds or ETFs which hold all the companies in a certain index. There's lots of good info about index investing available at Canadian Couch Potato. The types of investments recommended there are all possible to purchase inside a TFSA account, to shelter the growth from being taxed. EDIT: Here is an article from MoneySense that talks about transferring stocks into a TFSA. It also mentions the importance of having a diversified portfolio!\"" }, { "docid": "195152", "title": "", "text": "Put options are contracts to sell. You pay me a fee for the right to put the stock (or other underlying security) in my hands if you want to. That happens on a specific date (the strike date) and a specified price (the strike price). You can decide not to exercise that right, but I must follow through and let you sell it to me if you want to. Put options can be used by the purchaser to cap losses. For example: You purchase a PUT option for GE Oct19 13.00 from me. On October 19th, you can make me let you sell your GE stock to me for $13.00 a share. If the price for GE has fallen to $12.00, that would be a good idea. If its now at $15.00 a share, you will probably keep the GE or sell it at the current market price. Call options are contracts to buy. The same idea only in the other direction: You pay me a fee for the right to call the stock away from me. Calls also have a strike date and strike price. Like a put, you can choose not to exercises it. You can choose to buy the stock from me (on the strike date for the strike price), but I have to let you buy it from me if you want to. For example: You purchase a CALL option for GE Oct19 16.00 option from me. On October 19th, you can buy my GE stock from me for $16.00 a share. If the current price is $17.50, you should make me let you buy if from me for $16.00. If its less than $16.00, you could by it at the current market price for less. Commonly, options are for a block of 100 shares of the underlying security. Note: this is a general description. Options can be very complicated. The fee you pay for the option and the transaction fees associated with the shares affects whether or not exercising is financially beneficial. Options can be VERY RISKY. You can loose all your money as there is no innate value in the option, only how it relates to the underlying security. Before your brokerage will let you trade, there are disclosures you must read and affirm that you understand the risk." }, { "docid": "278630", "title": "", "text": "Firstly what are you trading that you could lose more than you put in? If you are simply trading stocks you will not lose more than you put in, unless you are trading on margin. A limit order is basically that, a limit on the maximum price you want your buy order bought at or the minimum price you want your sell order sold at. If you can't be glued to the screen all day when you place a limit order, and the market moves the opposite way, you may miss out on your order being executed. Even if you can be in front of the screen all day, you then have to decide if you want to chase the market of miss out on your purchase or sale. For example, if a stock is trading at $10.10 and you put a limit buy order to buy 1000 shares at or below $10.00 and the price keeps moving up to $10.20, then $10.30 and then $10.50, until it closes the day at $11.00. You then have the choice during the day to miss out on buying the shares or to increase your limit order in order to buy at a higher price. Sometime if the stock is not very liquid, i.e. it does not trade very often and has low volume, the price may hit $10.00 and you may only have part of your order executed, say 500 out of your 1000 shares were bought. This may mean that you may have to increase the price of your remaining order or be happy with only buying 500 shares instead of 1000. The same can happen when you are selling (but in reverse obviously). With market order, however, you are placing a buy order to buy at the next bid price in the depth or a sell order to sell at the next offer price in the depth. See the market depth table below: Note that this price depth table is taken before market open so it seems that the stock is somewhat illiquid with a large gap between the first and second prices in the buyers (bid) prices. When the market opened this gap is closed, as WBC is a major Australian bank and is quite liquid. (the table is for demonstration purposes only). If we pretend that the market was currently open and saw the current market depth for WBC as above, you could decide to place a limit sell order to sell 1000 shares at say $29.91. You would sell 100 shares straight away but your remaining 900 sell order will remain at the top of the Sellers list. If other Buyers come in at $29.91 you may get your whole sale completed, however, if no other Buyers place orders above $29.80 and other Sellers come into the market with sell orders below $29.91, your remaining order may never be executed. If instead you placed a market sell order you would immediately sell 100 shares at $29.91 and the remaining 900 shares at $29.80. (so you would be $99 or just over 0.3% worse off than if you were able to sell the full 1000 shares at $29.91). The question is how low would you have had to lower your limit order price if the price for WBC kept on falling and you had to sell that day? There are risks with whichever type of order you use. You need to determine what the purpose of your order is. Is it to get in or out of the market as soon as possible with the possibility of giving a little bit back to the market? Or is it to get the price you want no matter how long it takes you? That is you are willing to miss out on buying the shares (can miss out on a good buy if the price keeps rising for weeks or months or even years) or you are willing to miss out on selling them right now and can wait for the price to come back up to the price you were willing to sell at (where you may miss out on selling the shares at a good price and they keep on falling and you give back all your profits and more). Just before the onset of the GFC I sold some shares (which I had bought a few years earlier at $3.40) through a market order for $5.96. It had traded just above $6 a few days earlier, but if instead of a market order I had placed a limit order to sell at $6.00 or more I would have missed out on the sale. The price never went back up to $6 or above, and the following week it started dropping very quickly. It is now trading at about $1.30 and has never gone back above $2.00 (5.5 years later). So to me placing a limit order in this case was very risky." }, { "docid": "292159", "title": "", "text": "\"Scenario 1 - When you sell the shares in a margin account, you will see your buying power go up, but your \"\"amount available to withdraw\"\" stays the same until settlement. Yes, you can reallocate the same day, no need to wait until settlement. There is no margin interest for this scenario. Scenario 2 - If that stock is marginable to 50%, and all you have is $10,000 in that stock, you can buy another $10,000. Once done, you are at 50% margin, exactly.\"" }, { "docid": "395650", "title": "", "text": "A moving average will act as support or resistance to a stock only when the stock is trending. The way it acts as support for instance is similar to a trend-line. Take the daily chart of CBA over the last 6 months: The first chart shows CBA with an uptrend support line. The second chart shows CBA during the same period with 50 day EMA as a support. Both can be used as support for the uptrend. Generally you can used these types of support (or resistance in a downtrend) to determine when to buy a stock and when to sell a stock. If I was looking to buy CBA whilst it was uptrending, one strategy I could use was to wait until it hit or got very close to the support trend-line and then buy as it re-bounces back up. If I already held the stock I could use a break down below the uptrend support line as a stop to exit out of the stock." }, { "docid": "239998", "title": "", "text": "Owning a stock via a fund and selling it short simultaneously should have the same net financial effect as not owning the stock. This should work both for your personal finances as well as the impact of (not) owning the shares has on the stock's price. To use an extreme example, suppose there are 4 million outstanding shares of Evil Oil Company. Suppose a group of concerned index fund investors owns 25% of the stock and sells short the same amount. They've borrowed someone else's 25% of the company and sold it to a third party. It should have the same effect as selling their own shares of the company, which they can't otherwise do. Now when 25% of the company's stock becomes available for purchase at market price, what happens to the stock? It falls, of course. Regarding how it affects your own finances, suppose the stock price rises and the investors have to return the shares to the lender. They buy 1 million shares at market price, pushing the stock price up, give them back, and then sell another million shares short, subsequently pushing the stock price back down. If enough people do this to effect the share price of a stock or asset class, the managers at the companies might be forced into behaving in a way that satisfies the investors. In your case, perhaps the company could issue a press release and fire the employee that tried to extort money from your wife's estate in order to win your investment business back. Okay, well maybe that's a stretch." }, { "docid": "597401", "title": "", "text": "\"FINRA Description of Day Trading rules The rules adopt a new term \"\"pattern day trader,\"\" which includes any margin customer that day trades (buys then sells or sells short then buys the same security on the same day) four or more times in five business days, provided the number of day trades are more than six percent of the customer's total trading activity for that same five-day period. So, there's several ways to avoid being labeled a pattern day trader:\"" }, { "docid": "532485", "title": "", "text": "\"How often do investors really lose money? All the time. And it's almost always reason number 1. Let's start with the beginner investor, the person most likely to make some real losses and feel they've \"\"learned\"\" that investing is no better than Vegas. This person typically gets into it because they've been given a hot stock tip, or because they've received a windfall, decided to give this investing lark a try, and bought stock in half a dozen companies whose names they know from their everyday lives (\"\"I own a bit of Google! How cool is that?\"\"). These are people who don't understand the cyclic nature of the market (bear gives way to bull gives way to bear, and on and on), and so when they suddenly see that what was $1000 is now $900 they panic and sell everything. Especially as all the pundits are declaring the end of the world (they always do). Until the moment they sold, they only had paper losses. But they crystallised those losses, made them real, and ended at a loss. Then there's the trend-follower. These are people who don't necessarily hit a bear market, or even a downturn, in their early days, but never really try to learn how the market works in any real sense. They jump into every hot stock, then panic and sell out of anything that starts to go the wrong way. Both of these reactive behaviours seem reasonable in the moment (\"\"It's gone up 15% in the past week? Buy buy buy!\"\" and \"\"I've lost 10% this month on that thing? Get rid of it before I lose any more!\"\"), but they work out over time to lots of buying high and selling low, the very opposite of what you want to do. Then there's the day-trader. These are people who sit in their home office, buying and selling all day to try and make lots of little gains that add up to a lot. The reason these people don't do well in the long run is slightly different to the other examples. First, fees. Yes, most platforms offer a discount for \"\"frequent traders\"\", but it still ain't free. Second, they're peewees playing in the big leagues. Of course there are exceptions who make out like bandits, but day traders are playing a different game than the people I'd call investors. That game, unlike buy-and-hold investing, is much more like gambling, and day-traders are the enthusiastic amateurs sitting down at a table with professional poker players – institutional investors and the computers and research departments that work for them. Even buy-and-hold investors, even the more sophisticated ones, can easily realise losses on a given stock. You say you should just hold on to a stock until it goes back up, but if it goes low enough, it could take a decade or more to even just break even again. More savvy stock-pickers will have a system worked out, something like \"\"ok, if it gets down to 90% of what I bought it for, I cut my losses and sell.\"\" This is actually a sensible precaution, because defining hard rules like that helps​ you eliminate emotion from your investing, which is incredibly important if you want to avoid becoming the trend-follower above. It's still a loss, but it's a calculated one, and hopefully over time the exception rather than the rule. There are probably as many other ways to lose money as there are people investing, but I think I've given you a taste. The key to avoiding such things is understanding the psychology of investing, and defining the rules that you'll follow no matter what (as in that last example). Or just go learn about index investing. That's what I did.\"" }, { "docid": "542765", "title": "", "text": "Using Fundamental and Technical Analysis together is actually a good idea for longer term trading of up to 6 months or longer. The whole idea behind trading with Technical Analysis is to increase the probabilities of a trade going in the desired direction by using uncorrelated indicators that produce the same signal to buy or sell at the same time. For example, you might use a Moving Average (MA) as a buy signal when the price falls for a few days, hits the MA and then reverses and starts moving back up. If however, you also include a Stochastic Oscillator (SO) to indicate when the stock is oversold (under 20%), and if the price rebounds from the MA average at the same time as the Stochastic is crossing over in the oversold position, then this may be a higher probability trade. If you also only trade stocks that are Fundamentally healthy (as fundamentally good stocks are more likely to go up than fundamentally bad stocks) then this might increase the probabilities again. Then if you only buy when the market as a whole is moving up, then this will increase your chances again. A few weeks ago at a seminar, the presenter totalled the men in the room to be 76 and the women in the room to be 8. He then asked what will most likely be the next person to walk in the room - a man or a woman? The statistics are on the side of a wan walking in next. This is what we try to do with Technical Analysis, increase our chances when we take a trade. Of course a woman could be the next person to walk in the room, just like any trade can go against you, and this is why we use money management and risk management and take a small loss when a trade does go against you. Lets look at an example where you could incorporate FA with TA to increase your chances of profits: Above is a candlestick chart of Select Harvest (SHV), the green line above the price is the perceived value, the pink line is the 40 day MA, the blue line is the EPS, and the white lines is the Stochastic Oscillator (above 80% being overbought and below 20% is oversold). From Feb 2015 to start of Aug 2015 the stock was uptrending, since then the price reversed and started to downtrend. The stock was determined to be fundamentally good early in 2015 with the perceived value gradually increasing and greater than the share price, and the EPS starting to increase regularly from mid April. Thus, as the stock is seen as fundamentally healthy any price reversal in the vicinity of the MA could be seen as a buy opportunity. In fact there where 2 such opportunities on 31st March and 11th June where price had reversed and rebounded off the MA whist the SO crossed over in or near the oversold area. The price did reverse and then rebounded off the MA again on 9th July, however the SO was not in or near the oversold area on this occasion, so not as high in probability terms. The price still rebounded and went up again, however another momentum indicator (not shown here) shows some bearish divergence in this case - so another reason to possibly keep away at this point in time. A good signal to get out of the trade, that is your stop loss has not already taken you out, is when the price breaks and closes below the MA line. This occurred on 7th August. So if we had bought on the first signal on 31st March for $7.41 and sold when the priced broke through the MA on 7th August for $11.76, we would have made a profit of approx. 59% in just over 4 months. If bought on the second signal on 11th June for $9.98 and again sold on 7th August for $11.76, we would have made about 18% in under 2 months. So the fundamentals, the Price (in relation to MA) and the SO where all lining up to provide two high probability trades. Of course you would need to incorporate you risk management (including stops) in case the price did not continue upwards after you bought. If the market is also moving up on the day of the signal this will further increase your chances. Unless you day trade, which I would avoid, a good way to enter your trades after a signal is to enter a stop buy order after market close to buy if the price moves above the high of the signal day. That way if the market and the stock open and move lower during the day after the signal you avoid entering the trade altogether. This can be incorporated as part of your risk management and trading rules. After the price broke down through the MA we can see that a downtrend commenced which is still current today (in fact I just took a short trade on this stock yesterday). We can also see that the perceived value, whilst still above the price, has reached a peak and is currently moving downwards and the EPS after being flat for a few months has just moved down for the first time in 10 months. So maybe the fundamentals are starting to waver a bit on this stock. It may be a good stock to continue shorting into the future. So basically you can continue using Fundamental Analysis to select which stocks to buy, place them in a watch-list, and then use Technical Analysis to determine when these stocks are starting to uptrend and use a combination of uncorrelated indicators to produce higher probability signals for when to enter your trades." }, { "docid": "98510", "title": "", "text": "There's a possibility to lose money in exchange rate shifts, but just as much chance to gain money (Efficient Market Hypothesis and all that). If you're worried about it, you should buy a stock in Canada and short sell the US version at the same time. Then journal the Canadian stock over to the US stock exchange and use it to settle your short sell. Or you can use derivatives to accomplish the same thing." }, { "docid": "352346", "title": "", "text": "What are Pivot Points? Pivot Points indicate price levels that are of significance in technical analysis of securities. Pivot Points are used to provide clarity for a trader as they are a predictive indicator of where a security might go. There are at least 6 different types of Pivot Points (Woodie Pivot Point, Fibonacci Pivot, Demark etc..) and they are different based on their formulas but generally serve the same concept. I will be answering your question using the Camarilla Pivot Point formula. Camarilla Pivot Point Formula Generally any Pivot Point formula uses a combination of the Open, High, Low and Close of the previous timeframe. Since you are technically a swing trader indicated by say between a couple of days to a couple of weeks, as I don't want to do day trading you should use a weekly 5 to 30 minute chart but you can also use a daily chart as well. So for example if you use a daily chart, you would use the Open, High, Low and Close of the previous day. Example of fictitious stock: MOSEX (Money Stack Exchange) 01/14/16: Open: 10.25, High: 12.55, Low: 9.65, Close: 11.50 On 01/15/16: R4 Level: 13.10, R3 Level: 12.30, R2 Level: 12.03, R1 Level: 11.77, Pivot Point: 11.23, S1 Level: 11.23, S2 Level: 10.97, S3 Level: 10.70, S4 Level: 9.91 R = Resistance, S = Support How to identify these Pivot Points? Most charting software already have built in overlays that will identify the pivot points for you but you can always find and draw them yourself with an annotation tool. Since we are using the Camarilla Pivot Point formula, the important Pivot Point levels are the R4 which is considered as the Breakout Pivot, the S4 which is considered as the Breakdown Pivot. R3 and S3 are Reversal Pivot Points. Once identify the Pivot Points how should you proceed in a trade? This is the million dollar question and without spoon feeding you requires you to come up with your own strategy. To distinguish yourself from being a novice and pro trader is to have a strategy in a trade. Now I don't really have the time to look for actual charts to provide examples with but generally this is what you should look for to proceed in a trade: Potential Buy/Short Signals: Potential Sell Signals: If a stock moves above the R3 Level but then crosses below it, this would be a sell signal. This is confirmed when their is a lower lower then the candle that first crosses below it. Sell a stock when S4 Level is confirmed. See above for the confirmation. Other Useful Tips: Use the Pivot Point as your support or resistance. The Pivot Point levels can be used for your stop loss. For example, with an S3 reversal buy signal, the S4 should be used as a stop loss. Conversely, the Pivot Point levels can also be used for your target prices. For example, with an S3 reversal buy signal, you should take some profits at R3 level. You should also use a combination of other indicators to give you more information to confirm if a signal is correct. Examples of a good combination is the RSI, MACD and Moving Averages. Read that book in my comment above!!" }, { "docid": "490584", "title": "", "text": "There are multiple factors at play that drive stock price movements, but one that can be visualized is that stocks can be priced relative to other (similar stocks). When one stock price goes up without fundamental changes (i.e. daily market noise/movements), it becomes slightly more expensive relative to it's peers. Opportunists will sell the now slightly more expensive stock, while others may buying the slightly cheaper (relatively) peer stock. Imagine millions of transactions like this happening throughout each hour, downward selling pressure on a stock that rises too fast in value relative to it's peers or the market, and upward buying pressure on stocks that are relatively cheaper than it's peers. It pushes two stocks towards an equilibrium that is directionally the same. Another way to think of it is lets say tomorrow there is $10B in net new dollars moved into buy orders for stocks that comes from net selling of bonds (this is also partly why bonds/stocks are generally inversely related). That money goes to buys stocks ABC, XYZ, EFG. As the price of those goes up with more buying pressure, stocks JKL, MNO, PQR are relatively a tad cheaper, so some money starts to flow into there. Repeat until you get a large majority of the stocks that buyers are willing to buy and you can see why stocks move in the same direction a lot of times." }, { "docid": "71713", "title": "", "text": "I agree with the other comments that you should not buy/hold your company stock even if given at a discount. If equity is provided as part of the compensation package (Options/Restrictive Stock Units RSU)then this rule does not apply. As a matter of diversification, you should not have majority equity stake of other companies in the same sector (e.g. technology) as your employer. Asset allocation and diversification if done in the right way, takes care of the returns. Buying and selling on the same day is generally not allowed for ESPP. Taxation headaches. This is from personal experience (Cisco Systems). I had options issued in Sept 2008 at 18$ which vested regularly. I exited at various points - 19$,20$,21$,23$ My friend held on to all of it hoping for 30$ is stuck. Options expire if you leave your employment. ESPP shares though remain." }, { "docid": "1577", "title": "", "text": "If I buy VUSA from one exchange, can I sell it in a different exchange, assuming my brokerage account lets me trade in both exchanges? Or is it somehow tied to the exchange I bought it from? This doesn't happen for all securities and between all stock exchanges. So that is dependent on broker and country. I checked for VUSA with Selftrade. They categorically refused allowing me to trade in VUSA in different exchanges. I can only buy and sell in same currency only, albeit sell(buy) in the same exchange where I buy(sell) from. Should be the same behaviour for all brokers for us mere mortals, if you are a bank or a millionaire than that might be a different question. The VUSA you quote is quoted in GBP in LSE and in EUR in AEX, and the ETF has been created by an Irish entity and has an Irish ISIN. As Chris mentioned below, happens between US and Canadian exchanges, but not sure it happens across all exchanges. You cannot deal in inter-listed stocks in LSE and NYSE. Since it's the same asset, its value should not vary across exchanges once you compensate for exchange rates, right? Yes, else it opens up itself for arbitrage (profit without any risk) which everybody wants. So even if any such instance occurs, either people will exploit it to make the arbitrage profit zero (security reflects the equilibrium price) or the profit from such transaction is so less, compared with the effort involved, that people will tend to ignore it. Anyways arbitrage profit is very difficult to garner nowadays, considering the super computers at work in the market who exploit these discrepancies, the moment they see them and bring the security right to the zero arbitrage profit point. If there's no currency risk because of #2, what other factors should I consider when choosing an exchange to trade in? Liquidity? Something else? Time difference, by the time you wake up to trade in Japan, the Japanese markets would have closed. Tax implications across multiple continents. Law of the land, providing protection to investors. Finding a broker dealing in markets you want to explore or dealing with multiple brokers. Regulatory headaches." }, { "docid": "106324", "title": "", "text": "I don't know why stocks in some industries tend to have lower prices per share than others. It doesn't really matter much. Whether a company has 1,000,0000 shares selling for $100 each, or 10,000,000 shares selling for $10 each, either way the total value is the same. Companies generally like to keep the share price relatively low so that if someone wants to buy a small amount, they can. Like if the price was $10,000 per share, than an investor with less than $10,000 to put in that one stock would be priced out of the market. If it's $10, then if someone wants $10 they can buy one share, and if someone wants $10,000 they can buy 1000 shares. As to why energy stocks are volatile, I can think of several reasons. One, in our current world, energy is highly susceptible to politics. A lot of the world's energy comes from the Middle East, which is a notoriously unstable region. Any time there's conflict there, energy supplies from the region become uncertain. Oil-producing countries may embargo countries that they don't like. A war will, at the very least, interfere with transportation and shipping, and may result in oil wells being destroyed. Etc. Two, energy is consumed when you use it, and most consumers have very limited ability to stockpile. So you're constantly buying the energy you need as you need it. So if demand goes down, it is reflected immediately. Compare this to, say, clothing. Most people expect to keep the same clothes for years, wearing them repeatedly. (Hopefully washing them now and then!) So if for some reason you decided today that you only need three red shirts instead of four, this might not have any immediate impact on your buying. It could be months before you would have bought a new red shirt anyway. There is a tendency for the market to react rather slowly to changes in demand for shirts. But with energy, if you decide you only need to burn 3 gallons of gas per week instead of 4, your consumption goes down immediately, within days. Three, really adding to number two, energy is highly perishable, especially some forms of energy. If a solar power station is capable of producing 10 megawatts but today there is only demand for 9 megawatts, you can't save the unused megawatt for some future time when demand is higher. It's gone. (You can charge a battery with it, but that's pretty limited.) You can pile up coal or store natural gas in a tank until you need it, but you can't save the output of a power plant. Note numbers two and three also apply to food, which is why food production is also very volatile." }, { "docid": "403864", "title": "", "text": "Like an S&amp;P 500 ETF? So you're getting in some cash inflow each day, cash outflows each day. And you have to buy and sell 500 different stocks, at the same time, in order for your total fund assets to match the S&amp;P 500 index proportions, as much as possible. At any given time, the prices you get from the purchase/sale of stock is probably going to be somewhat different than the theoretical amounts you are supposed to get to match, so it's quite a tangle. This is my understanding of things. Some funds are simpler - a Dow 30 fund only has 30 stocks to balance out. Maybe that's easier, or maybe it's harder because one wonky trade makes a bigger difference? I'm not sure this is how it really operates. The closest I've gotten is a team that has submitted products for indexing, and attempted to develop funds from those indexes. Turns out finding the $25-50 million of initial investments isn't as easy as anyone would think." }, { "docid": "300139", "title": "", "text": "\"In summary: In long form: Spreads and shorts are not allowed in cash accounts, except for covered options. Brokers will allow clients to roll option positions in a single transaction, which look like spreads, but these are not actually \"\"sell to open\"\" transactions. \"\"Sell to open\"\" is forbidden in cash accounts. Short positions from closing the long half of a covered trade are verboten. Day-trading is allowed in both margin and cash accounts. However, \"\"pattern day-trading\"\" only applies to margin accounts, and requires a minimum account balance of $25,000. Cash accounts are free to buy and sell the same security on the same day over and over, provided that there is sufficient buying power to pay for opening a new position. Since proceeds are held for both stock and option sales in a cash account, that means buying power available at the start of the day will drop with each purchase and not rise again until settlement. Unsettled funds are available immediately within margin accounts, without restriction. In cash accounts, using unsettled funds to purchase securities will require you to hold the new position until funds settle -- otherwise your account will be blocked for \"\"free-riding\"\". Legally, you can buy securities in a cash account without available cash on deposit with the broker, but most brokers don't allow this, and some will aggressively liquidate any position that you are somehow able to enter for which you didn't have available cash already on deposit. In a margin account, margin can help gloss over the few days between purchase and deposit, allowing you to be somewhat more aggressive in investing funds. A margin account will allow you to make an investment if you feel the opportunity is right before requiring you to deposit the funds. See a great opportunity? With sufficient margin, you can open the trade immediately and then run to the bank to deposit funds, rather than being stuck waiting for funds to be credited to your account. Margin accounts might show up on your credit report. The possibility of losing more than you invested, having positions liquidated when you least expect it, your broker doing possibly stupid things in order to close out an over-margined account, and other consequences are all very serious risks of margin accounts. Although you mentioned awareness of this issue, any answer is not complete with mentioning those risks.\"" }, { "docid": "11311", "title": "", "text": "\"Why only long term investments? What do they care if I buy and sell shares in a company in the same year? Simple, your actually investing when you hold it for a long term. If you hold a stock for a week or a month there is very little that can happen to change the price, in a perfect market the value of a company should stay the same from yesterday to today so long as there is no news(a perfect market cannot exist). When you hold a stock for a long term you really are investing in the company and saying \"\"this company will grow\"\". Short term investing is mostly speculation and speculation causes securities to be incorrectly valued. So when a retail investor puts money into something like Facebook for example they can easily be burned by speculation whether its to the upside or downside. If the goal is to get me to invest my money, then why not give apply capital gains tax to my savings account at my local bank? Or a CD account? I believe your gains on these accounts are taxed... Not sure at what rate. If the goal is to help the overall health of business, how does it do that? During an IPO, the business certainly raises money, but after that I'm just buying and selling shares with other private shareholders. Why does the government give me an incentive to do this (and then hold onto it for at least a year)? There are many reasons why a company cares about its market price: A companies market cap is calculated by price * shares outstanding. A market cap is basically what the market is saying your company is worth. A company can offer more shares or sell shares they currently hold in order to raise even more capital. A company can offer shares instead of cash when buying out another company. It can pay for many things with shares. Many executives and top level employees are payed with stock options, so they defiantly want to see there price higher. these are some basic reasons but there are more and they can be more complex.\"" }, { "docid": "235772", "title": "", "text": "Don't ever, ever, ever let someone else handle your money, unless you want somebody else have your money. Nobody can guarantee a return on stocks. That's utter bullshit. Stock go up and down according to market emotions. How can your guru predict the market's future emotions? Keep your head cool with stocks. Only buy when you are 'sure' you are not going to need the money in the next 10 years. Buy obligations before stocks, invest in 'defensive' stocks before investing in 'aggressive' stocks. Keep more money in obligations and defensive stock than in aggressive stocks. See how you can do by yourself. Before buying (or selling) anything, think about the risks, the market, the expert's opinion about this investment, etc. Set a target for selling (and adjust the target according to the performance of the stock). Before investing, try to learn about investing, really. I've made my mistakes, you'll make yours, let's hope they're not the same :)" } ]