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588080 | Yes, many people want to be solo operators. Being an employee sucks, but having employees of your own also takes away a lot of your freedom. Thing is, I know a lot of freelancers who make great money. His math isn't totally wrong, but you can reduce a lot of those expenses depending on what you do- working remotely and cutting out the time and money of a commute helps a lot. Also, you can charge more than $100 an hour if you're providing a really valuable service- a lot more. |
588086 | A UK based organization had an end buyer who urgently required Steam Coal. The UK Company found a good supplier in Indonesia with competitive prices and struck a lucrative deal with them on payments terms by Standby Letter of Credit aka SBLC (MT760) with support of Bronze Wing Trading LLC. |
588134 | Anybody can contribute to a traditional ira up to the maximum limit. Does it make sense to contribute to a non-deductible IRA? There are a couple of cases where it does: If you're 59 1/2 or older, you're old enough to make IRA withdrawals without penalty. If you choose investments that maximize the value of tax deferral, you can use the nondeductible IRA to manage your tax burden. If you're aware of an upcoming change in tax law that will benefit high earning individuals, it might be beneficial to use a nondeductible IRA. For example - you know that income limits for converting a traditional to a Roth are going to change in the coming year. You set up a nondeductible IRA with the intention of converting it the next year, so you can get around Roth contribution rules. Beyond these cases, the main argument for contributing to a non-deductible IRA is -- compounded returns. If your IRA has a strong, steady growth rate, compounded returns can work wonders for your contributions. Let's take a hypothetical... You are 35. You contribute the max amount of $5,500 every year until you retire at 70. With a modest growth rate of 9.5%, your total contribution of 193K would become 1.46M. The compounded returns are 7.6 times your contributions. |
588247 | You make the investment in Jan 2016. Assuming the SEIS certificate is issued before 5th April 2016, then you will enter the SEIS investment on your 2015-2016 tax return and claim the relief in that year. If the certificate is not issued in time then you will enter it in the 2016-2017 tax return and get the relief then. Note: I am assuming that the startup is already registered with the SEIS scheme by someone else - because if you are asking about how to go about that, I don't think that is an issue of personal finance. |
588253 | I'm not a tax advisor, but I've done freelance work, so... If any of your side-business revenue is reported on a 1099, you're now a business owner, which is why Schedule C must be filled out. As a business owner, minimum wage doesn't apply to you. All revenue is income to you, and you owe taxes on the profit, after subtracting legitimate (verifiable) business expenses. You'll want to talk to a real tax advisor if you're going to start expensing mileage, part of your house (if you use a home office), etc. Don't forget that you'll owe self-employment tax (the employer's half of your payroll tax). You can't save money on business taxes by paying yourself a wage and then counting it as an expense to the business. You'll definitely want to talk to a tax expert if you start playing around with finances as an (the) owner of the business. Income that is not reported on a 1099 should be reported as hobby income. |
588398 | You wouldn't want to trade with too small amount of capital - it becomes harder and more expensive to diversify with a small account. Also, the bigger the account the more discounts and special may be offered by your broker (especially if you are a frequent trader). You are also able to trade more often, and have a buffer against a few losses in a row not wiping out your entire account. |
588574 | Is this the time of year this board attracts question regarding the law and how to skirt it? I've done as you suggested. I happened to have a month that I was going to blow through the $12000 limit I had on my credit card. So as the balance crossed $8000, I paid that amount, and when the bill was cut, it was just $4000 or so. Scrutiny would show the reason for partial payments was obvious, I wanted to avoid going over limit. I wouldn't have done so just to avoid the $10,000 transaction. Since then, I've asked that the limit be raised in case I have another wild month. |
588591 | Unfortunately, you are required, but most states do have agreements with neighboring states that let the states share the collected taxes without the person having to pay double taxes. So being as this is your first tax return in your current situation, you might be wise to have a professional fill it out for you this year and then next year you can use it as a template. Additionally, I really would like to see someone challenge this across state lines taxation in court. It sure seems to me that it is a inter-state tariff/duty, which the state's are expressly forbidden from doing in the constitution. |
589088 | "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." |
589139 | "Debits' and ""Credits"" are terms used in double-entry bookkeeping. Each transaction is entered in two different places to be able to double-check accuracy. The total debits and total credits being equal is what makes the balance sheet balance. For explaining debits and credits, wikiversity has a good example using eggs that I found helpful as a student. Debits and Credits When a financial transaction is recorded, the Debits (Dr) and Credits (Cr) need to balance in order to keep the accounts in balance. An easy rule to remember is, ""Debit the Asset that Increases"" For example, if you want to practice accounting for cooking a simple breakfast, you might proceed as follows: To record breaking the eggs and putting the eggs in the frying pan In this transaction, an asset, (the egg) is split into parts and some of the asset goes in the pan and some in the trash. A Debit (Dr) is used to show that the assets in the pan and the trash both increase. A balancing Credit (Cr) is used to show that the amount of assets (whole eggs) in the egg carton has decreased. This transaction is in balance because the total Credits equal the total Debits. Everything that is covered by the Debits (yolk, white and shell) is also covered by the Credits (one whole egg)" |
589416 | Any deductable expense will reduce your taxable income not your tax payable. Your Example 1 above is correct and gives you 100% deduction. It is like having a business where your sales are $100,000 and your expenses in making the sales is $40,000. The expenses are your tax deductions and reduce your profits on which you pay tax on to $60,000. If your Example 2 was correct then the situation above would change that you would pay say $30,000 tax on $100,000 sales, then apply your deductions (or expenses) of $40,000 so that you would pay no tax at all and in fact get $10,000 back in your return. In this case the government would not be collecting any taxes but paying out returns to everyone. Your Example 2 is absolutly incorrect. |
589476 | "In the end, this is really not a finance question. It's about changing one's habits. (One step removed, however, since you are helping a friend and not seeking advice for yourself). I've learned a simple cause & effect question - Does someone who wants (goal here) do (this current bad habit)? For example, someone with weight to lose is about to grab the chips to sit and watch TV. They should quickly ask themselves ""Does a healthy, energetic person sit in front of the TV eating chips?"" The friend needs to make a connection between the expense he'd like to save up for and his current actions. There's a conscious decision in making the takeout purchase, he'd rather spend the money on that meal than to save .5% (or whatever percent) of the trip's cost. If he is clueless in the kitchen, that opens another discussion, one in which I'd remark that on the short list of things parents should teach their kids, cooking is up there. My wife is clueless in the kitchen, I taught our daughter how to be comfortable enough to make her own meals when she wants or when she's off on her own. If this is truly your friend's issue, you might need to be a cooking spirit guide to be successful." |
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589543 | Really basic Revolving credit for individuals. Use a credit card to pay for a purchase. You pay the card off completely before you pay interest and get 30 days free money. Your cash balance is for that 30 days doing you some good instead. |
589544 | If such an investment existed, then why would the banks be parking their overnight funds with the Federal Reserve at an interest rate of pretty much nothing? |
589950 | "The Euro is not the reason for the debt crisis. It is only preventing those countries affected from using the easy way out. The fault is entirely that of those countries. They were given billions and billions in structural aid, to put the ""convergence criteria"" into reality. Instead they chose bubble economies. And no, this is not the same all around Europe. I don't see France or Germany having a giant property bubble." |
589970 | "If you're really a part-time worker, then there are some simple considerations.... The remote working environment, choice of own hours, and non-guarantee of work availability point to your ""part-time"" situation being more like a consultancy, and that would normally double or triple the gross hourly rate. But if they're already offering or paying you a low hourly figure, they are unlikely to give you consultant rates." |
590010 | What JoeTaxpayer means is that you can sell one ETF and buy another that will perform substantially the same during the 30 day wash sale period without being considered substantially the same from a wash sale perspective more easily than you could with an individual stock. For example, you could sell an S&P 500 index ETF and then temporarily buy a DJIA index ETF. As these track different indexes, they are not considered to be substantially the same for wash sale purposes, but for a short term investing period, their performance should still be substantially the same. |
590102 | When a business asks me to make out a cheque to a person rather than the business name, I take that as a red flag. Frankly it usually means that the person doesn't want the money going through their business account for some reason - probably tax evasion. I'm not saying you are doing that, but it is a frequent issue. If the company makes the cheque out to a person they may run the risk of being party to fraud. Worse still they only have your word for it that you actually own the company, and aren't ripping off your employer by pocketing their payment. Even worse, when the company is audited and finds that cheque, the person who wrote it will have to justify and document why they made it out to you or risk being charged with embezzlement. It's very much in their interests to make the cheque out to the company they did business with. Given that, you should really have an account in the name of your business. It's going to make your life much simpler in the long run. |
590218 | Theoretically, it could be daily, but depending upon the number of companies in the index, it could be anywhere between daily or once a month or so. Apart from that, there is a periodic index review that happens once every quarter. The methodology for each index is also different, and you need to be aware of it (we had positions on literally hundreds of indices, and I knew the methodology of almost each of them). If you have say, 2 billion dollars tracking a certain index, even a miniscule change in the composition would be substantial for you. But for certain others, you may just need to buy and sell $10k worth of stocks, and we would not even bother. |
590232 | To determine how much you can contribute to a regular and roth IRA you have to calculate your compensation: What Is Compensation? Generally, compensation is what you earn from working. For a summary of what compensation does and does not include, see Table 1-1. Compensation includes all of the items discussed next (even if you have more than one type).Wages, salaries, etc. Wages, salaries, tips, professional fees, bonuses, and other amounts you receive for provid-ing personal services are compensation. The IRS treats as compensation any amount properly shown in box 1 (Wages, tips, other compensation) of Form W-2, Wage and Tax Statement, provided that amount is reduced by any amount properly shown in box 11 (Nonqualified plans). Scholarship and fellowship payments are compen-sation for IRA purposes only if shown in box 1 of Form W-2. It a also includes commissions, self-employment income, and alimony an non-taxable combat pay. For most people it is what i in box 1 of the W-2. For the example in the question. If the sum of Box 1's equals $3,200 that is the maximum you can contribute to all your IRAs (regular and Roth). The funds can come from anywhere. It is not related to your net check. The money can be from savings, gifts, parents, grandparents... The IRS doesn't care about the source of the funds, only that you don't over contribute. Of course the calculation is more complex if the person is married, and if they have access to a retirement account. |
590234 | In how much trouble can I get exactly if the IRS finds out? I understand that there's a 6 year statute of limitations on criminal charges and no limitation at all on fraud. Is this considered fraud? I'm assuming not. There's no statute of limitations for fraud (which is a criminal charge). The statute of limitations is for failure to report income which is not fraud. In your case, since you willingly decided to not report it knowingly that you should, it can most definitely account for fraud, so I wouldn't count on statute of limitations in this case. I should amend my taxes for those years That would be the easiest way to go. would the IRS go all the way and file criminal charges considering the amount of money I owe They have the legal right to, and if you do get caught - likely they will. Easy money for them, since you obviously have income and can pay all the fines and penalties. Practically speaking, what's the worst case scenario? Theoretically - can be jail as well. Being charged in a criminal court, even if the eventual punishment is just a penalty, is a punishment of its own. You'll have troubles finding jobs, passing security checks, getting loans approved, etc. For $3200, when you're in 25% bracket as an individual for years, I'd say not worth it. |
590276 | "Warren Buffett: 'Investing Advice For You--And My Wife' (And Other Quotes Of The Week): What I advise here is essentially identical to certain instructions I’ve laid out in my will. One bequest provides that cash will be delivered to a trustee for my wife’s benefit…My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard’s.) I believe the trust’s long-term results from this policy will be superior to those attained by most investors… Similarly from Will Warren Buffett's investment advice work for you?: Specifically, Buffett wants the trustee of his estate to put 10 percent of his wife's cash inheritance in short-term government bonds and 90 percent in a low-cost S&P index fund - and he tips his hat specifically to Bogle's Vanguard in doing so. Says Buffett: ""I believe the trust's long-term results from this policy will be superior to those attained by most investors - whether pension funds, institutions or individuals.""" |
590310 | Alright, team! I found answers to part 1) and part 2) that I've quote below, but still need help with 3). The facts in the article below seem to point to the ability for the LLC to contribute profit sharing of up to 25% of the wages it paid SE tax on. What part of the SE tax is that? I assume the spirit of the law is to only allow the 25% on the taxable portion of the income, but given that I would have crossed the SS portion of SE tax, I am not 100%. (From http://www.sensefinancial.com/services/solo401k/solo-401k-contribution/) Sole Proprietorship Employee Deferral The owner of a sole proprietorship who is under the age of 50 may make employee deferral contributions of as much as $17,500 to a Solo 401(k) plan for 2013 (Those 50 and older can tack on a $5,500 annual catch-up contribution, bringing their annual deferral contribution to as much as $23,000). Solo 401k contribution deadline rules dictate that plan participant must formally elect to make an employee deferral contribution by Dec. 31. However, the actual contribution can be made up until the tax-filing deadline. Pretax and/or after-tax (Roth) funds can be used to make employee deferral contributions. Profit Sharing Contribution A sole proprietorship may make annual profit-sharing contributions to a Solo 401(k) plan on behalf of the business owner and spouse. Internal Revenue Code Section 401(a)(3) states that employer contributions are limited to 25 percent of the business entity’s income subject to self-employment tax. Schedule C sole-proprietors must base their maximum contribution on earned income, an additional calculation that lowers their maximum contribution to 20 percent of earned income. IRS Publication 560 contains a step-by-step worksheet for this calculation. In general, compensation can be defined as your net earnings from self-employment activity. This definition takes into account the following eligible tax deductions: (1) the deduction for half of self-employment tax and (2) the deduction for contributions on your behalf to the Solo 401(k) plan. A business entity’s Solo 401(k) contributions for profit sharing component must be made by its tax-filing deadline. Single Member LLC Employee Deferral The owner of a single member LLC who is under the age of 50 may make employee deferral contributions of as much as $17,500 to a Solo 401(k) plan for 2013 (Those 50 and older can tack on a $5,500 annual catch-up contribution, bringing their annual deferral contribution to as much as $23,000). Solo 401k contribution deadline rules dictate that plan participant must formally elect to make an employee deferral contribution by Dec. 31. However, the actual contribution can be made up until the tax-filing deadline. Pretax and/or after-tax (Roth) funds can be used to make employee deferral contributions. Profit Sharing Contribution A single member LLC business may make annual profit-sharing contributions to a Solo 401(k) plan on behalf of the business owner and spouse. Internal Revenue Code Section 401(a)(3) states that employer contributions are limited to 25 percent of the business entity’s income subject to self-employment tax. Schedule C sole-proprietors must base their maximum contribution on earned income, an additional calculation that lowers their maximum contribution to 20 percent of earned income. IRS Publication 560 contains a step-by-step worksheet for this calculation. In general, compensation can be defined as your net earnings from self-employment activity. This definition takes into account the following eligible tax deductions: (i) the deduction for half of self-employment tax and (ii) the deduction for contributions on your behalf to the Solo 401(k). A single member LLC’s Solo 401(k) contributions for profit sharing component must be made by its tax-filing deadline. |
590364 | Bonds released at the same time have different interest rates because they have different levels of risks and liquidity associated. Risk will depend on the company / country / municipality that offers the bond: their financial position, and their resulting ability to make future payments & avoid default. Riskier organizations must offer higher interest rates to ensure that investors remain willing to loan them money. Liquidity depends on the terms of the loan - principal-only bonds give you minimal liquidity, as there are no ongoing interest payments, and nothing received until the bond's maturity date. All bonds provide lower liquidity if they have longer maturity dates. Bonds with lower liquidity must have higher returns to compensate for the fact that you will have to give up your cash for a longer period of time. Bonds released at different times will have different interest rates because of what the general 'market rate' for interest was in those periods. ie: if a bond is released in 2016 with interest rates approaching 0%, even a high risk bond would have a lower interest rate than a bond released in the 1980s, when market rates were approaching 20%. Some bonds offer variable interest tied to some market indicator - those will typically have higher interest at the time of issuance, because the bondholder bears some risk that the prevailing market rate will drop. Note regarding sale of bonds after market rates have changed: The value of your bonds will fluctuate with the market. If a bond was offered with 1% interest, and next year interest rates go up and a new identical bond is offered for 2% interest, when you sell your old bond you will take a loss, because the market won't want to pay full price for it anymore. Whether you should sell lower-interest rate bonds depends on how you feel about the factors above - do you want junk bonds that have stock-like levels of returns but high risks of default, maturing in 30 years? Or do you want AAA+ Bonds that have essentially 0% returns maturing in 30 days? If you are paying interest on debt, it is quite likely that you could achieve a net income benefit by selling the bonds, and paying off debt [assuming your debt has a higher interest rate than your low-rate bonds]. Paying off debt is sometimes referred to as a 'zero risk return', because essentially there is no real risk that your lender would otherwise go bankrupt. That is, you will owe your bank the car loan until you pay it, and paying it is the only thing you can do to reduce it. However, some schools of thought suggest that maintaining savings + liquid investments makes sense even if you have some debt, because cash + liquid investments can cover you in some emergencies that credit cards can't help you with. ie: if you lose your job, perhaps your credit could be pulled and you would have nothing except for your liquid savings to tide you over. How much you should save in this way is a matter of opinion, but often repeated numbers are either 3 months or 6 months worth [which is sometimes taken as x months of expenses, and sometimes as x months of after-tax income]. You should look into this issue further; there are many questions on this site that discuss it, I'm sure. |
590390 | "This change doesn't make a ton of sense to me. Interest is an expense. Expenses are deductible. Yes, there are loopholes, but no matter what happens there will be loopholes. Seems like any easy ""no"" vote. Sometimes it worries me that we have financially incompetent people in power." |
590453 | 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. |
590632 | "So here's the sad truth. He might actually be making a return on his investment. Not because it's right or because the system works, but in all these schemes there are a range of people that actually do make money. In addition to that, there is that fact that he ""believes"" that he is doing a good thing, and is unwilling to discuss it. So, if he is making, even a tiny return, and really believes that he is making a large return, or that that large return is just around the bend, your never going to convince him otherwise. You have two real options; If he will listen, go though and look at money in v.s. money out. If money out is larger then money in, your screwed. Make sure to point out that he should look at real money in (left a bank account) and real money out (deposited to a bank account). Again be prepared for the fact that he is actually making money. Some people in the pyramid will make money, it's just never as much, or as many people as they make it out to be. Don't attack the system, attack other aspects. Try and argue liquidity, or FDIC insurance. Again not trying to show why the system is bad, but why a investment in foo instead may be better. If nothing else, go with diversify. Never put all your money in one spot, even if it's a really good spot. At least in that case he will have some money left over in the end. That said, your friend may not go for it. May just put on blinders, and may just stick finger in ears. Move to option two. Respect his wishes, and set boundaries. ""Ok, I hear you, you like system X, I won't bring it up again. Do me a favor, don't you bring it up again either. Let's just leave this with religion and politics."" If he continues to bring it up, then when he does, just point out you agreed not to discuss the issue, and if he continues to push it, rethink your friendship. If you both respect one another, you should be able to respect each others' decisions. If you can't then, sadly, you may need to stop spending time with one another." |
590744 | "This is a classic correlation does not imply causation situation. There are (at least) three issues at play in this question: If you are swing- or day-trading then the first and second issues can definitely affect your trading. A higher-price, higher-volume stock will have smaller (percentage) volatility fluctuations within a very small period of time. However, in general, and especially when holding any position for any period of time during which unknowns can become known (such as Netflix's customer-loss announcement) it is a mistake to feel ""safe"" based on price alone. When considering longer-term investments (even weeks or months), and if you were to compare penny stocks with blue chip stocks, you still might find more ""stability"" in the higher value stocks. This is a correlation alone — in other words, a stable, reliable stock probably has a (relatively) high price but a high price does not mean it's reliable. As Joe said, the stock of any company that is exposed to significant risks can drop (or rise) by large amounts suddenly, and it is common for blue-chip stocks to move significantly in a period of months as changes in the market or the company itself manifest themselves. The last thing to remember when you are looking at raw dollar amounts is to remember to look at shares outstanding. Netflix has a price of $79 to Ford's $12; yet Ford has a larger market cap because there are nearly 4 billion shares compared to Netflix's 52m." |
590836 | Did a little bit of digging, and found this article, from Staples High School in Westport, Connecticut. Hopefully this will be a growing trend. They say: A personal financial management class will now be offered at the beginning of the upcoming school year (2011-2012). According to the course catalogue, the focus of this course will be using mathematics as a tool in developing financial literacy skills. Topics covered in the course will include: earnings, banking, credit cards, loans, taxes, insurance, investing, loans, budgeting, and buying personal property. “In a perfect world, everyone would be required to take a personal finance course,” Principal John Dodig said. |
591007 | The reason is governments print extra money to cause inflation (hopefully reasonable) so that people don't just sit comfortably but do something to make money work. Thus inflation is an artificial measure which leads to money value gradually decreasing and causing people invest money in one way or another to beat inflation or maybe even gain some more money. Printing money is super cheap unlike producing any kind of commodity and that makes money different from commodities - commodities have their inherent value, but money has only nominal value, it's an artificial government-controlled product. |
591344 | Yeah true that. Counseling people to avoid the negatives has been more beneficial in my life than great recommendations. Even one mistake and you're up shit's creek. And I will say I have the knowledge to help people to avoid mistakes, but sometimes it devolves into mud slinging (unfortunately). If this wasn't a new account then it might give you an indication of how I've done this in the past. Most of the time it takes too much explaining to get people up to speed though. A word to the wise: I'd recommend being open to switching industries. Everyone in finance is pretty toxic and all ended up there because of money. End up chasing the CFA (cancer distilled into three exams), grad school, nonsense corporate jobs, or the dream in high finance/small shops where the founders don't think they need another smart hard-working person. Even if if it's obvious they do. I remember reaching out and counseling a firm on selling a position that I felt was really stupid. It was not at all in line with their investing objectives and also was one I would never touch. The guy actually agreed with me, didn't hire me (I was after a job), didn't sell the position, and lost them approx. $12 million within 12 months with my math on their 13-F's. I only reach out to firms I respect, which works out to about 1 firm per 100k people in population from what I've seen (in a city like Pittsburgh this was only 4 shops). That means there are maybe 200 people in the US who would make a hiring decision on me for what I like to do. But I've stopped playing that game. I now run a healthcare business I started. It was hard as hell to open but I now run circles around people because nobody actually is in the business of the industry. The doctors, nurses, etc. are all extremely bright - just not in my area. Makes for a much more fun workday. |
591377 | "For the USA part of the equation the ""fair market value"" is the value at the time you inherited it (time of death), and thus there is no capital gain." |
591461 | "I recommend you take a look at this lecture (really, the whole series is enlightening), from Swenson. He identifies 3 sources of returns: diversification, timing and selection. He appears to discard timing and selection as impossible. A student kinda calls him out on this. Diversification reduces risk, not increase returns. It turns out they did time the market, by shorting .com's before the bubble, and real estate just before the downturn. In 1990, Yale started a ""Absolute Return"" unit and allocated like 15 percent to it, mostly by selling US equities, that specializes in these sorts of hedging moves. As for why you might employ managers for specific areas, consider that the expense ratio Wall Street charges you or me still represent a very nice salary when applied to the billions in Yale's portfolio. So they hire internally to reduce expenses, and I'm sure they're kept busy. They also need people to sell off assets to maintain ratios, and figuring out which ones to sell might take specialized knowledge. Finally, in some areas, you functionally cannot invest without management. For example, Yale has a substantial allocation in private equity, and by definition that doesn't trade on the open market. The other thing you should consider is that for all its diversification, Yale lost 25 percent of their portfolio in 2009. For a technique that's supposed to reduce volatility, they seem to have a large range of returns over the past five years." |
591558 | Generally, the answer to the availability of holdings of a given mutual fund on a daily basis is no. Thus, an API is non-existent. The reasons for the lack of transparency on a daily basis is that it could/would impact the portfolio managers ability to trade. While this information would not necessarily permit individuals from front running the fund manager's trades, it does give insight in to the market outlook and strategy the fund is employing. The closest you'll be able to get to obtaining a list of holdings is by reading the most recent annual report and the quarterly filings each fund is required to file with the SEC. |
591636 | Yes. There are a number of reasons for this, most notably some form of tax credits transfer over from year to year IF you file your taxes, and the CRA will only pay you deductions if all your taxes have been filed. If you don't owe them anything you won't necessarily get in trouble, but don't expect to get any money back from them until you file! Also, while it's probably much too late for this, if you have a partner, you can transfer a certain amount of tax deductions to them, and save them some money. The site is here: http://www.cra-arc.gc.ca/formspubs/t1gnrl/llyrs-eng.html |
591785 | There's no reason for the employer not to deduct the whole amount before you leave. The FSA salary deduction has to be periodical, but it doesn't have to be calculated over a year. It just means that an equal amount will be deducted from your every paycheck, and if the employer (and you) know that your last paycheck is on June 30th even before the year starts - there's nothing to stop the employer from calculating the periodic payments so that it will cover your full FSA amount before you leave. That is, of course, other than mere convenience (it may be easier/cheaper to just give you the extra $1275 than to deal with the special case deduction calculation). This is different from unexpected termination/resignation, where the employer couldn't have made such an assumption and thus the periodic payments were calculated over a year. See pub. 969. The selection is annual - the deductions are periodical. |
592032 | Direct answers to your questions: contribute 6%, and put it in the Target Date Fund (probably Target Date Fund 2050). |
592192 | My advice is that if you've got the money now to pay off your student loans, do so. You've saved up all of that money in one year's time. If you pay it off now, you'll eliminate all of those monthly payments, you'll be done paying interest, and you should be able to save even more toward your business over the next year. Over the next year, you can get started on your business part time, while still working full time to pile up cash toward your business. Neither you nor your business will be paying interest on anything, and you'll start out in a very strong position. The interest on your student loans might be tax deductible, depending on your situation. However, this doesn't really matter a whole lot, in my opinion. You've got about $22k in debt, and the interest will cost you roughly $1k over the next year. Why pay $1k to the bank to gain maybe $250 in tax savings? Starting a business is stressful. There will be good times and bad. How long will it take you to pay off your debt at $250 a month? 5 or 6 years, probably. By eliminating the debt now, you'll be able to save up capital for your business even faster. And when you experience some slow times in your business, your monthly expenses will be less. |
592510 | However, if you are employed by a company that exists in a tax haven and your services are provided to an employer by that tax haven company, it is the tax haven company that gets paid, not you. Under various schemes that company need not pay you at all. For example it may make you a loan which is not taxed (ie you don't pay tax on a loan, just as you don't pay tax on the money lent you by a mortgage company). You are bound by the terms of the loan agreement to repay that loan at a rate that the company finds acceptable. Indeed the company may find eventually that it is simply convenient to write off the loan as unrecoverable. if the owners/officers of he company write off your loans, how much tax will you have paid on the money you have had as loans? The taxman can of course state that this was simply set up to avoid tax (which is illegal) so you should have a balancing scheme to show that that the loans were taken to supplement income,just as one might take a bank loan / mortgage, not replace it entirely as a tax scam. Hiring tax counsel to provide this adequate proof to HMRC has a price. Frequently this kind of loophole exists because the number of people using it were sufficiently low not to warrant policing ( if the policing costs more than the tax recovered, then it is more efficient to ignore it) or because at some stage the scheme has been perfectly legal (as in the old offshore'education' trust recommended by the government a few decades ago). When Gordon Brown set out a 75% tax rate (for his possibly ideological reasons rather than financially based ones)for those who had these accounts , he encountered opposition from MPs who were going to be caught up paying high tax bills for what was effctively retrospective taxation, so there was a built in 'loophole' to allow the funds to be returned without undue penalty. If you think that is morally wrong, consider what the response would be if a future Chancellor was to declare all IAs the work of the devil and claim that retrospective tax would need to be paid on all ISA transactions over the last few decades.eg: tot up all the dividends and capital gains made on an ISA in any year and pay 40% tax on all of them, even if that took the ISA into negative territory because the value today was low/ underperfoming. Yet this has been sggested as a way of filling in the hole in the budget on the grounds that anyone with an ISA can be represented as 'rich' to a selected party of voters. |
592709 | If you can afford to put more money into the 401(k) -- which is what paying yourself back at a higher rate than you're earning would amount to -- why not just put more money into the 401(k)? Or into an IRA, if you've maxed out what the 401(k) will allow. That would seem to have the same positive effects you're looking for, while avoiding the negative ones. |
592915 | Since you're coming out of college, you're probably a new investor and don't know too much about stocks, etc. I was in the same situation as well. I wanted to keep my cash 'liquid' and wanted to make low risk investments. What I ended up doing was investing the majority of my money in higher interest GICs (Guaranteed Investment Certificate) and keeping the rest in my chequing/savings account. I understand that GICs aren't exactly the most liquid asset out there. However, instead of investing it all into 1 GIC, I put them in to smaller increments with varying lock-in times and roll-over options. I.e. for 15000 keep $3000 on hand in your account 2x$1000 invested for 2 years 4x$1000 invested for 1 year 3x$1000 invested for 180 days 3x$1000 invested for 90 days When you find that you run out of cash from your $3000, you'll have a GIC expiring soon. The 'problem' with GICs is that redeeming them before the maturity period usually incurs a penalty in the form of no interest. Keeping them in smaller increments allows you to redeem only the amount you need without losing too much interest. At maturity, if you don't need the money, you can just have the GIC renew. The other problem with GICs, is that interest rates, though better than savings accounts, aren't that much more. You're basically just fighting off inflation. The benefit is that on maturity, you are guaranteed your principal and the interest. This plan is easy to implement if your bank/credit union allows you to create and manage GICs online. |
593017 | "I understood everything until ""Party B gets $3 from A but still owes his bank $4.25."" Doesn't B only owe $3 to his bank after the prime is now 2%? I understand though that B is paying out $4.25 but only receiving $3, thus having a net of -$1.25" |
593045 | "If you don't want to do the deep research on each individual company, you might want to look at index funds and similar ""whole market"" investments." |
593644 | NSCC illiquid charges are charges that apply to the trading of low-priced over-the counter (OTC) securities with low volumes. Open net buy quantity represents the total unsettled share amount per stock at any given time during a 3-day settlement cycle. Open net buy quantity must be less than 5,000,000 shares per stock for your entire firm Basically, you can't hold a long position of more than 5 million shares in an illiquid OTC stock without facing a fee. You'll still be assessed this fee if you accumulate a long position of this size by breaking your purchase up into multiple transactions. Open net sell quantity represents the total unsettled share amount per stock at any given time during a 3-day settlement cycle. Open net sell quantity must be less than 10% percent of the 20-day average volume If you attempt to sell a number of shares greater than 10% of the stock's average volume over the last 20 days, you'll also be assessed a fee. The first link I included above is just an example, but it makes the important point: you may still be assessed a fee for trading OTC stocks even if your account doesn't meet the criteria because these restrictions are applied at the level of the clearing firm, not the individual client. This means that if other investors with your broker, or even at another broker that happens to use the same clearing firm, purchase more than 5 million shares in an individual OTC stock at the same time, all of your accounts may face fees, even though individually, you don't exceed the limits. Technically, these fees are assessed to the clearing firm, not the individual investor, but usually the clearing firm will pass the fees along to the broker (and possibly add other charges as well), and the broker will charge a fee to the individual account(s) that triggered the restriction. Also, remember that when buying OTC/pink sheet stocks, your ability to buy or sell is also contingent on finding someone else to buy from/sell to. If you purchase 10,000 shares one day and attempt to sell them sometime in the future, but there aren't enough buyers to buy all 10,000 from you, you might not be able to complete your order at the desired price, or even at all. |
593671 | It seems too simple, but at the same time I feel that I'm over thinking/complicating things. My biggest fear is being sued or something. I feel like business ownership involves exposing yourself. It's like you're playing in the big leagues and every crooked person or competing business is out to get you. I'm not an expert on business law but I feel like that's something you largely acquire from business ownership and at the same time is something that you need to have an extremely firm grasp on or you'll get eaten alive. If I am over-complicating things and being overly cautious, what stops others from starting up small businesses? My second fear is getting busted for breaking some unknown law. In any case, I don't want to loose all of my hard-earned cash to anything accept a bad business plan. |
593694 | "1. What forms do I need to file to receive money from Europe None. Your client can pay you via wire transfer. They need to know your name, address, account number, and the name of your bank, its SWIFT number and its associated address. The addresses and names are required to make sure there are no typos in the numbers. 2. What forms do I need to file to pay people in Latin America (or any country outside the US) None. 1099s only need to be filled out when the contractor has a US tax ID. Make sure they are contractors. If they work for you for more than 2 years, that can create a problem unless they incorporate because they might look like ""employees"" to the IRS in which case you need to be reporting their identitites to the IRS via a W-8BEN form. Generally speaking any foreign contractor you have for more than 2 years should incorporate in their own country and you bill that corporation to prevent employee status from occurring. 3. Can I deduct payments I made to contractors from other countries as company expense Of course." |
593705 | 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... |
593708 | You are purchasing an Asset, I believe. |
593850 | "You're right. I did include ""is it reasonable"" in the title. Therefore that brings in the acceptability of those taxes. However I am making the case that I would like capital gains to be taxed most similarly to regular income (or at least in a parallel bracket), which is independent of the amount needed to be brought in. I think parallel brackets would be the most productive since it would encourage people to both produce and invest, because you would get the lowest taxes by maximizing both." |
593879 | "A diversified portfolio (such as a 60% stocks / 40% bonds balanced fund) is much more predictable and reliable than an all-stocks portfolio, and the returns are perfectly adequate. The extra returns on 100% stocks vs. 60% are 1.2% per year (historically) according to https://personal.vanguard.com/us/insights/saving-investing/model-portfolio-allocations To get those average higher stock returns, you need to be thinking 20-30 years (even 10 years is too short-term). Over the 20-30 years, you must never panic and go to cash, or you will destroy the higher returns. You must never get discouraged and stop saving, or you will destroy the higher returns. You have to avoid the panic and discouragement despite the likelihood that some 10-year period in your 20-30 years the stock market will go nowhere. You also must never have an emergency or other reason to withdraw money early. If you look at ""dry periods"" in stocks, like 2000 to 2011, a 60/40 portfolio made significant money and stocks went nowhere. A diversified portfolio means that price volatility makes you money (due to rebalancing) while a 100% stocks portfolio means that price volatility is just a lot of stress with no benefit. It's somewhat possible, probably, to predict dry periods in stocks; if I remember the statistics, about 50% of the variability in the market price 10 years out can be explained by normalized market valuation (normalized = adjusted for business cycle and abnormal profit margins). Some funds such as http://hussmanfunds.com/ are completely based on this, though a lot of money managers consider it. With a balanced portfolio and rebalancing, though, you don't have to worry about it very much. In my view, the proper goal is not to beat the market, nor match the market, nor is it to earn the absolute highest possible returns. Instead, the goal is to have the highest chance of financing your non-financial goals (such as retirement, or buying a house). To maximize your chances of supporting your life goals with your financial decisions, predictability is more important than maximized returns. Your results are primarily determined by your savings rate - which realistic investment returns will never compensate for if it's too low. You can certainly make a 40-year projection in which 1.2% difference in returns makes a big difference. But you have to remember that a projection in which value steadily and predictably compounds is not the same as real life, where you could have emergency or emotional factors, where the market will move erratically and might have a big plunge at just the wrong time (end of the 40 years), and so on. If your plan ""relies"" on the extra 1.2% returns then it's not a reasonable plan anyhow, in my opinion, since you can't count on them. So why suffer the stress and extra risk created by an all-stocks portfolio?" |
593951 | "You're correct that the trading costs would be covered by the expense ratio. Just to be clear here, the expense ratio is static and doesn't change very often. It's set in such a way that the fund manager *expects* it to cover *all* of their operational costs. It's not some sort of slider that they move around with their costs. I'm not familiar with any ETF providers doing agreements which cover rent and equipment (hedge funds do - see ""hedge fund hotels""). ETF providers do routinely enter into agreements with larger institutions that cover stuff like marketing. PowerShares, for a while, outsourced all of the management of the Qs to BNY and was responsible solely for marketing it themselves." |
594122 | If for every buyer, there's a seller, doesn't that also mean that there were $25B in outflows in the same time period? Yes for every buyer there is a seller. The inflows are not being talked in that respect. about there being $25B in inflows to US equity markets since the election...what does that mean? Lets say the index was at X. After a month the index is at X+100. So lets say there are only 10 companies listed. So if the Index has moved X to X+100, then share price S1 has moved to S1+d1. So if you sum all such shares/trades that have increased in value, you will get what in inflow. In the same period there could be some shares that have lost value. i.e. the price or another share was S2 and has moved to S2-d2. The sum of all such shares/trades that have decreased in value, you will get outflow. The terms are Gross outflow, Gross inflow. In Net terms for a period, it can only be Inflow or outflow; depending on the difference between inflow and outflow. The stats are done day to day and aggregated for the time period required. So generally if the index has increased, it means there is more inflow and less outflow. At times this analysis is also done on segments, FI's inflow is more compared to outflow or compared to inflow of NBFI or Institutional investors or Foreign participants etc. |
594226 | Edit: This is paywalled so I pasted it here. LONDON—The synthetic CDO, a villain of the global financial crisis, is back. A decade ago, investors’ bad bets on collateralized debt obligations helped fuel the crisis. Billed as safe, they turned out to be anything but. Now, more investors are returning to CDOs—and so are concerns that excess is seeping into the aging bull market. In the U.S., the CDO market sunk steadily in the years after the financial crisis but has been fairly flat since 2014. In Europe, the total size of market is now rising again—up 5.6% annually in the first quarter of the year and 14.4% in the last quarter of 2016, according to the Securities Industry and Financial Markets Association. Collateralized debt obligations package a bunch of assets, such as mortgage or corporate loans, into a security that is chopped up into pieces and sold to investors. The assets inside a synthetic CDO aren’t physical debt securities but rather derivatives, which in turn reference other investments such as loans or corporate debt. During the financial crisis, synthetic CDOs became a symbol of the financial excesses of the era. Labelled an “atomic bomb” in the movie “The Big Short,” they ultimately were the vehicle that spread the risks from the mortgage market throughout the financial system. Synthetic CDOs crammed with exposure to subprime mortgages—or even other CDOs—are long gone. The ones that remain contain credit-default swaps referencing a range of European and U.S. companies, effectively allowing investors to bet whether corporate defaults will pick up. Desperate for something that pays better than basic government bonds, insurance companies, asset managers and high-net worth investors are scooping up investments like synthetic CDOs, bankers say, which had largely become the preserve of hedge funds after 2008. Investment banks, which create and sell CDOs, are happy to oblige. Placid markets have made trading revenue weak this year, and such structured products are an increasingly important business line. Synthetic CDOs got “bad press,” says Renaud Champion, head of credit strategies at Paris-based hedge fund La Française Investment Solutions. But “that market has never ceased to fully function,” he added. These days, Mr. Champion still trades synthetic CDOs, receiving a stream of income for effectively insuring against a sharp rise in European corporate defaults. Many investors, though, still view the products as unnecessarily complex and are concerned they may be hard to offload when markets get choppy—as they did in the last crisis. From the DepthsThe amount outstanding of European collateralized debt obligations has been growing again after years of shrinking. “We don’t see that demand from our clients and we wouldn’t recommend it,” said Markus Stadlmann, chief investment officer at Lloyds Private Banking, citing concerns over the products’ lack of transparency and lack of liquidity, meaning it could be hard to offload a position when needed. The return of synthetic CDOs could present other risks. Even if banks are currently less willing to loan money to help clients juice returns, credit default swaps can be very leveraged, potentially allowing investors to make outsize bets. Structured products accounted for nearly all the $2.6 billion year-on-year growth in trading-division revenue at the top 12 global investment banks in the first quarter, according to Amrit Shahani, research director at financial consultancy Coalition. “There has been an uptick in interest in any kind of yield-enhancement structure,” said Kokou Agbo-Bloua, a managing director in Société Générale SA’s investment bank. The fastest growth this year has come in credit—the epicenter of the 2007-08 crisis. The top global 12 investment banks had around $1.5 billion in revenue in structured credit in the first quarter, according to Coalition, more than doubling since the first quarter of 2016. Structured equities are largest overall, a business dominated by sales of derivatives linked to moves in stock prices, with revenue of $5 billion in the first quarter. “The low-yield environment hurts,” said Lionel Pernias, a credit-fund manager at AXA Investment Managers. “So there are a lot of asset owners looking at structured credit.” These days, the typical synthetic CDO involves a portfolio of credit-default swaps on a range of companies. The portfolio is sliced into tranches, and investors receive payouts based on the performance of the swaps. Those investors owning lower tranches tend to get paid more but are subject to higher losses if the swaps sour. Structured GrowthBank revenues from structured products such as collateralized debt obligations are rising faster than conventionaltrading of stocks, bonds and currencies. For instance, an investor can sell insurance against a pick-up in defaults in the lowest—or “equity”—tranche of the iTraxx Europe index, a widely traded CDS benchmark that tracks European investment-grade companies. In return, the investor will receive regular payments, but those will shrink with every company default and stop altogether once 3% of the portfolio has been wiped out through defaults. During the financial crisis, synthetic CDOs based on standardized indexes like iTraxx Europe suffered losses as traders expected defaults to pick up. Investors who held on, though, have since done “great,” says Mr. Champion. Investors who agreed to insure against a rise in defaults for 10 years on the equity tranche of the iTraxx Europe index in March 2008 have made roughly 10% a year, according to an analysis of data from IHS Markit . That’s despite defaults from two companies in the index: Italian lender Monte dei Paschi di Siena and Portugal Telecom International Finance BV. In contrast, investors who sold insurance on tailored CDOs packed with riskier credits—such as Icelandic banks or monoline insurers—would have been on the hook for losses. Synthetic CDOs have evolved since the crisis, bankers say. For instance, most are shorter-dated, running up to around two to three years rather than seven to 10 years. Some banks will only slice and dice standardized CDS indexes that trade frequently in the market rather than craft tailored baskets of credits. There are also fewer banks involved in arranging these trades. Those active include BNP Paribas SA, Citigroup Inc., Goldman Sachs Group Inc., J.P. Morgan Chase & Co. and Société Générale. Postcrisis regulations have forced banks to set aside more capital against these transactions and use less leverage. That has encouraged banks to parcel out the risk to clients rather than keeping it on their own books. “There is a lot more regulation and scrutiny and a lot less leverage,” said Mr. Agbo-Bloua. Mr. Champion says he only trades tranches based on standardized CDS indexes, which he says are easier to buy and sell than more tailored products. Currently, he sees value in selling default protection on super-senior tranches. Mr. Champion said he has to lay down only around $1 million in upfront margin costs on a $100 million trade of this kind. “The cost of leverage in the derivatives space is very low,” he said. Any expectations of default rates picking up could inflict losses on synthetic CDOs, though at the moment analysts forecast they should decline. Still, the memory of how the market behaved in the immediate aftermath of the financial crisis is likely to keep many investors on the sidelines. “If you’re the person responsible for buying the synthetic CDO that suddenly goes wrong, your career risk is bigger than if you’d bought a plain vanilla bond that goes wrong. It has a bad name,” said Ulf Erlandsson, a portfolio manager at start-up hedge fund Glacier Impact, who until recently oversaw credit for one of Sweden’s public pension funds. |
594414 | "Here's an excerpt from VISA's Card Acceptance Guidelines for Visa Merchants (PDF) The merchant name is the single most important factor in cardholder recognition of transactions. Therefore, it is critical that the merchant name, while reflecting the merchant’s “Doing Business As” (DBA) name, also be clearly identifiable to the cardholder. This can minimize copy requests resulting from unrecognizable merchant descriptors. Merchant applications typically list the merchant name as the merchant DBA. This may differ from the legal name (which can represent the corporate owner or parent company), and may differ from the owner’s name which, for sole proprietorships, may reflect the business owner. I think that the key statement above is ""Therefore, it is critical that the merchant name [...] be clearly identifiable to the cardholder."" Since this merchant was not clearly identifiable to the cardholder, they are in breach of a critical point in these guidelines. This is from VISA, but I would assume that all other major credit cards would have similar guidelines for their merchants. However keep in mind that these are ""guidelines"", and not (necessarily) rules." |
594483 | Because of the way checks are processed, you can't write a check for $100 million or more: http://www.bankingquestions.com/checksyoureceived/q_limitfunds.html The field used for 'amount' has 10 digits, so anything at/above 10^10 cents (which would require 11 digits) can't be processed, at least not by normal means. |
594531 | "I am co-owner of a business, and we incorporated federally. (Mostly to limit liability.) There is some excellent information above, and most of my wisdom I got from a trusted lawyer and accountant (find experts you trust in these two areas, they will prove invaluable in so many areas.) The one point I would add is that if you decide to incorporate, you can do so federally or provincially. We were all set to go provincially, when our lawyer asked ""Is there any chance you might move the business? Any chance you might want to do work in other provinces? What about next year? Five years?"" If you are going through the expenses to set up a corporation, consider doing so federally, the extra costs were insignificant, but someday you might be glad you don't have to start from scratch. In this day and age, many people end up moving out of province for work, family concerns, etc." |
594652 | The only way you will incur underpayment penalties is if you withhold less than 90% of the current year's tax liability or 100% of last years tax liability (whichever is smaller). So as long as your total tax liability last year (not what you paid at filing, but what you paid for the whole year) was more than $1,234, you should not have any penalty. What you pay (or get back) when you file will be your total tax liability less what was withheld. For example, you had $1,234 withheld from your pay for taxes. If after deduction and other factors, your tax liability is $1,345, you will owe $111 when you file. On the other hand, if your tax liability is only $1,000, you'll get a refund of $234 when you file, since you've had more withheld that what you owe. Since your income was only for part of the year, and tax tables assume that you make that much for the whole year, I would suspect that you over-withheld during your internship, which would offset the lack of withholding on the other $6,000 in income. |
594784 | If you're a US citizen/resident - you pay taxes on your worldwide income regardless of where you live. The logic is that Americans generally don't agree to the view that there's more than one country in the world. If you're non-US person, not physically present in the US, and provide contract work for a US employer - you generally don't pay taxes in the US. The logic is that the US doesn't actually have any jurisdiction over that money, you didn't earn it in the US. That said, your employer might withheld tax and remit it to the IRS, and you'll have to chase them for refund. If you receive income from the US rental property or dividends from a US company - you pay income tax to the US on that income, and then bargain with your home tax authority on refunds of the difference between what you paid in the US and what you should have paid at home. You can also file non-resident tax return in the US to claim what you have paid in excess. The logic is that the money sourced in the US should be taxed in the US. You earned that money in the US. There are additional rules to more specific situation, and there are also bilateral treaties between countries (including a US-Canadian treaty) that supersede national laws. Bottom line, not only that each country has its own laws, there are also different laws for different situations, and if some of the international treaties apply to you - it further complicates the situation. If something is not clear - get a professional advice form a tax accountant licensed in the relevant jurisdictions (in your case - any of the US states, and the Canadian province where you live). |
594788 | One could wish that. If you speak to Chinese in China even they don't trust Chinese businessses and don't want Chinese goods. Hiring top European and American design and engineering firms for large projects doesn't help if the guy putting the base down decides not to follow the specifications or the subcontractor doing the concrete tries to save a few bucks and does a shoddy job. As far as coming up with new ideas? Do you know why so many Chinese firms and the government hack and steal information? Group think is a way of life and no one wants to stick out. |
595029 | This is an all too common problem and is not easy to resolve. Divorce agreements do not alter prior mortgage contracts. Most importantly, the bank is not required, and will not normally, remove the girlfriend from the mortgage even if she quitclaimed it to her Ex. If he has abandoned the property there is a good chance he will not make any more future payments. She should be prepared to make the payments if he doesn't or expect her credit to continue to deteriorate rapidly. She needs to contact her divorce attorney to review their mutual obligations. A court can issue orders to try to force the Ex to fulfill the divorce agreement. However, a court cannot impose a change to the mortgage obligations the borrowers made to the bank. Focus on this. It's far more important than adding her to a car loan or credit card. Sorry for the bad news. As for the car loan, it's best to leave her off the loan. You will get better terms without her as a joint owner. You can add her as an additional driver for insurance purposes. Adding her to your credit cards will help her credit but not a lot if the mortgage goes to default or foreclosure. |
595121 | 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. |
595287 | I wouldn't be too concerned, yet. You're young. Many young people are living longer in the family home. See this Guardian article: Young adults delay leaving family home. You're in good company. Yet, there will come a time when you ought to get your own place, either for your own sanity or your parents' sanity. You should be preparing for that and building up your savings. Since you've got an income, you should – if you're not already – put away some of that money regularly. Every time you get paid, make a point of depositing a portion of your income into a savings or investment account. Look up the popular strategy called Pay Yourself First. Since you still live at home, it's possible you're a little more loose with spending money than you should be – at least, I've found that to be the case with some friends who lived at home as young adults. So, perhaps pretend you're on your own. What would your rent be if you had to find a place of your own? If, say, £600 instead of the £200 you're currently paying, then you should reduce your spending to the point where you can save at least £400 per month. Follow a budget. With respect to your car, it's great you recognize your mistake. We're human and we can learn from our mistakes. Plan to make it your one and only car mistake. I made one too. With respect to your credit card debt, it's not an insurmountable amount. Focus on getting rid of that debt soon and then focus on staying out of debt. The effective way to use credit cards is to never carry a balance – i.e. pay it off in full each month. If you can't do that, you're likely overspending. Also, look at what pensions your employer might offer. If they offer matching contributions, contribute at least as much to maximize the tax free extra pay this equates to. If you have access to a defined benefit plan, join it as soon as you are eligible. Last, I think it's important to recognize that at age 23 you're just starting out. Much of your career income earning potential is ahead of you. Strive to be the best at what you do, get promotions, and increase your income. Meanwhile, continue to save a good portion of what you earn. With discipline, you'll get where you want to be. |
595455 | I know you say you are aware of secured and unsecured debt and you've made your decision. Did you do the numbers? You will pay 44k over the life of the mortgage for that 24k (Based on 4.5% APR mortgage). Once you refinance your mortgage, do you plan on using credit for a while? Lots of Americans are hyperfocused on credit scores. The only times it affects your life are when you finance something, when you apply to rent a house or apartment, and sometimes when you apply for a job. Credit score should not be a factor in this decision. You're borrowing the money at a lower rate to pay off the high rate cards because you want to pay less in interest. Considering #1 is there any reason NOT to pay off the cards immediately, if not sooner? |
595605 | "Yes, you would pay no taxes at the time of purchase. In fact, this is not uncommon. Many early employees of startup companies are offered stock options that can be ""early-exercised"" (exercised before they vest). In such a case, an employee who exercises immediately upon grant (and assuming the exercise price of the option is the FMV at the time of grant) purchases the stock at FMV, and there no no tax paid when filing 83(b) election." |
595765 | When you take the self employed health care deduction on on Line 29 of form 1040 for 2010 it also will lower your self employment tax. See line 3 of Schedule SE. You report your net earnings from self employment less line 29 from 1040. |
595822 | Payroll taxes are only paid on salary, so you will be paying SS Tax and Medicare only on the $60,000 you pay yourself. You will still pay income tax on the distribution, of course, but the payroll tax savings seem significant (~$13K according to the calculator below). While tinkering with a new web technology some time ago, I created this JsFiddle application. I can't swear to its correctness, but I'm pretty sure it's solid (use the UI in the bottom right quadrant of the screen): http://jsfiddle.net/psandler/NKAZd/ |
595897 | Whoops, an obvious one there. So much for audit! We were doing a Basel liquidity report at a bank. One set of numbers in Oracle always balanced with SAP. We were told to use their corrections to apply to the rest. It turns out that they ignored the transactions in Oracle and had loaded the balance sheet data from SAP in Oracle. Of course the data will match! |
596429 | I agree that to take the money from the defined benefit plan you are saying that you can get a better return than the plan. You are taking all the risk if you take the lump sum. But there are two more risks that you are taking by keeping the money in the plan even though you are decades from retirement. Funding risk: companies and state/city/county governments have underfunded their pension programs due to budget pressure. In some cases they have skipped payments when the market was good, because they felt they were ahead of their obligations. They also delayed or skipped contributions when they had a budget shortfall, and wanted to not end the government/company fiscal year in the red. The risk is that they can get so far behind that they change their promises to current and former employees. This was one of the issues with the city of Detroit this year. Bankruptcy: even though their are guarantees regarding pension benefits, the Pension Benefit Guaranty Corporation does set a maximum benefit. If the company goes bankrupt or the plan is terminated you might not get all the money you were expecting. While the chances of taking a haircut generally impacts people who have a long career, because they are entitled to a large benefit, it can impact people who don't expect it. |
596473 | it is possible that if you do not accept the offer, they will try offering you an even lower rate. if they offered you close to 0%, you could start carrying a balance and find a better use for the cash you would have spent paying it off. there are plenty of investments with a guaranteed return of over 0%. personally, i am using a 0% offer from one of my cards to invest in the stock market. i might lose that bet, but on average over the last 10 years, i have not. a pretty safe bet would be paying down your mortgage, or buying a cd that matures when the offer ends. that said, even a 10k$ balance might only pay you around 300$. is that worth the hassle to you? |
596664 | "If you have someplace to put the money which you think will yield significantly better returns, by all means sell and buy that. On the other hand, if you think this stock is likely to recover its value, you might want to hold it, or even buy more as a ""contrarian"" investment. Buy low, sell high, as much as possible. And diversify. You need to make a judgement call about the odds. We can point out the implications, but in the end whether to sell, buy, hold or hedge is your decision. (This also suggests you need to sit down and draw up a strategy. Agonizing over every decision is not productive. If you have a plan, you make this sort of decision before you ever put money into the stock in the first place.)" |
596665 | LIBOR rate swaps are common most among an international bank and a with a branch in another country, so say Company A is located in Kenya and Company B is in the US, A can borrow $100M from the US and B the same from Kenya and agree to swap assuming that A borrowed at a fixed rate of say 5% and B borrowed for say a 6 month LIBOR rate of maybe 4.2% which increases at a rate of say 0.5% above the prior 6 moth libor rate for time t being 5 years.A is the fixed rate payer and B is the floating rate payer. |
596798 | Does your family go to church? I know reddit hates religion but churches have been a great source of support for small shops just starting off. They are a great opportunity to network in your community. If not, look for other things, toast masters, chamber of commerce. Get something big on the truck, park it in a well lit-high traffic spot (empty). I have heard SOME decent things about location based google adwords. You may want to check out advertising. Also, make sure he comes up in the google results when people look for plumbers. Google is the not-so-new yellow pages and a lot of people just start at the top of the list and work their way down when they need someone in an emergency. Get him to network with General Contractors and maybe the HBA in your area. |
596914 | There's two competing forces at work, and they are at work worldwide. Banks can get money from several sources: Through inter-bank borrowing and from raising capital. Capital can come from from selling assets, stock offerings, deposits, etc. The money the banks get from depositors is capital. In the United States, the Federal Reserve regulates the amount of capital that banks must maintain. If there was no requirement for capital then there would be zero demand for capital at an interest rate above the inter-bank offering rate. As capital requirements have risen, banks are allowed to make less loans given a certain amount of capital. That has caused an increased demand for capital from depositors. As described in this Federal Reserve ruling, effective January 1st, 2014 the Federal Reserve is again raising capital requirements. As you can see here money can be borrowed, in the United States, at .0825% (100 - 99.9175). Currently interest rates paid to borrowers are quite high compared to prevailing inter-bank rates. They could see more upward pressure given the fact that banks will be forced to maintain an increased amount of capital for a given amount of loans. |
597229 | While r/finance has some great advice and posters who are well versed in their fields, this appears to be a legal question and if you're really concerned about the legality, I would strongly advise you to check in with a lawyer, not an online internet commenter. While there is a lot of good content on this site, you do see comments where the person is completely talking out of their ass. It would suck for you to raise concerns at your job, based on faulty 'legal' advice. |
597247 | Millionaire, Shmillionaire! Let's do this calculation Bruno Mars style (I wanna be a Billionaire...) If my calculations are correct, in the above scenario, at age 80, you would have more than a billion in the bank, after taxes. |
597265 | My realtor told me that even though they're only asking for 1/2 the money and have excellent credit that the mortgage company may not lend it to them if I'm over priced. Is this true? I've never heard of it before. It is a chance, but it is a red herring to the discussion. Having excellent credit has nothing to do with being eligible for a debt object of a specific size. Just because you have excellent credit, would you get approved for a property of $10,000,000 if you only made $35,000 a year (and had no other net worth)? But regarding your potential buyers, a chance vs a good chance is different. Your realtor just told you some basic always true lending fact that has nothing to do with your situation. |
597351 | It sounds for the most part you are a 'buy and hold' type investor and continue to contribute monthly. I follow the same philosophy and continue to contribute monthly as well. I use Questrade.com as my online broker. For trading it costs a penny per share with a minimum cost of $4.95 (so if you only buy 100 shares you will still pay $4.95) up to a maximum of $9.95 per trade (so if you buy 10,000 shares you only pay $9.95. Three trades at $4.95 per month across the year would be $178.20. This is assuming you are trading less then 495 share each trade. So switching to Questrade would save you an additional $111.80 per year! Multiply over number of year before you retire plus compound interest which could accrue and that can quite a bit of extra savings. You pay nothing else to Questrade either. No management fees, etc. You manage the accounts. |
597434 | Keep in mind that the bond market is dominated by US Treasury securities... if there were an S&P 500 for bonds, the US would take positions 1-400. Be careful that you understand what's in your bond funds -- you may not be as diversified as you think. |
597503 | You're last paragraph sums up what I mean exactly. Businesses will continue to make investments that try think make sense. Taxes have an pact on what makes sense. This combo is what we should be discussing. Thanks for adding to the conversation. |
597679 | "Leverage here is referring to ""financial leverage"". This is the practice of ""levering"" [ie increasing, like the use of a lever to increase the amount of weight you can lift] the value of your investment by taking on debt. For example: if you have 100k in cash, you can buy a 100k rental property. Assume the property makes 10k a year, net of expenses [10%]. Now assume the bank will also give you a 100k mortgage, at 3%. You could take the mortgage, plus your cash, and buy a 200k rental property. This would earn you 20k from the rental property, less 3k a year in interest costs [the 3%]. Your total income would be 17k, and since you only used 100k of your own money, your rate of return would now be 17% instead of 10%. This is financial leveraging. Note that this increases your risk, because if your investment fails not only have you lost your own money, you now need to pay back the bank. ""Beta riders"" appears to be negative commentary on investors who use Beta to calculate the value of a particular stock, without regard to other quantitative factors. Therefore ""leveraged beta riders"" are those who take on additional risk [by taking on debt to invest], and invest in a manner that the author would perhaps considered ""blindly"" following Beta. However, I have never seen this term before, and it appears tainted by the author's views on Quants. A ""quant process driven discipline"" appears to be positive commentary on investors who use detailed quantitative analysis to develop rules which they rigorously follow to invest. I have never seen this exact phrasing before, and like the above, it appears tainted by the author's views on Quants. I am not providing any opinion on whether ""beta riding"" or ""quant processes"" are good or bad things; this is just my attempt to interpret the quote as you presented it. Note that I did not go to the article to get context, so perhaps something else in the article could skew the language to mean something other than what I have presented." |
597699 | I think your best bet would be commission-free ETFs, which have no minimum and many have a share price under $100. Most online brokerages have these now, e.g. Vanguard, Fidelity, etc. Just have to watch out for any non-trading fees brokerages may charge with a low balance. |
597813 | Yes this is possible. The most likely tool to use in this case would be a Home Equity Line of Credit (HELOC). This is a line of credit for which the full amount is backed by home equity (difference between market and book prices). Most likely your financial institution will apply a factor to this collateral to account for various risks which will reduce the maximum amount that can be taken as a line of credit. https://en.m.wikipedia.org/wiki/Home_equity_line_of_credit |
598159 | First off, I'm very sorry for your loss. Depending on when the money comes in I would park it and give it some time. After that, one of the best investments is paying off debt. Right now your net worth is less than 30K and that is really not even accessible until retirement. If the money is there to pay off the house I would do that. If there isn't enough to pay off the house then I would pay off the automobile and put all or a sizable portion of the remainder into the house. Now you have very little risk in your life and most likely much more monthly income to invest in 401K, IRAs, college funds or any other investment. Life insurance is mostly to replace your income if there are people counting on that income (spouse, kids, etc). Normally this would be invested to hopefully replace that income with the growth of the money. In your case it doesn't sound like you were relying on your father's income, so this can go to clean up current debt. Finally, depending on your relationship, what kind of person your father was and how he was with financials, what do you think he would want you to do with it? |
598332 | If it was me, I would withdraw money from savings and be debt free today. I would then pour the $500 into building back your savings. Then of course, never again carry a balance on your CC. At your age MSFRX is a losing game. You can handle the volatility of better performing funds, I would have zero in there. If it was me, I would do something totally different then you are doing: Keep in mind you are doing very good as is. The best way to win with money is to make good moves overtime, and given your debt level, savings, and willingness to contribute to a 401K your moves are pretty darn good. Keep in mind you will probably want to start saving a down payment for a house. This should be done outside of your 401K. Overall good work! |
598460 | Did you read what I wrote? I sold some stock for a gain, that's a taxable event. Are you trying to say I just shouldn't have sold it? Do you understand investing at all? And the second point is moot, I still had to pay the tax, having write offs doesn't change the fact that my taxes were higher(more importantly that they would have been much higher if I couldn't take advantage of capital gains.) |
598484 | "I hate to be the guy that says this but if you are indeed competing in the CFAI Research Challenge it is probably important. Remember you cannot use CFA as a noun (CFA's) you can only use it as an adjective ie a CFA charterholder. As far as you question, what was provided below is pretty much all you need. Security Analysis, anything from the NYU professor and Greenwald stuff (although Greenwald, like someone already mentioned, is balance sheet focused) will get you where you need to go. I am not sure what you mean by ""exotic valuation"" methods. As far as I know, the three most accepted and used valuation models by practitioners are the DCF model, the multiple model and the residual income model. DCF uses short term cash flows and a terminal value discounted to today at some discount rate. The multiple model puts some multiple on earnings, book value, cash flow to arrive at a fair value. The residual model is the opposite of the DCF. One starts with the assets book value, then accrues all income generated in excess of WACC from all future periods. Find some CFAI Level 2 books on equity and bond valuation. They pretty much cover it all. And for a closing note, to perform well in investing and valuing companies it is not about what valuation model you use. Focus on WHY an asset should be worth what you think it is worth, not HOW you get to some valuation of that asset. Just my two cents." |
598553 | The payments might be on time, but the aren't made the same numbers of days apart: The percentage of the daily payment for interest is decreasing, but the numbers of days wasn't constant. |
598802 | "I sort of do this with credit cards. I actually have 4 AMEX cards that I've accumulated over the years. Certain types of expenses go on each card (""General expenses"", recurring bills, car-related and business-related) I use AMEX because they have pretty rich iPhone/Android applications to access your accounts and a rich set of alerts. So if we exceed our budget for gas, we get an email about it. Do whatever works for you, but you need to avoid the temptation to over-complicate." |
598908 | cash isn't part of changes in working capital calculation - dont include it in current assets. *edit - Also to answer a question you didn't ask, subtracting cash doesn't skew the multiples. If cash really is that excess, the market cap will reflect a large cash position, thus adding it all back into EV. Think of apple as a good example. If they theoretically would dividend out all the cash, market cap would drop and so would EV. |
599075 | I don't have a reference, but I think it depends on when you entered the workforce: If you finished school at age 24, your primary goals are to pay down expensive debt and to save up enough for a down payment. So essentially not much. Maybe $5k to $10k at the most. On the other hand if you entered the workforce at age 20, with no debts and no significant expenses, it should have been easy to sock away 20% of your income for 6 years, so $40k to $50k would be reasonable. The difference is that the first person's income earning potential should be higher, so eventually they'd be able to make up the difference and pass them. |
599436 | "1. Interest rates What you should know is that the longer the ""term"" of a bond fund, the more it will be affected by interest rates. So a short-term bond fund will not be subject to large gains or losses due to rate changes, an intermediate-term bond fund will be subject to moderate gains or losses, and a long-term bond fund will be subject to the largest gains or losses. When a book or financial planner says to buy ""bonds"" with no other qualification, they almost always mean investment-grade intermediate-term bond funds (or for individual bonds, the equivalent would be a bond ladder averaging an intermediate term). If you want technical details, look at the ""average duration"" or ""average maturity"" of the bond fund; as a rough guide, if the duration is 10, then a 1% change in interest rates would be a 10% gain or loss on the fund. Another thing you can do is look at long-term (10 years or ideally longer) performance history on some short, intermediate, and long term bond index funds, and you can see how the long term funds bounced around more. Non-investment-grade bonds (aka junk bonds or high yield bonds) are more affected by factors other than interest rates, including some of the same factors (economic booms or recessions) that affect stocks. As a result, they aren't as good for diversifying a portfolio that otherwise consists of stocks. (Having stocks, investment grade bonds, and also a little bit in high-yield bonds can add diversification, though. Just don't replace your bond allocation with high-yield bonds.) A variety of ""complicated"" bonds exist (convertible bonds are an example) and these are tough to analyze. There are also ""floating rate"" bonds (bank loan funds), these have minimal interest rate sensitivity because the rate goes up to offset rate rises. These funds still have credit risks, in the credit crisis some of them lost a lot of money. 2. Diversification The purpose of diversification is risk control. Your non-bond funds will outperform in many years, but in other years (say the -37% S&P 500 drop in 2008) they may not. You will not know in advance which year you'll get. You get risk control in at least a few ways. There's also an academic Modern Portfolio Theory explanation for why you should diversify among risky assets (aka stocks), something like: for a given desired risk/return ratio, it's better to leverage up a diverse portfolio than to use a non-diverse portfolio, because risk that can be eliminated through diversification is not compensated by increased returns. The theory also goes that you should choose your diversification between risk assets and the risk-free asset according to your risk tolerance (i.e. select the highest return with tolerable risk). See http://en.wikipedia.org/wiki/Modern_portfolio_theory for excruciating detail. The translation of the MPT stuff to practical steps is typically, put as much in stock index funds as you can tolerate over your time horizon, and put the rest in (intermediate-term investment-grade) bond index funds. That's probably what your planner is asking you to do. My personal view, which is not the standard view, is that you should take as much risk as you need to take, not as much as you think you can tolerate: http://blog.ometer.com/2010/11/10/take-risks-in-life-for-savings-choose-a-balanced-fund/ But almost everyone else will say to do the 80/20 if you have decades to retirement and feel you can tolerate the risk, so my view that 60/40 is the max desirable allocation to stocks is not mainstream. Your planner's 80/20 advice is the standard advice. Before doing 100% stocks I'd give you at least a couple cautions: See also:" |
599757 | What is the goal of the money? If it is to use in the short term, like savings for a car or college, then stick it in the bank and use it for that purpose. If you really want this money to mean something, then in my opinion you have only one choice: Open a ROTH IRA with something like Vanguard or Fidelity and invest in an index fund. Then do something that will be very difficult: Don't touch it. By the time you are 65, it will grow to about 60,000. However, assuming a 20% tax bracket, the value of that money is really more like 75,000. Clearly this will not make or break you either way. The way you live the rest of your life will have far more of an impact. It will get you started on the right path. BTW this is advice I gave my son who is about your age, and does not earn a ton of money as a state trooper. Half of his overtime pay goes into a ROTH. If he lives the rest of his life like he does now, he will be a wealthy man despite making an average income. No debt, and investing a decent portion of his pay. |
599779 | Yeah, I suppose that's true - and not just in finance but smaller companies in general. I think I might have a good gig right now where I can try my hand on both things. It's a bit tied to one IT system though (Misys Summit) but I guess a lot the skills are transferable. |
599842 | Fill out the form manually, using last year's return as an example of how to report these gains. Or experiment with one of the low-priced tax programs; I've been told that they are available for as little as $17, and if your alternative is doing it manually, spending a bit of time checking their results isn't a huge problem. Or run the basic TTax, and tell it to add the appropriate forms manually. It supports them, it just doesn't have the interview sections to handle them. (@DanielCarson's answer has more details about that.) Or... |
599876 | You are in business for yourself. You file Schedule C with your income tax return, and can deduct the business expenses and the cost of goods sold from the gross receipts of your business. If you have inventory (things bought but not yet sold by the end of the year of purchase), then there are other calculations that need to be done. You will have to pay income tax as well as Social Security and Medicare taxes (both the employee's share and the employer's share) on the net profits from this business activity. |
599925 | Investopedia has a good explanation of the term shorting which is what this is. In the simplest of terms, someone is borrowing the bond and selling it with the intent to replace the security and any dividends or coupons in the end. The idea is that if a bond is overvalued, one may be able to buy it back later for a cheaper price and pocket the difference. There are various rules about this including margin requirements to maintain since there is the risk of the security going up in price enough that someone may be forced into a buy to cover in the form of a margin call. If one can sell the bond at $960 now and then buy it back later for $952.38 then one could pocket the difference. Part of what you aren't seeing is what are other bonds doing in terms of their prices over time here. The key point here is that brokers may lend out securities and accrue interest on loaned securities for another point here. |