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5ce2241c1f1ae11c641321a9dfd1c2f3
|
Why might it be a bad idea to invest 100% of your 401(k) into a stock index fund?
|
[
{
"docid": "70423b1c3d64f05ea5ae171e3c0ca8da",
"text": "At your age, I don't think its a bad idea to invest entirely in stocks. The concern with stocks is their volatility, and at 40+ years from retirement, volatility does not concern you. Just remember that if you ever want to call upon your 401(k) for anything other than retirement, such as a down payment on a home (which is a qualified distribution that is not subject to early distribution penalties), then you should reconsider your retirement allocations. I would not invest 100% into stocks if I knew I were going to buy a house in five years and needed that money for a down payment. If your truly saving strictly for a retirement that could occur forty years in the future, first good for you, and second, put it all in an index fund. An S&P index has a ridiculously low expense ratio, and with so many years away from retirement, it gives you an immense amount of flexibility to choose what to do with those funds as your retirement date approaches closer every year.",
"title": ""
},
{
"docid": "bd8d9668f1528cb0c422ceaf8b49f866",
"text": "I've read a nice rule of thumb somewhere that you should consider: You should invest (100-YOURAGE)% of your money in stock The rest should be something less volatile and more liquid, so you have some money when the stock market goes down and you need some money nevertheless. So you would start with buying about 75% stock and balance your stock percentage over time by buing more secure assets to keep the stock percentage at the desired level. At some time you might need to sell stock to rebalance and invest in more secure assets.",
"title": ""
}
] |
[
{
"docid": "394e8db16539286dcd7b3a351f08a4af",
"text": "Conventional wisdom says (100-age) percentage of your saving should go to Equity and (age) percentage should go to debt. My advice to you is to invest (100-age) into index fund through SIP and rest in FD. You can re-balance your investment once a year. Stock picking is very risky. And so is market timing. Of cource you can change the 100 into a other number according to your risk tolerance.",
"title": ""
},
{
"docid": "10461449122022e813ed435098e7699a",
"text": "A 401(k) is an investment just like any other investment. You generally get two types of return lumped into that number, but there can be more and you should read your funds prospectus carefully. If you aren't investing in direct companies, you're using mutual funds for instance, then you should read the funds prospectus to see how they handle these situations for the underlying securities they hold for you. Although I think this is the basic answer to the question as you asked.",
"title": ""
},
{
"docid": "b4ec1d889d25ed417131dc2a91cefb11",
"text": "\"Holding pure cash is a problem for 401K companies because they would then have follow banking rules because they would be holding your cash on their balance sheets. They don't want to be in that business. Instead, they should offer at least one option as a cash equivalent - a money market fund. This way the money is held by the fund, not by 401K administrator. Money Market funds invest in ultra-short term paper, such as overnight loans between banks and other debt instruments that mature in a matter of days. So it is all extremely liquid, as close to \"\"Money\"\" as you can get without actually being money. It is extremely rare for a money market fund to lose value, or \"\"break the buck.\"\" During the crisis of 2008, only one or two funds broke the buck, and it didn't last long. They had gotten greedy and their short term investments were a little more aggressive as they were trying to get extra returns. In short, your money is safe in a money market fund, and your 401K plan should offer one as the \"\"cash\"\" option, or at least it should offer a short-term bond fund. If you feel strongly that your money should be in actual cash, you can always stop contributing to the 401K and put the money in the bank. This is not a good idea though. Unless you're close to retirement, you'll be much better off investing in a well diversified portfolio, even through the ups and downs of the market.\"",
"title": ""
},
{
"docid": "2426f3edbc19d9585b914fe34006af15",
"text": "Ok. I'll ask - Does the job offer a 401(k)? Matching deposits? You see, the answers given depend on your risk tolerance. There are two schools of thought, one extreme will tell you not to start investing until you have the emergency fund set up, the other, start from day one. I accept there are pros and cons to either approach. But - if you have access to a matched 401(k), even a conservative, risk-adverse approach might agree that a 100% match (on the first say 5% of your income) is preferable to saving in a low return emergency fund. If the emergency occurs, a low interest loan for the need is a cheap way out. Since the money goes in pre-tax and is matched, being able to borrow out half (IRS rules) effectively lets you borrow more than you deposited out of pocket. And the word emergency implies a low occurrence event. Deposit to the match and start the emergency fund in another account. If no matched 401(k) at work, the other two answers are great. Edit - To clarify, and answer a comment below - say the risk isn't just a money emergency, but job loss. $1000 deposited to the 401(k) cost $850 out of pocket, assuming 15% bracket. After the match, it's $2000. After the job loss, if this is withdrawn, if the 15% still applies (it may be 10% or even 0%) the net is $1700 less the 10% penalty, or $1500 back in your pocket. There are those who will say they are just not comfortable running an emergency account so lean, I understand that. For the OP here, $800/mo is nearly $10,000 per year. If even half of that can be deposited pre-tax and matched, the account will grow very quickly and there would still be cash on the side.",
"title": ""
},
{
"docid": "e5463efbd7bbd2ec1075a4e72ed4bbfa",
"text": "\"It's a trade-off. The answer depends on your risk tolerance. Seeking higher rewards demands higher risk. If you want advice, I would recommend hiring an expert to design a plan which meets your needs. As a sample point, NOT necessarily right for anyone else...I'm considered an aggressive investor, and my own spread is still more conservative than many folks. I'm entirely in low-cost index funds, distributed as ... with the money tied up in a \"\"quiesced\"\" defined-contribution pension fund being treated as a low-yield bond. Some of these have beaten the indexes they're tracking, some haven't. My average yield since I started investing has been a bit over 10%/year (not including the company match on part of the 401k), which I consider Good Enough -- certainly good enough for something that requires near-zero attention from me. Past results are not a guarantee of future performance. This may be completely wrong for someone at a different point in their career and/or life and/or finances. I'm posting it only as an example, NOT a recommendation. Regarding when to rebalance: Set some threshhold at which things have drifted too far from your preferred distribution (value of a fund being 5% off its target percentage in the mix is one rule I've sometimes used), and/or pick some reasonable (usually fairly low) frequency at which you'll actively rebalance (once a year, 4x/year, whenever you change your car's oil, something like that), and/or rebalance by selecting which funds you deposit additional money into whenever you're adding to the investments. Note that that last option avoids having to take capital gains, which is generally a good thing; you want as much of your profit to be long-term as possible, and to avoid triggering the \"\"wash sales\"\" rule. Generally, you do not have to rebalance very frequently unless you are doing something that I'd consider unreasonably risky, or unless you're managing such huge sums that a tiny fraction of a percent still adds up to real money.\"",
"title": ""
},
{
"docid": "2defed52ca4aaa726ad0c553ef8bde99",
"text": "The S&P500 is an index, not an investment by itself. The index lists a large number of stocks, and the value of the index is the price of all the stocks added together. If you want to make an investment that tracks the S&P500, you could buy some shares of each stock in the index, in the same proportions as the index. This, however, is impractical for just about everyone. Index mutual funds provide an easy way to make this investment. SPY is an ETF (exchange-traded mutual fund) that does the same thing. An index CFD (contract for difference) is not the same as an index mutual fund. There are a number of differences between investing in a security fund and investing in a CFD, and CFDs are not available everywhere.",
"title": ""
},
{
"docid": "2f1a0f80e6dd21796aad206c5e742633",
"text": "Some index funds offer lower expense ratios to those who invest large amounts of money. For example, Vanguard offers Admiral Shares of many of its mutual funds (including several index funds) to individuals who invest more than $50K or $100K, and these Shares have lower expense ratios than the Investor shares in the fund. There are Institutional Shares designed for investments by pension plans, 401k plans of large companies etc which have even lower expenses than Admiral Shares. Individuals working for large companies sometimes get access to Institutional Shares through their 401k plans. Thus, there is something to gained by investing in just one index fund (for a particular index) that offers lower expense ratios for large investments instead of diversifying into several index funds all tracking the same index. Of course, this advantage might be offset by failure to track the index closely, but this tracking should be monitored not on a daily basis but over much longer periods of time to test whether your favorite fund is perennially trailing the index by far more than its competitors with larger expense ratios. Remember that the Net Asset Value (NAV) published by each mutual fund after the markets close already take into account the expense ratio.",
"title": ""
},
{
"docid": "61a3236acf34529cae6bfa96e07ccccb",
"text": "\"As Dheer pointed out, the top ten mega-cap corporations account for a huge part (20%) of your \"\"S&P 500\"\" portfolio when weighted proportionally. This is one of the reasons why I have personally avoided the index-fund/etf craze -- I don't really need another mechanism to buy ExxonMobil, IBM and Wal-Mart on my behalf. I like the equal-weight concept -- if I'm investing in a broad sector (Large Cap companies), I want diversification across the entire sector and avoid concentration. The downside to this approach is that there will be more portfolio turnover (and expense), since you're holding more shares of the lower tranches of the index where companies are more apt to churn. (ie. #500 on the index gets replaced by an up and comer). So you're likely to have a higher expense ratio, which matters to many folks.\"",
"title": ""
},
{
"docid": "5e7474ca387cdf47d9c57a7c165ff9a1",
"text": "The alternative isn't too bad. Invest in a regular account. The dividends and cap gains will see favorable tax treatment. In my opinion, much of the magic of the retirement account is with 401(k) matched deposits. The benefit you'll miss is the long term opportunity to skim income off the top, at say, 25%, have it grow, and then withdraw it at a much lower average tax rate. If that benefit doesn't outweigh the fear of the 10%, stick with my first thought above.",
"title": ""
},
{
"docid": "7ede31fcc47e5b8ff627c7d2387e5796",
"text": "Why is that? With all the successful investors (including myself on a not-infrequent basis) going for individual companies directly, wouldn't it make more sense to suggest that new investors learn how to analyse companies and then make their best guess after taking into account those factors? I have a different perspective here than the other answers. I recently started investing in a Roth IRA for retirement. I do not have interest in micromanaging individual company research (I don't find this enjoyable at all) but I know I want to save for retirement. Could I learn all the details? Probably, as an engineer/software person I suspect I could. But I really don't want to. But here's the thing: For anyone else in a similar situation to me, the net return on investing into a mutual fund type arrangement (even if it returns only 4%) is still likely considerably higher than the return on trying to invest in stocks (which likely results in $0 invested, and a return of 0%). I suspect the overwhelming majority of people in the world are more similar to me than you - in that they have minimal interest in spending hours managing their money. For us, mutual funds or ETFs are perfect for this.",
"title": ""
},
{
"docid": "c2ae3e850c9a05b457725c0e854dd8f8",
"text": "The problem is that short-term trends are really unpredictable. There is nobody who can accurately predict where a fund (or even moreso, a single stock or bond) is going to move in a few hours, or days or even months. The long-term trends of the entire market, however, are (more or less) predictable. There is a definite upward bias when you look at time-scales of 5, 10, 20 years and more. Individual stocks and bonds may crash, and different sectors perform differently from year to year, but the market as a whole has historically always risen over long time scales. Of course, past performance never guarantees future performance. It is possible that everything could crash and never come back, but history shows that this would be incredibly unlikely. Which is the entire basis for strategies based on buying and holding (and periodically rebalancing) a portfolio containing funds that cover all market sectors. Now, regarding your 401(k), you know your time horizon. The laws won't let you withdraw money without penalty until you reach retirement age - this might be 40 years, depending on your current age. So we're definitely talking long term. You shouldn't care about where the market goes over a few months if you won't be using the money until 20 years from now. The most important thing for a 401(k) is to choose funds from those available to you that will be as diverse as possible. The actual allocation strategy is something you will need to work out with a financial advisor, since it will be different for every person. Once you come up with an appropriate allocation strategy, you will want to buy according to those ratios with every paycheck and rebalance your funds to those ratios whenever they start to drift away. And review the ratios with your advisor every few years, to keep them aligned with large-scale trends and changes in your life.",
"title": ""
},
{
"docid": "2945a37cd3f3dd83183b05ca5f474dcb",
"text": "Unless that 401K has very low expense ratios on its funds, you should roll it into an IRA and choose funds with low expense ratios. After rolling it over you should not take the 10% penalty and use it to purchase a home. Unless you use that home as an income property, it is unlikely to provide you more than a 1% inflation-adjusted rate of return given historical data. The S&P 500 is about 4% adjusted for inflation. And that money currently in your 401(k) is for your retirement - your future. Don't borrow against your future. Let compound interest do its work on that money. The value of a house is in the rent you aren't paying to live somewhere and there are a lot of costs to consider. That doesn't mean don't buy. It just means buy wisely. If you are currently maxing out your 401(k), you may consider cutting back to save for your down payment. Other than that I wouldn't touch retirement money unless it was a dire financial emergency.",
"title": ""
},
{
"docid": "a70ddb5bf96ad9b69ec5802f346d0bb6",
"text": "\"The question you should be asking yourself is this: \"\"Why am I putting money into a 401(k)?\"\" For many people, the answer is to grow a (large) nest egg and save for future retirement expenses. Investors are balancing risk and potential reward, so the asset categories you're putting your 401(k) contribution towards will be a reflection on how much risk you're willing to take. Per a US News & World Report article: Ultimately, investors would do well to remember one of the key tenants of investing: diversify. The narrower you are with your investments, the greater your risk, says Vanguard's Bruno: \"\"[Diversification] doesn't ensure against a loss, but it does help lessen a significant loss.\"\" Generally, investing in your employer's stock in your 401(k) is considered very risk. In fact, one Forbes columnist recommends not putting any money into company stock. FINRA notes: Simply stated, if you put too many eggs in one basket, you can expose yourself to significant risk. In financial terms, you are under-diversified: you have too much of your holdings tied to a single investment—your company's stock. Investing heavily in company stock may seem like a good thing when your company and its stock are doing well. But many companies experience fluctuations in both operational performance and stock price. Not only do you expose yourself to the risk that the stock market as a whole could flounder, but you take on a lot of company risk, the risk that an individual firm—your company—will falter or fail. In simpler terms, if you invest a large portion of your 401(k) funds into company stock, if your company runs into trouble, you could lose both your job AND your retirement investments. For the other investment assets/vehicles, you should review a few things: Personally, I prefer to keep my portfolio simple and just pick just a few options based on my own risk tolerance. From your fund examples, without knowing specifics about your financial situation and risk tolerance, I would have created a portfolio that looks like this when I was in my 20's: I avoided the bond and income/money market funds because the growth potential is too low for my investing horizon. Like some of the other answers have noted, the Target Date funds invest in other funds and add some additional fee overhead, which I'm trying to avoid by investing primarily in index funds. Again, your risk tolerance and personal preference might result in a completely different portfolio mix.\"",
"title": ""
},
{
"docid": "5a11ccdbf30c6fbfee86941d06167d15",
"text": "The expense fees are high, and unfortunate. I would stop short of calling it criminal, however. What you are paying for with your expenses is the management of the holdings in the fund. The managers of the fund are actively, continuously watching the performance of the holdings, buying and selling inside the fund in an attempt to beat the stock market indexes. Whether or not this is worth the expenses is debatable, but it is indeed possible for a managed fund to beat an index. Despite the relatively high expenses of these funds, the 401K is still likely your best investment vehicle for retirement. The money you put in is tax deductible immediately, your account grows tax deferred, and anything that your employer kicks in is free money. Since, in the short term, you have little choice, don't lose a lot of sleep over it. Just pick the best option you have, and occasionally suggest to your employer that you would appreciate different options in the future. If things don't change, and you have the option in the future to rollover into a cheaper IRA, feel free to take it.",
"title": ""
},
{
"docid": "5d2b124795bc36a1421cb615e4b3ab19",
"text": "\"Can you easily stomach the risk of higher volatility that could come with smaller stocks? How certain are you that the funds wouldn't have any asset bloat that could cause them to become large-cap funds for holding to their winners? If having your 401(k) balance get chopped in half over a year doesn't give you any pause or hesitation, then you have greater risk tolerance than a lot of people but this is one of those things where living through it could be interesting. While I wouldn't be against the advice, I would consider caution on whether or not the next 40 years will be exactly like the averages of the past or not. In response to the comments: You didn't state the funds so I how I do know you meant index funds specifically? Look at \"\"Fidelity Low-Priced Stock\"\" for a fund that has bloated up in a sense. Could this happen with small-cap funds? Possibly but this is something to note. If you are just starting to invest now, it is easy to say, \"\"I'll stay the course,\"\" and then when things get choppy you may not be as strong as you thought. This is just a warning as I'm not sure you get my meaning here. Imagine that some women may think when having a child, \"\"I don't need any drugs,\"\" and then the pain comes and an epidural is demanded because of the different between the hypothetical and the real version. While you may think, \"\"I'll just turn the cheek if you punch me,\"\" if I actually just did it out of the blue, how sure are you of not swearing at me for doing it? Really stop and think about this for a moment rather than give an answer that may or may not what you'd really do when the fecal matter hits the oscillator. Couldn't you just look at what stocks did the best in the last 10 years and just buy those companies? Think carefully about what strategy are you using and why or else you could get tossed around as more than a few things were supposed to be the \"\"sure thing\"\" that turned out to be incorrect like the Dream Team of Long-term Capital Management, the banks that were too big to fail, the Japanese taking over in the late 1980s, etc. There are more than a few times where things started looking one way and ended up quite differently though I wonder if you are aware of this performance chasing that some will do.\"",
"title": ""
}
] |
fiqa
|
daa82446a09bd4fd82c74315e7944329
|
Filing taxes on stocks
|
[
{
"docid": "36fcccad5602fec5364f2c1f4e6d3235",
"text": "Generally stock trades will require an additional Capital Gains and Losses form included with a 1040, known as Schedule D (summary) and Schedule D-1 (itemized). That year I believe the maximum declarable Capital loss was $3000--the rest could carry over to future years. The purchase date/year only matters insofar as to rank the lot as short term or long term(a position held 365 days or longer), short term typically but depends on actual asset taxed then at 25%, long term 15%. The year a position was closed(eg. sold) tells you which year's filing it belongs in. The tiny $16.08 interest earned probably goes into Schedule B, typically a short form. The IRS actually has a hotline 800-829-1040 (Individuals) for quick questions such as advising which previous-year filing forms they'd expect from you. Be sure to explain the custodial situation and that it all recently came to your awareness etc. Disclaimer: I am no specialist. You'd need to verify everything I wrote; it was just from personal experience with the IRS and taxes.",
"title": ""
},
{
"docid": "23daa071e6209ff4ccaf3a2c8cc13b2e",
"text": "You need to talk to an accountant who practices tax accounting, preferaby someone who is an Enrolled Agent (EA) with the IRS, and possibly an attorney who specializes in tax law. There are multiple issues here, and the executor of your father's estate might need to be involved here too. Presumably you were a minor in 2007 since the transactions took place in a custodial account, and perhaps you were a dependent of your father in 2007. So, were the transactions reported on your father's 2007 income tax return? or did he file a separate income tax return in your name? You say you have a W2 for 2007. So you were earning some income in 2007? This complicates matters. It is necessary to determine who has the responsibility to file income tax returns for a minor with earned income. Above all, I urge you to not file income tax returns on your own or using a tax return preparation program, or after talking to a tax return preparation service (where you will likely get someone who works on a seasonal basis and is unlikely to be familiar with tax law as of 2007).",
"title": ""
},
{
"docid": "d5a1458ae217b838333d1a4d8690a177",
"text": "You need to submit an updated return. The problem is that once three years have passed you can't update the return to get any kind of refund, but if they are going after you for the sale price of the stocks, not knowing the cost, your goal is to show them there was no gain, and in fact you'd have had the loss if you were aware of the account. This is less than ten years back, so the broker should be able to give you the statements pretty easily.",
"title": ""
}
] |
[
{
"docid": "175a9f550ec56623c289df7f2fe0dc18",
"text": "Here is how it should look: 100 shares of restricted stock (RSU) vest. 25 shares sold to pay for taxes. W2 (and probably paycheck) shows your income going up by 100 shares worth and your taxes withheld going up by 25 shares worth. Now you own 75 shares with after-tax money. If you stop here, there would be no stock sale and no tax issues. You'd have just earned W2 income and withheld taxes through your W2 job. Now, when you sell those 75 shares whether it is the same day or years later, the basis for those 75 shares is adjusted by the amount that went in to your W2. So if they were bought for $20, your adjusted basis would be 75*$20.",
"title": ""
},
{
"docid": "177452e08f5bcd1a5ccb6fada4720bcd",
"text": "\"(Insert the usual disclaimer that I'm not any sort of tax professional; I'm just a random guy on the Internet who occasionally looks through IRS instructions for fun. Then again, what you're doing here is asking random people on the Internet for help, so here goes.) The gigantic book of \"\"How to File Your Income Taxes\"\" from the IRS is called Publication 17. That's generally where I start to figure out where to report what. The section on Royalties has this to say: Royalties from copyrights, patents, and oil, gas, and mineral properties are taxable as ordinary income. In most cases, you report royalties in Part I of Schedule E (Form 1040). However, if you hold an operating oil, gas, or mineral interest or are in business as a self-employed writer, inventor, artist, etc., report your income and expenses on Schedule C or Schedule C-EZ (Form 1040). It sounds like you are receiving royalties from a copyright, and not as a self-employed writer. That means that you would report the income on Schedule E, Part I. I've not used Schedule E before, but looking at the instructions for it, you enter this as \"\"Royalty Property\"\". For royalty property, enter code “6” on line 1b and leave lines 1a and 2 blank for that property. So, in Line 1b, part A, enter code 6. (It looks like you'll only use section A here as you only have one royalty property.) Then in column A, Line 4, enter the royalties you have received. The instructions confirm that this should be the amount that you received listed on the 1099-MISC. Report on line 4 royalties from oil, gas, or mineral properties (not including operating interests); copyrights; and patents. Use a separate column (A, B, or C) for each royalty property. If you received $10 or more in royalties during 2016, the payer should send you a Form 1099-MISC or similar statement by January 31, 2017, showing the amount you received. Report this amount on line 4. I don't think that there's any relevant Expenses deductions you could take on the subsequent lines (though like I said, I've not used this form before), but if you had some specific expenses involved in producing this income it might be worth looking into further. On Line 21 you'd subtract the 0 expenses (or subtract any expenses you do manage to list) and put the total. It looks like there are more totals to accumulate on lines 23 and 24, which presumably would be equally easy as you only have the one property. Put the total again on line 26, which says to enter it on the main Form 1040 on line 17 and it thus gets included in your income.\"",
"title": ""
},
{
"docid": "d090e456a27088b6844ae132bb20c829",
"text": "\"You mention \"\"early exercise\"\" in your title, but you seem to misunderstand what early exercise really means. Some companies offer stock options that vest over a number of years, but which can be exercised before they are vested. That is early exercise. You have vested stock options, so early exercise is not relevant. (It may or may not be the case that your stock options could have been early exercised before they vested, but regardless, you didn't exercise them, so the point is moot.) As littleadv said, 83(b) election is for restricted stocks, often from exercising unvested stock options. Your options are already vested, so they won't be restricted stock. So 83(b) election is not relevant for you. A taxable event happen when you exercise. The point of the 83(b) election is that exercising unvested stock options is not a taxable event, so 83(b) election allows you to force it to be a taxable event. But for you, with vested stock options, there is no need to do this. You mention that you want it not to be taxable upon exercise. But that's what Incentive Stock Options (ISOs) are for. ISOs were designed for the purpose of not being taxable for regular income tax purposes when you exercise (although it is still taxable upon exercise for AMT purposes), and it is only taxed when you sell. However, you have Non-qualified Stock Options. Were you given the option to get ISOs at the beginning? Why did your company give you NQSOs? I don't know the specifics of your situation, but since you mentioned \"\"early exercise\"\" and 83(b) elections, I have a hypothesis as to what might have happened. For people who early-exercise (for plans that allow early-exercise), there is a slight advantage to having NQSOs compared to ISOs. This is because if you early exercise immediately upon grant and do 83(b) election, you pay no taxes upon exercise (because the difference between strike price and FMV is 0), and there are no taxes upon vesting (for regular or AMT), and if you hold it for at least 1 year, upon sale it will be long-term capital gains. On the other hand, for ISOs, it's the same except that for long-term capital gains, you have to hold it 2 years after grant and 1 year after exercise, so the period for long-term capital gains is longer. So companies that allow early exercise will often offer employees either NQSOs or ISOs, where you would choose NQSO if you intend to early-exercise, or ISO otherwise. If (hypothetically) that's what happened, then you chose wrong because you got NQSOs and didn't early exercise.\"",
"title": ""
},
{
"docid": "0872e70592a7f9883ba0fb74b214503f",
"text": "No such account exists as capital gains aren't realized until holdings are sold. For example: OR Both scenarios would result in you owing the appropriate taxes on a $40 gain from the dividends. The $100 gain or $100 loss that isn't realized (you haven't sold the stock) isn't accounted for until the year of sale.",
"title": ""
},
{
"docid": "1b2244942670394e9c2efb0cfe36dbcd",
"text": "If you receive dividends on an investment, those are taxed.",
"title": ""
},
{
"docid": "9c11adb5071b17afcac09a15263f2afe",
"text": "I did this for the last tax year so hopefully I can help you. You should get a 1099-B (around the same time you're getting your W-2(s)) from the trustee (whichever company facilitates the ESPP) that has all the information you need to file. You'll fill out a Schedule D and (probably) a Form 8949 to describe the capital gains and/or losses from your sale(s). It's no different than if you had bought and sold stock with any brokerage.",
"title": ""
},
{
"docid": "e8028417ab8882585d653989bfad1b06",
"text": "When you sell a stock that you own, you realize gains, or losses. Short-term gains, realized within a year of buying and selling an asset, are taxed at your maximum (or marginal) tax rate. Long term-gains, realized after a year, are taxed at a lower, preferential rate. The first thing to consider is losses. Losses can be cancelled against gains, reducing your tax liability. Losses can also be carried over to the next tax year and be redeemed against those gains. When you own a bunch of the same type of stock, bought at different times and prices, you can choose which shares to sell. This allows you to decide whether you realize short- or long-term gains (or losses). This is known as lot matching (or order matching). You want to sell the shares that lost value before selling the ones that gained value. Booking losses reduces your taxes; booking gains increases them. If faced with a choice between booking short term and long term losses, I'd go with the former. Since net short-term gains are taxed at a higher rate, I'd want to minimize the short-term tax liability before moving on to long-term tax liability. If my remaining shares had gains, I'd sell the ones purchased earliest since long-term gains are taxed at a lower rate, and delaying the booking of gains converts short-term gains into long-term ones. If there's a formula for this, I'd say it's (profit - loss) x (tax bracket) = tax paid",
"title": ""
},
{
"docid": "abd138c01e6d5a971c99c8f92350dfec",
"text": "\"That's a tricky question and you should consult a tax professional that specializes on taxation of non-resident aliens and foreign expats. You should also consider the provisions of the tax treaty, if your country has one with the US. I would suggest you not to seek a \"\"free advice\"\" on internet forums, as the costs of making a mistake may be hefty. Generally, sales of stocks is not considered trade or business effectively connected to the US if that's your only activity. However, being this ESPP stock may make it connected to providing personal services, which makes it effectively connected. I'm assuming that since you're filing 1040NR, taxes were withheld by the broker, which means the broker considered this effectively connected income.\"",
"title": ""
},
{
"docid": "87f69bd4a84c17b4ecab98edadb49928",
"text": "\"You can group your like-kind (same symbol, ST/LT) stock positions, just be sure that your totals match the total dollar amounts on the 1099. An inconsistency will possibly result in a letter from IRS to clarify. So, if you sold the 100 shares, and they came from 7 different buys, list it once. The sell price and date is known, and for the buy price, add all the buys and put \"\"Various\"\" for the date. If you have both long term and short term groups as part of those 7 buys, split them into two groups and list them separately.\"",
"title": ""
},
{
"docid": "b7976020809b0020375b57fb5be4dbcb",
"text": "Is the remaining amount tax free? As in, if the amount shown (which I can sell) on etrade is $5000 then if I sell the entire shares will my bank account be increased by $5000? The stocks they sell are withholding. So let's say you had $7000 of stock and they sold $2000 for taxes. That leaves you with $5000. But the actual taxes paid might be more or less than $2000. They go in the same bucket as the rest of your withholding. If too much is withheld, you get a refund. Too little and you owe them. Way too little and you have to pay penalties. At the end of the year, you will show $7000 as income and $2000 as withheld for taxes from that transaction. You may also have a capital gain if the stock increases in price. They do not generally withhold on stock sales, as they don't necessarily know what was your gain and what was your loss. You usually have to handle that yourself. The main point that I wanted to make is that the sale is not tax free. It's just that you already had tax withheld. It may or may not be enough.",
"title": ""
},
{
"docid": "57cb61fd296cae857e0413a84e463426",
"text": "is it possible to file that single form aside from the rest of my return? Turbotax will generate all the forms necessary to file your return. I recommend you access these forms and file them manually. According to the IRS in order to report capital gains and losses you need to fill out Form 8949 and summarize them on Form 1040 D. Add these two forms to the stack that turbotax generates. Add the total capital gains to line 13 of the Form 1040 which turbotax generated, and adjust the totals on the form accordingly.",
"title": ""
},
{
"docid": "00fd19472be34909b70a36447dd0f38e",
"text": "The simple answer is that brokerages have to close the books at the end of the year before they can send out the tax forms (what this entails is off topic for this site). I doubt that printing and mailing the forms takes very long. It is simply the process of reconciling the books so they don't have to send out corrected forms if errors are corrected during that reconciliation process.",
"title": ""
},
{
"docid": "2948cd0e63af02de801485656a7996bc",
"text": "\"Tax US corporate \"\"persons (citizens)\"\" under the same regime as US human persons/citizens, i.e., file/pay taxes on all income earned annually with deductions for foreign taxes paid. Problem solved for both shareholders and governments. [US Citizens and Resident Aliens Abroad - Filing Requirements](https://www.irs.gov/individuals/international-taxpayers/us-citizens-and-resident-aliens-abroad-filing-requirements) >If you are a U.S. citizen or resident alien living or traveling outside the United States, **you generally are required to file income tax returns, estate tax returns, and gift tax returns and pay estimated tax in the same way as those residing in the United States.** Thing is, we know solving this isn't the point. It is to misdirect and talk about everything, but the actual issues, i.e., the discrepancy between tax regimes applied to persons and the massive inequality it creates in tax responsibility. Because that would lead to the simple solutions that the populace need/crave. My guess is most US human persons would LOVE to pay taxes only on what was left AFTER they covered their expenses.\"",
"title": ""
},
{
"docid": "4c209b6413218de97335fc1c5d4d5f1b",
"text": "\"My tax preparing agent is suggesting that since the stock brokers in India does not have any US state ITINS, it becomes complicated to file that income along with US taxes Why? Nothing to do with each other. You need to have ITIN (or, SSN more likely, since you're on H1b). What brokers have have nothing to do with you. You must report these gains on your US tax return, and beware of the PFIC rules when you do it. He says, I can file those taxes separately in India. You file Indian tax return in India, but it has nothing to do with the US. You'll have to deal with the tax treaty/foreign tax credits to co-ordinate. How complicated is it to include Indian capital gains along with US taxes? \"\"How complicated\"\" is really irrelevant. But in any case - there's no difference between Indian capital gains and American capital gains, unless PFIC/Trusts/Mutual funds are involved. Then it becomes complicated, but being complicated is not enough to not report it. If PIFC/Trusts/Mutual funds aren't involved, you just report this on Schedule D as usual. Did anybody face similar situation More or less every American living abroad. Also the financial years are different in India and US Irrelevant.\"",
"title": ""
},
{
"docid": "5d3da25089418411eb6408c048816288",
"text": "In the United States, when key people in a company buy or sell shares there are reporting requirements. The definition of key people includes people like the CEO, and large shareholders. There are also rules that can lock out their ability to buy and sell shares during periods where their insider knowledge would give them an advantage. These reporting rules are to level the playing field regarding news that will impact the stock price. These rules are different than the reporting rules that the IRS has to be able to tax capital gains. These are also separate than the registration rules for the shares so that you get all the benefits of owning the stock (dividends, voting at the annual meeting, voting on a merger or acquisition).",
"title": ""
}
] |
fiqa
|
ba90f0fadce580f9144e0324629a5005
|
Plan/education for someone desiring to achieve financial independence primarily through investing?
|
[
{
"docid": "9752468477b80a382ab4d26802656041",
"text": "Stay in school, learn everything you can, and spend as little money as possible. And realize that the chances of you dropping out and becoming a millionaire are much lower than the chances of you staying in school and becoming a millionaire. You're unlikely to be a good investor if you make bets with negative expected payoffs.",
"title": ""
},
{
"docid": "47d9f11485eb276a283de6d2ec44239b",
"text": "The basic problem here is that you need to have money to invest before you can make a profit from it. Now if you have say $500K or more, you can put that in mutual funds and live modestly off the profits. If you don't have that $500K to start out with, you're either looking at a long time frame to accumulate it - say by working a job for 30+ years, and contributing the max to your 401k - or are playing the market trying to get it. The last is essentially gambling (though with somewhat better odds than casinos or horse racing), and puts you up against the Gambler's Ruin problem: https://en.wikipedia.org/wiki/Gambler's_ruin You also, I think, have a very mistaken idea about the a typical investor's lifestyle. Take for instance the best known one, Warren Buffet. No offence to him, but from everything I've read he lives a pretty boring life. Spends all day reading financial reports, and what sort of life is that? As for flying places being exciting, ever tried it? I have (with scientific conferences, but I expect boardrooms are much the same), and it is boring. Flying at 30,000 ft is boring, and if it's a commercial flight, unpleasant as well. A conference room in London, Paris, or Milan is EXACTLY the same as a conference room in Podunk, Iowa. Even the cities outside the conference rooms are much of a muchness these days: you can eat at McDonalds in Paris or Shanghai. Only way to find interest is to take time from your work to get outside the conference rooms & commercial districts, and then you're losing money.",
"title": ""
}
] |
[
{
"docid": "1064fdecc92155663d3b8808178a2388",
"text": "\"First off, monozok is right, at the end of the day, you should not accept what anyone says to do without your money - take their suggestions as directions to research and decide for yourself. I also do not think what you have is too little to invest, but that depends on how liquid you need to be. Often in order to make a small amount of money grow via investments, you have to be willing to take all the investment profits from that principle and reinvest it. Thus, can you see how your investment ability is governed by the time you plan to spend without that money? They mantra that I have heard from many people is that the longer you are able to wait, the more 'risk' you can take. As someone who is about the same age as you (I'm 24) I can't exactly say yet that what I have done is sure fire for the long term, but I suggest you adopt a few principles: 1) Go read \"\"A Random Walk Down Wall Street\"\" by Burton G. Malkiel. A key point for you might be that you can do better than most of these professional investors for hire simply by putting more money in a well selected index fund. For example, Vanguard is a nice online service to buy indexes through, but they may require a minimum. 2) Since you are young, if you go into any firm, bank, or \"\"financial planner,\"\" they will just think you are naive and try to get you to buy whatever is best for them (one of their mutual funds, money market accounts, annuities, some flashy cd). Don't. You can do better on your own and while it might be tempting because these options look more secure or well managed, most of the time you will barely make above inflation, and you will not have learned very much. 3) One exciting thin you should start learning now is about algorithmic trading because it is cool and super efficient. quantopian.com is a good platform for this. It is a fun community and it is also free. 4) One of the best ways I have found to watch the stock market is actually through a stock game app on my phone that has realtime stock price feed. Seeking Alpha has a good mobile app interface and it also connects you to news that has to do with the companies you are interested in.\"",
"title": ""
},
{
"docid": "3799199cc1a37a3e5988e37f91eb8788",
"text": "\"Well... (in the US, at least) \"\"making investments and building assets\"\" is how you save for retirement. The investments just happen to be in the stock market, and the federal legislature has directed the US version of Inland Revenue Services to give special tax breaks to investments which are not withdrawn until age 59 1/2. I don't know if there are such tax breaks in Pakistan, or what the stock market is like there, so I'm presuming that by saying, \"\"building lucrative assets\"\", your father is referring to buying real estate and/or becoming a trader. Anyway, it's a good thing that you are looking so far ahead in life instead of only thinking of fast cars and pretty girls.\"",
"title": ""
},
{
"docid": "57fce3ae5e1905a229985d4408016bf3",
"text": "\"It includes whatever you want to do with your investment. At least initially, it's not so much a matter of calculating numbers as of introspective soul-searching. Identifying your investment objectives means asking yourself, \"\"Why do I want to invest?\"\" Then you gradually ask yourself more and more specific questions to narrow down your goals. (For instance, if your answer is something very general like \"\"To make money\"\", then you may start to ask yourself, \"\"How much money do I want?\"\", \"\"What will I want to use that money for?\"\", \"\"When will I want to use that money?\"\", etc.) Of course, not all objectives are realistic, so identifying objectives can also involve whittling down plans that are too grandiose. One thing that can be helpful is to first identify your financial objectives: that is, money you want to be able to have, and things you want to do with that money. Investment (in the sense of purchasing investment vehicles likes stocks or bonds) is only one way of achieving financial goals; other ways include working for a paycheck, starting your own business, etc. Once you identify your financial goals, you have a number of options for how to get that money, and you should consider how well suited each strategy is for each goal. For instance, for a financial goal like paying relatively small short-term expenses (e.g., your electric bill), investing would probably not be the first choice for how to do that, because: a) there may be easier ways to achieve that goal (e.g., ask for a raise, eat out less); and b) the kinds of investment that could achieve that goal may not be the best use of your money (e.g., because they have lower returns).\"",
"title": ""
},
{
"docid": "17f422763da7c98daaef8a2982acbe14",
"text": "This is what helped me. - I did my own taxes - get your own job, not from your parents, or parents friends, but entirely by yourself. Complete independence will equate to financial independence - Wikipedia (for specifics and definitions) paired with finance genre movies - audiobook, or YouTube video, 'why an economy grows, and why it doesnt' That's a good start. Good luck! Don't be too gung ho to invest and all that crap, you got lots too learn. Rule 1: don't be too eager, that's how you lose all your money! My best financial investments to date were: 1) my education (engineering) 2) I didn't pay my student loan off, instead, I bought a property, and I made $70,000 in 8 months off of one, and $100,000 off of another one in 2 years, 3) still making minimum payments on my student loan, a dollar today is worth more than a dollar tomorrow 4) pack my own lunches every day, eating out every meal ends up costing more than most mortgage payments. This is in Vancouver BC, Canada.",
"title": ""
},
{
"docid": "54ce4f503afc151425f30f55a31e5e08",
"text": "You are smart to read books to better inform yourself of the investment process. I recommend reading some of the passive investment classics before focusing on active investment books: If you still feel like you can generate after-tax / after-expenses alpha (returns in excess of the market returns), take a shot at some active investing. If you actively invest, I recommend the Core & Satellite approach: invest most of your money in a well diversified basket of stocks via index funds and actively manage a small portion of your account. Carefully track the expenses and returns of the active portion of your account and see if you are one of the lucky few that can generate excess returns. To truly understand a text like The Intelligent Investor, you need to understand finance and accounting. For example, the price to earnings ratio is the equity value of an enterprise (total shares outstanding times price per share) divided by the earnings of the business. At a high level, earnings are just revenue, less COGS, less operating expenses, less taxes and interest. Earnings depend on a company's revenue recognition, inventory accounting methods (FIFO, LIFO), purchase price allocations from acquisitions, etc. If you don't have a business degree / business background, I don't think books are going to provide you with the requisite knowledge (unless you have the discipline to read textbooks). I learned these concepts by completing the Chartered Financial Analyst program.",
"title": ""
},
{
"docid": "7375b487322935638688af71c2a9a918",
"text": "\"The statement \"\"Finance is something all adults need to deal with but almost nobody learns in school.\"\" hurts me. However I have to disagree, as a finance student, I feel like everyone around me is sound in finance and competition in the finance market is so stiff that I have a hard time even finding a paid internship right now. I think its all about perspective from your circumstances, but back to the question. Personally, I feel that there is no one-size-fits-all financial planning rules. It is very subjective and is absolutely up to an individual regarding his financial goals. The number 1 rule I have of my own is - Do not ever spend what I do not have. Your reflected point is \"\"Always pay off your credit card at the end of each month.\"\", to which I ask, why not spend out of your savings? plan your grocery monies, necessary monthly expenditures, before spending on your \"\"wants\"\" should you have any leftovers. That way, you would not even have to pay credit every month because you don't owe any. Secondly, when you can get the above in check, then you start thinking about saving for the rainy days (i.e. Emergency fund). This is absolutely according to each individual's circumstance and could be regarded as say - 6 months * monthly income. Start saving a portion of your monthly income until you have set up a strong emergency fund you think you will require. After you have done than, and only after, should you start thinking about investments. Personally, health > wealth any time you ask. I always advise my friends/family to secure a minimum health insurance before venturing into investments for returns. You can choose not to and start investing straight away, but should any adverse health conditions hit you, all your returns would be wiped out into paying for treatments unless you are earning disgusting amounts in investment returns. This risk increases when you are handling the bills of your family. When you stick your money into an index ETF, the most powerful tool as a retail investor would be dollar-cost-averaging and I strongly recommend you read up on it. Also, because I am not from the western part of the world, I do not have the cultural mindset that I have to move out and get into a world of debt to live on my own when I reached 18. I have to say I could not be more glad that the culture does not exist in Asian countries. I find that there is absolutely nothing wrong with living with your parents and I still am at age 24. The pressure that culture puts on teenagers is uncalled for and there are no obvious benefits to it, only unmanageable mortgage/rent payments arise from it with the entry level pay that a normal 18 year old could get.\"",
"title": ""
},
{
"docid": "52683fac8adacb6501cef0f04b28178d",
"text": "The best way I know of is to join an investment club. They club will act like a mutual fund, investing in stocks researched and selected by the group. Taking part in research and presenting results to the group for peer review is an excellent way to learn. You'll learn what is a good reason to invest and what isn't. You'll probably pick both winners and losers. The goal of participation is education. Some people learn how to invest and continue happily doing so. Others learn how to invest in single stocks and learn it is not for them.",
"title": ""
},
{
"docid": "100c16089b98c6da4bdec9e3d52ba91b",
"text": "\"The raw question is as follows: \"\"You will be recommending a purposed portfolio to an investment committee (my class). The committee runs a foundation that has an asset base of $4,000,000. The foundations' dual mandates are to (a) preserve capital and (b) to fund $200,000 worth of scholarships. The foundation has a third objective, which is to grow its asset base over time.\"\" The rest of the assignment lays out the format and headings for the sections of the presentation. Thanks, by the way - it's an 8 week accelerated course and I've been out sick for two weeks. I've been trying to teach myself this stuff, including the excel calculations for the past few weeks.\"",
"title": ""
},
{
"docid": "bda3ef90192a9c5903b02085137489e8",
"text": "Your question seems to be making assumptions around “investing”, that investing is only about stock market and bonds or similar things. I would suggest that you should look much broader than that in terms of your investments. Investment Types Your should consider (and include) some or all of the following for your investments, depending on your age, your attitude towards risk, the number of dependents you have, your lifestyle, etc. I love @Blackjack’s explanation of diversification into other asset classes producing a lower risk portfolio. Excellent! All the above need to be considered in this spread of risk, depending as I said earlier on your age, your attitude towards risk, the number of dependents you have, your lifestyle, etc. Stock Market Investment I’ll focus most of the rest of my post on the stock markets, as that is where my main experience lies. But the comments are applicable to a greater or lesser extent to other types of investing. We then come to how engaged you want to be with your investments. Two general management styles are passive investment management versus active investment management. @Blackjack says That pretty much sums up passive management. The idea is to buy ETFs across asset classes and just leave them. The difficulty with this idea is that profitability is very dependent upon when the stocks are purchased and when they are sold. This is why active investing should be considered as a viable alternative to passive investment. I don’t have access to a very long time frame of stock market data, but I do have 30 or so years of FTSE data, so let’s say that we invest £100,000 for 10 years by buying an ETF in the FTSE100 index. I know this isn't de-risking across a number of asset classes by purchasing a number of different EFTs, but the logic still applies, if you will bear with me. Passive Investing I have chosen my example dates of best 10 years and worst 10 years as specific dates that demonstrate my point that active investing will (usually) out-perform passive investing. From a passive investing point of view, here is a graph of the FTSE with two purchase dates chosen (for maximum effect), to show the best and worst return you could receive. Note this ignores brokerage and other fees. In these time frames of data I have … These are contrived dates to illustrate the point, on how ineffective passive investing can be, depending if there is a bear/bull market and where you buy in the cycle. One obviously wouldn’t buy all their stocks in one tranche, but I’m just trying to illustrate the point. Active Investing Let’s consider now active investing. I use the following rules for selling and buying:- This is obviously a very simple technical trading system and I would not recommend using it to trade with, as it is overly simplistic and there are some flaws and inefficiencies in it. So, in my simulation, These beat the passive stock market profit for their respective dates. Summary Passive stock market investing is dependent upon the entry and exit prices on the dates the transactions are made and will trade regardless of market cycles. Active stock market trading or investing engages with the market using a set of criteria, which can change over time, but allows one’s investments to be in or out of the market at any point in time. My time frames were arbitrary, but with the logic applied (which is a very simple technical trading methodology), I would suggest that any 10 year time frame active investing would beat passive investing.",
"title": ""
},
{
"docid": "c0d1b0431028f21dbbe042d2feefdc13",
"text": "Goal - What is it that you are saving or investing to have: Educational costs, retirement, vacation, home, or something else. Dollar figure and time period would be the keys here. Risk tolerance - What kind of risks are you prepared to accept with the investment choices you are making? What kind of time commitment do these investments have and are you prepared to spend the time necessary for this to work? This is about how wild are the swings as well as what beliefs do you have that may play a role here. Strategy - Do you know what kind of buy and sell conditions you have? Do you know what kind of models you are following? This is really important to have before you buy something as afterward you may have buyer's remorse that may cause more problems in a sense. Record keeping - Do you know what kinds of records you'll need for tax purposes? Do you know how long to hold onto records? Those would be the main ones to my mind.",
"title": ""
},
{
"docid": "b225057ac5a2daf8508875ece3977755",
"text": "\"For a job doing that kind of stuff, what is PREFERRED is 4 year undergrad at ivy league school + 2 year MBA at ivy league school, and then several more years of experience, which you can sort of get by interning while in school this will of course saddle you with debt, which is counterintuitive to your plans basically, the easy way up is percentage based compensation. without knowing the right people, you will get a piss poor salary regardless of what you do, in the beginning. so portfolio managers earn money by percentage based fees, and can manage millions and billions. real estate agents can earn money by percentage based commissions if they close a property and other business venture/owners can do the same thing. the problem with \"\"how to trade\"\" books is that they are outdated by the time they are published. so you should just stick with literature that teaches a fundamental knowledge of the products you want to trade/make money from. ultimately regardless of how you get/earn your initial capital, you will still need to be an individual investor to grow your own capital. this has nothing to do with being a portfolio manager, even highly paid individuals on wall street are in debt to lavish expenditures and have zero capital for their own investments. hope this helps, you really need to be thinking in a certain way to just quickly deduce good ideas from bad ideas\"",
"title": ""
},
{
"docid": "2154894e784fa76977d182c90058d00e",
"text": "Well this is not the best situation. Sorry to your friend. First off ROTHs are out, you need earned income. Secondly, I don't think the focus should be on retirement planning until there is again an earned income. Thirdly, this person is just in a bad spot. Lets assume that you can find some really good mutual funds, that consistently return 10% per year. At best this person can only pull out 10K per year without touching principle. At that income level, taxes are not much of a concern; not as much as surviving. If this person knows anything about investing, they know funds don't work like this. They could be down 5%, down 5%, up ~40% in three years to give an average of 10% return. Which of course further complicates matters. This person (IMO) should seek to start a different career. One that can cater to any long term issues this person has with pain/disability. The money could be used toward training/education in order to get money flowing again. That is not to say the full amount should be used for a BA in Russian Folk Literature, but some minimum training to get a career that starts earning real money.",
"title": ""
},
{
"docid": "63edf1941f8f892ba7c319e07a6d3327",
"text": "\"There are many questions and good answers here regarding investment choices. The first decision you need to make is how involved do you intend to be in investment activity. If you plan to be actively investing by yourself, you should look for questions here about making investment choices. If you intend to be a more passive investor, look for posts by \"\"Bogleheads\"\", who focus on broad-focused, low cost investments. This is the optimal choice for many people. If you are not comfortable managing investments at all, you need to figure out how to find a competent and reasonably priced financial advisor to meet with and guide your investment strategy. This advice generally costs about 1-2% of your total managed assets annually.\"",
"title": ""
},
{
"docid": "1c007d2f764ed54de2b635b1ceb950c4",
"text": "\"(Leaving aside the question of why should you try and convince him...) I don't know about a very convincing \"\"tl;dr\"\" online resource, but two books in particular convinced me that active management is generally foolish, but staying out of the markets is also foolish. They are: The Intelligent Asset Allocator: How to Build Your Portfolio to Maximize Returns and Minimize Risk by William Bernstein, and A Random Walk Down Wall Street: The Time Tested-Strategy for Successful Investing by Burton G. Malkiel Berstein's book really drives home the fact that adding some amount of a risky asset class to a portfolio can actually reduce overall portfolio risk. Some folks won a Nobel Prize for coming up with this modern portfolio theory stuff. If your friend is truly risk-averse, he can't afford not to diversify. The single asset class he's focusing on certainly has risks, most likely inflation / purchasing power risk ... and that risk that could be reduced by including some percentage of other assets to compensate, even small amounts. Perhaps the issue is one of psychology? Many people can't stomach the ups-and-downs of the stock market. Bernstein's also-excellent follow-up book, The Four Pillars of Investing: Lessons for Building a Winning Portfolio, specifically addresses psychology as one of the pillars.\"",
"title": ""
},
{
"docid": "06cabc9409ed479bef4f066363863dbb",
"text": "\"Most articles on investing recommend that investors that are just starting out to invest in index stock or bonds funds. This is the easiest way to get rolling and limit risk by investing in bonds and stocks, and not either one of the asset classes alone. When you start to look deeper into investing there are so many options: Small Cap, Large Cap, technical analysis, fundamental analysis, option strategies, and on and on. This can end up being a full time job or chewing into a lot of personal time. It is a great challenge to learn various investment strategies frankly for the average person that works full time it is a huge effort. I would recommend also reading \"\"The Intelligent Asset Allocator\"\" to get a wider perspective on how asset allocation can help grow a portfolio and reduce risk. This book covers a simple process.\"",
"title": ""
}
] |
fiqa
|
e73744186c79f983fae6b9039eff306a
|
Why is a stock trade flat on large volume?
|
[
{
"docid": "64b54d4e4ecc2bbf9acb2240ed62c300",
"text": "Large volume just means a lot of market participants believe they know where the stock price will be (after some amount of time). The fact that the price is not moving just means that about 50% of those really confident traders think the stock will be moving up, and about 50% of those really confident traders think the stock will be moving down.",
"title": ""
}
] |
[
{
"docid": "e051c1d68cb00a50ab635c8eee34f5b3",
"text": "That's true. So instead, they brute force the exchange with buy orders before they know if there's even any demand for the equity. Most of these get cancelled. If they see someone else placing a large buy order, they let theirs go through and do not cancel. They meet the ask and get the order because they don't care about getting the best deal. The buy order the HFT sent through is for the entire book. The HFT can then demand the highest price possible. After that, they dump the unsought portion of the book back into the market. Regulation have cracked down on this practice. However, that just means HFT have decided to build their own exchanges. The HFT buy order was placed before they even knew there was anyone else looking for the same buy.",
"title": ""
},
{
"docid": "7e2f458774d5b5fc425a19b677227c5c",
"text": "The most likely explanation is that the calls are being bought as a part of a spread trade. It doesn't have to be a super complex trade with a bunch of buys or sells. In fact, I bought a far out of the money option this morning in YHOO as a part of a simple vertical spread. Like you said, it wouldn't make sense and wouldn't be worth it to buy that option by itself.",
"title": ""
},
{
"docid": "51177f91e6f80c79237c7bbda4babb73",
"text": "\"You are interpreting things wrong. Indian Infotech and Software Ltd (BOM:509051) clearly has volume and trades. The MoneyControl site says Your words like \"\"Nobody is selling the stock\"\" and \"\"no trade going on\"\" are completely unfounded.\"",
"title": ""
},
{
"docid": "6ff491bfc4b2f438ed6236f9c30b6548",
"text": "\"I've alway thought that it was strange, but the \"\"price\"\" that gets quoted on a stock exchange is just the price of the last transaction. The irony of this definition of price is that there may not actually be any more shares available on the market at that price. It's also strange to me that the price isn't adjusted at all for the size of the transaction. A transaction of just 1 share will post a new price even if just seconds earlier 100,000 shares traded for a different price. (Ok, unrealistic example, but you get my point.) I've always believed this is an odd way to describe the price. Anyway, my diatribe here is supposed to illustrate the point that the fluctuations you see in price don't really reflect changing valuations by the stock-owning public. Each post in the exchange maintains a book of orders, with unmatched buy orders on one side and unmatched sell orders on the other side. If you go to your broker and tell him, \"\"fill my order for 50,000 shares at market price\"\", then the broker won't fill you 50,000 shares at .20. Instead, he'll buy the 50 @ .22, then 80 @ .23, then 100 @ .30, etc. Because your order is so large compared to the unmatched orders, your market order will get matched a bunch of the unmatched orders on the sell side, and each match will notch the posted price up a bit. If instead you asked the broker, \"\"open a limit order to buy 50000 shares at .20\"\", then the exchange will add your order to the book: In this case, your order likely won't get filled at all, since nobody at the moment wants to sell at .20 and historically speaking it's unlikely that such a seller will suddenly appear. Filling large orders is actually a common problem for institutional investors: http://www.businessweek.com/magazine/content/05_16/b3929113_mz020.htm http://www.cis.upenn.edu/~mkearns/papers/vwap.pdf (Written by a professor I had in school!)\"",
"title": ""
},
{
"docid": "5671482527712efcef940b6b31d2b8fb",
"text": "I'd think that liquidity and speed are prioritized (even over retail brokers and in come cases over PoP) for institutional traders who by default have large positions. When the going gets tough, these guys are out and the small guys - trading through average retail brokers - are the ones left holding the empty bag.",
"title": ""
},
{
"docid": "00d64462b1b09ff604bb7c35a27c8c37",
"text": "All the time. For high volume stocks, it may be tough to see exactly what's going on, e.g. the bid/ask may be moving faster than your connection to the broker can show you. What I've observed is with options. The volume on some options is measured in the 10's or 100's of contracts in a day. I'll see a case where it's $1.80/$2.00 bid/ask, and by offering $1.90 will often see a fill at that price. Since I may be the only trade on that option in the 15 minute period and note that the stock wasn't moving more than a penny during that time, I know that it was my order that managed to fill between the bid/ask.",
"title": ""
},
{
"docid": "dd99ef5267bc2cb10f23ee1f62bc9f82",
"text": "I've never seen a dividend, split or other corporate action during the day, but I have seen trade suspended a few times when something big happened. The market opening price is not in general the same as the close of the previous day. It can gap up or down and does frequently. I don't know of an api to find out if the dividend was cash or stock, but stock dividends are a lot less common.",
"title": ""
},
{
"docid": "e450299e0cbede429bd9a9f93b8bee39",
"text": "Obviously there are good answers about the alternatives to the stock market in the referenced question. HFT has been debated heavily over the past couple of years, and the Flash crash of May 6, 2010, has spurred regulators to rein in heavy automated trading. HFT takes advantage of churn and split second reactions to changing market trends, news and rumors. It is not wise for individual investors to fight the big boys in these games and you will likely lose money in day trading as a result. HFT's defender's may be right when they claim that it makes the market more liquid for you to get the listed price for a security, but the article points out that their actions more closely resemble the currently illegal practice of front-running than a negotiated trade where both parties feel that they've received a fair value. There are many factors including supply and demand which affect stock prices more than volume does. While market makers are generating the majority of volume with their HFT practices, volume is merely the number of shares bought and sold in a day. Volume shows how many shares people are interested in trading, not the actual underlying value of the security and its long term prospects. Extra volume doesn't affect most long term investments, so your long term investments aren't in any extra danger due to HFT. That said, the stock market is a risky place whether panicked people or poorly written programs are trading out of control. Most people are better off investing rather than merely trading. Long term investors don't need to get the absolute lowest price or the highest sell. They move into and out of positions based on overall value and long term prospects. They're diversified so bad apples like Enron, etc. won't destroy their portfolio. Investors long term view allows them to ignore the effects of churn, while working like the tortoise to win the race while the hare eventually gets swallowed by a bad bet. There are a lot of worrying and stressful uncertainties in the global economy. If it's a question of wisdom, focus on sound investments and work politically (as a citizen and shareholder) to fix problems you see in the system.",
"title": ""
},
{
"docid": "6ea009c9cb60a6fff7331e6abd1e3c1e",
"text": "\"For stock options, where I'm used to seeing these terms: Volume is usually reported per day, whereas open interest is cumulative. In addition, some volume closes positions and some opens positions. For example, if I am long one contract and sell it to someone who was short one contract, then that adds to volume and reduces open interest. If I hold no contracts and sell (creating a short position) to someone who also had no contracts, then I add to volume and I increase open interest. EDIT: With the clarification in your comment, then I would say some people opened and closed positions in that one day. Their opening and closing trades both contribute to \"\"volume\"\" but they have not net position in the \"\"open interest.\"\"\"",
"title": ""
},
{
"docid": "8fd22fb4b04a3bab76b172ea9a18a837",
"text": "Something to consider is that in the case of the company you chose, on the OTC market, that stock is thinly traded and with such low volume, it can be easy for it to fluctuate greatly to have trades occur. This is why volume can matter for some people when it comes to buying shares. Some OTC stocks may have really low volume and thus may have bigger swings than other stocks that have higher volume.",
"title": ""
},
{
"docid": "e676528002cfe8b03ccc1da80e4e5e91",
"text": "It may have some value! Investopedia has a well-written quick article on how stock holders may still get some portion of the liquidated assets. While there is generally little left for common shareholders if the price of those shares is tiny and some money does come back to shareholders there can still be significant profit to be made. As to why the trading volume is so high... there are many firms and hedge funds that specialize in calculating the value of and buying distressed debt and stock. They often compete with each other to by the stock/debt that common shareholders are trying to get rid of. In this particular case, there is a lot of popular interest, intellectual property at stake and pending lawsuits that probably boosts volume.",
"title": ""
},
{
"docid": "04a2a79a70e0db2bef7ab9d57b6563bb",
"text": "\"When you look at those results you'll see that it lists the actual market cap for the stocks. The ones on the biggest price move are usually close the the $1B capitalization cut-off that they use. (The don't report anything with less than $1B in capitalization on these lists.) The ones on the biggest market cap are much larger companies. So, the answer is that a 40% change in price on a company that has $1B capitalization will be a $400M change in market cap. A 4% change on a company with $100B capitalization will be a $4B change in market cap. The one that moved 40% will make the \"\"price\"\" list but not the market cap list and vice versa.\"",
"title": ""
},
{
"docid": "bf168ee521b97096dbc19a8a9c86a3f4",
"text": "It could be an endless number of reasons for it. It could simply just be a break through a long term resistance causing technical traders to jump in. It could be an analyst putting out a buy recommendation. If fundamentals have not changed then maybe the technicals have changed. Momentum could have reached an oversold position causing new buyers to enter the market. Without knowing the actual stock, its fundamentals and its technicals, no one will ever know exactly why.",
"title": ""
},
{
"docid": "be25c00709dc2f9ad36703697f9aa7c0",
"text": "The volume required to significantly move the price of a security depends completely on the orderbook for that particular security. There are a variety of different reasons and time periods that a security can be halted, this will depend a bit on which exchange you're dealing with. This link might help with the halt aspect of your question: https://en.wikipedia.org/wiki/Trading_halt",
"title": ""
},
{
"docid": "f1182b37a245e09836037c4d1d97fecb",
"text": "First--and I'm only repeating what has been said already--roboadvisors are a great way to avoid paying high MERs and still not have to do much yourself. The Canadian Couch Potato method is great IF you are disciplined and spend the time every few months to regularly re-balance your portfolio. However, any savings you gain in low MERs is going to very likely be lost if you aren't re-balancing or if you aren't patient and disciplined in your investing. For that reason, the Couch Potato way isn't appropriate for 97% of the general population in my opinion. But if you are reading this, you probably already aren't a member of the general population. For myself, life seems always too busy and I've got a kid on the way. I see a huge value in using a robo-advisor (or alternatively Tangerine) and saving time in my day. The next question, which robo-advisor is best? I did a bunch of research here and my conclusion is that they are all fairly similar. My final three came down to Wealthbar/Wealthsimple/NestWeatlh. Price structures vary, but minus a few dollars here or there, there isn't a lot of difference in costs. What made WealthSimple stick out was that they provide some options for US citizens that help me prevent tax headaches. They also got back to me by email with really detailed answers when I had questions, which was really appreciated. Their site and monthly updates are minimalist and intuitive to navigate. Great user experience all around (I do web design myself). My gut feeling is that they have their act together and will stick around as a company for a long while.",
"title": ""
}
] |
fiqa
|
ff1ee180b0ece4bebc5c024a4909f9fe
|
Why is volatility in a positive direction clubbed in the same risk category as volatility in a negative direction?
|
[
{
"docid": "4fb91063f3f8bb3728c38bb13f0e6b20",
"text": "Mostly, when an equity's price rises, its statistical and implied volatilities fall and vice versa. The reason why is a mathematical phenomenon mixed with the reality that a unceasingly falling asset price will soon not exist, skewing the results with survivorship bias. Since volatility is standard deviation of price indexes, a security that changes in price by the same amount every day will have lower volatility, so a rising price will have lower implied volatility because its mostly experiencing positive daily price change while a recently falling price will have higher volatility because factored together with the positive price changes, the negative price changes will widen the standard deviation of the securities price index. Quantitatively, any change, in or out of one's favor, is a risk because change is uncertain, and any uncertainty is a risk. This quantitative interpretation while valid runs almost totally counter to the value opinion, that a lower price relative to value is a lower risk than a higher price relative to value, but both have their place in time. Over long time periods, it's best to use the value interpretation, quantitative for shorter. Using the opposite has hastily destroyed many a fund manager.",
"title": ""
}
] |
[
{
"docid": "ad95ac2efa8c6f348e8f9de9c1bdc83f",
"text": "Risk and return always go hand by hand.* Risk is a measure of expected return volatility. The best investment at this stage is a good, easy to understand but thorough book on finance. *Applies to efficient markets only.",
"title": ""
},
{
"docid": "7dba0900e0c8d2e5b352741e92b3abfd",
"text": "Equal weighted indexes are not theoretically meant to be less volatile or less risky; they're just a different way to weigh stocks in an index. If you had a problem that hurt small caps more than large caps, an equal weighted index will be hurt more than a market-cap weighted one. On the other hand, if you consider that second rung companies have come up to replace the top layer, it makes sense to weigh them on par. History changes on a per-country basis - in India, for instance, the market's so small at the lower-cap end that big money chases only the large caps, which go up more in a liquidity driven move. But in a more secular period (like the last 18 months) we see that smaller caps have outperformed.",
"title": ""
},
{
"docid": "8bb6f2fa37a7dadb2eecc6d87c3f65f2",
"text": "\"In theory, the idea is that diversified assets will perform differently in different circumstances, spreading your risk around. Whether that still functions in practice is a decent question, as the \"\"truth\"\" of most probability based arguments for diversification rely on the different assets being at least somewhat uncorrelated. This article suggests that might not be true. Specifically: The correlations we note among industry sectors are profoundly and dysfunctionally high. and Gold and silver traders have gotten too used to the negative correlation trade with stocks. This is, in fact, an unusual relationship for precious metals tostocks. The correlation should actually be zero.\"",
"title": ""
},
{
"docid": "262e7e5fd2ce5bb84fb3f35d9644cb26",
"text": "\"This is because volatility is cumulative and with less time there is less cumulative volatility. The time value and option value are tied to the value of the underlying. The value of the underlying (stock) is quite influenced by volatility, the possible price movement in a given span of time. Thirty days of volatility has a much broader spread of values than two days, since each day benefits from the possible price change of the prior days. So if a stock could move up to +/- 1% in a day, then compounded after 5 days it could be +5%, +0%, or -5%. In other words, this is compounded volatility. Less time means far less volatility, which is geometric and not linear. Less volatility lowers the value of the underlying. See Black-Scholes for more technical discussion of this concept. A shorter timeframe until option expiration means there are fewer days of compounded volatility. So the expected change in the underlying will decrease geometrically. The odds are good that the price at T-5 days will be close to the price at T-0, much more so than the prices at T-30 or T-90. Additionally, the time value of an American option is the implicit put value (or implicit call). While an \"\"American\"\" option lets you exercise prior to expiry (unlike a \"\"European\"\" option, exercised only at expiry), there's an implicit put option in a call (or an implicit call in a put option). If you have an American call option of 60 days and it goes into the money at 30 days, you could exercise early. By contract, that stock is yours if you pay for it (or, in a put, you can sell whenever you decide). In some cases, this may make sense (if you want an immediate payoff or you expect this is the best price situation), but you may prefer to watch the price. If the price moves further, your gain when you use the call may be even better. If the price goes back out of the money, then you benefited from an implicit put. It's as though you exercised the option when it went in the money, then sold the stock and got back your cash when the stock went out of the money, even though no actual transaction took place and this is all just implicit. So the time value of an American option includes the implicit option to not use it early. The value of the implicit option also decreases in a nonlinear fashion, since the value of the implicit option is subject to the same valuation principles. But the larger principle for both is the compounded volatility, which drops geometrically.\"",
"title": ""
},
{
"docid": "84479c44e3b2139c6c5622fe4c66eda9",
"text": "I think I may have gotten my reasoning backwards, since beta can be thought of as just the quantification of the relationship in prices but in itself isn't the actual reason behind them. Risk free are things such as Treasury bonds/bills.",
"title": ""
},
{
"docid": "b354cfcaa22f3ae30140295627b99872",
"text": "The point of derivatives is to get rid of the risk you don't want so you can acquire exposure only to the risk you want. Who wants weather/temperature risk -- speculators. Who doesn't want that risk? Anyone who's core business is adversely affected by bad weather. It's the same reason multinational firms will hedge FX and interest rates. All a speculator is typically doing is taking the other side of the trade based on what they feel is the true price of the risk they are assuming",
"title": ""
},
{
"docid": "aeb64b07561075ceb2b069672dc49c04",
"text": "From a mathematical expected-value standpoint, there is no difference between gambling (e.g. buying a lottery ticket) and investing (e.g. buying a share of stock). The former probably has negative expected value while the latter probably has positive expected value, but that is not a distinction to include in a definition (else every company that gives a bad quarterly earnings report suddenly changes categories). However, investment professionals have a vested interest in claiming there is a difference; that justifies them charging fees to steer you into the right investment. Consequently, hair-splitting ideas like the motive behind a purchase are introduced. The classification of an item to be purchased should not depend on the mental state of its purchaser. Depending on the situation, it may be right to engage in negative EV behavior. For example, if you have $1000 and need $2000 by next week or else you can't have an operation and you will die (and you can't find anyone to give you a loan). Your optimal strategy is to gamble your $1000, at the best odds you can get, with a possible outcome of $2000. So even if you only have a 1/3 chance of winning and getting that operation, it's still the right bet if you can't find a better one.",
"title": ""
},
{
"docid": "10fc3cef181d456bb37c2c3051b40413",
"text": "\"people are willing to pay higher premiums for options when stocks go down. Obviously the time value and intrinsic value and interests rates of the option doesn't change because of this so the miscalculation remainder is priced into the implied volatility part of the formula. Basically, anything that suggests the stock price will get volatile (sharp moves in either direction) will increase the implied volatility of the option. For instance, around earnings reports, the IV in both calls and puts in the nearest expiration dates are very high. When stocks go down sharply, the volatility is high because some people are buying puts for protection and others are buying calls because they think there will be a rebound move in the other direction. People (the \"\"sleep-at-night\"\" investors, not the derivatives traders ;) ) tend to be calm when stocks are going up, and fearful when they are going down. The psychology is important to understand and observe and profit from, not to quantitatively prove. The first paragraph should be your qualitative answer\"",
"title": ""
},
{
"docid": "51f14906edc80d47fca0c89609ed7aa5",
"text": "These statements aren't necessarily contradictory. In the first case, investors are bearish because they anticipate selling in the future (because all the interested buyers have bought, so all that remains in the short run are people willing to sell and therefore drive down the price). In the second case, the trend is strengthened because the increase in volume indicates that the price movement interested a lot of traders. The trend could be bullish or bearish. The statements aren't contradictory because the second case could very well lead to the first case. For example, if an increase in price is coupled with an increase in volume, this could indicate that the positive trend is strengthening (second case). Traders are becoming more interested in the price move, so they buy. However, once all of the traders who are willing to enter the market long do so, we're in the first case. Investors realize that all of the traders who were interested in buying have bought, so they become bearish because they expect selling to start soon.",
"title": ""
},
{
"docid": "5f433f37e8a807b99fd870b5f098ff10",
"text": "well well, good question, worth a discussion, the more filters you add to your strategy (volatility in this case), the lower its predictive power. i mean, one could further filter it by day of the week, whether prices are above or below a 200 day moving average...etc.",
"title": ""
},
{
"docid": "7e6f4f331cde178e6cbfb007797db5f9",
"text": "The risk of the particular share moving up or down is same for both. however in terms of mitigating the risk, Investor A is conservative on upside, ie will exit if he gets 10%, while is ready to take unlimited downside ... his belief is that things will not go worse .. While Investor B is wants to make at least 10% less than peak value and in general is less risk averse as he will sell his position the moment the price hits 10% less than max [peak value] So it more like how do you mitigate a risk, as to which one is wise depends on your belief and the loss appetite",
"title": ""
},
{
"docid": "963343cd587bb4eead1e951bd5f258af",
"text": "A change in implied volatility tells us something about what investors are thinking (or fearing) about the volatility going forward for the life of the associated option contracts (which may be short or long-lived). IV does a good job of summarizing the information available to investors, which includes information about the past and the present. However, whether these investor views actually translate into what happens in the future is a topic of debate in the finance literature--investors do not generally know the future--there are conflicting results available. There have been papers that show that implied volatility has predictive power in some situations, time periods, and horizons (though it is also biased) and other papers that show that it does not have statistically significant predictive power at all. The consensus last time I checked was that implied volatility is no worse than historical volatility (including methods that use trends in historical volatility to forecast where it is going) at predicting future volatility. Whether it is significantly better and whether either reliably predicts the future is something that is not agreed on. I take this lack of consensus as evidence that if it does predict future volatility, it does so poorly. Somewhat dated FAJ survey on the subject",
"title": ""
},
{
"docid": "89dda066ba2eec4f675e094aaa531a4e",
"text": "\"First off, the jargon you are looking for is a hedge. A hedge is \"\"an investment position intended to offset potential losses/gains that may be incurred by a companion investment\"\" (http://en.wikipedia.org/wiki/Hedge_(finance)) The other answers which point out that put options are frequently used as a hedge are correct. However there are other hedging instruments used by financial professionals to mitigate risk. For example, suppose you would really prefer that Foo Corporation not go bankrupt -- perhaps because they own you money (because you're a bondholder) or perhaps because you own them (because you're a stockholder), or maybe you have some other reason for wanting Foo Corp to do well. To mitigate the risk of loss due to bankruptcy of Foo Corp you can buy a Credit Default Swap (http://en.wikipedia.org/wiki/Credit_default_swap). A CDS is essentially a bet that pays off if Foo Corp goes bankrupt, just as insurance on your house is a bet that pays off if your house burns down. Finally, don't ever forget that all insurance is not just a bet that the bad thing you're insuring against is going to happen, it is also a bet that the insurer is going to pay you if that happens. If the insurer goes bankrupt at the same time as the thing you are insuring goes bad, you're potentially in big trouble.\"",
"title": ""
},
{
"docid": "dfe42869d03227277ae9575312efd0e8",
"text": "Volatility is a shitty metric and is sample dependent, What is more interesting is point recurrence, i.e. how many times has a certain point been touched in x time, you can make good day trading strategies off point recurrence (relative that is).",
"title": ""
},
{
"docid": "4fe71dad8b6df9ac042bb484b3097c02",
"text": "I use two measures to define investment risk: What's the longest period of time over which this investment has had negative returns? What's the worst-case fall in the value of this investment (peak to trough)? I find that the former works best for long-term investments, like retirement. As a concrete example, I have most of my retirement money in equity, since the Sensex has had zero returns over as long as a decade. Since my investment time-frame is longer, equity is risk-free, by this measure. For short-term investments, like money put aside to buy a car next year, the second measure works better. For this purpose, I might choose a debt fund that isn't the safest, and has had a worst-case 8% loss over the past decade. I can afford that loss, putting in more money from my pocket to buy the car, if needed. So, I might choose this fund for this purpose, taking a slight risk to earn higher return. In any case, how much money I need for a car can only be a rough guess, so having 8% less than originally planned may turn out to be enough. Or it may turn out that the entire amount originally planned for is insufficient, in which case a further 8% shortfall may not be a big deal. These two measures I've defined are simple to explain and understand, unlike academic stuff like beta, standard deviation, information ratio or other mumbo-jumbo. And they are simple to apply to a practical problem, as I've illustrated with the two examples above. On the other hand, if someone tells me that the standard deviation of a mutual fund is 15%, I'll have no idea what that means, or how to apply that to my financial situation. All this suffers from the problem of being limited to historical data, and the future may not be like the past. But that affects any risk statistic, and you can't do better unless you have a time machine.",
"title": ""
}
] |
fiqa
|
8ad12da4c3d0d1299dc1613bcc2b3721
|
What does the term “match the market” mean?
|
[
{
"docid": "05cc8ae38c4386b8c01bec254bcc9d81",
"text": "If your returns match the market, that means their rate of return is the same as the market in question. If your returns beat the market, that means their rate of return is higher. There's no one 'market', mind you. I invest in mutual funds that track the S&P500 (which is, very roughly, the U.S. stock market), that track the Canadian stock market, that track the international stock market, and which track the Canadian bond market. In general, you should be deeply dubious of any advertised investment option that promises to beat the market. It's certainly possible to do so. If you buy a single stock, for example, that stock may go up by 40% over the course of a year while the market may go up by 5%. However, you are likely taking on substantially more risk. So there's a very good chance (likely, a greater chance) that the investment would go down, losing you money.",
"title": ""
},
{
"docid": "ec7d20b5c677efd4ec7050b333963bfe",
"text": "\"From Investopedia: \"\"Beating the market\"\" is a difficult phrase to analyze. It can be used to refer to two different situations: 1) An investor, portfolio manager, fund or other investment specialist produces a better return than the market average. The market average can be calculated in many ways, but usually a benchmark - such as the S&P 500 or the Dow Jones Industrial Average index - is a good representation of the market average. If your returns exceed the percentage return of the chosen benchmark, you have beaten the market - congrats! (To learn more, read Benchmark Your Returns With Indexes.) 2) A company's earnings, sales or some other valuation metric is superior to that of other companies in its industry. Matching the market, I would presume will be generating returns equivalent to the index you are comparing your portfolio with. If for a sector/industry then it would be the returns generated by the sector/industry. As an index is more or less a juxtaposition of the market as a whole, people tend to use an index.\"",
"title": ""
},
{
"docid": "a80dc7533ccb40699db040f79d2ee423",
"text": "\"There was a time when everyone felt their goal was to beat the respective index they followed. But of course, in aggregate, that's a mathematical impossibility. The result was that the average say large cap fund, whose benchmark index would be the S&P, would lag on average by 1-2%. A trend toward ETFs that would match the market had begun, and the current ETFs that follow the S&P are sub .1% expense. For the fact that studies (Google \"\"Dalbar\"\" for examples) show the typical investor lags not by 1% or 2%, but by far more for reasons of bad timing, my own statement that \"\"I've gotten a return these past years of .06% less than the S&P\"\" would have been seen many years ago as failure, now it's bragging. It handily beats the typical investor and yet, can be had by anyone wishing to stay the course, keep the ETF very long term.\"",
"title": ""
}
] |
[
{
"docid": "1c79d026471b09975eace0f7562df02f",
"text": "\"A \"\"market maker\"\" is someone that is contractually bound, by the exchange, to provide both bid and ask prices for a given volume (e.g. 5000 shares). A single market maker usually covers many stocks, and a single stock is usually covered by many market makers. The NYSE has \"\"specialists\"\" that are market makers that also performed a few other roles in the management of trading for a stock, and usually a single issue on the NYSE is covered by only one market maker. Market makers are often middlemen between brokers (ignoring stuff like dark pools, and the fact that brokers will often trade stocks internally among their own clients before going to the exchange). Historically, the market makers gave up buy/sell discretion in exchange for being the \"\"go-to guys\"\" for anyone wanting to trade in that stock. When you told your broker to buy a stock for you, he didn't hook you up with another retail investor; he went to the market maker. Market makers would also sometimes find investors willing to step in when more liquidity was needed for a security. They were like other floor traders; they hung out on the exchange floors and interacted with traders to buy and sell stocks. Traders came to them when they wanted to buy one of the specialist's issues. There was no public order book; just ticker tape and a quote. It was up to the market maker to maintain that order book. Since they are effectively forbidden from being one-sided traders in a security, their profit comes from the bid-ask spread. Being the counter-party to almost every trade, they'd make profit from always selling above where they were buying. (Except when the price moved quickly -- the downside to this arrangement.) \"\"The spread goes to the market maker\"\" is just stating that the profit implicit in the spread gets consumed by the market maker. With the switch to ECNs, the role of the market maker has changed. For example, ForEx trading firms tend to act as market makers to their customers. On ECNs, the invisible, anonymous guy at the other end of most trades is often a market maker, still performing his traditional role. Yet brokers can interact directly with each other now, rather than relying on the market maker's book. With modern online investing and public order books, retail investors might even be trading directly with each other. Market makers are still out there; in part, they perform a service sold by an Exchange to the companies that choose to be listed on that exchange. That service has changed to helping tamp volatility during normal high-volatility periods (such as at open and close).\"",
"title": ""
},
{
"docid": "ddcc7257e95751a370cd19fbef3d16d5",
"text": "The OTC market is a marketplace, the location it definitely relied on the purchaser marketplace. The OTC market is mostly used to exchange bonds among the two occasions and all this technique are executed by way of manner of the third celebration. They are able to also be used to alternate equity, such because of the OTC QX and purple marketplaces within the USA. The minamargroup is the Florida, USA situated agency, who elements their purchase investor relation with to present organization into to make new ones. OTC way it's far a protection traded in some context other, changing between parties or groups inclusive of New York Stock trade.",
"title": ""
},
{
"docid": "b0f82993d563596a6bbed60b0526e324",
"text": "\"With my current, limited knowledge (see end), I understand it the following way: Are share prices really described as \"\"memoryless\"\"? Yes. Is there a technical meaning of the term? What does it really mean? The meaning comes from Markov Models: Think of the behavior of the stock market over time as a Markov Chain, i.e. a probabilistic model with states and probabilistic transitions. A state is the current price of all stocks of the market, a transition is a step in time. Memoryless means that transitions that the stock market might make can be modelled by a relation from one state to another, i.e. it only depends on the current state. The model is a Markov Chain, as opposed to a more general Stochastic Process where the next state depends on more than the current state. So in a Markov Chain, all the history of one stock is \"\"encoded\"\" already in its current price (more precisely in all stock's prices). The memorylessness of stocks is the main statement of the Efficient Market Theory (EMT). If a company's circumstances don't change, then a drop in its share price is going to be followed by a rise later. So if the EMT holds, your statement above is not necessarily true. I personally belief the EMT is a good approximation - only large corporations (e.g. Renaissance Technologies) have enough ressources (hundreds of mathematicians, billions of $) to be able to leverage tiny non-random movements that stem from a not completely random, mostly chaotic market. The prices can of course change when the company's circumstances change, but they aren't \"\"memoryless\"\" either. A company's future state is influenced by its past. In the EMT, a stock's future state is only influenced by its past as much as is encoded in its current price (more precisely, the complete market's current state). Whether that price was reached by a drop or a rise makes no difference. The above is my believe, but I'm by far no finance expert. I am working professionally with probabilistic models, but have only read one book on finance: Kommer's \"\"Souverän investieren mit Indexfonds und ETFs\"\". It's supposed to contain many statements of Malkiel's \"\"A Random Walk Down Wall Street\"\".\"",
"title": ""
},
{
"docid": "16e7501c9ae0531f21f66a8cb46cfa3e",
"text": "\"In general economic theory, there are always two markets created based on a need for a good; a spot market (where people who need something now can go outbid other people who need the same thing), and a futures market (where people who know they will need something later can agree to buy it for a pre-approved price, even if the good in question doesn't exist yet, like a grain crop). Options exist as a natural extension of the futures market. In a traditional future, you're obligated, by buying the contract, to execute it, for good or ill. If it turns out that you could have gotten a lower price when buying, or a higher price when selling, that's tough; you gave up the ability to say no in return for knowing, a month or three months or even a year in advance, the price you'll get to buy or sell this good that you know you need. Futures thus give both sides the ability to plan based on a known price, but that's their only risk-reduction mechanism. Enter the option. You're the Coors Brewing Company, and you want to buy 50 tons of barley grain for delivery in December in order to brew up for the Super Bowl and other assorted sports parties. A co-op bellies up to close the deal. But, since you're Coors, you compete on price with Budweiser and Miller, and if you end up paying more than the grain's really worth, perhaps because of a mild wet fall and a bumper crop that the almanac predicts, then you're going to have a real bad time of it in January. You ask for the right to say \"\"no\"\" when the contract falls due, if the price you negotiate now is too high based on the spot price. The co-op now has a choice; for such a large shipment, if Coors decided to leave them holding the bag on the contract and instead bought it from them anyway on a depressed spot market, they could lose big if they were counting on getting the contract price and bought equipment or facilities on credit against it. To mitigate those losses, the co-op asks for an option price; basically, this is \"\"insurance\"\" on the contract, and the co-op will, in return for this fee (exactly how and when it's paid is also negotiable), agree to eat any future realized losses if Coors were to back out of the contract. Like any insurance premium, the option price is nominally based on an outwardly simple formula: the probability of Coors \"\"exercising\"\" their option, times the losses the co-op would incur if that happened. Long-term, if these two figures are accurate, the co-op will break even by offering this price and Coors either taking the contract or exercising the option. However, coming up with accurate predictions of these two figures, such that the co-op (or anyone offering such a position) would indeed break even at least, is the stuff that keeps actuaries in business (and awake at night).\"",
"title": ""
},
{
"docid": "0a70b48ec2d2c7dc2da2515de90e3740",
"text": "\"Market price is just the bid or offer price of the last sell or buy order in the market. The price that you actually receive or pay will be the price that the person buying the stock off you or selling it to you will accept. If there are no other participants in the market to make up the other side of your order (i.e. to buy off you if you are selling or to sell to you if you are buying) the exchange pays large banks to be \"\"market makers\"\"; they fulfil your order using stocks that they don't want to either buy or sell just so that you get your order filled. When you place an order outside of market hours the order is kept on the broker's order books until the market reopens and then, at market opening time there is an opening \"\"auction\"\" at which orders are matched to opposing orders (i.e. each buy order will be matched with a sell) at a price determined by auction. You will not know what price the order was filled at until it has been filled. If you want to guarantee a price you can do so by placing a limit order that says not to pay more than a certain price for any unit of the stock.\"",
"title": ""
},
{
"docid": "6b6960e0b8dc9992091e46d97f77b2ab",
"text": "If you're talking about an ETF trading on Arca, it's probably because of the opening auction: The match price is the price that maximizes the volume that can be executed within the Auction Collars. The Core Open Auction will use the match price closest to the closing price of the previous trading day (based on normal market hours) if more than one indicative match price is valid. The core opening auction doesn't really take the opening session activity into account, as you can see - the market runs an auction and whatever price clears the most volume, within certain limits, is the opening print.",
"title": ""
},
{
"docid": "382cfb115f0b4a4d9cc4f7bfefcb26b1",
"text": "\"There seems to be a common sentiment that no investor can consistently beat the market on returns. What evidence exists for or against this? First off, even if the markets were entirely random there would be individual investors that would consistently beat the market throughout their lifetime entirely by luck. There are just so many people this is a statistical certainty. So let's talk about evidence of beating the market due to persistent skill. I should hedge by saying there isn't a lot of good data here as most understandably most individual investors don't give out their investment information but there are some ok datasets. There is weak evidence, for instance, that the best individual investors keep outperforming and interestingly that the trading of individual investors can predict future market movements. Though the evidence is more clear that individual investors make a lot of mistakes and that these winning portfolios are not from commonly available strategies and involve portfolios that are much riskier than most would recommend. Is there really no investment strategy that would make it likely for this investor to consistently outperform her benchmark? There are so, many, papers (many reasonable even) out there about how to outperform benchmarks (especially risk-adjusted basis). Not too mention some advisers with great track records and a sea of questionable websites. You can even copy most of what Buffet does if you want. Remember though that the average investor by definition makes the average \"\"market\"\" return and then pays fees on top of that. If there is a strategy out there that is obviously better than the market and a bunch of people start doing it, it quickly becomes expensive to do and becomes part the market. If there was a proven, easy to implement way to beat the market everyone would do it and it would be the market. So why is it that on this site or elsewhere, whenever an active trading strategy is discussed that potentially beats the market, there is always a claim that it probably won't work? To start with there are a large number of clearly bad ideas posed here and elsewhere. Sometimes though the ideas might be good and may even have a good chance to beat the market. Like so many of the portfolios that beat the market though and they add a lot of uncertainty and in particular, for this personal finance site, risk that the person will not be able to live comfortably in retirement. There is so much uncertainty in the market and that is why there will always be people that consistently outperform the market but at the same time why there will be few, if any, strategies that will outperform consistently with any certainty.\"",
"title": ""
},
{
"docid": "0eabeb93cababb5106d595ec924f6c44",
"text": "Is my observation that the currency exchange market is indirect correct? Is there a particular reason for this? Why isn't currency traded like stocks? I guess yes. In Stocks its pretty simple where the stock is held with a depository. Hence listing matching is simple and the exchange of money is via local clearing. Currency markets are more global and there is no one place where trades happen. There are multiple places where it happens and is loosely called Fx market place. Building a matching engine is also complex and confusing. If we go with your example of currency pair, matches would be difficult. Say; If we were to say all transactions happen in USD say, and list every currency as item to be purchased or sold. I could put a trade Sell Trade for Quantity 100 Stock Code EUR at Price 1.13 [Price in USD]. So there has to be a buy at a price and we can match. Similarly we would have Stock Code for GBP, AUD, JPY, etc. Since not every thing would be USD based, say I need to convert GBP to EUR, I would have to have a different set of Base currency say GBP. So here the quantity would All currencies except GBP which would be price. Even then we have issues, someone using USD as base currency has quoted for Stock GBP. While someone else using GBP has quoted for Stock USD. Plus moving money internationally is expensive and doing this for small trades removes the advantages. The kind of guarantees required are difficult to achieve without established correspondence bank relationships. One heavily traded currency pair, the exchange for funds happens via CLS Bank.",
"title": ""
},
{
"docid": "ba9683a3eaa2a07d63ac4edb4a7b5fee",
"text": "The principle of demand-supply law will not work if spoofing (or layering, fake order) is implemented. However, spoofing stocks is an illegal criminal practice monitored by SEC. In stock market, aggressive buyer are willing to pay for a higher ask price pushing the price higher even if ask size is considerably larger than bid size, especially when high growth potential with time is expected. Larger bids may attract more buyers, further perpetuating a price increase (positive pile-on effect). Aggressive sellers are willing to accept a lower bid price pushing the price lower even if ask size is considerably smaller than bid size, when a negative situation is expected. Larger asks may attract more sellers, further perpetuating a price fall (negative pile-on effect). Moreover, seller and buyers considers not only price but also size of shares in their decision-making process, along with marker order and/or limit order. Unlike limit order, market order is not recorded in bid/ask size. Market order, but not limit order, immediately affects the price direction. Thus, ask/bid sizes alone do not give enough information on price direction. If stocks are being sold continuously at the bid price, this could be the beginning of a downward trend; if stocks are being sold continuously at the ask price, this could be the beginning of a upward trend. This is because ask price is always higher than bid price. In all the cases, both buyers and sellers hope to make a profit in a long-term and short-term view",
"title": ""
},
{
"docid": "86002c2881dc80cdb1d691a332a2557e",
"text": "\"1) Are the definitions for capital market from the two sources the same? Yes. They are from two different perspectives. Investopedia is looking at it primarily from the perspective of a trader and they lead-off with the secondary market. This refers to the secondary market: A market in which individuals and institutions trade financial securities. This refers to the primary market: Organizations/institutions in the public and private sectors also often sell securities on the capital markets in order to raise funds. Also, the Investopedia definition leaves much to be desired, but it is supposed to be pithy. So, you are comparing apples and oranges, to some extent. One is an article, as short as it may be, this other one is an entry in a dictionary. 2) What is the opposite of capital market, according to the definition in investopedia? It's not quite about opposites, this is not physics. However, that is not the issue here. The Investopedia definition simply does not mention any other possibilities. The Wikipedia article defines the term more thoroughly. It talks about primary/secondary markets in separate paragraph. 3) According to the Wikipedia's definition, why does stock market belong to capital market, given that stocks can be held less than one year too? If you follow the link in the Wikipedia article to money market: As money became a commodity, the money market is nowadays a component of the financial markets for assets involved in short-term borrowing, lending, buying and selling with original maturities of one year or less. The key here is original maturities of one year or less. Here's my attempt at explaining this: Financial markets are comprised of money markets and capital markets. Money is traded as if it were a commodity on the money markets. Hence, the short-term nature in its definition. They are more focused on the money itself. Capital markets are focused on the money as a means to an end. Companies seek money in these markets for longer terms in order to improve their business in some way. A business may go to the money markets to access money quickly in order to deal with a short-term cash crunch. Meanwhile, a business may go to the capital markets to seek money in order to expand its business. Note that capital markets came first and money markets are a relatively recent development. Also, we are typically speaking about the secondary (capital) market when we are talking about the stock or bond market. In this market, participants are merely trading among themselves. The company that sought money by issuing that stock/bond certificate is out of the picture at that point and has its money. So, Facebook got its money from participants in the primary market: the underwriters. The underwriters then turned around and sold that stock in an IPO to the secondary market. After the IPO, their stock trades on the secondary market where you or I have access to trade it. That money flows between traders. Facebook got its money at the \"\"beginning\"\" of the process.\"",
"title": ""
},
{
"docid": "5210ada172610a33494d4d0965ec1762",
"text": "Please refer to this question to understand the basics of how an order is matched. How do exchanges match limit orders? Now most of the times even Block orders follow the same matching criteria. I think you are assuming that for every large buy order there is a matching large sell order. This is not true. So on the Buy side at various point in times there were Buy Orders, with Single order more than 10,000 shares. On the sell side to fulfil these orders there may or may not be a single order of 10,000. More often there will be quite a few smaller orders or 500, 1000 or whatever amount that are present in the queue based on the amount & time sort order or even partially matching out of a sell order of 10,000 ... Similarly when there is a large sell order of more than 10,000 , these may not have got filled in by a large buy order but by smaller buy orders etc ... So if you average out the amounts on the buy side and the sell side there would definately be a difference. The analysis of this difference is as indicated in your question, buy price is more than sell price and hence people are bullish ...",
"title": ""
},
{
"docid": "0e09e504da831f2a596ce992d0226259",
"text": "\"For every buyer there is a seller. That rule refers to actual (historical) trades. It doesn't apply to \"\"wannabees.\"\" Suppose there are buyers for 2,000 shares and sellers for only 1,000 at a given price, P. Some of those buyers will raise their \"\"bid\"\" (the indication of the price they are willing to pay) above P so that the sellers of the 1000 shares will fill their orders first (\"\"sold to the highest bidder\"\"). The ones that don't do this will (probably) not get their orders filled. Suppose there are more sellers than buyers. Then some sellers will lower their \"\"offer\"\" price to attract buyers (and some sellers probably won't). At a low enough price, there will likely be a \"\"match\"\" between the total number of shares on sale, and shares on purchase orders.\"",
"title": ""
},
{
"docid": "f1c69ba86c03badba30673e8435ced1e",
"text": "\"What does \"\"points\"\" mean In any stock market, there are certain stocks that go up and certain stocks that go down. Hence if we want to find the generic health of stock market, i.e. on an average is it going up or down, we have no means to find out. A practise that has evolved over the years is take a set of companies and find if on average they have gone up or gone down. In very simple terms say in 1970 I take the Market Capitalization of a set of 50 companies, lets say its value is \"\"X\"\". I would now call this index as value of 100. Now after a month if the Market Capitalization is 2X, the index value would be 200. After another month if the Market Capitalization come down to 1.5X, then index value would be 150. So essentially now one is able to get the general trend more easily. S&P is an index of Select 500 companies based on various parameters. So in isolation 2000 does not mean anything. However as a comparison it does give quite a bit of insight. Note there are various adjustments made to factor, i.e. certain companies go bankrupt or are not doing well are removed from Index, share splits, mergers, etc. This ensure that the Index is neutral and does not show unwarranted spikes.\"",
"title": ""
},
{
"docid": "f34458f083eae68c8949828e68620000",
"text": "A stock market is just that, a market place where buyers and sellers come together to buy and sell shares in companies listed on that stock market. There is no global stock price, the price relates to the last price a stock was traded at on a particular stock market. However, a company can be listed on more than one stock exchange. For example, some Australian companies are listed both on the Australian Stock Exchange (ASX) and the NYSE, and they usually trade at different prices on the different exchanges. Also, there is no formula to determine a stock price. In your example where C wants to buy at 110 and B wants to sell at 120, there will be no sale until one or both of them decides to change their bid or offer to match the opposite, or until new buyers and/or sellers come into the market closing the gap between the buy and sell prices and creating more liquidity. It is all to do with supply and demand and peoples' emotions.",
"title": ""
},
{
"docid": "82df923388802b1ff77c26ddf148d76d",
"text": "Remember that balance transfers are rarely fee free. As you state, there is a fee associated with the balance transfer. If your 0% rate is for 18 months and the fee is 3%, you are really paying 2% per year on the amount you transferred. The advantage is that you can redirect the debt you transferred is interest free and you can attack other debt with high interest on it. This can save you in interest fees and allow you to direct more of your money towards debt. The disadvantage is that your 0% interest will expire and become a much higher interest rate. Unless you pay off the transfer before the expiration, you will have to pay off the debt at the higher interest. How you decide to attack your debt reduction may need to factor in how long you expect to have debt and what other debt you have. Often times though, the savings in interest is less important than simplifying the number of debt accounts you have. The inspiration you receive from reducing your debt accounts is much more powerful. You realize reducing debt accounts allows you to actually see an end in sight and provides the recurring positive feedback that you are making progressing. This is why the advice to pay off your lowest balance credit cards first.",
"title": ""
}
] |
fiqa
|
8486d0a7d5113cec1b3be78b39f78d46
|
Selling put and call Loss Scenario Examples
|
[
{
"docid": "3d3024badcf485a7f35871a15bc54bf9",
"text": "\"The question you are asking concerns the exercise of a short option position. The other replies do not appear to address this situation. Suppose that Apple is trading at $96 and you sell a put option with a strike price of $95 for some future delivery date - say August 2016. The option contract is for 100 shares and you sell the contract for a premium of $3.20. When you sell the option your account will be credited with the premium and debited with the broker commission. The premium you receive will be $320 = 100 x $3.20. The commission you pay will depend on you broker. Now suppose that the price of Apple drops to $90 and your option is exercised, either on expiry or prior to expiry. Then you would be obliged to take delivery of 100 Apple shares at the contracted option strike price of $95 costing you $9,500 plus broker commission. If you immediately sell the Apple shares you have purchased under your contract obligations, then assuming you sell the shares at the current market price of $90 you would realise a loss of $500 ( = 100x($95-$90) )plus commission. Since you received a premium of $320 when you sold the put option, your net loss would be $500-$320 = $180 plus any commissions paid to your broker. Now let's look at the case of selling a call option. Again assume that the price of Apple is $96 and you sell a call option for 100 shares with a strike price of $97 for a premium of $3.60. The premium you receive would be $360 = 100 x $3.60. You would also be debited for commission by your broker. Now suppose that the price of Apple shares rises to $101 and your option is exercised. Then you would be obliged to deliver 100 Apple shares to the party exercising the option at the contracted strike price of $97. If you did not own the shares to effect delivery, then you would need to purchase those shares in the market at the current market price of $101, and then sell them to the party exercising the option at the strike price of $97. This would realise an immediate loss of $400 = 100 x ($101-$97) plus any commission payable. If you did own the shares, then you would simply deliver them and possibly pay some commission or a delivery fee to your broker. Since you received $360 when you sold the option, your net loss would be $40 = $400-$360 plus any commission and fees payable to the broker. It is important to understand that in addition to these accounting items, short option positions carry with them a \"\"margin\"\" requirement. You will need to maintain a margin deposit to show \"\"good faith\"\" so long as the short option position is open. If the option you have sold moves against you, then you will be called upon to put up extra margin to cover any potential losses.\"",
"title": ""
},
{
"docid": "9fff01263a13d8dcb07ae921e2bba43b",
"text": "Here's a simple example for a put, from both sides. Assume XYZ stock trades at $200 right now. Let's say John writes a $190 out of the money put on XYZ stock and sells this put to Abby for the premium, which is say $5. Assume the strike date, or date of settlement, is 6 months from now. Thus Abby is long one put option and John is short one put option (the writer of the option is short the option). On settlement date, let's assume two different scenarios: (1) If the price of the stock decreases by $50, then the put that Abby bought is 'in the money'. Abby's profit can be calculated as being strike price 190 - current stock price 150 - premium paid 5 = $35 So not including any transaction fees, that is a $35 dollar return on a $5 investment. (2) If the price of the stock increases by $50, then the put that Abby bought is worthless and her loss was 100%, or her entire $5 premium. For John, he made $5 in 6 months (in reality you need collateral and good credit to be able to write sizable option positions).",
"title": ""
},
{
"docid": "d0205be6f073238c2f232152d9fc9bf5",
"text": "See how you can only make the premium amount but your risk is the same as holding the stock when writing a put option.",
"title": ""
}
] |
[
{
"docid": "d82fb34dc2e7a18aa51ebcdac70db38a",
"text": "\"The previous answers make valid points regarding the risks, and why you can't reasonably compare trading for profit/loss to a roll of the die. This answer looks at the math instead. Your assumption: I have an equal probability to make a profit or a loss. Is incorrect, for the reasons stated in other answers. However, the answer to your question: Can I also assume that probabilistically speaking, a trader cannot do worst than random? Is \"\"yes\"\". But only because the question is flawed. Consequently it's throwing people in all directions with their answers. But quite simply, in a truly random environment the worst case scenario, no matter how improbable, is that you lose over and over again until you have nothing left. This can happen in sequential rolls of the dice AND in trading securities/bonds/whatever. You could guess wrong for every roll of the die AND all of your stock picks could become worthless. Both outcomes result in $0 (assuming you do not gamble with credit). Tell me, which $0 is \"\"worse\"\"? Given the infinite number of plays that \"\"random\"\" implies, the chance of losing your entire bankroll exists in both scenarios, and that is enough by itself to make neither option \"\"worse\"\" than the other. Of course, the opposite is also true. You could only pick winners, with an unlimited upside potential, but again that could happen with either dice rolls or stock picks. It's just highly improbable. my chances cannot be worse than random and if my trading system has an edge that is greater than the percentage of the transaction that is transaction cost, then I am probabilistically likely to make a profit? Nope. This is where it all falls apart. Just because your chances of losing it all are similarly improbable, does not make you more likely to win with one method or the other. Regression to the mean, when given infinite, truly random outcomes, makes it impossible to \"\"have an edge\"\". Also, \"\"probabilistically\"\" isn't a word, but \"\"probably\"\" is.\"",
"title": ""
},
{
"docid": "15c5d78ccb8d6d61e0703f8875d028f5",
"text": "\"Yes, of course there have been studies on this. This is no more than a question about whether the options are properly priced. (If properly priced, then your strategy will not make money on average before transaction costs and will lose once transaction costs are included. If you could make money using your strategy, on average, then the market should - and generally will - make an adjustment in the option price to compensate.) The most famous studies on this were conducted by Black and Scholes and then by Merton. This work won the Nobel Prize in 1995. Although the Black-Scholes (or Black-Scholes-Merton) equation is so well known now that people may forget it, they didn't just sit down one day and write and equation that they thought was cool. They actually derived the equation based on market factors. Beyond this \"\"pioneering\"\" work, you've got at least two branches of study. Academics have continued to study option pricing, including but not limited to revisions to the original Black-Scholes model, and hedge funds / large trading house have \"\"quants\"\" looking at this stuff all of the time. The former, you could look up if you want. The latter will never see the light of day because it's proprietary. If you want specific references, I think that any textbook for a quantitative finance class would be a fine place to start. I wouldn't be surprised if you actually find your strategy as part of a homework problem. This is not to say, by the way, that I don't think you can make money with this type of trade, but your strategy will need to include more information than you've outlined here. Choosing which information and getting your hands on it in a timely manner will be the key.\"",
"title": ""
},
{
"docid": "a38a79a2d92f9dc619c8dd5d99637ceb",
"text": "A long straddle using equity would be more akin to buying a triple leveraged ETF and an inverse triple leveraged ETF, only because one side will approach zero while the other can theoretically increase to infinity, in a short time span before time decay hits in. The reason your analogy fails is because the delta is 1.0 on both sides of your trade. At the money options, a necessary requirement for a straddle, have a delta of .5 There is an options strategy that uses in the money calls and puts with a delta closer to 1.0 to create an in the money strangle. I'm not sure if it is more similar to your strategy, an analogous options strategy would be better than yours as it would not share the potential for a margin call.",
"title": ""
},
{
"docid": "89ec2c32f8875d784be9200e9b3c8c6d",
"text": "\"I think the issue you are having is that the option value is not a \"\"flow\"\" but rather a liability that changes value over time. It is best to illustrate with a balance sheet. The $33 dollars would be the premium net of expense that you would receive from your brokerage for having shorted the options. This would be your asset. The liability is the right for the option owner (the person you sold it to) to exercise and purchase stock at a fixed price. At the moment you sold it, the \"\"Marked To Market\"\" (MTM) value of that option is $40. Hence you are at a net account value of $33-$40= $-7 which is the commission. Over time, as the price of that option changes the value of your account is simply $33 - 2*(option price)*(100) since each option contract is for 100 shares. In your example above, this implies that the option price is 20 cents. So if I were to redo the chart it would look like this If the next day the option value goes to 21 cents, your liability would now be 2*(0.21)*(100) = $42 dollars. In a sense, 2 dollars have been \"\"debited\"\" from your account to cover your potential liability. Since you also own the stock there will be a credit from that line item (not shown). At the expiry of your option, since you are selling covered calls, if you were to be exercised on, the loss on the option and the gain on the shares you own will net off. The final cost basis of the shares you sold will be adjusted by the premium you've received. You will simply be selling your shares at strike + premium per share (0.20 cents in this example)\"",
"title": ""
},
{
"docid": "b7b72120035518e6dfdd1a02bfa7bb9c",
"text": "$15 - $5 = $10 How did you possibly buy a put for less than the intrinsic value of the option, at $8.25 So we can infer that you would have had to get this put when the stock price was AT LEAST $6.75, but given the 3 months of theta left, it was likely above $7 The value of the put if the price of the underlying asset (the stock ABC) meandered between $5 - $7 would be somewhere between $10 - $8 at expiration. So you don't really stand to lose much in this scenario, and can make a decent gain in this scenario. I mean decent if you were trading stocks and were trying to beat the S&P or keep up with Warren Buffett, but a pretty poor gain since you are trading options! If the stock moves above $7 this is where the put starts to substantially lose value.",
"title": ""
},
{
"docid": "329675bf2c9692f2f78d55243aa4920e",
"text": "\"Yes, long calls, and that's a good point. Let's see... if I bought one contract at the Bid price above... $97.13 at expiry of $96.43 option = out of the money =- option price(x100) = $113 loss. $97.13 at expiry of $97.00 option = out of the money =- option price(x100) = $77 loss. $97.13 at expiry of $97.14 option = in the money by 1-cent=$1/contract profit - option price(x100) = $1-$58 = $57 loss The higher strike prices have much lower losses if they expire with the underlying stock at- or near-the-money. So, they carry \"\"gentler\"\" downside potential, and are priced much higher to reflect that \"\"controlled\"\" risk potential. That makes sense. Thanks.\"",
"title": ""
},
{
"docid": "4b6da6db0482f0c3ee1f3176632c122c",
"text": "I frequently do this on NADEX, selling out-of-the-money binary calls. NADEX is highly illiquid, and the bid/ask is almost always from the market maker. Out-of-the-money binary calls lose value quickly (NADEX daily options exist for only ~21 hours). If I place an above-ask order, it either gets filled quickly (within a few minutes) due to a spike in the underlying, or not at all. I compensate by changing my price hourly. As Joe notes, one of Black-Scholes inputs is volatility, but price determines (implied) volatility, so this is circular. In other words, you can treat the bid/ask prices as bid/ask volatilities. This isn't as far-fetched as it seems: http://www.cmegroup.com/trading/fx/volatility-quoting-fx-options.html",
"title": ""
},
{
"docid": "32ca0287dec65ed058c50e3065c832de",
"text": "\"Suppose the stock is $41 at expiry. The graph says I will lose money. I think I paid $37.20 for (net debit) at this price. I would make money, not lose. What am I missing? The `net debit' doesn't have anything to do with your P/L graph. Your graph is also showing your profit and loss for NOW and only one expiration. Your trade has two expirations, and I don't know which one that graph is showing. That is the \"\"mystery\"\" behind that graph. Regardless, your PUTs are mitigating your loss as you would expect, if you didn't have the put you would simply lose more money at that particular price range. If you don't like that particular range then you will have to consider a different contract. it was originally a simple covered call, I added a put to protect from stock going lower.. Your strike prices are all over the place and NBIX has a contract at every whole number.... there is nothing simple about this trade. You typically won't find an \"\"always profitable\"\" combination of options. Also, changes in volatility can distort your projects greatly.\"",
"title": ""
},
{
"docid": "3e9ed8d204d91a4d492322f8b343b568",
"text": "I understand what you're asking for (you want to write options ON call options... essentially the second derivative of the underlying security), and I've never heard of it. That's not to say it doesn't exist (I'm sure some investment banker has cooked something like this up at some point), but if it does exist, you wouldn't be able to trade it as easily as you can a put or a LEAP. I'm also not sure you'd actually want to buy such a thing - the amount of leverage would be enormous, and you'd need a massive amount of margin/collateral. Additionally, a small downward movement in the stock price could wipe out the entire value of your option.",
"title": ""
},
{
"docid": "87762fba6c108480835b5f9945920f30",
"text": "\"I look for buying a call option only at the money, but first understand the background above: Let's suppose X stock is being traded by $10.00 and it's January The call option is being traded by $0.20 with strike $11.00 for February. (I always look for 2% prize or more) I buy 100 stocks by $10.00 each and sell the option, earning $0.20 for each X stock. I will have to deliver my stocks by $11.00 (strike value agreed). No problem for me here, I took the prize plus the gain of $1.00. (continuing from item 3) I still can sell the option for the next month with strike equal or higher than that I bought. For instance, I can sell a call option of strike $10.00 and it might be worth to deliver stocks by $10.00 and take the prize. (continuing from item 3) Probably, it won't be possible to sell a call option with strike at the price that I paid for the stock, but that's not a problem. At the end of the option life (in February), the strike was $11.00 but the stock's price is $8.00. I got the $0.20 as prize and my stocks are free for trade again. I'll sell the call option for March with strike $9.00 (taking around 2% of prize). Well, I don't want to sell my stocks by $9.00 and make loss, right? But I'm selling the call option anyway. Then I wait till the price of the stock gets near the strike value (almost ATM) and I \"\"re-buy\"\" the option sold (Example: [StockX]C9 where C means month = March) and sell again the call option with higher strike to April (Example [StockX]D10, where D means month = April) PS.: At item 9 there should be no loss between the action of \"\"re-buy\"\" and sell to roll-out to the next month. When re-buying it with the stock's price near the strike, option value for March (C9) will be lower than when selling it to April (D10). This isn't any rule to be followed, this is just a conservative (I think they call it hedge) way to handle options and stocks. Few free to make money according to your goals and your style. The perfect rule is the one that meet your expectation, don't take the generalized rules too serious.\"",
"title": ""
},
{
"docid": "df0a822e90da03f08e77430b4a587980",
"text": "\"if you buy back the now ITM calls, then you will have a short term loss. That pair of transactions is independent, from a tax perspective, of your long position (which was being used as \"\"collateral\"\" in the very case that occurred). I can see your tax situation and can see the logic of taking a short term loss to balance a short term gain. Referring to D Stanley's answer, #2 and #3 are not the same because you are paying intrinsic value in the options and the skew in #2, whereas #3 has no intrinsic value. Of course, because you can't know the future, the stock price could move higher or lower between #2 and #3. #1 presumes the stock continues to climb.\"",
"title": ""
},
{
"docid": "dc97090be3ab27139fd98f9ac08e954b",
"text": "\"You are likely making an assumption that the \"\"Short call\"\" part of the article you refer to isn't making: that you own the underlying stock in the first place. Rather, selling short a call has two primary cases with considerably different risk profiles. When you short-sell (or \"\"write\"\") a call option on a stock, your position can either be: covered, which means you already own the underlying stock and will simply need to deliver it if you are assigned, or else uncovered (or naked), which means you do not own the underlying stock. Writing a covered call can be a relatively conservative trade, while writing a naked call (if your broker were to permit such) can be extremely risky. Consider: With an uncovered position, should you be assigned you will be required to buy the underlying at the prevailing price. This is a very real cost — certainly not an opportunity cost. Look a little further in the article you linked, to the Option strategies section, and you will see the covered call mentioned there. That's the kind of trade you describe in your example.\"",
"title": ""
},
{
"docid": "660331631252e07e739012bc4d478f12",
"text": "\"Here's my attempt at \"\"Options for Kids\"\" \"\"Hey kid... So you have this video game that you paid $50 for that you want to sell two months from now\"\" \"\"Yes, Mr. Video Game Broker, but I want to lock in a price so I know how much to save for a new Tickle Me Elmo for my baby sister.\"\" \"\"Ok, for $3, I'll sell you a 'Put' option so you can sell the game for $40 in two months.\"\" .... One month later .... \"\"Hey, Mr. Video Game Broker, I can't wait to get this new Tickle Me Elmo for my little sister for Christmas, but its hard to get and I'm afraid prices will go up. I can only spend $100!\"\" \"\"Ok kid, for $4 I'll sell you a 'Call' option to buy a Tickle me Elmo on December 21st for $95. If you can find it cheaper, the option can expire, otherwise $95 is the most you will pay!\"\"\"",
"title": ""
},
{
"docid": "3c289a96ce11b904b67bfafb42f5a1aa",
"text": "If the buyer exercises your option, you will have to give him the stock. If you already own the stock, the worst that can happen is you have to give him your stock, thus losing the money you spend to buy it. So the most you can lose is what you already spent to buy the stock (minus the price the buyer paid for your option). If you don't own the stock, you will have to buy it. But if the stock skyrockets in value, it will be very expensive to buy it. If for instance you buy the stock when it is worth $100, sell your covered call, and the next day the stock shoots to $1000, you will lose the $100 you got from the purchase of the stock. But if you had used a naked call, you would have to buy the stock at $1000, and you would lose $900. Since there is no limit to how high the stock can go, there is no limit to how much money you may lose.",
"title": ""
},
{
"docid": "2502f030fa961b4e3a9fc48d7cbecae3",
"text": "Sounds like an illiquid option, if there are actually some bidders, market makers, then sell the option at market price (market sell order). If there are not market makers then place a really low limit sell order so that you can sit at the ask in the order book. A lot of time there is off-book liquidity, so there may be a party looking for buy liquidity. You can also exercise the option to book the loss (immediately selling the shares when they get delivered to you), if this is an American style option. But if the option is worthless then it is probably significantly underwater, and you'd end up losing a lot more as you'd buy the stock at the strike price but only be able to sell at its current market value. The loss could also be increased further if there are even MORE liquidity issues in the stock.",
"title": ""
}
] |
fiqa
|
e817e282e5249b675ce292e4d84b9d7a
|
Am I understanding buying options on stock correctly
|
[
{
"docid": "4a4e169b5eea3cfb86085c017abf222b",
"text": "Here is a quick and dirty explanation of options. In a nutshell, you pay a certain amount to buy a contract that gives you the right, but not the obligation, to buy or sell a stock at a predetermined price at some date in the future. They come in a few flavors: I'll give you $100 if you let me buy 10,000 shares of XYZ for $10 more per share than it is trading at today any time before August 10th. I'll give you $100 if you promise to buy 10,000 shares of XYZ from me for $10 less per share than it is trading at today if I ask before August 10th. There are also two main types based on the expiration behavior: There are lots of strategies that employ options, too many to go into. Two key uses are.. Leverage: Buying Call options can give you a much higher return on your investment than just investing in the actual stock. However, with much higher risk of losing all of your investment instead of just some of it when the stock drops. Hedging: If you already own the underlying stock, put options can be used to buy down risk of serious drops in a holding.",
"title": ""
},
{
"docid": "9a1a98051b627a029a57786061576c51",
"text": "\"Options have legitimate uses as a way of hedging a bet, but in the hands of anyone but an expert they're gambling, not investing. They are EXTREMELY volatile compared to normal stocks, and are one of the best ways to lose your shirt in the stock market yet invented. How options actually work is that you're negotiating a promise that, at some future date or range of dates, they will let you purchase some specific number of shares (call), or they will let you sell them that number of shares (put), at a price specified in the option contract. The price you pay (or are paid) to obtain that contract depends on what the option's seller thinks the stock is likely to be worth when it reaches that date. (Note that if you don't already own the shares needed to back up a put option, you're promising to pay whatever it takes to buy those shares so you can sell them at the agreed upon price.) Note that by definition you're betting directly against experts, as opposed to a normal investment where you're usually trying to ride along with the experts. You are claiming that you can predict the future value of the stock better than they can, and that you will make a profit (on the difference between the value locked in by the option and the actual value at that time) which exceeds the cost of purchasing the option in the first place. Let me say that again: the option's price will have been set based on an expert's opinion of what the stock is likely to do in that time. If they think that it's really likely to be up $10 per share when the option comes due (really unlikely for a $20 stock!!!), they will try to charge you almost $10 per share to purchase the option at the current price. \"\"Almost\"\" because you're giving them a guaranteed profit now and assuming all the risk. If they're less sure it will go up that much, you'll pay less for the option -- but again, you're giving them hard money now and betting that you can predict the probabilities better than they can. Unless you have information that the experts don't have -- in which case you're probably committing insider trading -- this is a very hard bet to win. And it can be extremely misleading, since the price during the option period may cross back and forth over the \"\"enough that you'll make a profit\"\" line many times. Until you actually commit to exercising the option or not, that's all imaginary money which may vanish the next minute. Unless you are willing and able to invest pro-level resources in this, you'd probably get better odds in Atlantic City, and definitely get better odds in Las Vegas. If you don't see the sucker at the poker table, he's sitting in your seat. And betting against the guy who designed and is running the game is usually Not a Good Idea.\"",
"title": ""
},
{
"docid": "252190f8cf27a50f5c1992c752c1fd77",
"text": "There is a reason why most professional option traders are sellers instead of buyers. Option sellers IMO are analogous to insurance companies that come out ahead in the long run. That is not to say if you are bullish about a stock then you should not buy it. I personally would never buy an option outright and look to reduce my cost basis by selling options around it such as:",
"title": ""
}
] |
[
{
"docid": "5eba55b8b3ae2afd8cc8c689c49f5463",
"text": "\"More perspective on whether buying the stock (\"\"going long\"\") or options are better. My other answer gave tantalizing results for the option route, even though I made up the numbers; but indeed, if you know EXACTLY when a move is going to happen, assuming a \"\"non-thin\"\" and orderly option market on a stock, then a call (or put) will almost of necessity produce exaggerated returns. There are still many, many catches (e.g. what if the move happens 2 days from now and the option expires in 1) so a universal pronouncement cannot be made of which is better. Consider this, though - reputedly, a huge number of airline stock options were traded in the week before 9/11/2001. Perversely, the \"\"investors\"\" (presumably with the foreknowledge of the events that would happen in the next couple of days) could score tremendous profits because they knew EXACTLY when a big stock price movement would happen, and knew with some certainty just what direction it would go :( It's probably going to be very rare that you know exactly when a security will move a substantial amount (3% is substantial) and exactly when it will happen, unless you trade on inside knowledge (which might lead to a prison sentence). AAR, I hope this provides some perspective on the magnitude of results above, and recognizing that such a fantastic outcome is rather unlikely :) Then consider Jack's answer above (his and all of them are good). In the LONG run - unless one has a price prediction gift smarter than the market at large, or has special knowledge - his insurance remark is apt.\"",
"title": ""
},
{
"docid": "ca79662e35a8967e8928ef6b4e487cd4",
"text": "yes, you are double counting. Your profit is between ($7.25 and $8) OR ($7.75 and $8.50). in other words, you bought the stock at $7.75 and sold at $8.00 and made $0.50 on top. Profit = $8.00-$7.75+$0.50 (of course all this assumes that the stock is at or above $8.00 when the option expires. If it's below, then your profit = market price - $7.75 + $0.50 by the way the statement won't call me away until the stock reaches $8.50 is wrong. They already paid $0.50 for the right to buy the stock at $8.00. If the stock is $8.01 on the day of expiration your options will be executed(automatically i believe).",
"title": ""
},
{
"docid": "3f43bf7e07ab2c5813cfe16dd48110f7",
"text": "There are many stategies with options that you have listed. The one I use frequently is buy in the money calls and sell at the money staddles. Do this ONLY on stocks you do not mind owning because that is the worse thing that can happen and if you like the company you stand less of a chance of being scared out of the trade. It works well with high quality resonable dividend paying stocks. Cat, GE, Mrk, PM etc. Good luck",
"title": ""
},
{
"docid": "984809559258356c409adc72fdf537ff",
"text": "Here is the answer for #3 from my brokerage: Your math is correct. Typically, option traders never take delivery of the stock simply to then turn around and sell it at the higher price that the stock is trading at. You wold always expect the option to have a higher value that simply selling the stock at market price. There are many factors involved in options pricing and the math behind it is quite complicated, but unless it is right at expiration, the option will have a higher price than the stock itself.",
"title": ""
},
{
"docid": "1c5ff34a1c34998592e20bd71ee9096a",
"text": "In addition to all these great answers, check out the Wikipedia entry on options. The most important thing to note from their definition is that an option is a derivative (and nothing about any derivative is simple). Because it is a derivative, increases or decreases in the price of the underlying stock won't automatically result in the same amount of change in the value of the option.",
"title": ""
},
{
"docid": "a41b28962081b4bb521da2ee9f30c4f8",
"text": "Options are an indication what a particular segment of the market (those who deal a lot in options) think will happen. (and just because people think that, doesn't mean it will) Bearing in mind however that people writing covered-calls may due so simply as part of a strategy to mitigate downside risk at the expense of limiting upside potential. The presence of more people offering up options is to a degree an indication they are thinking the price will fall or hold steady, since that is in effect the 'bet' they are making. OTOH the people buying those options are making the opposite bet.. so who is to say which will be right. The balance between the two and how it affects the price of the options could be taken as an indication of market sentiment (within the options market) as to the future direction the stock is likely to take. (I just noticed that Blackjack posted the forumula that can be used to model all of this) To address the last part of your question 'does that mean it will go lower' I would say this. The degree to which any of this puts actual pressure on the stock of the underlying instrument is highly debatable, since many (likely most) people trading in a stock never look at what the options for that stock are doing, but base their decision on other factors such as price history, momentum, fundamentals and recent news about the company. To presume that actions in the options market would put pressure on a stock price, you would need to believe that a signficant fraction of the buyers and sellers were paying attention to the options market. Which might be the case for some Quants, but likely not for a lot of other buyers. And it could be argued even then that both groups, those trading options, and those trading stocks, are both looking at the same information to make their predictions of the likely future for the stock, and thus even if there is a correlation between what the stock price does in relation to options, there is no real causality that can be established. We would in fact predict that given access to the same information, both groups would by and large be taking similar parallel actions due to coming to similar conclusions regarding the future price of the stock. What is far MORE likely to pressure the price would be just the shear number of buyers or sellers, and also (especially since repeal of the uptick rule) someone who is trying to actively drive down the price via a lot of shorting at progressively lower prices. (something that is alleged to have been carried out by some hedge fund managers in the course of 'bear raids' on particular companies)",
"title": ""
},
{
"docid": "4bf726bf77ecbdc2e5d41ca4a6984d6a",
"text": "\"A 'Call' gives you the right, but not the obligation, to buy a stock at a particular price. The price, called the \"\"strike price\"\" is fixed when you buy the option. Let's run through an example - AAPL trades @ $259. You think it's going up over the next year, and you decide to buy the $280 Jan11 call for $12. Here are the details of this trade. Your cost is $1200 as options are traded on 100 shares each. You start to have the potential to make money only as Apple rises above $280 and the option trades \"\"in the money.\"\" It would take a move to $292 for you to break even, but after that, you are making $100 for each dollar it goes higher. At $300, your $1200 would be worth $2000, for example. A 16% move on the stock and a 67% increase on your money. On the other hand, if the stock doesn't rise enough by January 2011, you lose it all. A couple points here - American options are traded at any time. If the stock goes up next week, your $1200 may be worth $1500 and you can sell. If the option is not \"\"in the money\"\" its value is pure time value. There have been claims made that most options expire worthless. This of course is nonsense, you can see there will always be options with a strike below the price of the stock at expiration and those options are \"\"in the money.\"\" Of course, we don't know what those options were traded at. On the other end of this trade is the option seller. If he owns Apple, the sale is called a \"\"covered call\"\" and he is basically saying he's ok if the stock goes up enough that the buyer will get his shares for that price. For him, he knows that he'll get $292 (the $280, plus the option sale of $12) for a stock that is only $259 today. If the stock stays under $280, he just pocketed $12, 4.6% of the stock value, in just 3 months. This is why call writing can be a decent strategy for some investors. Especially if the market goes down, you can think of it as the investor lowering his cost by that $12. This particular strategy works best in a flat to down market. Of course in a fast rising market, the seller misses out on potentially high gains. (I'll call it quits here, just to say a Put is the mirror image, you have the right to sell a stock at a given price. It's the difference similar to shorting a stock as opposed to buying it.) If you have a follow up question - happy to help. EDIT - Apple closed on Jan 21, 2011 at $326.72, the $280 call would have been worth $46.72 vs the purchase price of $12. Nearly 4X return (A 289% gain) in just over 4 months for a stock move of 26%. This is the leverage you can have with options. Any stock could just as easily trade flat to down, and the entire option premium, lost.\"",
"title": ""
},
{
"docid": "efd524a48659c49c9949fa0c942f32ad",
"text": "My interpretation of that sentence is that you can't do the buying/selling of shares outright (sans margin) because of the massive quantity of shares he's talking about. So you have to use margin to buy the stocks. However, because in order to make significant money with this sort of strategy you probably need to be working dozens of stocks at the same time, you need to be familiar with portfolio margin. Since your broker does not calculate margin calls based on individual stocks, but rather on the value of your whole portfolio, you should have experience handling margin not just on individual stock movements but also on overall portfolio movements. For example, if 10% (by value) of the stocks you're targeting tend to have a correlation of -0.8 with the price of oil you should probably target another 10% (by value) in stocks that tend to have a correlation of +0.8 with the price of oil. And so on and so forth. That way your portfolio can weather big (or even small) changes in market conditions that would cause a margin call on a novice investor's portfolio.",
"title": ""
},
{
"docid": "8087b7aad543cf60eb8dd55cccbdd07b",
"text": "There is an approach which suggests that each weekend you should review your positions as if they were stocks to be considered for purchase on Monday. I can't offer advice on picking stocks, but it's fair to say that you need to determine if the criteria you used to buy it the first time is still valid. I own a stock trading at over $300, purchased for $5. Its P/E is still reasonable as the darn E just keeps rising. Unless your criteria is to simply grab small gains, which in my opinion is a losing strategy, an 8% move up would never be a reason to sell, in and of itself. Doing so strikes me as day trading, which I advise againgst.",
"title": ""
},
{
"docid": "4abb0b19a0c5f907b80017b1f1b1ef0d",
"text": "\"Simply put, yes. I bought that call. I was betting the shares would rise in value by Jan 2018, and chose the $130 strike. With a strike nearly a year away, I paid a premium that was all time value as the shares traded at Now the shares are replaced by $128. The time value has gone to zero, and there is no intrinsic \"\"in the money\"\" value. If the shares were bought at $140, the time value stills drops to zero, but the option is closed at $10 in the money. My answer was for a cash deal. In a case where the old shares are replaced by new shares or a combination of shares and money, the options terms are changed to reflect the combination of new assets for old. Update based on disclosure that it's Monsanto we are discussing. Bayer and Monsanto have announced that they signed a definitive agreement under which Bayer will acquire Monsanto for USD 128 per share in an all-cash transaction. Based on Monsanto’s closing share price on May 9, 2016, the day before Bayer’s first written proposal to Monsanto, the offer represents a premium of 44 percent to that price. You can see that the deal has been in the works for some time now. Further research shows they expect the deal to close by \"\"the end of 2017\"\". It's not a done deal. This is why the options are still trading. Now the shares are replaced by $128. The time value has gone to zero, and there is no intrinsic \"\"in the money\"\" value. If the shares were bought at $140, the time value stills drops to zero, but the option is closed at $10 in the money. My answer was for a cash deal. In a case where the old shares are replaced by new shares or a combination of shares and money, the options terms are changed to reflect the combination of new assets for old. Update based on disclosure that it's Monsanto we are discussing. Bayer and Monsanto have announced that they signed a definitive agreement under which Bayer will acquire Monsanto for USD 128 per share in an all-cash transaction. Based on Monsanto’s closing share price on May 9, 2016, the day before Bayer’s first written proposal to Monsanto, the offer represents a premium of 44 percent to that price. You can see that the deal has been in the works for some time now. Further research shows they expect the deal to close by \"\"the end of 2017\"\". It's not a done deal. This is why the options are still trading.\"",
"title": ""
},
{
"docid": "0de9e9a762696f6dba56fbf83b75a153",
"text": "You bought the right – but not the obligation – to buy a certain number of shares at $15 from whomsoever sold you the option, and you paid a premium for it. You can choose whether you want to buy the shares at $15 during the period agreed upon. If you call for the shares, the other guy has to sell the shares to you for $15 each, even if the market price is higher. You can then turn around and promptly resell the purchased shares at the higher market price. If the market price never rises above $15 at any time while the option is open, you still have the right to buy the shares for $15 if you choose to do so. Most rational people would let the option expire without exercising it, but this is not a legal requirement. Doing things like buying shares at $15 when the market price is below $15 is perfectly legal; just not very savvy. You cannot cancel the option in the sense of going to the seller of the option and demanding your premium money back because you don't intend to exercise the option because the market price is below $15. Of course, if the market price is above $15 and you tell the seller to cancel the contract, they will be happy to do so, since it lets them off the hook. They may or may not give you the premium back in this case.",
"title": ""
},
{
"docid": "e215380be65e1d229d6662ffc05ffa45",
"text": "A bullish (or 'long') call spread is actually two separate option trades. The A/B notation is, respectively, the strike price of each trade. The first 'leg' of the strategy, corresponding to B, is the sale of a call option at a strike price of B (in this case $165). The proceeds from this sale, after transaction costs, are generally used to offset the cost of the second 'leg'. The second 'leg' of the strategy, corresponding to A, is the purchase of a call option at a strike price of A (in this case $145). Now, the important part: the payoff. You can visualize it as so. This is where it gets a teeny bit math-y. Below, P is the profit of the strategy, K1 is the strike price of the long call, K2 is the strike price of the short call, T1 is the premium paid for the long call option at the time of purchase, T2 is the premium received for the short call at the time of sale, and S is the current price of the stock. For simplicity's sake, we will assume that your position quantity is a single option contract and transaction costs are zero (which they are not). P = (T2 - max(0, S - K2)) + (max(0, S - K1) - T1) Concretely, let's plug in the strikes of the strategy Nathan proposes, and current prices (which I pulled from the screen). You have: P = (1.85 - max(0, 142.50 - 165)) - (max(0, 142.50 - 145)) = -$7.80 If the stock goes to $150, the payoff is -$2.80, which isn't quite break even -- but it may have been at the time he was speaking on TV. If the stock goes to $165, the payoff is $12.20. Please do not neglect the cost of the trades! Trading options can be pretty expensive depending on the broker. Had I done this trade (quantity 1) at many popular brokers, I still would've been net negative PnL even if NFLX went to >= $165.",
"title": ""
},
{
"docid": "a27c61433e34654034b7d34f192f6750",
"text": "Put options are contracts to sell. You pay me a fee for the right to put the stock (or other underlying security) in my hands if you want to. That happens on a specific date (the strike date) and a specified price (the strike price). You can decide not to exercise that right, but I must follow through and let you sell it to me if you want to. Put options can be used by the purchaser to cap losses. For example: You purchase a PUT option for GE Oct19 13.00 from me. On October 19th, you can make me let you sell your GE stock to me for $13.00 a share. If the price for GE has fallen to $12.00, that would be a good idea. If its now at $15.00 a share, you will probably keep the GE or sell it at the current market price. Call options are contracts to buy. The same idea only in the other direction: You pay me a fee for the right to call the stock away from me. Calls also have a strike date and strike price. Like a put, you can choose not to exercises it. You can choose to buy the stock from me (on the strike date for the strike price), but I have to let you buy it from me if you want to. For example: You purchase a CALL option for GE Oct19 16.00 option from me. On October 19th, you can buy my GE stock from me for $16.00 a share. If the current price is $17.50, you should make me let you buy if from me for $16.00. If its less than $16.00, you could by it at the current market price for less. Commonly, options are for a block of 100 shares of the underlying security. Note: this is a general description. Options can be very complicated. The fee you pay for the option and the transaction fees associated with the shares affects whether or not exercising is financially beneficial. Options can be VERY RISKY. You can loose all your money as there is no innate value in the option, only how it relates to the underlying security. Before your brokerage will let you trade, there are disclosures you must read and affirm that you understand the risk.",
"title": ""
},
{
"docid": "1a6050c4d12f94d73dedb8d92bd49986",
"text": "When your options vest, you will have the option to buy your company's stock at a particular price (the strike price). A big part of the value of the option is the difference between the price that your company's stock is trading at, and the strike price of the option. If the price of the company stock in the market is lower than the strike price of the option, they are almost worthless. I say 'almost' because there is still the possibility that the stock price could go up before the options expire. If your company is big enough that their stock is not only listed on an exchange, but there is an active options market in your company's stock, you could get a feel for what they are worth by seeing what the market is willing to buy or sell similar exchange listed options. Once the options have vested, you now have the right to purchase your company's stock at the specified strike price until the options expire. When you use that right, you are exercising the option. You don't have to do that until you think it is worthwhile buying company stock at that price. If the company pays a dividend, it would probably be worth exercising the options sooner, (options don't receive a dividend). Ultimately you are buying your company's stock (albeit at a discount). You need to see if your company's stock is still a good investment. If you think your company has growth prospects, you might want to hold onto the stock. If you think you'd be better off putting your money elsewhere in the market, sell the stock you acquired at a discount and use the money to invest in something else. If there are any additional benefits to holding on to the stock for a period of time (e.g. selling part to fit within your capital gain allowance for that year) you should factor that into your investment decision, but it shouldn't force you to invest in, or remain invested in something you would otherwise view as too risky to invest in. A reminder of that fact is that some employees of Enron invested their entire retirement plans into Enron stock, so when Enron went bankrupt, these employees not only lost their job but their savings for retirement as well...",
"title": ""
},
{
"docid": "9b40cfde36c298fa85ed57128325b279",
"text": "Yes. There are levels of option trading permission. For example, I've never set myself up for naked put writing. But, if you already have the call spread, buying back the shorted call will leave you with a long call. This wouldn't be an issue. As long as you have the cash/margin to buy back that higher strike call.",
"title": ""
}
] |
fiqa
|
53f275415fc7343010effee93a9cb593
|
How is unmarketable stock valued for tax purposes?
|
[
{
"docid": "f292e6255da333b3bd70c894d8d7c53c",
"text": "How you are taxed will depend on what kind of stock awards they are. The value will be determined by the company that issues it, and appropriate tax forms will be sent to you to include with your taxes. The way the value is determined is an accounting question that is off-topic here, but the value will be stated on your stock award paperwork. If you are awarded the stock directly then that value will be taxed as ordinary income. If you are awarded options, then you can purchase the stock to start the clock on long-term capital gains, but you will not incur any tax liability through the initial purchase. If the company is sold privately and you have held the stock for over 1 year, then yes, it will be taxed as a long-term capital gain. If you receive/exercise the stock less than 1 year before such an acquisition, then it will be considered a short-term capital gain and will be taxed as ordinary income.",
"title": ""
}
] |
[
{
"docid": "258c76938c7fe7a967057eda50b957c9",
"text": "A rather good IRS paper on the topic states that a donation of a business' in-kind inventory would be Under IRC 170(e)(1), however, the fair market value must be reduced by the amount of gain that would not be long-term capital gain if the property had been sold by the donor at the property's fair market value (determined at the time of the contribution). Under this rule, deductions for donated inventory are limited to the property's basis (generally its cost), where the fair market value exceeds the basis. There are references to IRC regulations in a narrative context you may find helpful: This paper goes on for 16 pages describing detailed exceptions and the political reasons for the exceptions (most of which are concerned with encouraging the donation of prepared food from restaurants/caterers to hunger charities by guaranteeing a value for something that would otherwise be trashed valueless); and a worked out example of fur coats that had a cost of goods of $200 and a market value of $1000.",
"title": ""
},
{
"docid": "ac92b9bf00a4d1b18d5a4e79b41b059e",
"text": "Typically, the discount is taxable at sale time But what about taxes? When the company buys the shares for you, you do not owe any taxes. You are exercising your rights under the ESPP. You have bought some stock. So far so good. When you sell the stock, the discount that you received when you bought the stock is generally considered additional compensation to you, so you have to pay taxes on it as regular income. Source: Turbotax. Second source. Your pretax rate of return would be: 17% (100/85) In your scenario where the stock price is fixed at $100. Your tax rate would be your marginal rate. If the stock stayed at 100, you would still be taxed as income on $15/share (the discount) and would receive no benefit for holding the stock one year. Assuming you are in the 25% tax bracket, your after tax rate of return would be 13% ((15*.75)+85)/85)",
"title": ""
},
{
"docid": "0c6d9c87fc60a8c5f72ee0140b593d35",
"text": "\"A stock, at its most basic, is worth exactly what someone else will pay to buy it right now (or in the near future), just like anything else of value. However, what someone's willing to pay for it is typically based on what the person can get from it. There are a couple of ways to value a stock. The first way is on expected earnings per share, most of would normally (but not always) be paid in dividends. This is a metric that can be calculated based on the most recently reported earnings, and can be estimated based on news about the company or the industry its in (or those of suppliers, likely buyers, etc) to predict future earnings. Let's say the stock price is exactly $100 right now, and you buy one share. In one quarter, the company is expected to pay out $2 per share in dividends. That is a 2% ROI realized in 3 months. If you took that $2 and blew it on... coffee, maybe, or you stuffed it in your mattress, you'd realize a total gain of $8 in one year, or in ROI terms an annual rate of 8%. However, if you reinvested the money, you'd be making money on that money, and would have a little more. You can calculate the exact percentage using the \"\"future value\"\" formula. Conversely, if you wanted to know what you should pay, given this level of earnings per share, to realize a given rate of return, you can use the \"\"present value\"\" formula. If you wanted a 9% return on your money, you'd pay less for the stock than its current value, all other things being equal. Vice-versa if you were happy with a lesser rate of return. The current rate of return based on stock price and current earnings is what the market as a whole is willing to tolerate. This is how bonds are valued, based on a desired rate of return by the market, and it also works for stocks, with the caveat that the dividends, and what you'll get back at the \"\"end\"\", are no longer constant as they are with a bond. Now, in your case, the company doesn't pay dividends. Ever. It simply retains all the earnings it's ever made, reinvesting them into doing new things or more things. By the above method, the rate of return from dividends alone is zero, and so the future value of your investment is whatever you paid for it. People don't like it when the best case for their money is that it just sits there. However, there's another way to think of the stock's value, which is it's more core definition; a share of the company itself. If the company is profitable, and keeps all this profit, then a share of the company equals, in part, a share of that retained earnings. This is very simplistic, but if the company's assets are worth 1 billion dollars, and it has one hundred million shares of stock, each share of stock is worth $10, because that's the value of that fraction of the company as divided up among all outstanding shares. If the company then reports earnings of $100 million, the value of the company is now 1.1 billion, and its stock should go up to $11 per share, because that's the new value of one ten-millionth of the company's value. Your ROI on this stock is $1, in whatever time period the reporting happens (typically quarterly, giving this stock a roughly 4% APY). This is a totally valid way to value stocks and to shop for them; it's very similar to how commodities, for instance gold, are bought and sold. Gold never pays you dividends. Doesn't give you voting rights either. Its value at any given time is solely what someone else will pay to have it. That's just fine with a lot of people right now; gold's currently trading at around $1,700 an ounce, and it's been the biggest moneymaker in our economy since the bottom fell out of the housing market (if you'd bought gold in 2008, you would have more than doubled your money in 4 years; I challenge you to find anything else that's done nearly as well over the same time). In reality, a combination of both of these valuation methods are used to value stocks. If a stock pays dividends, then each person gets money now, but because there's less retained earnings and thus less change in the total asset value of the company, the actual share price doesn't move (much). If a stock doesn't pay dividends, then people only get money when they cash out the actual stock, but if the company is profitable (Apple, BH, etc) then one share should grow in value as the value of that small fraction of the company continues to grow. Both of these are sources of ROI, and both are seen in a company that will both retain some earnings and pay out dividends on the rest.\"",
"title": ""
},
{
"docid": "8d47624bf870dbd7329aeee3c6afc574",
"text": "What about in the case of a company with unexpectedly low cash (and therefore an inability to easily pay out dividends) but with a surplus of inventory? Obviously the investors should receive some premium for that, because I think anyone would prefer cash, but there are certainly extreme circumstances where it might be appropriate.",
"title": ""
},
{
"docid": "7656f373c9e4cfffccc92e080131a065",
"text": "If the charity accepts stock, you can avoid the tax on the long term cap gain when you donate it. e.g. I donate $10,000 in value of Apple. I write off $10,000 on my taxes, and benefit with a $2500 refund. If I sold it, I'd have nearly a $1500 tax bill (bought long enough ago, the basis is sub $100). Any trading along the way, and it's on you. Gains long or short are taxed on you. It's only the final donation that matters here. Edit - to address Anthony's comment on other answer - I sell my Apple, with a near $10,000 gain (it's really just $9900) and I am taxed $1500. Now I have $8500 cash I donate and get $2125 back in a tax refund. By donating the stock I am ahead nearly $375, and the charity, $1500.",
"title": ""
},
{
"docid": "a195bc1db3e3089f9216fa4126fd4007",
"text": "\"Yes, you can do that, but you have to have the stocks issued in your name (stocks that you're holding through your broker are issued in \"\"street name\"\" to your broker). If you have a physical stock certificate issued in your name - you just endorse it like you would endorse a check and transfer the ownership. If the stocks don't physically exist - you let the stock registrar know that the ownership has been transferred to someone else. As to the price - the company doesn't care much about the price of private sales, but the taxing agency will. In the US, for example, you report such a transaction as either a gift (IRS form 709), if the transaction was at a price significantly lower than the FMV (or significantly higher, on the other end), or a sale (IRS form 1040, schedule D) if the transaction was at FMV.\"",
"title": ""
},
{
"docid": "aad610e3a0fb5a902164d4ff0b71f472",
"text": "No. Mark-to-market valuation relies on using a competitive market of public traders to determine the share price --- from free-market trading among independent traders who are not also insiders. Any professional valuation would see through the promotional nature of the share offer. It is pretty obvious that the purchaser of a share could not turn around and sell their share for $10, unless the 'free hosting' that is worth most of the $10 follows it... and that's more of hybrid of stock and bond than pure stock. It is also pretty obvious that selling a few shares for $10 does not mean one could sell 10,000,000 shares for $10, because of the well known decreasing marginal value effect from economics. While this question seems hypothetical, as a practical matter offering to sell share of unregistered securities in a startup for $10 to the general public, is likely to run afoul of state or federal securities laws -- irregardless of the honesty of the business or any included promotional offers. See http://www.sec.gov/info/smallbus/qasbsec.htm for more information about the SEC regulations for raising capital for small businesses.",
"title": ""
},
{
"docid": "1af8f81a857213cb573cf7e58603bb56",
"text": "You don't. When you sell them - your cost basis would be the price of the stock at which you sold the stocks to cover the taxes, and the difference is your regular capital gain.",
"title": ""
},
{
"docid": "6ff9928c031afb43520082e791325731",
"text": "(I'm assuming the tag of United-states is accurate) Yes, the remaining amount is tax free -- at the current price. If you sell at exactly the original price, there is no capital gain, no capital loss. So you've already payed the taxes. If you sell and there is a capital gain of $3000, then you will pay taxes on the $3000. If 33% is your marginal tax rate, and if you held the stock for less than a year, then you will keep $7000 and pay taxes of $1000. Somehow, I doubt your marginal tax rate is 33%. If you hold the stock for a year after eTrade sold some for you to pay taxes, then you will pay 15% on the gain -- or $450. eTrade sold the shares to pay the taxes generated by the income. Yes, those shares were considered income. If you sell and have a loss, well, life sucks. However, if you sell something else, you can use the loss to offset the other gain. So if you sell stock A for a loss of $3000, and sell stock B at a gain of $4000, then you pay taxes on the net of $1000.",
"title": ""
},
{
"docid": "797b16b3563fe6ae859003ee4dcf5569",
"text": "Restricted Stock Units are different from stock options because instead of buying them at a particular strike price, you receive the actual shares of stock. They are taxed as ordinary income at the time that the restriction is lifted (you don't have to sell them to be taxed). Usually, you can choose to have a percentage of the stock withheld to cover tax withholding or pay for the withholding out of pocket (so you can retain all of your shares).",
"title": ""
},
{
"docid": "e1797c0491a4af3e6fa3e28b50e09be2",
"text": "The original post's $16 has two errors: Here is the first scenario: . Tax Liability($) on Net . Cash # of Price Paper Realized Value Time: ($) Shares ($/sh) Profits Profits ($) 1. Start with: 100 - n/a - - 100 2. After buy 10@10$/sh: - 10 10 - - 100 3. Before selling: - 10 12 (5) - 115 4. After sell 10@12$/sh: 120 - n/a - (5) 115 5. After buy 12@10$/sh: - 12 10 - (5) 115 6. Before selling: - 12 12 (6) (5) 133 7. After sell 12@12$/sh: 144 - n/a - (11) 133 8. After buy 14@10$/sh: 4 14 10 - (11) 133 9. Before selling: 4 14 12 (7) (11) 154 10.After sell 14@12$/sh: 172 - n/a - (18) 154 At this point, assuming that all of the transactions occurred in the same fiscal year, and the realized profits were subject to a 25% short-term capital gains tax, you would owe $18 in taxes. Yes, this is 25% of $172 - $100.",
"title": ""
},
{
"docid": "8f710fd6dbc5785f5ee8dd817323e99c",
"text": "Yes, you would have to report the gain. It is not relevant that you traded the stock previously, you still made a profit on the trade-at-hand. Imagine if for some reason this type of trade were exempt. Investors could follow the short term swings of volatile stocks completely tax-free.",
"title": ""
},
{
"docid": "da781e6cc464fae224f7616998e5d61b",
"text": "Imagine that I own 10% of a company, and yesterday my portion was valued at $1 Million, therefore the company is valued at $10 Million. Today the company accepts an offer to sell 1% of the company for $500 Thousand: now my portion is worth $5 Million, and company is worth $50 Million. The latest stock price sets the value of the company. If next week the news is all bad and the new investor sells their shares to somebody else for pennies on the dollar, the value of the company will drop accordingly.",
"title": ""
},
{
"docid": "085e2dffab276a036853dd071ebe34cc",
"text": "\"Offset against taxable gains means that the amount - $25 million in this case - can be used to reduce another sum that the company would otherwise have to pay tax on. Suppose the company had made a profit of $100 million on some other investments. At some point, they are likely to have to pay corporation tax on that amount before being able to distribute it as a cash dividend to shareholders. However if they can offset the $25 million, then they will only have to pay tax on $75 million. This is quite normal as you usually only pay tax on the aggregate of your gains and losses. If corporation tax is about 32% that would explain the claimed saving of approximately $8 million. It sounds like the Plaintiffs want the stock to be sold on the market to get that tax saving. Presumably they believe that distributing it directly would not have the same effect because of the way the tax rules work. I don't know if the Plaintiffs are right or not, but if they are the difference would probably come about due to the stock being treated as a \"\"realized loss\"\" in the case where they sell it but not in the case where they distribute it. It's also possible - though this is all very speculative - that if the loss isn't realised when they distribute it directly, then the \"\"cost basis\"\" of the shareholders would be the price the company originally paid for the stock, rather than the value at the time they receive it. That in turn could mean a tax advantage for the shareholders.\"",
"title": ""
},
{
"docid": "3700ea152d1680761ab5001bc0390c48",
"text": "Reading IRS Regulations section 15a.453-1(c) more closely, I see that this was a contingent payment sale with a stated maximum selling price. Therefore, at the time of filing prior years, there was no way of knowing the final contingent payment would not be reached and thus the prior years were filed correctly and should not be amended. Those regulations go on to give an example of a sale with a stated maximum selling price where the maximum was not reached due to contingency and states that in such cases: When the maximum [payment] amount is subsequently reduced, the gross profit ratio will be recomputed with respect to payments received in or after the taxable year in which an event requiring reduction occurs. However, in this case, that would result in a negative gross profit ratio on line 19 of form 6252 which Turbo Tax reports should be a non-negative number. Looking further in the regulations, I found an example which relates to bankruptcy and a resulting loss in a subsequent year: For 1992 A will report a loss of $5 million attributable to the sale, taken at the time determined to be appropriate under the rules generally applicable to worthless debts. Therefore, I used a gross profit ratio of zero on line 19 and entered a separate stock sale not reported on a 1099-B as a worthless stock on Form 8949 as a capital loss based upon the remaining basis in the stock sold in an installment sale. I also included an explanatory statement with my return to the IRS stating: In 2008, I entered into an installment sale of stock. The sale was a contingent payment sale with a stated maximum selling price. The sales price did not reach the agreed upon maximum sales price due to some contingencies not being met. According to the IRS Regulations section 15a.453-1(c) my basis in the stock remains at $500 in 2012 after the final payment. Rather than using a negative gross profit ratio on line 19 of form 6252, I'm using a zero ratio and treating the remaining basis as a schedule-D loss similar to worthless stock since the sale is now complete and my remaining basis is no longer recoverable.",
"title": ""
}
] |
fiqa
|
46785630f86c3ec03a3f930b4324e3c3
|
What is buying pressure?
|
[
{
"docid": "7cdff41bc8fe9de657c5969883088d44",
"text": "\"Buying pressure is when there are more buy orders than sell orders outstanding. Just because someone wants to buy a stock doesn't mean there's a seller ready to fill that order. When there's buying pressure, stock prices rise. When there's selling pressure, stock prices fall. There can be high volume where buying and selling are roughly equal, in which case share prices wouldn't move much. The market makers who actually fill buy and sell orders for stock will raise share prices in the face of buying pressure and lower them in the face of selling pressure. That's because they get to keep the margin between what they bought shares from a seller for and what they can sell them to a new buyer for. Here's an explanation from InvestorPlace.com about \"\"buying pressure\"\": Buying pressure can basically be defined as increasingly higher demand for a particular stock's shares. This demand for shares exceeds the supply and causes the price to rise. ... The strength or weakness of a stock determines how much buying or selling interest will be required to break support and resistance areas. I hope this helps!\"",
"title": ""
},
{
"docid": "9fbc48e4c50131a5f239d32429769355",
"text": "Buying pressure means there are more interested buyers than there are ready sellers putting upward pressure on prices. That might include institutional buyers who are slowly executing buy orders because they still want the best prices possible without clearing out the market. Buying pressure doesn't have to be related to volume at all. If everyone who owns shares think they are going to be worth far more than recent market prices, they will not offer them for sale. That means there is more demand to buy than there is a supply of shares to be bought. That condition can exist regardless of trading volume.",
"title": ""
}
] |
[
{
"docid": "b0206039572173944e447beff4d19bbe",
"text": "VaR and Stressed VaR are kind of mandatory market risk measurement techniques for anyone with a banking licence in Europe. This doesn't stop you from doing other stuff as well, but you need to have the basics (Basel 2 accord) and you must backtest to check your model. The big problem is that doesn't really account for what happens during a liquidity squeeze. Other measures may be used at portfolio level, but it is the basic VaR stuff that is churning away after hours.",
"title": ""
},
{
"docid": "9af0557f84f79e21e7f87405211ea996",
"text": "\"There are two distinct questions that may be of interest to you. Both questions are relevant for funds that need to buy or sell large orders that you are talking about. The answer depends on your order type and the current market state such as the level 2 order book. Suppose there are no iceberg or hidden orders and the order book (image courtesy of this question) currently is: An unlimited (\"\"at market\"\") buy order for 12,000 shares gets filled immediately: it gets 1,100 shares at 180.03 (1,[email protected]), 9,700 at 180.04 and 1,200 at 180.05. After this order, the lowest ask price becomes 180.05 and the highest bid is obviously still 180.02 (because the previous order was a 'market order'). A limited buy order for 12,000 shares with a price limit of 180.04 gets the first two fills just like the market order: 1,100 shares at 180.03 and 9,700 at 180.04. However, the remainder of the order will establish a new bid price level for 1,200 shares at 180.04. It is possible to enter an unlimited buy order that exhausts the book. However, such a trade would often be considered a mis-trade and either (i) be cancelled by the broker, (ii) be cancelled or undone by the exchange, or (iii) hit the maximum price move a stock is allowed per day (\"\"limit up\"\"). Funds and banks often have to buy or sell large quantities, just like you have described. However they usually do not punch through order book levels as I described before. Instead they would spread out the order over time and buy a smaller quantity several times throughout the day. Simple algorithms attempt to get a price close to the time-weighted average price (TWAP) or volume-weighted average price (VWAP) and would buy a smaller amount every N minutes. Despite splitting the order into smaller pieces the price usually moves against the trader for many reasons. There are many models to estimate the market impact of an order before executing it and many brokers have their own model, for example Deutsche Bank. There is considerable research on \"\"market impact\"\" if you are interested. I understand the general principal that when significant buy orders comes in relative to the sell orders price goes up and when a significant sell order comes in relative to buy orders it goes down. I consider this statement wrong or at least misleading. First, stocks can jump in price without or with very little volume. Consider a company that releases a negative earnings surprise over night. On the next day the stock may open 20% lower without any orders having matched for any price in between. The price moved because the perception of the stocks value changed, not because of buy or sell pressure. Second, buy and sell pressure have an effect on the price because of the underlying reason, and not necessarily/only because of the mechanics of the market. Assume you were prepared to sell HyperNanoTech stock, but suddenly there's a lot of buzz and your colleagues are talking about buying it. Would you still sell it for the same price? I wouldn't. I would try to find out how much they are prepared to buy it for. In other words, buy pressure can be the consequence of successful marketing of the stock and the marketing buzz is what changes the price.\"",
"title": ""
},
{
"docid": "a41b28962081b4bb521da2ee9f30c4f8",
"text": "Options are an indication what a particular segment of the market (those who deal a lot in options) think will happen. (and just because people think that, doesn't mean it will) Bearing in mind however that people writing covered-calls may due so simply as part of a strategy to mitigate downside risk at the expense of limiting upside potential. The presence of more people offering up options is to a degree an indication they are thinking the price will fall or hold steady, since that is in effect the 'bet' they are making. OTOH the people buying those options are making the opposite bet.. so who is to say which will be right. The balance between the two and how it affects the price of the options could be taken as an indication of market sentiment (within the options market) as to the future direction the stock is likely to take. (I just noticed that Blackjack posted the forumula that can be used to model all of this) To address the last part of your question 'does that mean it will go lower' I would say this. The degree to which any of this puts actual pressure on the stock of the underlying instrument is highly debatable, since many (likely most) people trading in a stock never look at what the options for that stock are doing, but base their decision on other factors such as price history, momentum, fundamentals and recent news about the company. To presume that actions in the options market would put pressure on a stock price, you would need to believe that a signficant fraction of the buyers and sellers were paying attention to the options market. Which might be the case for some Quants, but likely not for a lot of other buyers. And it could be argued even then that both groups, those trading options, and those trading stocks, are both looking at the same information to make their predictions of the likely future for the stock, and thus even if there is a correlation between what the stock price does in relation to options, there is no real causality that can be established. We would in fact predict that given access to the same information, both groups would by and large be taking similar parallel actions due to coming to similar conclusions regarding the future price of the stock. What is far MORE likely to pressure the price would be just the shear number of buyers or sellers, and also (especially since repeal of the uptick rule) someone who is trying to actively drive down the price via a lot of shorting at progressively lower prices. (something that is alleged to have been carried out by some hedge fund managers in the course of 'bear raids' on particular companies)",
"title": ""
},
{
"docid": "f3355d1d044e3ba54251bc8f163353c6",
"text": "Investopedia defines it in the following way: It's essentially a market order that doesn't get entered until the last minute (or thereabouts) of trading. With this type of order you are not necessarily guaranteed the closing price but usually something very similar, depending on the liquidity in the market and bid-ask for the security in question. Traders who believe that a security or market will move more heavily during the last few minutes of trading will often place such an order in the hopes of having their order filled at a more desirable price.",
"title": ""
},
{
"docid": "0d2e0573d0cc917b52c7b308c9e9f620",
"text": "When you buy a futures contract you are entering into an agreement to buy gold, in the future (usually a 3 month settlement date). this is not an OPTION, but a contract, so each party is taking risk, the seller that the price will rise, the buyer that the price will fall. Unlike an option which you can simply choose not to exercise if the price goes down, with futures you are obligated to follow through. (or sell the contract to someone else, or buy it back) The price you pay depends on the margin, which is related to how far away the settlement date is, but you can expect around 5% , so the minimum you could get into is 100 troy ounces, at todays price, times 5%. Since we're talking about 100 troy ounces, that means the margin required to buy the smallest sized future contract would be about the same as buying 5 ounces of gold. roughly $9K at current prices. If you are working through a broker they will generally require you to sell or buy back the contract before the settlement date as they don't want to deal with actually following through on the purchase and having to take delivery of the gold. How much do you make or lose? Lets deal with a smaller change in the price, to be a bit more realistic since we are talking typically about a settlement date that is 3 months out. And to make the math easy lets bump the price of gold to $2000/ounce. That means the price of a futures contract is going to be $10K Lets say the price goes up 10%, Well you have basically a 20:1 leverage since you only paid 5%, so you stand to gain $20,000. Sounds great right? WRONG.. because as good as the upside is, the downside is just as bad. If the price went down 10% you would be down $20000, which means you would not only have to cough up the 10K you committed but you would be expected to 'top up the margin' and throw in ANOTHER $10,000 as well. And if you can't pay that up your broker might close out your position for you. oh and if the price hasn't changed, you are mostly just out the fees and commissions you paid to buy and sell the contract. With futures contracts you can lose MORE than your original investment. NOT for the faint of heart or the casual investor. NOT for folks without large reserves who can afford to take big losses if things go against them. I'll close this answer with a quote from the site I'm linking below The large majority of people who trade futures lose their money. That's a fact. They lose even when they are right in the medium term, because futures are fatal to your wealth on an unpredicted and temporary price blip. Now consider that, especially the bit about 'price blip' and then look at the current volatility of most markets right now, and I think you can see how futures trading can be as they say 'Fatal to your Wealth' (man, I love that phrase, what a great way of putting it) This Site has a pretty decent primer on the whole thing. their view is perhaps a bit biased due to the nature of their business, but on the whole their description of how things work is pretty decent. Investopedia has a more detailed (and perhaps more objective) tutorial on the futures thing. Well worth your time if you think you want to do anything related to the futures market.",
"title": ""
},
{
"docid": "b4b7755c5c684972b1d4a7bb0089c7ad",
"text": "Inflation also provides incentives for consumers to purchase now rather than later (which helps drive sales) and it provides incentive for money to be invested and put back into businesses, rather than held as cash, because you need to earn at least a little interest on your money just to break even.",
"title": ""
},
{
"docid": "de44418b1a4e0c4e0b86ac2e3c8cc274",
"text": "\"During market hours, there are a lot of dealers offering to buy and sell all exchange traded stocks. Dealers don't actually care about the company's fundamentals and they set their prices purely based on order flow. If more people start to buy than sell, the dealer notices his inventory going down and starts upping the price (both his bid and ask). There are also traders who may not be \"\"dealers\"\", but are willing to sell if the price goes high enough or buy if the price goes low enough. This keeps the prices humming along smoothly. During normal trading hours, if you buy something and turn around and sell it two minutes later, you'll probably be losing a couple cents per share. Outside normal market hours, the dealers who continue to have a bid and ask listed know that they don't have access to good price information -- there isn't a liquid market of continuous buying and selling for the dealer to set prices he considers safe. So what does he do? He widens the spread. He doesn't know what the market will open tomorrow at and doesn't know if he'll be able to react quickly to news. So instead of bidding $34.48 and offering at $34.52, he'll move that out to $33 and $36. The dealer still makes money sometimes off this because maybe some trader realized that he has options expiring tomorrow, or a short position that he's going to get a margin call on, or some kind of event that pretty much forces him to trade. Or maybe he's just panicking and overreacting to some news. So why not trade after hours? Because there's no liquidity, and trading when there's no liquidity costs you a lot.\"",
"title": ""
},
{
"docid": "33d099c8da7f15157ff66e6ab94e8a96",
"text": "My in-laws are pressuring me to buy a home. I don't really have much financial experience. In fact, I'm a nightmare with finances. I almost have my student loans payed off from school. My in-laws and husband are great with finances and with real-estate. My husband has a good job and $200k in savings. I have a good job too, and still have some debt from school. (approx $60k left of 180k). They say the house will be available in Jan or February for purchase, and that we should really try to buy it (prob $2-3 mil). My guess is they want to make it available to us off the market (which is a huge benefit in this area, there are really no houses available lately) . The problem is: I am uncomfortable because I don't have all of my loans payed off, I could divert money away from paying off the loans in order to save for a larger downpayment. I just got a bonus of $35k (after taxes) I don't think I'll have all of my loans payed off by January. Should I save my money for the downpayment or focus on my loans, should I go for the house? I don't know how to weigh these options against each other with such little experience.",
"title": ""
},
{
"docid": "f4ed417141918153347ad59bdaa98385",
"text": "Buying stocks is like an auction. Put in the price you want to pay and see if someone is willing to sell at that price. Thing to remember about after hours trading; There is a lot less supply so there's always a larger bid/ask price spread. That's the price brokers charge to handle the stocks they broker over and above the fee. That means you will always pay more after the market closes. Unless it is bad news, but I don't think you want to buy when that happens. I think a lot of the after market trading is to manipulate the market. Traders drive up the price overnight with small purchases then sell their large holdings when the market opens.",
"title": ""
},
{
"docid": "12e6071287bf36c6e54c5e0dc0b9b47b",
"text": "December, 9, 2011 (01:30pm) :- Gold & Silver are faced to be highest selling pressure by the investors and by the daily traders after the release of initial claim data. Initial claims are least at 3,81,000 as comparing from the last 9 month data's. Gold & Silver trend totally negative side because Gold breaks their important support at $ 1728 which is also broke yesterday. Under $ 1728 Gold trend totally down for Short term. Silver have support at $ 32, which is already broke yesterday & also strong resistance at $ 32.60. On Wednesday we saw that Big investors sold around 3500 Kg approx Gold & bought 30,000 Kg Silver.",
"title": ""
},
{
"docid": "90e7844834a97be772f1ace755cdb207",
"text": "From your question and how you have framed it, I get you find Agressive Sales tactics disturb the buying process for you. ;) I understand because I also find the whole process of Research / Negotiating / Buying / Owning / Using is all on one continuum, so anything that ruins the process will likely lose the sale or enjoyment of the item, at the end of the day. [Very long answer .... Sorry :) ] The answer to this is to KNOW what you want before you have to deal with the Sales people. A good Sales person likes a customer who knows what they want. I would suggest that you follow my 'Buying Process' (Much you have already done) : Before you Buy: Identify the item you want and the max/min 'realistic' price you would buy at. [Stick to this price else 'Buyers Remorse' may bite later.] Write the questions you have down on paper before you visit the Dealer. Write the answers you want on the same list, if known. Decide which questions are most important and therefore must get the answer you want. These should be the questions you ask first. Mark these on the list. Re-visit points 1-3 are they complete and to your satisfaction ? Would you buy if all the answers & the price are right ? If NO then re-visit point 1-3 else you are not ready to buy now !!! If YES then Organise your visit to the Dealer. [Book appointment etc if needed.] At Dealer: Meet your Sales person and clearly state what you want (the item) and importantly when you intend to buy, if all your questions are answered to your satisfaction. There is no need to discuss price at this point as the 'haggling' is only possible IF the questions are answered to your satisfaction. Do not give information such as your maximum budget or similar requests, as they give the sales person the upper hand to maximise his/her pricing. If asked state that your budget is conditional on the answers you get. As the questions are answered assess the answer and assign +/- to the question on your list. If any of your most critical / important questions are answered in the negative, they are the reasons you have to call it a day and walk out. You can assess whether they are worth ignoring but you will need to factor this into your price and if you have identified your questions correctly there should be little room for debate. Assuming you have got all your questions answered you should know what you are buying and have assessed what is a reasonable price for it, if you still want it as this point. If you have lost interest, say so and let the Sales person go. Don't waste their time. They may make some sort of offer to you BUT don't forget that if you have doubts now they will not go away easily no matter what the 'great' price is. If you want it then continue. Buying your Item: [None of the following is really usefull if you have told the Sales person your Budget, as they will be aiming for the highest end of your budget. You will often find that the best price is very close to your maximum budget !!! :)] Do not forget your realistic price range, this should limit your buying price no matter what tactics are used by the Sales person. Only you know what you are prepared to pay and if an extra 1% or 50% is considered worth it to you, if you have to have the item :) Regardless, you have to have some idea of your limit and be prepared to stick to it. You must be able to walk away if the price is silly and not worth it. Assuming you have not been smitten by your item and funds are NOT unlimited, ask for the price and assess it against your price range. At this point I can only offer pointers as there are no 'magic' rules to get what you want at the lowest price. The only advice I would offer is that you will be lucky to get something at your 1st offer price unless the seller really needs to sell, because of this your 1st offer should be less than your price range lowest band. You will need to assess how much less but be prepared to get a 'No' response. If you get a 'Yes' and your research is good 'Buy It !!!' If you get too enthusiastic a response, question your research & if not sure bail out [No Sale] :) At this point you are likely to be 'Haggling' so you need to be ready for all the 'Must buy Now' tactics. If you have clearly stated your wants and timescales there is no reason to be pulled in by these tactics and they can be ignored until the price has reached the level you are happy with. If the price is not moving where you want than clearly state you cannot 'buy at that price'. If you get a total stop and no movement than you need to assess your 'need' and if priced too high then you should walk out. Remember if you stated that you had a timescale to buy of 1/2/3 weeks you should act like you have 1/2/3 weeks to keep looking. Any eagerness on your part will tell the Sales person that you have lied !!! :) You can always come back and try again, reminding the Sales person that the 'item' is still there and perhaps it is priced too high to sell and make the same offer. !!! (A bit of cheek sometimes works.) If the price is close and you still want it and the Sales person is not moving you need to try walking out while stating that you would love the 'item' if it was priced better, if no improved offer as you go, try an increased offer but again you need to assess how much and remember you can only go up, or walk out and come back another day. If the price is at a level you are happy with then you should have no reason not to buy (if you have followed this process) but this does not mean that you should be forced into buying now if you do not want to. Regardless of any 'Must buy now' tactics if the price is right and you cannot buy now, tell the Sales person when you CAN buy and see if you can get an agreement with this. It is unfair to expect a price to be held for an indeterminate time, so you do need to state when you could buy if not now when a price has been agreed. This is a point where the deal may break down if the Sales person thinks they have a sale and trys to force the Sale now. Once again you have to assess your 'need' and whether buying now is better than walking out. If the deal breaks down there is nothing stopping you from coming back and offering the same price when you can buy. A final option is to agree if a deposit can be left to reserve the item until you can buy. This gives the Sales person some assurance that you will come back and is sometimes NON-Refundable unless you agree otherwise before you pay, so check this detail first. (This tends to be smaller Dealers but generally in the UK the large companies offer refundable deposits as part of their Customer Service, the advantage of using larger Stores/Dealers etc.) Apologies for the epic reply, hope it helps.",
"title": ""
},
{
"docid": "57b5f0d983c7a065b61c11d2854ade30",
"text": "\"You have heard the old adage \"\"Buy low, sell high\"\", right? That sounds so obvious that you'd have to wonder why they would ever bother coining such an expression. It should rank up there with \"\"Don't walk in front of a moving car\"\" on the Duh scale of advice. Well, your question demonstrates exactly why it isn't quite so obvious in the real world and that people need to be reminded of it. So, in your example, the stock prices are currently low (relative to what they have been). So per that adage, do you sell or buy when prices are low? Hint: It isn't sell. Yes. Your gut is going to tell you the exact opposite thanks to the fact that our brains are unfortunately wired to make us susceptible to the loss aversion fallacy. When the market has undergone a big drop is the WORST time to stop contributing (buying stocks). This example might help get your brain and gut to agree a little more easily: If you were talking about any other non-investment commodity, cars for instance. Your question equates to.. I really need a car, but the prices have been dropping like crazy lately. Maybe I should wait until the car dealers start raising their prices again before I buy one. Dollar Cost Averaging As littleadv suggested, if you have an automatic payroll deduction for your retirement account, you are getting the benefit of Dollar Cost Averaging. Because you are investing the same amount on a scheduled interval, you are buying more shares when they are cheap and fewer when they are expensive. It is like an automatic buy low strategy is built into the account. The alternative, which you are implying, is a market timing strategy. Under this strategy, instead of investing regularly you try to get in and out of investments right before they go up/drop. There are two MAJOR flaws with this approach: 1) Your brain will work against you (see above) and encourage you to do the exact opposite of what you should be doing. 2) Unless you are clairvoyant, this strategy isn't much better than gambling. If you are lucky it can work, but because of #1, the odds are stacked against you.\"",
"title": ""
},
{
"docid": "1af73c2101167cdcddce208ed32aeb24",
"text": "There is no such thing as buying at the best price. That only exists in hindsight. If you could consistently predict the lower bound, then you would have no reason to waste your time investing. Quit your job and bet with all leverage in. What if the price never reaches your lower bound and the market keeps rallying? What if today is crash day and you catch a falling knife? I'd say the best strategy would be just buy at whatever the market price is the moment your investment money hits your account with the smallest possible commission.",
"title": ""
},
{
"docid": "c3769b9ae784697a27145429d159b577",
"text": "\"Your question contains a faulty assumption: During crashes and corrections the amount of sellers is of course higher than the amount of buyers, making it difficult to sell stocks. This simply isn't true. Every trade has two sides; thus, by definition, for every seller there is buyer and vice versa. Even if we broaden the definition of \"\"buyers\"\" and \"\"sellers\"\" to mean \"\"people willing to buy (or sell) at some price\"\", the assumption still isn't true. When a stock is falling it is generally not because potential buyers are exiting the market; it is because they are revising the prices they are willing to buy at downward. For example, say there are a bunch of orders to buy Frobnitz Consolidated (DUMB) at $5. Suppose DUMB announces a downward revision to its earnings guidance. Those people might not be willing to buy at $50 anymore, so they'll probably cancel their $50 buy orders. However, just because DUMB isn't worth as much as they thought it was, that doesn't mean it's completely worthless. So, those prospective buyers will likely enter new orders at some lower value, say, $45. With that, the value of DUMB has just dropped by $5, a 10% correction. However, there are still plenty of buyers, and you can still sell your DUMB holdings, if you're willing to take $45 for them. In other words, the value of a security is not determined by the relative numbers of buyers and sellers. It is determined by the prices those buyers and sellers are willing to pay to buy or accept to sell. Except for cases of massive IT disruptions, such as we saw in the \"\"flash crash\"\", there is always somebody willing to buy or sell at some price.\"",
"title": ""
},
{
"docid": "2b8a7519aee178e4ef58fdfb95f5c355",
"text": "Running for-profit business doesn't pressure those involved to make the best product, it pressures them to make the best profit. Making the best profit pressures those involved to produce the cheapest product that the market won't reject marked at the highest price the market won't reject. Private companies have the freedom to avoid or limit the effect of that pressure if they choose, and sacrifice some profit for quality and improved customer satisfaction (though many still choose profit). Public companies, who are eventually beholdent to shareholders who sole goal is profitability, are much less likely to avoid the pressures to increase profits at all costs; particularly in the age of day traders and CEO merry-go-round, long-term planning is very difficult when short-term profitability is on the line. A company that made one widget a year for $1 and sold that widget for $10 billion would be a very successful company from the profit standpoint, and would likely have an excellent share price if the business model looked secure for the next year or two. Competition helps alleviate this morass and pushes for better products and lower prices by upping the bar of what the market will reject over time - increase the available alternatives, and the features/quality/price scale shifts. The importance of having a level playing field, anti-monopoly laws and ensure that new players can come onto the scene is fundamental to capitalism working - otherwise those who hold monopoly positions will prevent competition from emerging and charge as much as is possible for the cheapest product people will still buy. This is of particular issue when not buying the product is a threat to one's life or safety (medical care, emergency services, food, etc).",
"title": ""
}
] |
fiqa
|
76276fe0e4c6bcafe2a928d879003943
|
What is market capitalization? [duplicate]
|
[
{
"docid": "69c205cbf9bf56e0b9473160c3e8c9ba",
"text": "Market Capitalization is the equity value of a company. It measures the total value of the shares available for trade in public markets if they were immediately sold at the last traded market price. Some people think it is a measure of a company's net worth, but it can be a misleading for a number of reasons. Share price will be biased toward recent earnings and the Earnings Per Share (EPS) metric. The most recent market price only reflects the lowest price one market participant is willing to sell for and the highest price another market participant is willing to buy for, though in a liquid market it does generally reflect the current consensus. In an imperfect market (for example with a large institutional purchase or sale) prices can diverge widely from the consensus price and when multiplied by outstanding shares, can show a very distorted market capitalization. It is also a misleading number when comparing two companies' market capitalization because while some companies raise the money they need by selling shares on the markets, others might prefer debt financing from private lenders or sell bonds on the market, or some other capital structure. Some companies sell preferred shares or non-voting shares along with the traditional shares that exist. All of these factors have to be considered when valuing a company. Large-cap companies tend to have lower but more stable growth than small cap companies which are still expanding into new markets because of their smaller size.",
"title": ""
},
{
"docid": "a26a00ac9aeb9b8f04f1f97a152a9542",
"text": "Market capitalization is one way to represent the value of the company. So if a company has 10 million shares, which are each worth $100, then the company's market capitalization is 1 billion. Large cap companies tend to be larger and more stable. Small cap companies are smaller, which indicates higher volatility. So if you want more aggressive investments then you may want to invest in small cap companies while if you lean on the side of caution then big cap companies may be your friend.",
"title": ""
},
{
"docid": "6b45beb208958f92f06816ae6a8a6035",
"text": "\"Market Capitalization is the value the market attributes to the company shares calculated by multiplying the current trading price of these shares by the total amount of shares outstanding. So a company with 100 shares trading at $10 has a market cap of $1000. It is technically not the same as the value of a company (in the sense of how much someone would need to pay to acquire the company), Enterprise value is what you want to determine the net value of a company which is calculated as the market capitalization + company debt (as the acquirer has to take on this debt) - company cash (as the acquirer can pocket this for itself). The exact boundary for when a company belongs to a certain \"\"cap\"\" is up for debate. For a \"\"large cap\"\" a market capitalization of $10 billion+ is usually considered the cutoff (with $100+ billion behemoths being called \"\"mega caps\"\"). Anything between $10 billion and ~$1 billion is considered \"\"mid cap\"\", from ~$1billion to ~$200 million it's called a \"\"small cap\"\" and below $200 million is \"\"nano cap\"\". Worth noting that these boundaries change quite dramatically over time as the overall average market capitalization increases as companies grow, for example in the 80s a company with a market cap of $1 billion would be considered \"\"large cap\"\". The market \"\"determines\"\" what the market cap of company should be based (usually but certainly not always!) on the historical and expected profit a company makes, for a simple example let's say that our $1000 market cap company makes $100 a year, this means that this company's earnings per share is $1. If the company grows to make $200 a year you can reasonably expect the share price to rise from $10 to ~$20 with the corresponding increase in market cap. (this is all extremely simplified of course).\"",
"title": ""
},
{
"docid": "a798c7a4df57b38523165d841b23d497",
"text": "Market Capitalization is the product of the current share price (the last time someone sold a share of the stock, how much?) times the number of outstanding shares of stock, summed up over all of the stock categories. Assuming the efficient market hypothesis and a liquid market, this gives the current total value of the companies' assets (both tangible and intangible). Both the EMH and perfect liquidity may not hold at all times. Beyond those theoretical problems, in practice, someone trying to buy or sell the company at that price is going to be in for a surprise; the fact that someone wants to sell that many stocks, or buy that many stocks, will move the price of the company stock.",
"title": ""
}
] |
[
{
"docid": "12b89079c7fbc1cf5425bddf6210cabc",
"text": "It means $400m expected revenue, likely spread out over multiple years as it gets implemented, and not entirely guaranteed to happen as they still need to fulfill the contract. The impact on the stock price is complex - it should be positive, but nowhere close to a $400m increase in market cap. If the company is expected to routinely win such contracts, it may have no significant effect on the stock price, as it's already priced in - say, if analysts expect the company to win 1.2b contracts in this fiscal year, and now they've done 1/3 of that, as expected.",
"title": ""
},
{
"docid": "ee5c8dd03dbbb88e869d9288e03091f7",
"text": "\"At any given moment, one can tally the numbers used for NAV. It's math, and little more. The Market Cap, which as you understand is a result of share value. Share value (stock price) is what the market will pay today for the shares. It's not only based on NAV today, but on future expectations. And expectations aren't the same for each of us. Which is why there are always sellers for the buyers of a stock, and vice-versa. From your question, we agree that NAV can be measured, it's the result of adding up things that are all known. (For now, let's ignore things such as \"\"goodwill.\"\") Rarely is a stock price simply equal to the NAV divided by the number of shares. Often, it's quite higher. The simplest way to look at it is that the stock price not only reflects the NAV, but investors' expectations looking into the future. If you look for two companies with identical NAV per share but quite different share prices, you'll see that the companies differ in that one might be a high growth company, the other, a solid one but with a market that's not in such a growth mode.\"",
"title": ""
},
{
"docid": "c88acf92d8a3f41fe59469111e40423d",
"text": "\"It's either equal weighted or market cap weighted, not both. This one appears to be equal weighted. \"\" S&P Pharmaceuticals Select Industry Index (SPSIPH) is an equal-weighted index that draws constituents from the GICS sub-industries that contain companies involved in pharmaceutical related activities. Liquidity and market capitalization screens are applied to the indices to ensure investability\"\" http://www.amex.com/amextrader/tdrInfo/data/axNotices/2006/valert2006-17.html\"",
"title": ""
},
{
"docid": "7cdff41bc8fe9de657c5969883088d44",
"text": "\"Buying pressure is when there are more buy orders than sell orders outstanding. Just because someone wants to buy a stock doesn't mean there's a seller ready to fill that order. When there's buying pressure, stock prices rise. When there's selling pressure, stock prices fall. There can be high volume where buying and selling are roughly equal, in which case share prices wouldn't move much. The market makers who actually fill buy and sell orders for stock will raise share prices in the face of buying pressure and lower them in the face of selling pressure. That's because they get to keep the margin between what they bought shares from a seller for and what they can sell them to a new buyer for. Here's an explanation from InvestorPlace.com about \"\"buying pressure\"\": Buying pressure can basically be defined as increasingly higher demand for a particular stock's shares. This demand for shares exceeds the supply and causes the price to rise. ... The strength or weakness of a stock determines how much buying or selling interest will be required to break support and resistance areas. I hope this helps!\"",
"title": ""
},
{
"docid": "c5158b4448a8dd6770b62826b77c8ee1",
"text": "In order to calculate the ratio you are looking for, just divide total debt by the market capitalization of the stock. Both values can be found on the link you provided. The market capitalization is the market value of equity.",
"title": ""
},
{
"docid": "9fbc48e4c50131a5f239d32429769355",
"text": "Buying pressure means there are more interested buyers than there are ready sellers putting upward pressure on prices. That might include institutional buyers who are slowly executing buy orders because they still want the best prices possible without clearing out the market. Buying pressure doesn't have to be related to volume at all. If everyone who owns shares think they are going to be worth far more than recent market prices, they will not offer them for sale. That means there is more demand to buy than there is a supply of shares to be bought. That condition can exist regardless of trading volume.",
"title": ""
},
{
"docid": "0390f2d24db9cccefd2200541646e809",
"text": "\"Market cap is the current value of a company's equity and is defined as the current share price multiplied by the number of shares. Please check also \"\"enterprise value\"\" for another definition of a company`s total value (enterprise value = market cap adjusted for net nebt). Regarding the second part of your question: Issuing new shares usually does not affect market cap in a significant way because the newly issued shares often result in lower share prices and dilution of the existing share holders shares.\"",
"title": ""
},
{
"docid": "dfa933229cc96a45eb5007baee03701a",
"text": "The difference between the two numbers is that the market size of a particular product is expressed as an annual number ($10 million per year, in your example). The market cap of a stock, on the other hand, is a long-term valuation of the company.",
"title": ""
},
{
"docid": "458a5ee0d5fd74e8e9e32d5dd0a46556",
"text": "\"You are comparing two things that are not comparable. The \"\"market size\"\" would be the total annual revenue in one market, in this year. The \"\"market caps\"\" of a company is the number of shares multiplied by the share price. This should be equal to the total profit that the company is going to make through its life time, taking into account that you would get interest on an investment, so future profits have to be counted less accordingly. So if the \"\"market size\"\" is ten million dollars, and a company has four million revenue in that market with one million profit, and everyone thinks that company will continue making that profit for the next fifty years, then surely one million a year for the next 50 years is worth more than ten million. That's if the market stands still. If the \"\"market size\"\" is ten million, and we expect that market size to double for the next three years, then the market size is still ten million, but a company having a 40% share of a market growing at that speed is going to be worth a lot more!\"",
"title": ""
},
{
"docid": "3c3623605989b5c930a54bf89e907c7f",
"text": "\"Lots of questions: In general, no. Market Capitalization and Equity represent 2 different things. Equity first, the equity of a firm is the value of the assets (what it owns) less its liabilities (what it owes) and consists (broadly) of two components - share capital (what the firm gets when it sells to investors as part of an IPO or subsequent share issue) and retained earnings (what the firm has as a result of making profits and not paying them out as dividends). This is the theoretical liquidation value of the firm - what it is worth if it stops trading, sells all its assets and pays all its debts. Market Capitalization is the current value of the future cash flow of the firm as perceived by the market - the value today of all the dividends that the firm will pay in the future for as long as it exists. This is the theoretical going concern value of the firm - what it is worth as a functioning business. In general, Market Capitalization is bigger than Equity - if it isn't the firm is worth more as scrap than as an operating business. Um ... no. If you don't have any shares then you are by definition not an owner. Having shares is what makes you an owner. What I think you mean is, is it possible for the owner(s) of a private company to sell all of its shares when it goes public? The answer is yes. It is uncommon for a start-up owner to do this but it is standard practice for \"\"corporate raiders\"\" who buy failing companies, take them private, restructure them and then take them public again - they have done their job and they are not interested in maintaining an ownership stake. Nope. See above and below. Not at all, equity is an accounting construct and market capitalization is about market sentiment. Consider the following hypothetical firm: It has $1m in equity, it makes $4m in profit and will do for the foreseeable future, it pays all of that $4m out as dividends - if we work on a simple ROI of 10% then this firm is worth $40m dollars - way more than its equity.\"",
"title": ""
},
{
"docid": "18aa96f3262074f80fbd3733e132a152",
"text": "I think you're over complicating it! There is the market maker in the pure sense as what chilldontkill said - a bookie, a middleman. They are just the brokers in between the buyers and sellers, and they simply make profit off of the spread differential. But market maker is also used to refer to large, high volume buyers and sellers that can influence the price because they control a larger % of volume. These only really exist on low volume products, and they slowly ween out the larger the volume. On higher volume products, I like to refer to them as institutions - that is, well informed, large pockets - whether is be central banks, clearing houses, hedge funds, boutique firms. These are the people who are generally in the know and they often bet against eachother.hope this helps ...",
"title": ""
},
{
"docid": "91682a9471a03a1a7b0635df80db6520",
"text": "Quote driven markets are the predecessors to the modern securities market. Before electronic trading and HFTs specifically, trading was thin and onerous. Today, the average investor can open up a web page, type in a security, and buy at the narrowest spread permitted by regulators with anyone else who wants to take the other side. Before the lines between market maker and speculator became blurred to indistinction, a market maker was one who was contractually obligated to an exchange to provide a bid and ask for a given security on said exchange even though at heart a market maker is still simply a trader despite the obligation. A market maker would simultaneously buy a large amount of securities privately and short the same amount to have no directional bias, exposure to the direction of the security, and commence to making the market. The market maker would estimate its cost basis for the security based upon those initial trades and provide a bid and ask appropriate for the given level of volume. If volumes were high, the spread would be low and vice versa. Market makers who survived crashes and spikes would forgo the potential profit in always providing a steady price and spread, ie increased volume otherwise known as revenue, to maintain no directional bias. In other words, if there were suddenly many buyers and no sellers, hitting the market maker's ask, the MM would raise the ask rapidly in proportion to the increased exposure while leaving the bid somewhere below the cost basis. Eventually, a seller would arise and hit the MM's bid, bringing the market maker's inventory back into balance, and narrowing the spread that particular MM could provide since a responsible MM's ask could rise very high very quickly if a lack of its volume relative to its inventory made inventory too costly. This was temporarily extremely costly to the trader if there were few market makers on the security the trader was trading or already exposed to. Market makers prefer to profit from the spread, bidding below some predetermined price, based upon the cost basis of the market maker's inventory, while asking above that same predetermined cost basis. Traders profit from taking exposure to a security's direction or lack thereof in the case of some options traders. Because of electronic trading, liquidity rebates offered by exchanges not only to contractually obligated official market makers but also to any trader who posts a limit order that another trader hits, and algorithms that become better by the day, market making HFTs have supplanted the traditional market maker, and there are many HFTs where there previously were few official market makers. This speed and diversification of risk across many many algorithmically market making HFTs have kept spreads to the minimum on large equities and have reduced the same for the smallest equities on major exchanges. Orders and quotes are essentially identical. Both are double sided auction markets with impermenant bids and asks. The difference lies in that non-market makers, specialists, etc. orders are not shown to the rest of the market, providing an informational advantage to MMs and an informational disadvantage to the trader. Before electronic trading, this construct was of no consequence since trader orders were infrequent. With the prevalence of HFTs, the informational disadvantage has become more costly, so order driven markets now prevail with much lower spreads and accelerated volumes even though market share for the major exchanges has dropped rapidly and hyperaccelerated number of trades even though the size of individual trades have fallen. The worst aspect of the quote driven market was that traders could not directly trade with each other, so all trades had to go between a market maker, specialist, etc. While this may seem to have increased cost to a trader who could only trade with another trader by being arbitraged by a MM et al, paying more than what another trader was willing to sell, these costs were dwarfed by the potential absence of those market makers. Without a bid or ask at any given time, there could be no trade, so the costs were momentarily infinite. In essence, a quote driven market protects market makers from the competition of traders. While necessary in the days where paper receipts were carted from brokerage to brokerage, and the trader did not dedicate itself to round the clock trading, it has no place in a computerized market. It is more costly to the trader to use such a market, explaining quote driven markets' rapid exit.",
"title": ""
},
{
"docid": "3d2d90e1bda83babf879836b40840068",
"text": "\"If you look at the biotech breakdown, you'll find a lot of NAs when it comes to P/E since there are many young biotech companies that have yet to make a profit. Thus, there may be something to be said for how is the entire industry stat computed. Biotechnology can include pharmaceutical companies that can have big profits due to patents on drugs. As an example, look at Shire PLC which has a P/E of 1243 which is pretty high with a Market Capitalization of over a billion dollars, so this isn't a small company. I wonder what dot-com companies would have looked like in 1998/1999 that could well be similar as some industries will have bubbles you do realize, right? The reason for pointing out the Market Capitalization is that this a way to measure the size of a company, as this is merely the sum of all the stock of the company. There could be small companies that have low market capitalizations that could have high P/Es as they are relatively young and could be believed to have enough hype that there is a great deal of confidence in the stock. For example, Amazon.com was public for years before turning a profit. In being without profits, there is no P/E and thus it is worth understanding the limitations of a P/E as the computation just takes the previous year's earnings for a company divided by the current stock price. If the expected growth rate is high enough this can be a way to justify a high P/E for a stock. The question you asked about an industry having this is the derivation from a set of stocks. If most of the stocks are high enough, then whatever mean or median one wants to use as the \"\"industry average\"\" will come from that.\"",
"title": ""
},
{
"docid": "c1bbfa7ea4432fb5415348ae089e5bd6",
"text": "Any portfolio, even one composed of risk-free assets is subject to risk. That said, to short an equity without margin risk, puts can provide. To replicate a short without excess margin, an at the money put should be used. To take on less leverage, a deep in the money put can be used. Puts are not available on equities deemed illiquid by regulation. A long/short portfolio can help mitigate variance risk, but then the problem becomes the risk of a lack of volatility since options decline in value over time and without a beneficial change in the underlying.",
"title": ""
},
{
"docid": "dde75a1e21f7b47ec49b3adab2452970",
"text": "Mint.com—Easy solution to provide insight into finances. Pros: Cons:",
"title": ""
}
] |
fiqa
|
b15790d368944b5e795c3f18be356839
|
How might trading volume affect future share price?
|
[
{
"docid": "f80e0c551e55b89818dbc1557ebea430",
"text": "There is no direct relationship between volume and stock price. High volume indicates how much stock is changing hands. That can be because people are enthusiastically buying OR enthusiastically selling... and their reasons for doing so may not agree with your own sense of the future value of the stock. Higher volume may mean that the price is more likely to change during the day, but it can be in either direction -- or in no direction at all if there isn't a general agreement on how to react to some piece of news. It's a possibly interesting datum, but it means nothing in isolation.",
"title": ""
},
{
"docid": "6a54e644b5544df0d9b26eb811dd81af",
"text": "You can't tell for sure. If there was such a technique then everyone would use it and the price would instantly change to reflect the future price value. However, trade volume does say something. If you have a lemonade stand and offer a large glass of ice cold lemonade for 1c on a hot summer day I'm pretty sure you'll have high trading volume. If you offer it for $5000 the trading volume is going to be around zero. Since the supply of lemonade is presumably limited at some point dropping the price further isn't going to increase the number of transactions. Trade volumes reflect to some degree the difference of valuations between buyers and sellers and the supply and demand. It's another piece of information that you can try looking at and interpreting. If you can be more successful at this than the majority of others on the market (not very likely) you may get a small edge. I'm willing to bet that high frequency trading algorithms factor volume into their trading decisions among multiple other factors.",
"title": ""
},
{
"docid": "b69d285da0ed0700b3cf059001f2f7e5",
"text": "\"There tends to be high volume around big changes in stock price. The volume of a stock does not remain constant and the term \"\"fat fingers\"\" can influence price.--> http://www.bloomberg.com/news/2014-10-01/that-japanese-fat-finger-can-absolutely-happen-in-u-s-.html That being said keshlam is 99% right when it comes to a stock moving when their is no news or earnings announcements. Check out these papers. http://onlinelibrary.wiley.com/doi/10.1111/j.1475-6803.2010.01285.x/full They do a time series analysis to try and predict future prices off of past demand during news events. They forecast using auto-regressive models. google \"\"forecasting autoregressive model\"\" and the upenn lecture will be helpful. I would post another link but I cannot because I do not have enough rep/ This is more of a quant question. Hope this helps. JL\"",
"title": ""
},
{
"docid": "91b417b497de26427f7464a4309b0339",
"text": "As said previously, most of the time volume does not affect stock prices, except with penny stocks. These stocks typically have a small volume in the 3 or 4 figure range and because of this they typically experience very sharp rises and drops in stock prices, contrasting normal stocks that go up and down constantly every minute. Volume is not one thing you should be looking at when analyzing a stock in most cases, since it is simply the number of people of trades made in a day. That has no effect on the value of the company, whereas looking at P/E ratios, dividend growth, etc all can be analyzed to see if a company is growing and is doing well in its field. If I buy an iPhone, it doesn't matter if 100 other people or 100,000 other people have bought it as well, since they won't really affect my experience with the product. Whereas the type of iPhone I buy will.",
"title": ""
},
{
"docid": "0d004b1d7e0b8e2309af0ee4e6b08f4d",
"text": "Volumes are used to predict momentum of movement, not the direction of it. Large trading volumes generally tend to create a price breakout in either positive or negative direction. Especially in relatively illiquid stocks (like small caps), sudden volume surges can create sharp price fluctuations.",
"title": ""
}
] |
[
{
"docid": "4a8ff89be169d4386afa9703d41dbe4a",
"text": "You say: Every time it seems the share price dips. Does it? Have you collected the data? It may just be that you are remembering the events that seem most painful at the time. To move the market with your trade you need to be dealing in a large amount of shares. Unless the stock is illiquid (e.g most VCT in the UK), I don’t think you are dealing in that large a number; if you were then you would likely have access to a real time feed of the order book and could see what was going on.",
"title": ""
},
{
"docid": "a1cce483992031f0184a0294fbedcb4c",
"text": "\"I've said it before here on Reddit, and I'll say it again: How does HFT affect an investor looking to buy XYZ at $10 and hold for six months to sell at $12? The answer: It doesn't. HFT is just the new exchange \"\"floor.\"\" There have always been professionals on the floors of the exchanges who could compete with one another for single ticks. And then, just as now, they had little to no impact on long-term investors. Reading through the comments of the article makes it abundantly clear that there is a shocking lack of knowledge of HFT practices and impact on the markets.\"",
"title": ""
},
{
"docid": "1eb7cc400f45f63142875802f3ff7dcc",
"text": "Theoretically, it's a question of rate of return. If a desired or acceptable rate of return for market makers' capital is X, and X is determined by the product of margin & turnover then higher turnover means lower margin for a constant X. Margin, in the case of trading, is the bid/ask spread, and turnover, in the case of trading, is volume. Empirically, it has been noted in the last markets still offering such wide-varying evidence, equity options: http://faculty.baruch.cuny.edu/lwu/890/mayhew_jf2002.pdf",
"title": ""
},
{
"docid": "91c79dcdf2c298131d02119744c2cdb1",
"text": "While trading in stochastic I've understood, one needs reference (SMA/EMA/Bolinger Band and even RSI) to verify trade prior entering it. Stochastic is nothing to do with price or volume it is about speed. Adjusting K% has ability to turn you from Day trader to -> swing trader to -> long term investor. So you adjust your k% according to chart time-frame. Stochastic setup for 1 min, 5 min ,15, 30, 60 min, daily, weekly, monthly, quarterly, half yearly and yearly are all different. If you try hopping from one time-frame to another just because it is below oversold or above overbought region with same K%, you may get confused. Worst you may not square-off your loss making trade. And rather not use excel; charts gives better visual for oscillators.",
"title": ""
},
{
"docid": "e231de6f5c1fe41d56d47d4a08108166",
"text": "I hovered over the label for trading volume and the following message popped up: Volume / average volume Volume is the number of shares traded on the latest trading day. The average volume is measured over 30 days.",
"title": ""
},
{
"docid": "ca3f7736aee95448f9e98da943e33d6b",
"text": "Yes there will be enough liquidity to sell your position barring some sort of Flash Crash anomaly. Volume generally rises on the day of expiration to increase this liquidity. Don't forget that there are many investment strategies--buying to cover a short position is closing out a trade similar to your case.",
"title": ""
},
{
"docid": "9fa967e62946c3b1420aa199448e2f81",
"text": "Trading volumes are higher at the end of the day as many traders close their open positions. In the morning however, traders incorporate various factors like performance of worldwide markets overnight, any corporate or government announcements, global macro events, etc.",
"title": ""
},
{
"docid": "b7c4a0d571de62eb3406e5bca11eef0d",
"text": "You can definitely affect the price - putting in a buy increases the demand for the stock, causing a permanent price move. Also if you hammer the market trying to execute too quickly you can hit offers that are out of the money and move the price temporarily before it stabilizes to its new equilibrium. True, as an individual investor your trades will be negligible in size and the effect will be nonexistent. But if you are a hedge fund putting in a buy for 5% of dtv, you can have a price impact. not 50%, but at least a handful of bps.",
"title": ""
},
{
"docid": "d96eada018190b559af05e3c817086ae",
"text": "Consider the case where a stock has low volume. If the stock normally has a few hundred shares trade each minute and you want to buy 10,000 shares then chances are you'll move the market by driving up the price to find enough sellers so that you can get all those shares. Similarly, if you sell way more than the typical volume, this can be an issue.",
"title": ""
},
{
"docid": "e861e14d3c7e57344f7ab5c34eb4a717",
"text": "There has been a lot of research on the effects of stock splits. Some studies have concluded that: However note that (i) these are averages over large samples and does not say it will work on every split and (ii) most of the research is a bit dated and more recent papers have often struggled to find any significant performance impact after 1990, possibly because the effect has been well documented and the arbitrage no longer exists. This document summarises the existing research on the subject although it seems to miss some of the more recent papers. More practically, if you pay a commission per share, you will pay more commissions after the split than before. Bottom line: don't overthink it and focus on other criteria to decide when/whether to invest.",
"title": ""
},
{
"docid": "81672f347fadcd53ec6ff20a2ae9f470",
"text": "No, at least not noticeably so. The majority of what HFT does is to take advantage of the fact that there is a spread between buy and sell orders on the exchange, and to instantly fill both orders, gaining relatively risk-free profit from some inherent inefficiencies in how the market prices stocks. The end result is that intraday trading of the non-HFT nature, as well as speculative short-term trading will be less profitable, since HFT will cause the buy/sell spread to be closer than it would otherwise be. Buying and holding will be (largely) unaffected since the spread that HFT takes advantage of is miniscule compared to the gains a stock will experience over time. For example, when you go to buy shares intending to hold them for a long time, the HFT might cost you say, 1 to 2 cents per share. When you go to sell the share, HFT might cost you the same again. But, if you held it for a long time, the share might have doubled or tripled in value over the time you held it, so the overall effect of that 2-4 cents per share lost from HFT is negligible. However, since the HFT is doing this millions of times per day, that 1 cent (or more commonly a fraction of a cent) adds up to HFTs making millions. Individually it doesn't affect anyone that much, but collectively it represents a huge loss of value, and whether this is acceptable or not is still a subject of much debate!",
"title": ""
},
{
"docid": "6840ddecbf02e8c564ec38036cce7563",
"text": "You can execute block trades on the options market and get exercised for shares to create a very large position in Energy Transfer Partners LP without moving the stock market. You can then place limit sell orders, after selling directly into the market and keep an overhang of low priced shares (the technical analysis traders won't know what you specifically are doing, and will call this 'resistance'). If you hit nice even numbers (multiples of 5, multiples of 10) with your sell orders, you can exacerbate selling as many market participants will have their own stop loss orders at those numbers, causing other people to sell at lower and lower prices automatically, and simultaneously keep your massive ask in effect. If your position is bigger than the demand then you can keep a stock lower. The secondary market doesn't inherently affect a company in any way. But many companies have borrowed against the price of their shares, and if you get the share price low enough they can get suddenly margin called and be unable to service their existing debt. You will also lose a lot of money doing this, so you can also buy puts along the way or attempt to execute a collar to lower your own losses. The collar strategy is nice because it is unlikely that other traders and analysts will notice what you are doing, since there are calls, puts and share orders involved in creating it. One person may notice the block trade for the calls initially, but nobody will notice it is part of a larger strategy with multiple legs. With the share position, you may also be able to vote on some things, but that solely depends on the conditions of the shares.",
"title": ""
},
{
"docid": "138446b35e5b8053b604db40cab61b74",
"text": "\"The effect of making a single purchase, of size and timing described, would not cause market disequilibrium, it would only hurt you (and your P&L). As @littleadv said, you would be unlikely to get your order filled. You asked about making a \"\"sudden\"\" purchase. Let's say you placed the order and were willing to accept a series of partial fills e.g. in 5,000 or 10,000 share increments at a time, over a period of hours. This would be a more moderate approach. Even spread out over the span of a day, this remains unwise. A better approach would be to buy small lots over the course of a week or month. But your transaction fees would increase. Investors make money in pink sheets and penny stocks due to increases in share price of 100% (on the low end), with a relatively small number of shares. It isn't feasible to earn speculator profits by purchasing huge blocks (relative to number of shares outstanding) of stock priced < $1.00 USD and profit from merely 25% price increases on large volume.\"",
"title": ""
},
{
"docid": "1cd39845c4506ace1ae07aecdfa65a9c",
"text": "Opening - is the price at which the first trade gets executed at the start of the trading day (or trading period). High - is the highest price the stock is traded at during the day (or trading period). Low - is the lowest price the stock is traded at during the day (or trading period). Closing - is the price at which the last trade gets executed at the end of the trading day (or trading period). Volume - is the amount of shares that get traded during the trading day (or trading period). For example, if you bought 1000 shares during the day and another 9 people also bought 1000 shares each, then the trading volume for the day would be 10 x 1000 = 10,000.",
"title": ""
},
{
"docid": "f619e556111df0fd3eaf002df79a9597",
"text": "Yep, you have it pretty much right. The volume is the number of shares traded that day. The ticker is giving you the number of shares bought at that price in a given transaction, the arrow meaning whether the stock is up or down on the day at that price. Institutional can also refer to pensions, mutuals funds, corporates; generally any shareholder that isn't an individual person.",
"title": ""
}
] |
fiqa
|
bb150889e061ec5ac6d0563cd80782b0
|
What happens when the bid and ask are the same?
|
[
{
"docid": "89e3beda30f53ba8ac2de67b874e8dd3",
"text": "This question is impossible answer for all markets but there are 2 more possibilities in my experience:",
"title": ""
},
{
"docid": "373870f36e0e786e2363317fec02a8a8",
"text": "In the world of stock exchanges, the result depends on the market state of the traded stock. There are two possibilities, (a) a trade occurs or (b) no trade occurs. During the so-called auction phase, bid and ask prices may overlap, actually they usually do. During an open market, when bid and ask match, trades occur.",
"title": ""
},
{
"docid": "ccc59d257311b512fe3377b472a7bb2f",
"text": "In simple terms, this is how the shares are traded, however most of the times market orders are placed. Consider below scenario( hypothetical scenario, there are just 2 traders) Buyer is ready to buy 10 shares @ 5$ and seller is ready to sell 10 shares @ 5.10$, both the orders will remain in open state, unless one wish to change his price, this is an example of limit order. Market orders If seller is ready to sell 10 shares @ 5$ and another 10 shares @5.05$, if buyer wants to buy 20 shares @ market price, then the trade will be executed for 10 shares @ 5$ and another 10 shares @ 5.05$",
"title": ""
},
{
"docid": "d735ddb8da3e41c19041337cdf051c7c",
"text": "Rule 610 (Google for it) stands that if Bid and Ask are the same, the market is considered Locked, and the exchange must stop all trading. So the same person can't quote the same bid and ask price. However, HFTs have found ways to circumvent this limitation when exchanges created special order types for them, e.g. Spam-and-Cancel",
"title": ""
}
] |
[
{
"docid": "aa91198f9bdf5ee0cf579c4336dc2a1f",
"text": "\"It's good to ask this question, because this is one of the fundamental dichotomies in market microstructure. At any time T for each product on a (typical) exchange there are two well-defined prices: At time T there is literally no person in the market who wants to sell below the ask, so all the people who are waiting to buy at the bid (or below) could very well be waiting there forever. There's simply no guarantee that any seller will ever want to part with their product for a lesser price than they think it's worth. So if you want to buy the product at time T you have a tough choice to make: you get in line at the bid price, where there's no guarantee that your request will ever be filled, and you might never get your hands on the product you decide that owning the product right now is more valuable to you than (ask - bid) * quantity, so you tell the exchange that you're willing to buy at the ask price, and the exchange matches you with whichever seller is first in line Now, if you're in the market for the long term, the above choice is completely immaterial to you. Who cares if you pay $10.00 * 1000 shares or $10.01 * 1000 shares when you plan to sell 30 years from now at $200 (or $200.01)? But if you're a day trader or anyone else with a very short time horizon, then this choice is extremely important: if the price is about to go up several cents and you got in line at the bid (and never got filled) then you missed out on some profit if you \"\"cross the spread\"\" to buy at the ask and then the price doesn't go up (or worse, goes down), you're screwed. In order to get out of the position you'll have to cross the spread again and sell at at most the bid, meaning you've now paid the spread twice (plus transaction fees and regulatory fees) for nothing. (All of the above also applies in reverse for selling at the ask versus selling at the bid, but most people like to learn in terms of buying rather than selling.)\"",
"title": ""
},
{
"docid": "1af10b20aad5898e5868d79f09afeaf6",
"text": "But what about the following scenario which is my paraphrasing of a Nanex article (I'm hoping you can help clarify this for me). 1. I observe a 1,000 lot @$10 advertised for Sell on a lit exchange. 2. I try to lift the 1,000 by placing a limit order @10. 3. My order goes through some kind of order routing process. First, 3 orders get executed on a dark pool. Let's say I got a 50 lot filled (so available offer reduces to 950). 4. My order hits a lit exchange. I get a partial fill for 100 (offer shrinks to 850); but the offered size shrinks instead to 500. Or 0. 5. Now, in order to execute my trade, I will have to take a higher price than the original advertised liquidity. My question (maybe you can answer this) is why did my original order size of 1,000 appear in smaller blocks? Is this because the order routing algorithm breaks up the size? Or is it that market makers only post offers in small block sizes (e.g. 100) So even if the order book looked like: 100 @ 10 100 @ 10 100 @ 10 100 @ 10 100 @ 10 100 @ 10 All the way to 1,000 total -- as soon as the first 100 shares were lifted, the MM can immediately cancel the remainder of the advertised liquidity -- in practical terms making it impossible to execute large orders at an advertised price.",
"title": ""
},
{
"docid": "98ec62c00c0dccd391719cde2f4c95bc",
"text": "When there is a difference between the two ... no trading occurs. Let's look at an example: Investor A, B, C, and D all buy/sell shares of company X. Investor A wants to sell 10 shares at $20 a share (Ask price $20 x10). Investor B wants to buy 15 shares at $10 a share (Bid price $10 x15). Since the bid price and ask price are different, no sale is made. Next Investor C comes along and wants to sell 5 shares at $14 (Ask price $14 x5). Still no sale. Investor D comes along and wants to buy 5 shares for $14 each. So a sale is finally made. At this point, the stock quote moves to $14. The ask price is $20 x10 and the bid price is $10 x15. No further trading will occur until another investor is willing to buy at $20 or sell at $10. Another discussion of this topic is shown on this post.",
"title": ""
},
{
"docid": "8057d06cbcb766b7211eb29e90b52746",
"text": "This sometimes happens to me. It depends on how liquid the option is. Normally what I see happening is that the order book mutates itself around my order. I interpret this to mean that the order book is primarily market makers. They see a retail investor (me) come in and, since they don't have any interest in this illiquid option, they back off. Some other retail investor (or whatever) steps in with a market order, and we get matched up. I get a fill because I become the market maker for a brief while. On highly liquid options, buy limits at the bid tend to get swallowed because the market makers are working the spread. With very small orders (a contract or two) on very liquid options, I've had luck getting quick fills in the middle of the spread, which I attribute to MM's rebalancing their holdings on the cheap, although sometimes I like to think there's some other anal-retentive like me out there that hates to see such a lopsided book. :) I haven't noticed any particular tendency for this to happen more with puts or calls, or with buy vs sell transactions. For a while I had a suspicion that this was happening with strikes where IV didn't match IV of other strikes, but I never cared enough to chase it down as it was a minor part of my overall P/L.",
"title": ""
},
{
"docid": "8bc05a91109205f52534ba5a9306deef",
"text": "\"In the first situation you describe, any intelligent routing algo will send a 1000 lot order to the lit exchange in step 1. Then you get filled 1000@$10. After the fill occurs, the matching engine tells everyone what happened. If the order book consists of 100 orders of 1 lot @ $10, and you place a \"\"buy 100 lots\"\" order, here is what happens: 1. The matching engine receives your order. 2. The matching engine matches your order against the 100 individual orders on the book. 3. The matching engine broadcasts 100 trade notifications. No one has any opportunity to cancel their orders since they only hear of the fill after it happened. The only way someone would have the opportunity to cancel is if there was 500 lots on one exchange and 500 on another. Then someone might observe a trade on exchange #1 and cancel their sell order on exchange #2 in response.\"",
"title": ""
},
{
"docid": "bba854ffdfbf0f35c47ae1787697e656",
"text": "One broker told me that I have to simply read the ask size and the bid size, seeing what the market makers are offering. This implies that my order would have to match that price exactly, which is unfortunate because options contract spreads can be WIDE. Also, if my planned position size is larger than the best bid/best ask, then I should break up the order, which is also unfortunate because most brokers charge a lot for options orders.",
"title": ""
},
{
"docid": "acd5ff5c2df4893c413d262d9372f25b",
"text": "The order book looks fine, if it were a liquid market. However, a bid that matches with an ask will always be met on a first come first serve basis. There's no other way to do it. Most traders don't like doing that because they want to try to get a lower price. HFT don't have to worry about meeting the ask because they're just going to pass that cost on to the guy on the hook. By the time the HFT makes the buy they already know the guy wants to buy at 70.00 They did not know that at the time they placed the buy order. If the buy order from the HFT hasn't been cancelled it means they already found someone. How? By testing the market with sell orders at the same time they were sending buy orders. They keep a little bit of stock in reserve to perform these tests.",
"title": ""
},
{
"docid": "9423efe84c7fc3bad04c93871b20eaf2",
"text": "\"I place a trade, a limit order on a thinly traded stock. I want to buy 1000 shares at $10. The current price is $10.50. Someone places a market order for 500 shares. Another trader has a limit order for $10.10 for 400 shares. His order fills, and I get 100 at my price. I wait another day to see if I get any more shares. This is just an example of how it can work. I can place my order as \"\"all or none\"\" if I wish to avoid this.\"",
"title": ""
},
{
"docid": "f2fe8ee83a5dfd9f2fe251ca84d3ea89",
"text": "\"The current stock price you're referring to is actually the price of the last trade. It is a historical price – but during market hours, that's usually mere seconds ago for very liquid stocks. Whereas, the bid and ask are the best potential prices that buyers and sellers are willing to transact at: the bid for the buying side, and the ask for the selling side. But, think of the bid and ask prices you see as \"\"tip of the iceberg\"\" prices. That is: The \"\"Bid: 13.20 x200\"\" is an indication that there are potential buyers bidding $13.20 for up to 200 shares. Their bids are the highest currently bid; and there are others in line behind with lower bid prices. So the \"\"bid\"\" you're seeing is actually the best bid price at that moment. If you entered a \"\"market\"\" order to sell more than 200 shares, part of your order would likely be filled at a lower price. The \"\"Ask: 13.27 x1,000\"\" is an indication that there are potential sellers asking $13.27 for up to 1000 shares. Their ask prices are the lowest currently asked; and there are others in line behind with higher ask prices. So the \"\"ask\"\" you're seeing is the best asking price at that moment. If you entered a \"\"market\"\" order to buy more than 1000 shares, part of your order would likely be filled at a higher price. A transaction takes place when either a potential buyer is willing to pay the asking price, or a potential seller is willing to accept the bid price, or else they meet in the middle if both buyers and sellers change their orders. Note: There are primarily two kinds of stock exchanges. The one I just described is a typical order-driven matched bargain market, and perhaps the kind you're referring to. The other kind is a quote-driven over-the-counter market where there is a market-maker, as JohnFx already mentioned. In those cases, the spread between the bid & ask goes to the market maker as compensation for making a market in a stock. For a liquid stock that is easy for the market maker to turn around and buy/sell to somebody else, the spread is small (narrow). For illiquid stocks that are harder to deal in, the spread is larger (wide) to compensate the market-maker having to potentially carry the stock in inventory for some period of time, during which there's a risk to him if it moves in the wrong direction. Finally ... if you wanted to buy 1000 shares, you could enter a market order, in which case as described above you'll pay $13.27. If you wanted to buy your shares at no more than $13.22 instead, i.e. the so-called \"\"current\"\" price, then you would enter a limit order for 1000 shares at $13.22. And more to the point, your order would become the new highest-bid price (until somebody else accepts your bid for their shares.) Of course, there's no guarantee that with a limit order that you will get filled; your order could expire at the end of the day if nobody accepts your bid.\"",
"title": ""
},
{
"docid": "cef4fa3efefe86f85f703ff4e020704f",
"text": "\"If there is a very sudden and large collapse in the exchange rate then because algorithmic trades will operate very fast it is possible to determine “x” immediately after the change in exchange rate. All you need to know is the order book. You also need to assume that the algorithmic bot operates faster than all other market participants so that the order book doesn’t change except for those trades executed by the bot. The temporarily cheaper price in the weakened currency market will rise and the temporarily dearer price in the strengthened currency market will fall until the prices are related by the new exchange rate. This price is determined by the condition that the total volume of buys in the cheaper market is equal to the total volume of sells in the dearer market. Suppose initially gold is worth $1200 on NYSE or £720 on LSE. Then suppose the exchange rate falls from r=0.6 £/$ to s=0.4 £/$. To illustrate the answer lets assume that before the currency collapse the order book for gold on the LSE and NYSE looks like: GOLD-NYSE Sell (100 @ $1310) Sell (100 @ $1300) <——— Sell (100 @ $1280) Sell (200 @ $1260) Sell (300 @ $1220) Sell (100 @ $1200) ————————— buy (100 @ $1190) buy (100 @ $1180) GOLD-LSE Sell (100 @ £750) Sell (100 @ £740) ————————— buy (200 @ £720) buy (200 @ £700) buy (100 @ £600) buy (100 @ £550) buy (100 @ £530) buy (100 @ £520) <——— buy (100 @ £500) From this hypothetical example, the automatic traders will buy up the NYSE gold and sell the LSE gold in equal volume until the price ratio \"\"s\"\" is attained. By summing up the sell volumes on the NYSE and the buy volumes on the LSE, we see that the conditions are met when the price is $1300 and £520. Note 800 units were bought and sold. So “x” depends on the available orders in the order book. Immediately after this, however, the price of the asset will be subject to the new changes of preference by the market participants. However, the price calculated above must be the initial price, since otherwise an arbitrage opportunity would exist.\"",
"title": ""
},
{
"docid": "d502149a85e0fe587f5e0b9b1570ba9c",
"text": "It this a real situation or is it a made up example? Because for a stock that has a last traded priced of $5 or $6 and volume traded over $4M (i.e. it seems to be quite liquid), it is hardly likely that the difference from bid to ask would be as large as $1 (maybe for a stock that has volume of 4 to 5 thousand, but not for one having volume of 4 to 5 million). In regards to your question, if you were short selling the order would go in exactly the same as if you were selling a stock you owned. So your order would be on the ask side and would need to be matched up with a price on the bid side for there to be a trade.",
"title": ""
},
{
"docid": "22193ec82ae522964d22232d696c02f4",
"text": "\"The market price of a stock is based on nothing at all more than what two parties were last willing to transact for it. The stock has a \"\"bid\"\" and an \"\"ask\"\" each is the value placed by a counterparty. For the sale to occur, one party must meet the other. The stock transacts and that is the price. For a stock to \"\"go up\"\" people must be willing to pay more for it. Likewise, for it to \"\"go down\"\" people must be willing to accept less for it.\"",
"title": ""
},
{
"docid": "84434322484e6ec1298d53c4d304f4a4",
"text": "The obvious thing would happen. 10 shares change owner at the price of $100. A partially still open selling order would remain. Market orders without limits means to buy or sell at the best possible or current price. However, this is not very realistic. Usually there is a spread between the bid and the ask price and the reason is that market makers are acting in between. They would immediately exploit this situation, for example, by placing appropriately limited orders. Orders without limits are not advisable for stocks with low trading activity. Would you buy or sell stuff without caring for the price?",
"title": ""
},
{
"docid": "e23e5f9545636f5431c911d953156a45",
"text": "\"Market makers (shortened MM) in an exchange are generally required to list both a bid and ask price to allow both buyers and sellers to trade and keep the market moving. However, a more general idea of a MM may includes companies off an exchange (say large banks acting as broker/dealers in an over-the-counter market) are not required to give a simultaneous bid/ask, but often will on request. So, it might depend on where you are getting this data but likely the bid/ask was quoted simultaneously. An exchange, like the NASDAQ for instance, may have multiple MMs for a given market. The \"\"market\"\" spread will be from the highest bid to the lowest ask over all the MMs. The highest bid and lowest ask may come from different MMs and any particular MM often will have a larger spread. The size of the spread gives a rough idea of how much a MM is trying to make off of a \"\"round trip\"\" trade (buying than immediately selling to someone else or selling than immediately buying from someone else). Of course, immediate round-trip trades are not always possible and there are many other complications. However, half the spread is a rough indicator of how much they hope to make off of a single trade.\"",
"title": ""
},
{
"docid": "9acd1c0fa638544a342b47e02511496c",
"text": "Yes for every order there is a buyer and seller. But overall there are multiple buyers and multiple sellers. So every trade is at a different price and this price is agreed by both buyer and seller. Related question will help you understand this better. How do exchanges match limit orders?",
"title": ""
}
] |
fiqa
|
d8688a86ef010d7f48be447603647d06
|
Taking partial capital loss purely for tax purposes
|
[
{
"docid": "a9f1667c1c5842672022e480c86b017a",
"text": "Note that the rules around wash sales vary depending on where you live. For the U.S., the wash sale rules say that you cannot buy a substantially identical stock or security within 30 days (before or after) your sale. So, you could sell your stock today to lock in the capital losses. However, you would then have to wait at least 30 days before purchasing it back. If you bought it back within 30 days, you would disqualify the capital loss event. The risk, of course, is that the stock's price goes up substantially while you are waiting for the wash sale period. It's up to you to determine if the risk outweighs the benefit of locking in your capital losses. Note that this applies regardless of whether you sell SOME or ALL of the stock. Or indeed, if we are talking about securities other than stocks.",
"title": ""
},
{
"docid": "60a3de3c4b6ba916c9d838b8a08d250c",
"text": "\"When a question is phrased this way, i.e. \"\"for tax purposes\"\" I'm compelled to advise - Don't let the tax tail wag the investing dog. In theory, one can create a loss, up to the $3K, and take it against ordinary income. When sold, the gains may be long term and be at a lower rate. In reality, if you are out of the stock for the required 30 days, it will shoot up in price. If you double up, as LittleAdv correctly offers, it will drop over the 30 days and negate any benefit. The investing dog's water bowl is half full.\"",
"title": ""
}
] |
[
{
"docid": "412af011c70132f78f47a1037f0fc2cd",
"text": "Nominal. What you say is true, but I'm guessing it would be too complicated to modelate. Plus, a shareholder of a very large company would not necessarily experience said loss if he/she sells the stock in small chunks at a time.",
"title": ""
},
{
"docid": "20c9e9ae8c397b3bcdda3a75e314265a",
"text": "You can write industry loss warrants. This is the closest thing I’ve found since I’ve been interested in this side of the ILS trade. Hedge funds and asset managers can do this. From what I understand it’s you selling the risk. Want to start a fund? 🤔",
"title": ""
},
{
"docid": "c225f0d51cc196dd2a9a93844144f5cb",
"text": "All that it is saying is that if you withdraw money from your account it doesn't matter whether it has come from dividends or capital gains, it is still a withdrawal. Of course you can only withdraw a capital gain if you sell part of the assets. You would only do this if it was the right time for you to sell the asset.",
"title": ""
},
{
"docid": "bdc4ff578f36f17f49e1d879f130ca3e",
"text": "If you received shares as part of a bonus you needed to pay income tax on the dollar valuse of those shares at the time you received them. This income tax is based on the dollar value of the bonus and has nothing to do with the shares. If you have since sold these shares you will need to report any capital gain or loss you made from their dollar value when you received them. If you made a gain you would need to pay capital gains tax on the profits (if you held them for more than a year you would get a discount on the capital gains tax you have to pay). If you made a loss you can use that capital loss to reduce any other capital gains in that income year, reduce any other income up to $3000 per year, or carry any additional capital loss forward to future income years to reduce any gains or income (up to $3000 per year) you do have in the future.",
"title": ""
},
{
"docid": "937e178303c71f9a48e8980a920490ce",
"text": "This loss would be unrealized and, assuming you're a cash-basis tax-payer, you would not be able to take a loss on your 2014 tax return. This is similar to if you held a stock that lost 50% of its value. You wouldn't be able to claim this loss until you finally sold it. The link that User58220 posted may come into play if you converted your UAH back to USD.",
"title": ""
},
{
"docid": "7c1674dbe0971d64da0bdbd3313c7196",
"text": "\"There are (at least) two problems with the argument suggested in the OP. First, the ability to cover the cost, doesn't mean willingness, ease, or no major side effects of doing so. Second is the mitigation of \"\"upside risk\"\". It might be true that the most usual loss is small and manageable, but 10% of incidents could be considerably larger and 1% may be very much larger - without limit. Your own attitude to risk and loss will determine how much these are seen as unlikely+ignore, or worst case situation+avoid.\"",
"title": ""
},
{
"docid": "7ec4040c3ac8334ab36c650435360cd4",
"text": "\"As Dilip said, if you want actual concrete, based in tax law, answers, please add the country (and if applicable, state) where you pay income tax. Also, knowing what tax bracket you're in would help as well, although I certainly understand if you're not comfortable sharing that. So, assuming the US... If you're in the 10% or 15% tax bracket, then you're already not paying any federal tax on the $3k long term gain, so purposely taking losses is pointless, and given that there's probably a cost to taking the loss (commission, SEC fee), you'd be losing money by doing so. Also, you won't be able to buy back the loser for 31 days without having the loss postponed due to the wash sale that would result. State tax is another matter, but (going by the table in this article), even using the highest low end tax rate (Tennessee at 6%), the $50 loss would only save you $3, which is probably less than the commission to sell the loser, so again you'd be losing money. And if you're in a state with no state income tax, then the loss wouldn't save you anything on taxes at the state level, but of course you'll still be paying to be able to take the loss. On the high end, you'd be saving 20% federal tax and 13.3% state tax (using the highest high end tax state, California, and ignoring (because I don't know :-) ) whether they tax long-term capital gains at the same rate as regular income or not), you'd be saving $50 * (20% + 13.3%) = $50 * 33.3% = $16.65. So for taxes, you're looking at saving between nothing and $16.65. And then you have to subtract from that the cost to achieve the loss, so even on the high end (which means (assuming a single filer)) you're making >$1 million), you're only saving about $10, and you're probably actually losing money. So I personally don't think taking a $50 loss to try to decrease taxes makes sense. However, if you really meant $500 or $5000, then it might (although if you're in the 10-15% brackets in a no income tax state, even then it wouldn't). So the answer to your final question is, \"\"It depends.\"\" The only way to say for sure is, based on the country and state you're in, calculate what it will save you (if anything). As a general rule, you want to avoid letting the tax tail wag the dog. That is, your financial goal should be to end up with the most money, not to pay the least taxes. So while looking at the tax consequences of a transaction is a good idea, don't look at just the tax consequences, look at the consequences for your overall net worth.\"",
"title": ""
},
{
"docid": "f8e8ea901175d73d27287d7dee8f433f",
"text": "Since you say the money was invested in a corporation that would lead me to believe you mean a stock purchase. Stock losses can be treated as a tax exemption filed as a capital loss. http://moneycentral.msn.com/content/Taxes/Cutyourtaxes/P33438.asp http://www.usatoday.com/money/perfi/columnist/krantz/2006-03-10-capital-losses_x.htm Canada has slightly more restrictions on how this can be done. http://www.taxtips.ca/filing/capitallosses.htm",
"title": ""
},
{
"docid": "eb5e9815faf7113e06c057aa15dd3c3e",
"text": "\"As long as the losing business is not considered \"\"passive activity\"\" or \"\"hobby\"\", then yes. Passive Activity is an activity where you do not have to actively do anything to generate income. For example - royalties or rentals. Hobby is an activity that doesn't generate profit. Generally, if your business doesn't consistently generate profit (the IRS looks at 3 out of the last 5 years), it may be characterized as hobby. For hobby, loss deduction is limited by the hobby income and the 2% AGI threshold.\"",
"title": ""
},
{
"docid": "a77d1bcfc023522e1e1e57a7df3620f2",
"text": "You are correct. She cannot claim the initial loss of $1,000 on her taxes, she can only report the $500 profit. However, the IRS does allow her to add the $1,000 loss to the basis cost of her replacement shares. e.g.",
"title": ""
},
{
"docid": "bb5ad2a26e78ae916de76fa854300476",
"text": "\"While you'd need to pay tax if you realized a capital gain on the sale of your car, you generally can't deduct any loss arising from the sale of \"\"personal use property\"\". Cars are personal use property. Refer to Canada Revenue Agency – Personal-use property losses. Quote: [...] if you have a capital loss, you usually cannot deduct that loss when you calculate your income for the year. In addition, you cannot use the loss to decrease capital gains on other personal-use property. This is because if a property depreciates through personal use, the resulting loss on its disposition is a personal expense. There are some exceptions. Read up at the source links.\"",
"title": ""
},
{
"docid": "a4145f2a8b7e3f573a413505cf772d3d",
"text": "Yes, an overall $500 loss on the stock can be claimed. Since the day trader sold both lots she acquired, the Wash Sale rule has no net impact on her taxes. The Wash Sale rule would come into play if within thirty days of second sale, she purchased the stock a third time. Then she would have to amend her taxes because claiming the $500 loss would no longer be a valid under the Wash Sale rule. It would have to be added to the cost basis of the most recent purchase.",
"title": ""
},
{
"docid": "451e7176d208d3ff2634c0612d4b61bb",
"text": "The loss for B can be used to write off the gain for A. You will fill out a schedule 3 with cost base and proceeds of disposition. This will give you a $0 capital gain for the year and an amount of $5 (50% of the $10 loss) you can carry forward to offset future capital gains. You can also file a T1-a and carry the losses back up to 3 years if you're so inclined. It can't be used to offset other income (unless you die). Your C and D trades can't be on income account except for very unusual circumstances. It's not generally acceptable to the CRA for you to use 2 separate accounting methods. There are some intricacies but you should probably just use capital gains. There is one caveat that if you do short sales of Canadian listed securities, they will be on income account unless you fill out form T-123 and elect to have them all treated as capital gains. I just remembered one wrinkle in carrying forward capital losses. They don't reduce your capital gains anymore, but they reduce your taxable income. This means your net income won't be reduced and any benefits that are calculated from that (line 236), will not get an increase.",
"title": ""
},
{
"docid": "2c84b819d643d7752d14fc9c0ed08e1e",
"text": "No, if you are taking a loss solely and purely to reduce the tax you have to pay, then it is not a good strategy, in fact it is a very bad strategy, no matter what country you are in. No investment choice should be made solely due to your tax consequeses. If you are paying tax that means you made a profit, if you made a loss just to save some tax then you are loosing money. The whole point of investing is to make money not lose it.",
"title": ""
},
{
"docid": "61c13cf9a0b369acedef93cf0ee9c8cc",
"text": "If so, are there ways to reduce the amount of taxes owed? Given that it's currently December, I suppose I could sell half of what I want now, and the other half in January and it would split the tax burden over 2 years instead, but beyond that, are there any strategies for tax reduction in this scenario? One possibility is to also sell stocks that have gone down since you bought them. Of course, you would only do this if you have changed your mind about the stock's prospects since you bought it -- that is, it has gone down and you no longer think it will go up enough to be worth holding it. When you sell stocks, any losses you take can offset any gains, so if you sell one stock for a gain of $10,000 and another for a loss of $5,000, you will only be taxed on your net gain of $5,000. Even if you think your down stock could go back up, you could sell it to realize the loss, and then buy it back later at the lower price (as long as you're not worried it will go up in the meantime). However, you need to wait at least 30 days before rebuying the stock to avoid wash sale rules. This practice is known as tax loss harvesting.",
"title": ""
}
] |
fiqa
|
4dd01d5e50b238ae2c1cbc0149de129e
|
Stock portfolio value & profit in foreign currency
|
[
{
"docid": "e31d7b409665eca4837ff11465bdb214",
"text": "I think this will do the trick:",
"title": ""
},
{
"docid": "7c5e4cc3f975021d306cac2f5730af64",
"text": "It's very simple. Use USDSGD. Here's why: Presenting profits/losses in other currencies or denominations can be useful if you want to sketch out the profit/loss you made due to foreign currency exposure but depending on the audience of your app this may sometimes confuse people (like yourself).",
"title": ""
}
] |
[
{
"docid": "3df65e68c8633ccfc01a4496253623f3",
"text": "How can I calculate my currency risk exposure? You own securities that are priced in dollars, so your currency risk is the amount (all else being equal) that your portfolio drops if the dollar depreciates relative to the Euro between now and the time that you plan to cash out your investments. Not all stocks, though, have a high correlation relative to the dollar. Many US companies (e.g. Apple) do a lot of business in foreign countries and do not necessarily move in line with the Dollar. Calculate the correlation (using Excel or other statistical programs) between the returns of your portfolio and the change in FX rate between the Dollar and Euro to see how well your portfolio correlated with that FX rate. That would tell you how much risk you need to mitigate. how can I hedge against it? There are various Currency ETFs that will track the USD/EUR exchange rate, so one option could be to buy some of those to offset your currency risk calculated above. Note that ETFs do have fees associated with them, although they should be fairly small (one I looked at had a 0.4% fee, which isn't terrible but isn't nothing). Also note that there are ETFs that employ currency risk mitigation internally - including one on the Nasdaq 100 . Note that this is NOT a recommendation for this ETF - just letting you know about alternative products that MIGHT meet your needs.",
"title": ""
},
{
"docid": "057ae904873b2ee54eff36561ff82c99",
"text": "Yes, it's possible and even common but it depends on your bank or broker. One of the main differences is that you might assume FX risk if your account is in EUR and you trade stock denominated in USD. You might also encounter lower liquidity or price differences if you don't trade on the primary exchange where stocks are listed, i.e. NYSE, Nasdaq...",
"title": ""
},
{
"docid": "d6a5c5df9cb8565dd591940be0b2d64f",
"text": "International means from all over the world. In the U.S. A Foreign Equity fund would be non-US stocks. There's an odd third choice I'm aware of, a fund of US companies that derive their sales from overseas, primarily.",
"title": ""
},
{
"docid": "642605635985e7e03e7dea5aa0e99d77",
"text": "Foreign stocks tend to be more volatile -- higher risk trades off against higher return potential, always. The better reason for having some money in that area is that, as with bonds, it moves out-of-sync with the US markets and once you pick your preferred distribution, maintaining that balance semi-automatically takes advantage of that to improve your return-vs-risk position. I have a few percent of my total investments in an international stock index fund, and a few percent in an international REIT, both being fairly low-fee. (Low fees mean more of the money reaches you, and seems to be one of the better reasons for preferring one fund over another following the same segment of the market.) They're there because the model my investment advisor uses -- and validated with monte-carlo simulation of my specific mix -- shows that keeping them in the mix at this low level is likely to result in a better long-term outcome than if i left them out. No guarantees, but probabilities lean toward this specfic mix doing what i need. I don't pretend to be able to justify that via theory or to explain why these specific ratios work... but I understand enough about the process to trust that they are on (perhaps of many) reasonable solutions to get the best odds given my specific risk tolerance, timeline, and distaste for actively managing my money more than a few times a year. If that.",
"title": ""
},
{
"docid": "941bc8c4d7501db47ebd7aab8979253a",
"text": "Foreign stocks have two extra sources of risk attached to them; exchange rate and political. Exchange rate risk is obvious; if I buy a stock in a foreign currency and there is a currency movement that makes that investment worth less I lose money no matter what the stock does. This can be offset using exchange rate swaps. (This is ceteris paribus, of course; changes in exchange rate can give a comparative advantage to international and exporting companies that will improve the fundamentals and so increase the price of the stock relative to a local firm. The economics of the firms in particular are not explored in this answer as it would get too complicated and long if I did.) Political risk relates not only to the problems surrounding international politics such as a country deciding that foreign nationals may no longer own shares in their national industries or deciding to seize foreign nationals' assets as happens in some areas. Your home country may also decide to apply sanctions to the country in which you are invested thus making it impossible to get your money back even though the foreign country will allow you to redeem them or sell. Diplomatic relations and trade agreements tend to be difficult. There are further problems in lack of understanding of foreign countries' laws, tax code, customs etc. relating to investments and the necessity to find legal representation in a country you may never have visited if there are issues. There is also a hidden risk in that, as an individual investor, you are not likely to be reading the local financial news for that country regularly enough to spot company specific issues arising. By the time these issues get into international media its far too late as all of the local investors have sold out of their positions already. The risks are probably no different if you have the time to monitor international relations and the foreign country's news, and have FX swaps in place to counteract FX risk as the funds and investment banks do but as an individual investor the time required is not feasible.",
"title": ""
},
{
"docid": "d55d842e506aca1a0bab26aac7e5778a",
"text": "Cross-listing shouldn't be an issue, as the sole reason stocks would behave differently on different exchanges would be due to exchange rates (sure, noise and time differences, but weekly data should take care most of that). If you're using MSCI World index figures in USD, you either have to convert stocks denominated in other currencies to USD at their historical fx rates, or just save a lot of time and use data from stocks listed in the US, when available.",
"title": ""
},
{
"docid": "410f540b4ab654bf8bda42f5bd8443f1",
"text": "If you make money in currency speculation (as in your example), that is a capital gain. A more complicated example is if you were to buy and then sell stocks on the mexican stock exchange. Your capital gain (or loss) would be the difference in value in US dollars of your stocks accounting for varying exchange rates. It's possible for the stocks to go down and for you to still have a capital gain, and vice versa.",
"title": ""
},
{
"docid": "2591ce2451f7d5ac4b526b0f345156c6",
"text": "I use Yahoo Finance to plot my portfolio value over time. Yahoo Finance uses SigFig to link accounts (I've linked to Fidelity), which then allows you to see you exact portfolio and see a plot of its historical value. I'm not sure what other websites SigFig will allow you to sync with, but it is worth a try. Here is what the plot I have looks like, although this is slightly out of date, but still gives you an idea of what to expect.",
"title": ""
},
{
"docid": "7658a2827e8c0dfc9718a89e0c64f7aa",
"text": "\"Rebalancing a portfolio helps you reduce risk, sell high, and buy low. I'll use international stocks and large cap US stocks. They both have ups and downs, and they don't always track with each other (international might be up while large cap US stocks are down and vice-versa) If you started with 50% international and 50% large cap stocks and 1 year later you have 75% international and 25% large cap stocks that means that international stocks are doing (relatively) well to large cap stocks. Comparing only those two categories, large cap stocks are \"\"on sale\"\" relative to international stocks. Now move so you have 50% in each category and you've realized some of the gains from your international investment (sell high) and added to your large cap stocks (buy low). The reason to rebalance is to lower risk. You are spreading your investments across multiple categories to manage risk. If you don't rebalance, you could end up with 95% in one category and 5% in another which means 95% of your portfolio is tied to the performance of a single asset category. I try to rebalance every 12 months and usually get it done by every 18 months. I like being a hands-off long term investor and this has proven often enough to beat the S&P500.\"",
"title": ""
},
{
"docid": "fc93eb85a8ba75714a63ca94aa30cdf8",
"text": "There's no unique way to split the profit, it's about claims and arguments. I propose the approach based on internal rate of return. Consider we have a project with cash flow -500 at the beginning, -1000 at 3 months and +2300 (1000 profit - 200 fee + 1500 of initial investments) at 1 year. The balance looks as follows (simple compounding): The solution is r = 64% (not bad!). Now, the value of the 1-st investment is 500*(1+0.64)=820 and the value of the second is 1000*(1+0.64*0.75)=1480 (at t=1 year). This gives the shares of 35.65% (820/2300) and 64.35% (1480/2300). Then split the profit according to the shares.",
"title": ""
},
{
"docid": "6d2bbe8026eb8335cb86b52eee7df766",
"text": "\"For the S&P and many other indices (but not the DJIA) the index \"\"price\"\" is just a unitless number that is the result of a complicated formula. It's not a dollar value. So when you divide said number by the earnings/share of the sector, you're again getting just a unitless number that is incomparable to standard P-E ratios. In fact, now that I think about, it kinda makes sense that each sector would have a similar value for the number that you're computing, since each sector's index formula is presumably written to make all the index \"\"price\"\"s look similar to consumers.\"",
"title": ""
},
{
"docid": "b7b84c856eb772803ebfa337eef126f3",
"text": "\"Yes, you're still exposed to currency risk when you purchase the stock on company B's exchange. I'm assuming you're buying the shares on B's stock exchange through an ADR, GDR, or similar instrument. The risk occurs as a result of the process through which the ADR is created. In its simplest form, the process works like this: I'll illustrate this with an example. I've separated the conversion rate into the exchange rate and a generic \"\"ADR conversion rate\"\" which includes all other factors the bank takes into account when deciding how many ADR shares to sell. The fact that the units line up is a nice check to make sure the calculation is logically correct. My example starts with these assumptions: I made up the generic ADR conversion rate; it will remain constant throughout this example. This is the simplified version of the calculation of the ADR share price from the European share price: Let's assume that the euro appreciates against the US dollar, and is now worth 1.4 USD (this is a major appreciation, but it makes a good example): The currency appreciation alone raised the share price of the ADR, even though the price of the share on the European exchange was unchanged. Now let's look at what happens if the euro appreciates further to 1.5 USD/EUR, but the company's share price on the European exchange falls: Even though the euro appreciated, the decline in the share price on the European exchange offset the currency risk in this case, leaving the ADR's share price on the US exchange unchanged. Finally, what happens if the euro experiences a major depreciation and the company's share price decreases significantly in the European market? This is a realistic situation that has occurred several times during the European sovereign debt crisis. Assuming this occurred immediately after the first example, European shareholders in the company experienced a (43.50 - 50) / 50 = -13% return, but American holders of the ADR experienced a (15.95 - 21.5093) / 21.5093 = -25.9% return. The currency shock was the primary cause of this magnified loss. Another point to keep in mind is that the foreign company itself may be exposed to currency risk if it conducts a lot of business in market with different currencies. Ideally the company has hedged against this, but if you invest in a foreign company through an ADR (or a GDR or another similar instrument), you may take on whatever risk the company hasn't hedged in addition to the currency risk that's present in the ADR/GDR conversion process. Here are a few articles that discuss currency risk specifically in the context of ADR's: (1), (2). Nestle, a Swiss company that is traded on US exchanges through an ADR, even addresses this issue in their FAQ for investors. There are other risks associated with instruments like ADR's and cross-listed companies, but normally arbitrageurs will remove these discontinuities quickly. Especially for cross-listed companies, this should keep the prices of highly liquid securities relatively synchronized.\"",
"title": ""
},
{
"docid": "2b6cde81fdb549260eac7262ff180761",
"text": "The idea of an index is that it is representative of the market (or a specific market segment) as a whole, so it will move as the market does. Thus, past performance is not really relevant, unless you want to bank on relative differences between different countries' economies. But that's not the point. By far the most important aspect when choosing index funds is the ongoing cost, usually expressed as Total Expense Ratio (TER), which tells you how much of your investment will be eaten up by trading fees and to pay the funds' operating costs (and profits). This is where index funds beat traditional actively managed funds - it should be below 0.5% The next question is how buying and selling the funds works and what costs it incurs. Do you have to open a dedicated account or can you use a brokerage account at your bank? Is there an account management fee? Do you have to buy the funds at a markup (can you get a discount on it)? Are there flat trading fees? Is there a minimum investment? What lot sizes are possible? Can you set up a monthly payment plan? Can you automatically reinvest dividends/coupons? Then of course you have to decide which index, i.e. which market you want to buy into. My answer in the other question apparently didn't make it clear, but I was talking only about stock indices. You should generally stick to broad, established indices like the MSCI World, S&P 500, Euro Stoxx, or in Australia the All Ordinaries. Among those, it makes some sense to just choose your home country's main index, because that eliminates currency risk and is also often cheaper. Alternatively, you might want to use the opportunity to diversify internationally so that if your country's economy tanks, you won't lose your job and see your investment take a dive. Finally, you should of course choose a well-established, reputable issuer. But this isn't really a business for startups (neither shady nor disruptively consumer-friendly) anyway.",
"title": ""
},
{
"docid": "18592d5b1726ea3a530fbe0804392bad",
"text": "Do developing country equities have a higher return and/or lower risk than emerging market equities? Generally in finance you get payed more for taking risk. Riskier stocks over the long run return more than less risky bonds, for instance. Developing market equity is expected to give less return over the long run as it is generally less risky than emerging market equity. One way to see that is the amount you pay for one rupee/lira/dollar/euro worth of company earnings is fewer rupees/lira and more dollars/euros. when measured in the emerging market's currency? This makes this question interesting. Risky emerging currencies like the rupee tend to devalue over time against less risky currencies euro/dollars/yen like where most international investment ends up, but the results are rather wild. Think how badly Brazil has done recently and how relatively well the rupee has been doing. This adds to the returns (roughly based on interest rates) of foreign stocks from the point of view of a emerging market investor on average but has really wild variations. Do you have data for this over a long timeframe (decades), ideally for multiple countries? Not really, unfortunately. Good data for emerging markets is a fairly new phenomenon and even where it does exist decades ago it would have been very hard to invest like we can now so it likely is not comparable. Does foreign equity pay more or less when measured in rupees (or other emerging market currency)? Probably less on average (theoretically and empirically) all things included though the evidence is not strong, but there is a massive amount of risk in a portfolio that is 85% in a single emerging market currency. Think about if you were a Brazilian and needed to retire now and 85% of your portfolio was in the Real. International goods like gas would be really expensive and your local currency portfolio would seem paltry right now. If you want to bet on emerging markets in the long run I would suggest that you at least spread the risk over many emerging markets and add a good chunk developed to the mix. As for investing goals, it's just to maximize my return in INR, or maximize my risk-adjusted return. That is up to you, but the goal I generally recommend is making sure you are comfortable in retirement. This usually involves looking for returns are high in the long run, but not having a ton of risk in a single currency or a single market. There are reasons to believe a little bias toward your homeland is good as fees tend to be lower on local investments and local investments tend to track closer to your retirement costs, but too much can be very dangerous even for countries with stronger currencies, say Greece.",
"title": ""
},
{
"docid": "14261eef50e1108226c297703ecfa89a",
"text": "The US doesn't have a Value Added Tax, which is the one usually refundable upon departing the country... so sales taxes you pay in this country stay in this country and you don't get a refund. Just remember to treat the tax as an implied part of the price. (And be aware that state and local taxes may vary, so the total price may be higher in one place than in another. New York City adds a few percent on top of the state sales tax, for example.) If you aren't sure how much tax would be, don't be afraid to ask.",
"title": ""
}
] |
fiqa
|
098947283fea3b5b8cb5a2ac1f38e2a3
|
How does start-up equity end up paying off?
|
[
{
"docid": "46f0b0939fec289c9ed174c47479bde6",
"text": "The details of how you can convert your 5% equity share to cash or stocks will be detailed in writing in the legal agreement you have already signed. If you do not have any signed written agreement, there is no 5%. Since 0% of anything is zero, you can expect to get $0 some time within the next few years. Lastly, if the person running the business, tells you that there is 5% equity for you, even though it is not in writing, that is extremely unlikely to be the case. This is because the Seller of the equity has no obligation whatsoever to pay you. In fact, they are obligated by their other agreements with actual shareholders not to dilute their equity without good cause. So, odds are, if your agreement is not in writing, not only will it not be honored, but it probably can't be honored.",
"title": ""
},
{
"docid": "dc61bab52d0f73aaebd7179bee102155",
"text": "You will probably never see it. The startup at some point may start issuing dividends to the shareholders (which would be the owners, including you if you are in fact getting equity), but that day may never come. If they hire others with this method, you'll likely lose even that 5% as more shares are created. Think of inflation that happens when government just prints more money. All notes effectively lose value. I wouldn't invest either, most startups fail. Don't work for free on the vague promise of some future compensation; you want a salary and benefits. Equity doesn't put food on your table.",
"title": ""
},
{
"docid": "035d6bea1dd42ac71c51671df2da59f4",
"text": "\"Read the book, \"\"Slicing Pie: Fund Your Company Without Funds\"\". You can be given 5% over four years and in four years, they hire someone and give him twice as much as you, for working a month and not sacrificing his salary at all. Over the four years, the idiot who offered you the deal will waste investors money on obvious, stupid things because he doesn't know anything about how to build what he's asking you to build, causing the need for more investment and the dilution of your equity. I'm speaking from personal experience. Don't even do this. Start your own company if you're working for free, and tell the idiot who offered you 5% you'll offer him 2% for four years of him working for you for free.\"",
"title": ""
},
{
"docid": "58fee466a1611be7e3a36f466ff3a5b7",
"text": "\"Equity could mean stock options. If that's the case if the company makes it big, you'll have the option to buy stocks cheap (which can then be sold at a huge profit) How are you going to buy those without income? 5% equity is laughable. I'd be looking for 30-40% if not better without salary. Or even better, a salary. To elaborate, 5% is fine, and even normal for an early employee taking a mild pay cut in exchange for a chance at return. That chance of any return on the equity is only about 1/20 (94% of startups fail) There is no reason for an employee to work for no pay. An argument could be made for a cofounder, with direct control and influence in the company to work for equity only, but it would be a /lot/ more (that 30-40%), or an advisory role (5% is reasonable) I also just noticed you mentioned \"\"investing\"\" in the startup with cash. As an angel investor, I'd still expect far more than 5%, and preferred shares at that. More like 16-20%. Read this for more info on how equity is usually split.\"",
"title": ""
},
{
"docid": "d682ec08327aec0e660ebd6bf5b50850",
"text": "\"I agree with all the people cautioning against working for free, but I'll also have a go at answering the question: When do I see money related to that 5%? Is it only when they get bought, or is there some sort of quarterly payout of profits? It's up to the shareholders of the company whether and when it pays dividends. A new startup will typically have a small number of people, perhaps 1-3, who between them control any shareholder vote (the founder(s) and an investor). If they're offering you 5%, chances are they've made sure your vote will not matter, but some companies (an equity partnership springs to mind) might be structured such that control is genuinely distributed. You would want to check what the particular situation is in this company. Assuming the founders/main investors have control, those people (or that person) will decide whether to pay dividends, so you can ask them their plans to realise money from the company. It is very rare for startups to pay any dividends. This is firstly because they're rarely profitable, but even when they are profitable the whole point of a startup is to grow, so there are plenty of things to spend cash on other than payouts to shareholders. Paying anything out to shareholders is the opposite of receiving investment. So unless you're in the very unusual position of a startup that will quickly make so much money that it doesn't need investment, and is planning to pay out to shareholders rather than spend on growth, then no, it will not pay out. One way for a shareholder to exit is to be bought out by other shareholders. For example if they want to get rid of you then they might make you an offer for your 5%. This can be any amount they think you'll take, given the situation at the time. If you don't take it, there may be things they can do in future to reduce its value to you (see below). If you do take it then your 5% would pay you once, when you leave. If the company succeeds, commonly it will be wholly or partly sold (either privately or by IPO). At this point, if it's wholly sold then the soon-to-be-ex-shareholders at the time will receive the proceeds of the sale. If it's partly sold then as with an investment round it's up for negotiation what happens. For example I believe the cash from an IPO of X% of the company could be taken into the company, leaving the shareholders with no immediate direct payout but (100-X)% of shares in their names that they're more-or-less free to sell, or retain and receive future dividends. Alternatively, if the company settles down as a small private business that's no longer in startup mode, it might start paying out without a sale. If the company fails, as most startups do, it will never pay anything. It's very important to remember that it's the shareholders at the time who receive money in proportion to their holding (or as defined by the company articles, if there are different classes of share). Just because you have 5% now doesn't mean you'll have 5% by that time, because any new investment into the company in the mean time will \"\"dilute\"\" your shareholding. It works like this: Note that I've assumed for simplicity that the new investment comes in at equal value to the old investment. This isn't necessarily the case, it can be more or less according to the terms of the new investment voted for by the shareholders, so the first line really is \"\"nominal value\"\", not necessarily the actual cash the founders put in. Therefore, you should not think of your 5% as 5% of what you imagine a company like yours might eventually exit for. At best, think of it as 5% of what a company like yours might exit for, if it receives no further investment whatsoever. Ah, but won't the founders also have their holdings diluted and lose control of the company, so they wouldn't do that? Well, not necessarily. Look carefully at whether you're being offered the same class of shares as the founders. If not consider whether they can dilute your shares without diluting their own. Look also at whether a new investor could use the founders' executive positions to give them new equity in the same way they gave you old equity, without giving you any new equity. Look at whether the founders will themselves participate in future investment rounds using sacks of cash that they own from other ventures, when you can't afford to keep up. Look at whether new investors will receive a priority class of share that's guaranteed at exit to pay out a certain multiple of the money invested before the older, inferior classes of shares receive anything (VCs like to do this, at least in the UK). Look at any other tricks they can legally pull: even if the founders aren't inclined to be tricky, they may eventually be forced to consider pulling them by a future new investor. And when I say \"\"look\"\", I mean get your lawyer to look. If your shareholding survives until exit, then it will pay out at exit. But repeated dilutions and investors with priority classes of shares could mean that your holding doesn't survive to exit even if the company does. Your 5% could turn into a nominal holding that hasn't really \"\"survived\"\", that entitles you to 0.5% of any sale value over $100 million. Then if the company sells for $50 million you get $0, while other investors are getting a good return. All of this is why you should not work for equity unless you can afford to work for free. And even then you need to lawyer up, now and during any future investment, so your lawyer can explain to you what your investment actually is, which almost certainly is different from what it looks like at a casual uninformed glance.\"",
"title": ""
},
{
"docid": "34ca4c64635f2c69fa7b98f5e381c71c",
"text": "In the real world, there are only two times you'll see that 5% become worth anything - ie, something you can exchange for cash - 1) if another company buys them; (2) if they go public. If neither of these things happen, you cannot do anything with the stock or stock options that you own.",
"title": ""
}
] |
[
{
"docid": "3045b540feb9f49fe398d1594def0733",
"text": "The value of the company is ill-defined until it actually has some assets and/or product. You give the investors whatever equity stakes you and they negotiate as appropriate for their investment based on how convinced they are by your plan and how badly you need their money.",
"title": ""
},
{
"docid": "1e8848b553e50fe4896a991a1746354b",
"text": "I think you're looking at the picture in an odd way. When each of you made your initial investments and determined what portions you owned, that gave the company capital that they could use to finance its operations. In return, you are entitled to the future profits of the company (in proportion to your ownership). Any future investment by either of you is at your own discretion. Your company now faces a situation where it would like to pursue a potentially lucrative opportunity, but needs more capital than it has to do so. So, you need to raise more capital. That capital can come from one or both of you (or from an outsider). Since that investment would be discretionary, what the investor gets is a negotiation: the company negotiates with the investor how much equity (in the form of new shares) to award in exchange for the new investment (or whatever other compensation you decide on, if not equity).",
"title": ""
},
{
"docid": "f08935866a28093a6c1ec0b4ac63cb12",
"text": "Okay- I follow that. When we look a shorting a name - what makes that an equity transaction rather than a debt one? I guess how does that differ from investing in a bond? I recognize the simplicity of this question. Thanks.",
"title": ""
},
{
"docid": "f0656add052a98a8db4a16389833068c",
"text": "Source, see if you have access to it Convertible notes are often used by angel investors who wish to fund businesses without establishing an explicit valuation of the company in which they are investing. When an investor purchases equity in a startup, the purchase price of the equity implies a company valuation. For example, if an investor purchases a 10 per cent ownership stake in a company, and pay $1m for that stake, this implies that the company is worth $10m. Some early stage investors may wish to avoid placing a value on the company in this way, because this in turn will affect the terms under which later-stage investors will invest in the company. Convertible notes are structured as loans at the time the investment is made. The outstanding balance of the loan is automatically converted to equity when a later equity investor appears, under terms that are governed by the terms set by the later-stage equity investor. An equity investor is someone who purchases equity in a company. Example:- Suppose an angel investor invests $100,000 using a convertible note. Later, an equity investor invests $1m and receives 10% of the company's shares. In the simplest possible case, the initial angel investor's convertible note would convert to 1/10th of the equity investor's claim. Depending on the exact structure of the convertible note, however, the angel investor may also receive extra shares to compensate them for the additional risk associated with being an earlier investor The worst-case scenario would be if the issuing company initially performed well, meaning that the debt would be converted into shares, and subsequently went bankrupt. The converted shares would become worthless, but the holder of the note would no longer have any recourse. Will twitter have to sell their offices and liquidate staff to close this debt? This depends on the seniority(priority) of the debt. Debt is serviced according to seniority. The higher seniority debts will be paid off first and then only the lower seniority debts be serviced. This will all be in the agreements when you enter into a transaction. When you say liquidate staff you mean sell off their assets and not sell their staff into slavery.",
"title": ""
},
{
"docid": "7ffa49547ede3ac0898ebc62bf9ffbc6",
"text": "Yep, a lot of startup funding these days is called equity, which makes for nice valuation, but there are often so many extra stipulations (I've even read of caps on upside; wish I could find the Matt Levine column on it now) that it really is effectively debt.",
"title": ""
},
{
"docid": "74ef942d4e73c953544714a81f8b0383",
"text": "Paying out dividends and financing new projects with debt also lessens the agency problem. The consequences of a failed project are greater when debt is used, so the manager now has a greater incentive to see that the project is a success. This, in addition to the paid divided is a benefit to the shareholder. If equity wasn't paid out and instead used for the project then the manager may not be so interested in its success. And if it's a failure then the shareholders are worse off.",
"title": ""
},
{
"docid": "a14bffe08685cbcd145cdf1e51818c1e",
"text": "Say the company has created 500 shares [or whatever number]. You have 10 shares [equivalent of 2%]. Now when new capital is needed, generally more shares are created. Say they create 100 more shares and sell it to venture capital to raise funds. After this happens; Total Shares: 500+100 = 600 You own: 10 shares Your Ownership % = 1.66% down from 2% Like wise for other older shareholder. The New Venture guy gets 16.66% of ownership. More funds would mean more growth and overall the value of your 10 shares would be more depending on the valuation.",
"title": ""
},
{
"docid": "2674e3dbb422406c13629b52b2e65c27",
"text": "This is a very common misconception. I've been studying equities and credits for a while now, and the simplest way to explain the difference is this: - Credit is about stable cash flows. Your investment in a bond has almost (read: almost) nothing to do with growth rate. It has everything to do with how stable the cash flows are and interest coverage. - Equity is about growth. No wonder companies with highly irregular cash flows (e.g., every single young tech company in the history of tech companies) can have the most in-demand equity while few bond investors would touch them with a ten foot pole.",
"title": ""
},
{
"docid": "c5b994a25ca09a67f011ce562354c85e",
"text": "\"I'm not the OP, but I'm happy to give a brief overview. Basically, pre-JOBS act there were a lot of limits on who could make an equity investment in a non-public company (i.e. a startup or even a hedge fund). There were some loopholes, but basically you had to be an 'accredited investor'. An accredited investor was someone who either has made $200,000+ ($300,000+ for married people) for the past two years and expects to make that much again in the current year. Alternately, they could have a net worth of $1 million, excluding the value of their primary residence. There was also a limit of 500 investors for a non-public company before the company had to become public (they didn't really have to IPO, but they did have to file their financials with the SEC, so the effect was basically the same). Finally, non-public companies were prohibited from seeking investment through advertising basically. They couldn't take out an ad in a paper or event send a mass email and say, \"\"Hey, we're looking to raise a $1 million funding round, contact us if you're interested!\"\" Okay, now after the JOBS Act. The JOBS Act changed a) the number and type of investors who could make equity investments in a non-public company b) the regulation of advertising for investments. Post-JOBS private companies could have 2,000 shareholders and 500 of those could be unaccredited (e.g. regular people like you and I). The change in the number of shareholders isn't really that important because it's just shareholders of record, but that's another post for another day. There are still some requirements for unaccredited shareholder, which I don't remember off the top of my head. I think you have to have income of at least $40k. They also changed the solicitation ban, so it's possible that you might see an ad in the WSJ someday for a startup company, venture capital fund, hedge fund, etc. There are some other things it changed, but IMO those are the two most important.\"",
"title": ""
},
{
"docid": "0c0799dfc1e51a71540e0aa8aa6cb460",
"text": "Some qualitative factors to consider when deciding whether to finance with equity vs debt (for a publicly traded company): 1) The case for equity: Is the stock trading high relative to what management believes is its intrinsic value? If so, raising equity may be attractive since management would be raising a lot of $$$, but the downside is you give up future earnings since you are diluting current ownership 2) The case for debt: What is the expected return for the project in which the raised capital will be utilized for? Is its expected return higher than the interest payments (in % terms)? If so raising debt would be more attractive than raising equity since current ownership would not be diluted That's all I can think of off the top of my head right now, I'm sure there are a few more qualitative factors to consider but I think these two are the most intuitive",
"title": ""
},
{
"docid": "cafd80031a7f88125c0fa2b02d28426a",
"text": "I work for an investment group in Central Asia in private equity/project investment. We use SPV and collateralized convertible loans to enter a project, we issue the loan at our own commercial bank. For each industry, the exact mechanisms vary. In most outcomes, we end up in control of some very important part of the business, and even if we have minority shares on paper, no decision is made w/o our approval. For example, we enter cosntruction projects via aquisiton of land and pledging the land as equity for an SPV, then renting it to the project operator. Basically, when you enter a business, be in control of the decisions there, or have significant leverage on the operations. Have your own operating professionals to run it. Profit.",
"title": ""
},
{
"docid": "e918d6079515b710674ee738486d37a6",
"text": "\"What if there were no mortgage, and you gave the friend the house? They are getting the house' value. In your case the discount from market value is their instant profit. We often think of our house in terms of the equity we have, plus the mortgage. Equity therefore is what's left after the mortgage is paid off, if you sell the house. In your question, you are, in effect, \"\"giving all equity to your friend. Where else would you imagine it goes?\"",
"title": ""
},
{
"docid": "b1d34b1d26e2475da61a79c444403aab",
"text": "On last nights episode of The Profit Marcus made an offer to the owner of a coffee company. The owner said up front he has 51% with the remaining 49% split between two early investors. Marcus asked for 40%, said the owner will have 40% and the investors will be reduced to 20%. Question is how can the owner agree to that deal and take equity away from the investors? It's not his percentage to sell.",
"title": ""
},
{
"docid": "dbbbfb16fb026b997f1c90807b69104e",
"text": "Is the following correct? The firm needs $20,000 for the investment. It borrows $6,000 @ 7%, and supplies $14,000 in equity. The interest expense on the borrowing is $420 ($6,000 times 7%). After one year, the firm receives $26,500 from its investment. Subtract $6,420 (return borrowings plus interest). The firm is left with $20,080. Divide by starting equity of $14,000. Subtract 1 from the ratio. **Levered return on equity is 43.4%.**",
"title": ""
},
{
"docid": "cef4fa3efefe86f85f703ff4e020704f",
"text": "\"If there is a very sudden and large collapse in the exchange rate then because algorithmic trades will operate very fast it is possible to determine “x” immediately after the change in exchange rate. All you need to know is the order book. You also need to assume that the algorithmic bot operates faster than all other market participants so that the order book doesn’t change except for those trades executed by the bot. The temporarily cheaper price in the weakened currency market will rise and the temporarily dearer price in the strengthened currency market will fall until the prices are related by the new exchange rate. This price is determined by the condition that the total volume of buys in the cheaper market is equal to the total volume of sells in the dearer market. Suppose initially gold is worth $1200 on NYSE or £720 on LSE. Then suppose the exchange rate falls from r=0.6 £/$ to s=0.4 £/$. To illustrate the answer lets assume that before the currency collapse the order book for gold on the LSE and NYSE looks like: GOLD-NYSE Sell (100 @ $1310) Sell (100 @ $1300) <——— Sell (100 @ $1280) Sell (200 @ $1260) Sell (300 @ $1220) Sell (100 @ $1200) ————————— buy (100 @ $1190) buy (100 @ $1180) GOLD-LSE Sell (100 @ £750) Sell (100 @ £740) ————————— buy (200 @ £720) buy (200 @ £700) buy (100 @ £600) buy (100 @ £550) buy (100 @ £530) buy (100 @ £520) <——— buy (100 @ £500) From this hypothetical example, the automatic traders will buy up the NYSE gold and sell the LSE gold in equal volume until the price ratio \"\"s\"\" is attained. By summing up the sell volumes on the NYSE and the buy volumes on the LSE, we see that the conditions are met when the price is $1300 and £520. Note 800 units were bought and sold. So “x” depends on the available orders in the order book. Immediately after this, however, the price of the asset will be subject to the new changes of preference by the market participants. However, the price calculated above must be the initial price, since otherwise an arbitrage opportunity would exist.\"",
"title": ""
}
] |
fiqa
|
3f3a9deff91946d63a1976deea41c923
|
Investing thought experiment
|
[
{
"docid": "532b028ee0febd16e415f834038090ea",
"text": "The market cap always reflect the company's equity. Except that you cannot fix a stock price in a free market. A company with such profit pattern would have stock price behave like present value of a perpetuity (future income stream discounted by risk free rate) Since your assumption is unachievable, there is no point in determining the logic.",
"title": ""
},
{
"docid": "6f6fec8005ed02131e0800d1430c3710",
"text": "Yes, if your assumptions are correct then your conclusions are correct. But your assumptions are never correct, and so this thought experiment doesn't tell us anything useful.",
"title": ""
}
] |
[
{
"docid": "ee77ed54bd1eff8264dd44dd0dfa186a",
"text": "Perhaps someone has an investment objective different than following the market. If one is investing in stocks with an intent on getting dividend income then there may be other options that make more sense than owning the whole market. Secondly, there is Slice and Dice where one may try to find a more optimal investment idea by using a combination of indices and so one may choose to invest 25% into each of large-cap value, large-cap growth, small-cap value and small-cap growth with an intent to pick up benefits that have been seen since 1927 looking at Fama and French's work.",
"title": ""
},
{
"docid": "04717255289992a30cb660ae6fd4c2a6",
"text": "\"I think that pattern is impossible, since the attempt to apply the second half would seem to prevent executing the first. Could you rewrite that as \"\"After the stock rises to $X, start watching for a drop of $Y from peak price; if/when that happens, sell.\"\" Or does that not do what you want? (I'm not going to comment on whether the proposed programmed trading makes sense. Trying to manage things at this level of detail has always struck me as glorified guesswork.)\"",
"title": ""
},
{
"docid": "e795c20207a150efbab52959a052880d",
"text": "I'm familiar with the efficient market hypothesis. And the argument over if the markets are weak, semi-strong or strong firm efficient. Most of the evidence suggests they are semi-strong form efficient. Are you looking after fees? I'd argue before fees, you'd find a lot more that do on a regular basis. If you'd like to read something, take a look at Warren Buffets letter in the back of intelligent Investor. It's named something about Graham Doddville. He addresses your argument as to random dollar winners. Now you've made a promise you can't keep, because I'm not very wrong. :)",
"title": ""
},
{
"docid": "08d5925d71bac21221c3b6a39b518ede",
"text": "There is a difference between trading which is short term focussed and investing which is longterm focussed. On the long term what drives stock prices is still the overall economy and the performance of the underlying business aspects. I do not think that any trading algorithms will change this. These are more concerned with short term profits regardless of the underlying business economics. Therefore I think that longterm investing using index funds is still a viable strategy for most private investors.",
"title": ""
},
{
"docid": "a9f1d97d08857ec75a4dae304f17d6bd",
"text": "\"This was an article meant for mass consumption, written by a Yale law professor and an individual who has a PhD in economics (in addition to his practical, on the job experience managing the Yale endowment). I'm having a hard time believing that it was \"\"poorly argued.\"\" As for proof, that's the sort of thing you find in financial and economic journals (for example, [The Effect of Maker-Taker Fees on Investor Order Choice and Execution Quality in U.S. Stock Markets](http://people.stern.nyu.edu/jhasbrou/SternMicroMtg/SternMicroMtg2015/Papers/MakerTakerODonoghue.pdf)). One of the direct takeaways from the above paper states: *\"\"I find that total trading cost to investors increases, when the taker fee and maker rebate increase, even if the net fee is held fixed. The total trading cost represents the net-of-fees bid-ask spread and the brokerage commission to an investor wanting to buy and then sell the same stock.\"\"* I'm not here to argue for the paper. I'm really here to tell you that these guys have far more of a clue than you realize. ~~A dash of humility on your part may be in order, given the fact that you've already admitted to the reality that you aren't sure of any of this yourself.~~ *Edit*: Thought I was responding to a different thread.\"",
"title": ""
},
{
"docid": "1d63cd0299ab297fd07d4a648063b2e1",
"text": "\"If it could, it seems yet to be proven. Long Term Capital Management was founded by a bunch of math whizzes and they seem to have missed something. I'd never suggest that something has no value, but similar to the concept that \"\"if time travel were possible, why hasn't anyone come back from the future to tell us\"\" I'd suggest that if there were a real advantage to what you suggest, someone would be making money from it already. In my opinion, the math is simple, little more than a four function calculator is needed.\"",
"title": ""
},
{
"docid": "8f5425400aa00739f218859eaffbd248",
"text": "\"The argument you are making here is similar to the problem I have with the stronger forms of the efficient market hypothesis. That is if the market already has incorporated all of the information about the correct prices, then there's no reason to question any prices and then the prices never change. However, the mechanism through which the market incorporates this information is via the actors buying an selling based on what they see as the market being incorrect. The most basic concept of this problem (I think) starts with the idea that every investor is passive and they simply buy the market as one basket. So every paycheck, the index fund buys some more stock in the market in a completely static way. This means the demand for each stock is the same. No one is paying attention to the actual companies' performance so a poor performer's stock price never moves. The same for the high performer. The only thing moving prices is demand but that's always up at a more or less constant rate. This is a topic that has a lot of discussion lately in financial circles. Here are two articles about this topic but I'm not convinced the author is completely serious hence the \"\"worst-case scenario\"\" title. These are interesting reads but again, take this with a grain of salt. You should follow the links in the articles because they give a more nuanced understanding of each potential issue. One thing that's important is that the reality is nothing like what I outline above. One of the links in these articles that is interesting is the one that talks about how we now have more indexes than stocks on the US markets. The writer points to this as a problem in the first article, but think for a moment why that is. There are many different types of strategies that active managers follow in how they determine what goes in a fund based on different stock metrics. If a stocks P/E ratio drops below a critical level, for example, a number of indexes are going to sell it. Some might buy it. It's up to the investors (you and me) to pick which of these strategies we believe in. Another thing to consider is that active managers are losing their clients to the passive funds. They have a vested interest in attacking passive management.\"",
"title": ""
},
{
"docid": "546e0c06691b487e035f23ed55eccc9a",
"text": "\"I am strongly skeptical of this. In fact, after reading your question, I did the following: I wrote a little program in python that \"\"simulates\"\" a stock by flipping a coin. Each time the coin comes up heads, the stock's value grows by 1. Each time the coin comes up tails, the stock's value drops by 1. I then group, say, 50 of these steps into a \"\"day\"\", and for each day I look at opening, closing, maximum and minimum. This is then graphed in a candlestick chart. Funny enough, those things look exactly like the charts analysts look at. Here are a few examples: If you want to be a troll, show these to a technical analyst and ask them which of these stocks you should sell short and which of them you should buy. You can try this at home, I posted the code here and it only needs Python with a few extra packages (Numpy and Pylab, should both be in the SciPy package). In reply to a comment from JoeTaxpayer, let me add some more theory to this. My code actually performs a one-dimensional random walk. Now Joe in the comments says that an infinite number of flips should approach the zero line, but that is not exactly correct. In fact, there is a high chance to end up far from the zero line, because the expected distance from the start for a random walk with N steps is sqrt(N). What does indeed approach the zero line is if you took a bunch of these random walks and then performed the average over those. There is, however, one important aspect in which this random walk differs from the stock market: The random walk can go down as far as it likes, whereas a stock has a bottom below which it cannot fall. Reaching this bottom means the company is bankrupt and gets removed from the market. This means that the total stock market, which we might interpret as a sum of random walks, does indeed have a bias towards upwards movement, since I'm only averaging over those random walks that don't go below a certain threshold. But you can really only benefit from this effect by being broadly diversified.\"",
"title": ""
},
{
"docid": "7b817ec03dd15fd9541bdb6b536bf2bd",
"text": "\"not sure if I will help or just spread more gibberish but maybe the first concept I'd look at is risk tolerance. Risk tolerance is discerning your ability to risk losing money to get better results. So you know the saying \"\"the higher the risk the higher the reward\"\"? The way most people are going to operate is somewhere on the midpoint of behavior - not doing the riskiest thing, but not doing the very most cautious thing either. So given that concept, some investments will be more appealing given different economic scenarios. Typically stocks are going to reward your investment a little more aggressively than a treasury bond if the economy is humming along. This drives prices of treasuries lower, stock yields higher. In a crappy economy, people want to move their money into conservative investments like a treasury bond. Bond prices rise while stock prices dip. If you google 'correlations between the market prices of stocks and the market prices of Treasury bonds' you will find plenty of helpful and hopefully not too convoluted articles a la http://finance.zacks.com/correlation-treasuries-stocks-10871.html Don't get freaked out by graphs, the graphs are just a way to put into a picture that correlation.\"",
"title": ""
},
{
"docid": "649ef789d568c6c872bfffbf1b6f17af",
"text": "Your autograph analogy seems relevant to me. But it is not just speculation. In the long run, investing in stocks is like investing in the economy. In the long run, the economy is expected to grow , hence stock prices are expected to go up. Now in theory: the price of any financial instrument is equal to the net present value today of all the future cash flows from the instrument. So if company's earnings improve, shareholders hope that the earnings will trickle down to them either in form of dividends or in form of capital gain. So they buy the stock, creating demand for it. I can try to explain more if this did not make any sense. :)",
"title": ""
},
{
"docid": "7586147cc335126f7bc08f20bff2f746",
"text": "In your own example of VW, it dropped from its peak price of $253 to $92. If you had invested $10,000 in VW in April 2015, by September of that year it would have gone down to $3,600. If you held on to your investment, you would now be getting back to $6,700 on that original $10,000 investment. Your own example demonstrates that it is possible to lose. I have a friend who put his fortune into a company called WorldCom (one of the examples D Stanley shared). He actually lost all of his retirement. Luckily he made some money back when the startup we both worked for was sold to a much larger company. Unsophisticated investors lose money all the time by investing in individual companies. Your best bet is to start searching this site for answers on how to invest your money so that you can see actual strategies that reduce your investment risk. Here's a starting point: Best way to start investing, for a young person just starting their career? If you want to better illustrate this principle to yourself, try this stock market simulation game.",
"title": ""
},
{
"docid": "2b3d7a7c4d8d36118d82262283492883",
"text": "\"Ah I got ya. I partially agree with you, but it's far more complex. I think that is simplifying the debate a bit too much. When people go \"\"passive\"\" you are making the assumption that they are able to stay fully invested the full time period (say 30-40 years until retirement when you might change the asset allocation). This is not a fair assumption because many studies on behavioral finance have shown that people (90% plus) are not able to sit tight through a full market cycle and often sell out during a bear market. I'm not debating you're point that passive often outperforms due to the fees (although there are many managers that do outperform), but the main issue with self-managing and passive investing is people usually make emotional decisions, which then hurts their long-term performance. This would be the reason to hire an adviser. Assuming that people are able to stay passive the entire time and not make a single \"\"active\"\" decision is a very unfair assumption. There was a good study on this referenced in Forbes article below: https://www.forbes.com/sites/advisor/2014/04/24/why-the-average-investors-investment-return-is-so-low/#5169be2b111a Another issue is that there are a lot \"\"active managers\"\" that really just replicate their benchmarks and don't actually actively manage. If you look at active managers who really do have huge under-weights and over-weights relative to their benchmarks they actually tend to outperform them (look at the study below by martin cremers, he's one of the most highly respected researchers when it comes to investment performance research and the active vs passive debate) http://www.cfapubs.org/doi/pdf/10.2469/faj.v73.n2.4 I guess what I'm trying to say is that for most people having an adviser (and paying them a 1% fee) is usually better than going it alone, where they are going to A. chase heat (I bet they always choose the hottest benchmark from the past few years) and B. make poor emotional decisions relating their finances.\"",
"title": ""
},
{
"docid": "783469edc7d5260e6e7c3f9f5e7716ff",
"text": "\"2010 - What $20M looks like with hindsight of 7 years Friend: \"\"Dude there is this new thing, you should grab some, it is $0.10 per.\"\" Me: \"\"So like a penny stock? Nah im good that seems like a waste.\"\" Friend: \"\"No man this is going to blow up and is the future. Take like $500 buy some and it will be worth like $1000 next year.\"\" Me: \"\"Nah ill keep putting my $500 in safe investments making me 5-10% a year.\"\" Edit: I am aware I probably made the \"\"smart\"\" choice but turning $500 into even $200,000 would have been nice\"",
"title": ""
},
{
"docid": "6a6596afc17a33022b76c8b593409015",
"text": "The value premium would state the opposite in fact if one looks at the work of Fama and French. The Investment Entertainment Pricing Theory (INEPT) shows a graph with the rates on small-cap/large-cap and growth/value combinations that may be of interest as well for another article noting the same research. Index fund advisors in Figure 9-1 shows various historical returns up to 2012 that may also be useful here for those wanting more detailed data. How to Beat the Benchmark is from 1998 that could be interesting to read about index funds and beating the index in a simpler way.",
"title": ""
},
{
"docid": "f6f3af904870fa87141b1519e22bcd73",
"text": "Sure.. its possible, its exactly what activist investors do (with institutional money - e.g. pension funds, family foundations). Crowdsourcing probably implies an average <$100 donation per contributor in your mind however, so you'd need a lot of contributors (as opposed to an institution writing a $1B check out of the box) As a benchmark, you can start agitating even without owning shares, but it probably lends credibility to have a few percentage points. As of today, GS's market cap is $46B, JPM's market cap is $122B, BAML's market cap is $77B... so you'd need at least $1B of capital to buy a percentage point or two. At $100 per ticket. that's 10M individual donors.",
"title": ""
}
] |
fiqa
|
a9a463bfa028c0df2c0108f846a4c212
|
where to get stock price forecast
|
[
{
"docid": "dc01d1b7933246b62b23dbf1a0033086",
"text": "\"First, stock prices forecasts are usually pretty subjective so in the following resources you will find differing opinions. The important thing is to read both positive and negative views and do some of your additional research and form your own opinion. To answer your question, some analysts don't provide price targets, some just say \"\"Buy\"\", \"\"Sell\"\", \"\"Hold\"\", and others actually give you a price target. Yahoo provides a good resource for collecting reports and giving you a price target. http://screener.finance.yahoo.com/reports.html\"",
"title": ""
},
{
"docid": "946f3ce23e6c568eac2af2495c403eae",
"text": "There's only one real list that states what people think stock prices should be, and that's the stocks order book. That lists the prices at which stock owners are willing to buy stocks now, and the price that buyers are willing to pay. A secondary measure is the corresponding options price. Anything else is just an opinion and not backed by money.",
"title": ""
},
{
"docid": "5b5e3ad5eedadb699deaf191b14424aa",
"text": "\"I believe you are looking for price forecasts from analysts. Yahoo provides info in the analyst opinions section: here is an example for Apple the price targets are located in the \"\"Price Target Summary\"\" section.\"",
"title": ""
}
] |
[
{
"docid": "4eeeb700522713da024781f45893656f",
"text": "Interactive Brokers provides historical intraday data including Bid, Ask, Last Trade and Volume for the majority of stocks. You can chart the data, download it to Excel or use it in your own application through their API. EDIT: Compared to other solutions (like FreeStockCharts.com for instance), Interactive Brokers provides not only historic intraday LAST**** trades **but also historic BID and ASK data, which is very useful information if you want to design your own trading system. I have enclosed a screenshot to the chart parameter window and a link to the API description.",
"title": ""
},
{
"docid": "684939ebba51de25344e1ff641d21134",
"text": "\"Try the general stock exchange web page. http://www.aex.nl I did a quick trial myself and was able to download historical data for the AEX index for the last few years. To get to the data, I went to the menu point \"\"Koersen\"\" on the main page and chose \"\"Indices\"\". I then entered into the sub page for the AEX index. There is a price chart window in which you have to choose the tab \"\"view data\"\". Now you can choose the date range you need and then download in a table format such as excel or csv. This should be easy to import into any software. This is the direct link to the sub page: http://www.aex.nl/nl/products/indices/NL0000000107-XAMS/quotes\"",
"title": ""
},
{
"docid": "01131b6c4535ef8d627a5e5604a24d61",
"text": "\"If you base your predictions on the past - the market will crash at some point in the future. Historically, October is one of the worse months for the markets. People tend to use this to create click-bait for people like you. They tend to get compensated on page views. Thus, more clicks - more profit for them. If anyone could predict a market crash - they would likely just be \"\"guessing\"\" correctly. However, that does not mean there aren't some people that are better at guessing these sorts of things. The people I would look at are leaders of the field, Warren Buffet, George Soros, etc. Just FYI, there are rumors Warren Buffet is sitting on pretty large cash position currently. However, they are just rumors. If you want to know how market crashes affect things - there are plenty of examples to look at. 1929, 2001, 2007 just to name a few. Do some research of your own, maybe even actually try to emulate what \"\"market analysts\"\" do. Then, you can write the click-bait articles, instead of clicking on them.\"",
"title": ""
},
{
"docid": "081512f0aaafbef6ec324b5e271c4821",
"text": "\"Check out Professor Damodaran's website: http://pages.stern.nyu.edu/~adamodar/ . Tons of good stuff there to get you started. If you want more depth, he's written what is widely considered the bible on the subject of valuation: \"\"Investment Valuation\"\". DCF is very well suited to stock analysis. One doesn't need to know, or forecast the future stock price to use it. In fact, it's the opposite. Business fundamentals are forecasted to estimate the sum total of future cash flows from the company, discounted back to the present. Divide that by shares outstanding, and you have the value of the stock. The key is to remember that DCF calculations are very sensitive to inputs. Be conservative in your estimates of future revenue growth, earnings margins, and capital investment. I usually develop three forecasts: pessimistic, neutral, optimistic. This delivers a range of value instead of a false-precision single number. This may seem odd: I find the DCF invaluable, but for the process, not so much the result. The input sensitivity requires careful work, and while a range of value is useful, the real benefit comes from being required to answer the questions to build the forecast. It provides a framework to analyze a business. You're just trying to properly fill in the boxes, estimate the unguessable. To do so, you pore through the financials. Skimming, reading with a purpose. In the end you come away with a fairly deep understanding of the business, how they make money, why they'll continue to make money, etc.\"",
"title": ""
},
{
"docid": "96ffe6a551593b9b69ec6a68d6a2175b",
"text": "You may refer to project http://jstock.sourceforge.net. It is open source and released under GPL. It is fetching data from Yahoo! Finance, include delayed current price and historical price.",
"title": ""
},
{
"docid": "f40ce647ec1934ec570d35784baa2775",
"text": "James Roth provides a partial solution good for stock picking but let's speed up process a bit, already calculated historical standard deviations: Ibbotson, very good collection of research papers here, examples below Books",
"title": ""
},
{
"docid": "fe41bd844ccdd880ae9b1f59abe82487",
"text": "\"Google Finance certainly has data for Tokyo Stock Exchange (called TYO on Google) listings. You could create a \"\"portfolio\"\" consisting of the stocks you care about and then visit it once per day (or write a script to do so).\"",
"title": ""
},
{
"docid": "7d9fd9278d1df7eff6f2b32d543ed49d",
"text": "I've had luck finding old stock information in the Google scanned newspaper archives. Unfortunately there does not appear to be a way to search exactly by date, but a little browsing /experimenting should get what you want. For instance, here's a source which shows the price to be 36 3/4 (as far as I can read anyway) on that date.",
"title": ""
},
{
"docid": "03e9557aeedc4a1650f7eba55a9cf3b6",
"text": "I work for a fund management company and we get our news through two different service providers Bloomberg and Thomson One. They don't actually source the news though they just feed news from other providers Professional solutions (costs ranging from $300-1500+ USD/month/user) Bloomberg is available as a windows install or via Bloomberg Anywhere which offers bimometric access via browser. Bloomberg is superb and their customer support is excellent but they aren't cheap. If you're looking for a free amateur solution for stock news I'd take a look at There are dozens of other tools people can use for day trading that usually provide news and real time prices at a cost but I don't have any direct experience with them",
"title": ""
},
{
"docid": "93c269eb0810f9a10c3ac6a7948633d1",
"text": "\"any major brokerage firm will have something like this. more speculative rumors will typically not make their way to the \"\"news\"\" there, though; the news feeds are from established wires, who don't report on those things until confirmed.\"",
"title": ""
},
{
"docid": "105d56c81f6e2fbc365e6571b8b8d301",
"text": "you could try [FRED](http://research.stlouisfed.org/fred2/graph/?g=HO7), or maybe try the CME and ICE's websites for some decent data.. haven't looked just suggestions - pretty sure the symbol for the Libor futures is EM, you could approximate from that so long as it's not a doctoral thesis",
"title": ""
},
{
"docid": "42a6227caae2ab12663e34c5bcc7f38b",
"text": "Check out WorldCap.org. They provide fundamental data for Hong Kong stocks in combination with an iPad app. Disclosure: I am affiliated with WorldCap.",
"title": ""
},
{
"docid": "d1d17cab7820e2dde13a9add87fa3ebb",
"text": "Analysts normally (oxymoron here) gauge their targets on where the stock is currently and more importantly where it has been. Except for in the case of say a Dryships where it was a hundred dollar stock and is now in the single digits, it is safe to assume that Apple for instance was well over $ 700 and is now at $500, and that a price guidance of $ 580 is not that remarkable and a not so difficult level to strike. Kind of like a meteorologist; fifty percent chance of rain. Analysts and weathermen.Hard to lose your job when your never really wrong. Mr Zip, Over and outta here",
"title": ""
},
{
"docid": "2649f29b989d8e7f895fca5b3d7d7194",
"text": "\"At the bottom of Yahoo! Finance's S & P 500 quote Quotes are real-time for NASDAQ, NYSE, and NYSE MKT. See also delay times for other exchanges. All information provided \"\"as is\"\" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein. Fundamental company data provided by Capital IQ. Historical chart data and daily updates provided by Commodity Systems, Inc. (CSI). International historical chart data, daily updates, fund summary, fund performance, dividend data and Morningstar Index data provided by Morningstar, Inc. Orderbook quotes are provided by BATS Exchange. US Financials data provided by Edgar Online and all other Financials provided by Capital IQ. International historical chart data, daily updates, fundAnalyst estimates data provided by Thomson Financial Network. All data povided by Thomson Financial Network is based solely upon research information provided by third party analysts. Yahoo! has not reviewed, and in no way endorses the validity of such data. Yahoo! and ThomsonFN shall not be liable for any actions taken in reliance thereon. Thus, yes there is a DB being accessed that there is likely an agreement between Yahoo! and the providers.\"",
"title": ""
},
{
"docid": "ae2ba800a965df882172d0d96a844e3f",
"text": "Since it's not a public company it would be difficult for anyone to value these options or predict their future value without a lot more details on the finances of the firm. Once the firm goes public you can use the Black Shoales equation to get a present value for the options. And once they've got several months of trading data you can get a very rough estimate the future stock price with it's beta. But with individual stocks predicting future values can really be a crapshoot.",
"title": ""
}
] |
fiqa
|
73ad3201fc61260066f0baf03e66841a
|
Stability of a Broker: What if your broker goes bankrupt? Could you lose equity in your account?
|
[
{
"docid": "a23b75bc29184c2d0df5f1bcc4c48394",
"text": "The Securities Investor Protection Corporation is roughly analogous to the FDIC for investments. There are some important differences like a lack of 100% guarantee you get all of your funds back. The SIPC understands you invested knowing there was some risk, and therefore you take that same risk in getting your money from a failed brokerage. However there is still a level of commitment and trust that lessen the risk of investing in the wrong place. Also, do not typo the acronym at your work computer. In the US (and perhaps elsewhere) it is a racist term, and you are likely to get some bad search results. http://www.sipc.org/how/brochure.cfm",
"title": ""
},
{
"docid": "a9ff1ff89e7d9db0011e56f52f429f5f",
"text": "\"Look at the link to the SIPC. I don't know exactly what you mean by \"\"runs out of funds,\"\" but the SIPC will replace shares of stock stolen from your account, and up to $100,000 in cash. The real risk is when a shady brokers sells you shares in a stock that becomes worthless, that's when \"\"buyer beware\"\" kicks in. No help there.\"",
"title": ""
},
{
"docid": "c95b01fcfd47ce1346fbba3a8e90cf64",
"text": "\"Careful with the \"\"stock stolen from your account\"\" thing. SIPC protects investors against broker/dealer insolvency. Don't think they provide protection against theft.\"",
"title": ""
}
] |
[
{
"docid": "d62e3a39316e279e4ee8a1655d33359f",
"text": "\"If you don't use leverage you can't lose more than you invested because you \"\"play\"\" with your own money. But even with leverage when you reach a certain limit (maintenance margin) you will receive a margin call from your broker to add more funds to your account. If you don't comply with this (meaning you don't add funds) the broker will liquidate some of the assets (in this case the currency) and it will restore the balance of the account to meet with his/her maintenance margin. At least, this is valid for assets like stocks and derivatives. Hope it helps! Edit: I should mention that\"",
"title": ""
},
{
"docid": "9c8e35e35c5f8ae1c2031f9cc2fee911",
"text": "While you are correct that no broker-dealer ever qualifies for FDIC and it could be sufficient for customers to know that general rule, for broker-dealers located at or 'networked' with a bank -- and nowadays many probably most are -- these explicit statements that non-bank investments are not guaranteed by the bank or FDIC and may lose principal (often stated as 'may lose value') are REQUIRED; see http://finra.complinet.com/en/display/display_main.html?rbid=2403&element_id=9093 .",
"title": ""
},
{
"docid": "d60080d712fb6218076fb188ce7bf4ff",
"text": "In this example, Client A has to buy shares to return them to Client B for his sale (closing Client A's short position). Client B then sells the shares. The end result is there are no shares within the brokerage clientele anymore, so Client A can't borrow them anymore. The broker is just an intermediary, they wouldn't go out and acquire securities on their own for the benefit of a client wanting to short it, as they would be taking on the risk of the opposite position. This would be in addition to the risk they already take on when allowing people to short sell -- which is that Client A won't have the money to buy the shares it owes to Client B, in which case the broker has to make Client B whole.",
"title": ""
},
{
"docid": "95c2adec4356b3c197307f57a31ce4a5",
"text": "Brokerage firms must settle funds promptly, but there's no explicit definition for this in U.S. federal law. See for example, this article on settling trades in three days. Wikipedia also has a good write-up on T+3. It is common practice, however. It takes approximately three days for the funds to be available to me, in my Canadian brokerage account. That said, the software itself prevents me from using funds which are not available, and I'm rather surprised yours does not. You want to be careful not to be labelled a pattern day trader, if that is not your intention. Others can better fill you in on the consequences of this. I believe it will not apply to you unless you are using a margin account. All but certainly, the terms of service that you agreed to with this brokerage will specify the conditions under which they can lock you out of your account, and when they can charge interest. If they are selling your stock at times you have not authorised (via explicit instruction or via a stop-loss order), you should file a complaint with the S.E.C. and with sufficient documentation. You will need to ensure your cancel-stop-loss order actually went through, though, and the stock was sold anyway. It could simply be that it takes a full business day to cancel such an order.",
"title": ""
},
{
"docid": "2ef4857918552045209a4b65c1bdbf03",
"text": "Not sure if I follow your question completely. Re: What if some fraud takes place that's too big even for it to fund? SIPC does not fund anything. What it does is takes over the troubled brokerage firm, books / assets and returns the money faster. Refer to SIPC - What SIPC Covers... What it Does Not and more specifically SIPC - Why We Are Not the FDIC. SIPC is free for ordinary investors. To get the same from elsewhere one has to pay the premium. Edit: The event we are saying is a large brokrage firm, takes all of the Margin Money from Customer Accounts and loses it and also sell off all the stocks actually shown as being held in customer account ... that would be to big. While its not clear as to what exactly will happens, my guess is that the limits per customers will go down as initial payments. Subsequent payments will only be done after recover of funds from the bankrupt firm. What normally happens when a brokrage firm goes down is some of the money from customers account is diverted ... stocks are typically safe and not diverted. Hence the way SIPC works is that it will give the money back to customer faster to individuals. In absence of SIPC individual investors would have had to fight for themselves.",
"title": ""
},
{
"docid": "168c362273c0d7c6290eff2a9ee578dc",
"text": "Can you advice what I should take care about, or just continue to maximize equity? As others have said, you definitely need to learn about risk management and position sizing, but I also think you should consider:",
"title": ""
},
{
"docid": "9656dbde9bcf9ceff0f8dccdca838802",
"text": "Depending on your perspective of it, I can see reasons for and against this idea. Only with the benefit of hindsight can one say how wise or unwise it is to do so. Earlier in my career, I invested and lost it all. Understand if you do buy when would you be able to sell, do you have to have an account with the underwriter, what fees may there be in having such an account, and would there be restrictions on when you could sell.",
"title": ""
},
{
"docid": "485023b813893e67c05daaa3fd16dd2d",
"text": "For every seller, there's a buyer. Buyers may have any reason for wanting to buy (bargain shopping, foolish belief in a crazy business, etc). The party (brokerage, market maker, individual) owning the stock at the time the company goes out of business is the loser . But in a general panic, not every company is going to go out of business. So the party owning those stocks can expect to recover some, or all, of the value at some point in the future. Brokerages all reserve the right to limit margin trading (required for short selling), and during a panic would likely not allow you to short a stock they feel is a high risk for them.",
"title": ""
},
{
"docid": "5c1e07897b69e023fcb14cdb2dd90557",
"text": "You cannot lose more than what you have in your account (equity). You'll get margin called. No broker will allow you to go negative, at least if they aren't caught off guard like when the Swiss decided to decouple their currency. If you want to understand the basics of forex I suggest you read the following: http://www.babypips.com/school This part explains the basics about leverage and margin. They do a good job so no need in repeating it here: http://www.babypips.com/school/undergraduate/senior-year/the-number-1-cause-of-death-of-forex-traders/leverage-defined.html You you need to keep the following in mind when trading forex:",
"title": ""
},
{
"docid": "f48f2f7e7684e11a35af00f9f7ed2509",
"text": "\"Lending of shares happens in the background. Those who have lent them out are not aware that they have been lent out, nor when they are returned. The borrowers have to pay any dividends to the lenders and in the end the borrowers get their stock back. If you read the fine print on the account agreement for a margin account, you will see that you have given the brokerage the permission to silently loan your stocks out. Since the lending has no financial impact on your portfolio, there's no particular reason to know and no particular protection required. Actually, brokers typically don't bother going through the work of finding an actual stock to borrow. As long as lots of their customers have stocks to lend and not that many people have sold short, they just assume there is no problem and keep track of how many are long and short without designating which stocks are borrowed from whom. When a stock becomes hard to borrow because of liquidity issues or because many people are shorting it, the brokerage will actually start locating individual shares to borrow, which is a more time-consuming and costly procedure. Usually this involves the short seller actually talking to the broker on the phone rather than just clicking \"\"sell.\"\"\"",
"title": ""
},
{
"docid": "c8573a8d7fb74832b7b1cc1f8d917b10",
"text": "You are asking about what happens when an ETF/mutual fund company goes bankrupt. If you were asking about a bank account you would be asking about FDIC coverage. Investment funds are different, the closest thing to FDIC protection is provided by Securities Investors Protection Corporation (SIPC) SIPC was created under the Securities Investor Protection Act as a non-profit membership corporation. SIPC oversees the liquidation of member broker-dealers that close when the broker-dealer is bankrupt or in financial trouble, and customer assets are missing. In a liquidation under the Securities Investor Protection Act, SIPC and the court-appointed Trustee work to return customers’ securities and cash as quickly as possible. Within limits, SIPC expedites the return of missing customer property by protecting each customer up to $500,000 for securities and cash (including a $250,000 limit for cash only). SIPC is an important part of the overall system of investor protection in the United States. While a number of federal and state securities agencies and self-regulatory organizations deal with cases of investment fraud, SIPC's focus is both different and narrow: restoring customer cash and securities left in the hands of bankrupt or otherwise financially troubled brokerage firms. SIPC was not chartered by Congress to combat fraud. Although created under a federal law, SIPC is not an agency or establishment of the United States Government, and it has no authority to investigate or regulate its member broker-dealers. It is important to understand that SIPC is not the securities world equivalent of the Federal Deposit Insurance Corporation (FDIC), which insures depositors of insured banks.",
"title": ""
},
{
"docid": "d35cff4fb7363e321d88241932eab2a0",
"text": "\"If I really understood it, you bet that a quote/currency/stock market/anything will rise or fall within a period of time. So, what is the relationship with trading ? I see no trading at all since I don't buy or sell quotes. You are not betting as in \"\"betting on the outcome of an horse race\"\" where the money of the participants is redistributed to the winners of the bet. You are betting on the price movement of a security. To do that you have to buy/sell the option that will give you the profit or the loss. In your case, you would be buying or selling an option, which is a financial contract. That's trading. Then, since anyone should have the same technic (call when a currency rises and put when it falls)[...] How can you know what will be the future rate of exchange of currencies? It's not because the price went up for the last minutes/hours/days/months/years that it will continue like that. Because of that everyone won't have the same strategy. Also, not everyone is using currencies to speculate, there are firms with real needs that affect the market too, like importers and exporters, they will use financial products to protect themselves from Forex rates, not to make profits from them. [...] how the brokers (websites) can make money ? The broker (or bank) will either: I'm really afraid to bet because I think that they can bankrupt at any time! Are my fears correct ? There is always a probability that a company can go bankrupt. But that's can be very low probability. Brokers are usually not taking risks and are just being intermediaries in financial transactions (but sometime their computer systems have troubles.....), thanks to that, they are not likely to go bankrupt you after you buy your option. Also, they are regulated to insure that they are solid. Last thing, if you fear losing money, don't trade. If you do trade, only play with money you can afford to lose as you are likely to lose some (maybe all) money in the process.\"",
"title": ""
},
{
"docid": "edd7c58449073fbfca72e3ec8921e2a8",
"text": "If you are using a US broker, you are protected by SIPC up to $500,000. SIPC also oversees the liquidation of the broker itself, either by appointing a trustee, or by directly contacting clients. If they are able to transfer accounts to a healthy broker before bankruptcy, they will do so, but if not, you will need to file a claim with them.",
"title": ""
},
{
"docid": "9e767c26bb5156cea063ee0911642690",
"text": "\"Yes. I heard back from a couple brokerages that gave detailed responses. Specifically: In a Margin account, there are no SEC trade settlement rules, which means there is no risk of any free ride violations. The SEC has a FAQ page on free-riding, which states that it applies specifically to cash accounts. This led me to dig up the text on Regulation T which gives the \"\"free-riding\"\" rule in §220.8(c), which is titled \"\"90 day freeze\"\". §220.8 is the section on cash accounts. Nothing in the sections on margin accounts mentions such a settlement restriction. From the Wikipedia page on Free Riding, the margin agreement implicitly covers settlement. \"\"Buying Power\"\" doesn't seem to be a Regulation T thing, but it's something that the brokerages that I've seen use to state how much purchasing power a client has. Given the response from the brokerage, above, and my reading of Regulation T and the relevant Wikipedia page, proceeds from the sale of any security in a margin account are available immediately for reinvestment. Settlement is covered implicitly by margin; i.e. it doesn't detract from buying power. Additionally, I have personally been making these types of trades over the last year. In a sub-$25K margin account, proceeds are immediately available. The only thing I still have to look out for is running into the day-trading rules.\"",
"title": ""
},
{
"docid": "93c0dd8ea161a1275c9113b1fd75a006",
"text": "2 things may happen. Either your positions are closed by the broker and the loss or profit is credited to your account. Else it is carried over to the next day and you pay interest on the stocks lent to you. What happens will be decided by the agreement signed between you and your broker.",
"title": ""
}
] |
fiqa
|
3df36aa84ed0da79a4e83ab99e74bc8a
|
Can I buy stocks directly from a public company?
|
[
{
"docid": "c11fe5f13315fd4fb806ae0e7b291386",
"text": "\"As far as I know, the answer to this is generally \"\"no.\"\" The closest thing would be to identify the stock transfer company representing the company that you want to hold and buy through them. (I have held this way, but I don't know if it's available on all stocks.) This eliminates the broker, but there's still a \"\"middle man\"\" in the transfer company. Note this section from the Stock transfer agent Wikipedia article: A public company usually only designates one company to transfer its stock. Stock transfer agents also run annual meetings as inspector of elections, proxy voting, and special meetings of shareholders. They are considered the official keeper of the corporate shareholder records. The decision to have a single transfer company is a practical one, ensuring that there is one entity responsible for recording this data - Hence even if you could buy stock \"\"directly\"\" from the company that you want to own, it would likely still get routed through the transfer company for recording.\"",
"title": ""
},
{
"docid": "532bbd8ec65a74efd07b91dd9f8be6ca",
"text": "This is allowed somewhat infrequently. You can often purchase stocks through DRIPs which might have little or no commission. For example Duke Energy (DUK) runs their plan internally, so you are buying from them directly. There is no setup fee, or reinvestment fee. There is a fee to sell. Other companies might have someone else manage the DRIP but might subsidize some transaction costs giving you low cost to invest. Often DRIPs charge relatively large amounts to sell and they are not very nimble if trading is what you are after. You can also go to work for a company, and often they allow you to buy stock from them at a discount (around 15% discount is common). You can use a discount broker as well. TradeKing, which is not the lowest cost broker, allows buys and sells at 4.95 per trade. If trading 100 shares that is similar in cost to the DUK DRIP.",
"title": ""
},
{
"docid": "7f45011a6336fee7be61768d0ccc71e1",
"text": "Yes, you often can buy stocks directly from the company at little or no transaction cost. Many companies have either a Dividend Reinvestment Plan (DRIP) or a Direct Stock Plan (DSP). With these plans, you purchase shares directly from the company (although, often there is a third party transfer agent that handles the transaction), and the stock is issued in your name. This differs from purchasing stock from a broker, where the stock normally remains in the name of the broker. Generally, in order to begin participating in a DRIP, you need to already be a registered stockholder. This means that you need to purchase your first share of stock outside of the DRIP, and get it in your name. After that, you can register with the DRIP and purchase additional shares directly from the company. If the company has a DSP, you can begin purchasing shares directly without first being a stockholder. With the advent of discount brokers, DRIPs do not save as much money for regular investors as they once did. However, they can still sometimes save money for someone who wants to purchase shares on a regular basis over even a discount broker. If you are interested in DRIPs and DSPs and want to learn more, there is an informative website at dripinvesting.org that has lots of information on which DRIPs are available and how to get started.",
"title": ""
},
{
"docid": "6f178facbd7508300d25c48cbe0b2462",
"text": "If the company has a direct reinvestment plan or DRIP that they operate in house or contract out to a financial company to administer, yes. There can still be transaction fees, and none of these I know of offer real time trading. Your trade price will typically be defined in the plan as the opening or closing price on the trade date. Sometimes these plans offer odd lot sales at a recent running average price which could provide a hundred dollar or so arbitrage opportunity.",
"title": ""
}
] |
[
{
"docid": "4dcf19ba186d15a463ef6a75516fb0a3",
"text": "The S&P is cap-weighted. So it's not as simple as buying 1 share of each of 500 stocks. (If it were, getting started might be doable, although adding to your position would take time and another large unit of money.) Can you do it? Sure? Do you have enough money to actually do it? I don't know. I'm happy to pay my .02-.03% to not worry about such things.",
"title": ""
},
{
"docid": "fe39007b6afce2e43176aa30787fb6a6",
"text": "Yes, that is correct. There is no limit. An initial public offering of common stock by a company means that these shares remain outstanding for as long as the company wishes. The exceptions are through corporate actions, most commonly either",
"title": ""
},
{
"docid": "ab0454cb97484b5aee38694219afe541",
"text": "\"I can see two possibilities. Either a deal is struck that someone (the company itself, or a large owner) buys out the remaining shares. This is the scenario @mbhunter is talking about, so I won't go too deeply into it, but it simply means that you get money in your bank account for the shares in question the same as if you were to sell them for that price (in turn possibly triggering tax effects, etc.). I imagine that this is by far the most common approach. The other possibility is that the stock is simply de-listed from a public stock exchange, and not re-listed elsewhere. In this case, you will still have the stock, and it will represent the same thing (a portion of the company), but you will lose out on most of the \"\"market\"\" part of \"\"stock market\"\". That is, the shares will still represent a monetary value, you will have the same right to a portion of the company's profits as you do now, etc., but you will not have the benefit of the market setting a price per share so current valuation will be harder. Should you wish to buy or sell stock, you will have to find someone yourself who is interested in striking a deal with you at a price point that you feel comfortable with.\"",
"title": ""
},
{
"docid": "c2f5def027a81c2bd2a43665ac808a3c",
"text": "It depends a large part on your broker's relationship with the issuing bank how early you can participate in the IPO round. But the nature of the stock market means the hotter the stock and the closer to the market (away from the issuing bank) you have to buy the higher the price you'll pay. The stock market is a secondary market, meaning the only things for sale are shares already owned by someone. As a result, for a hot stock the individual investor will have to wait for another investor (not the issuing bank) to trade (sell) the stock.",
"title": ""
},
{
"docid": "b3878fc1739e70bd1bd6b352da2cf21f",
"text": "A purchase of a stock is not a taxable event. No 1099 to worry about. Welcome to Money.SE",
"title": ""
},
{
"docid": "f07ac4680194626215deef6479418a33",
"text": "\"The answer is partly and sometimes, but you cannot know when or how. Most clearly, you do not take somebody else's money if you buy shares in a start-up company. You are putting your money at risk in exchange for a share in the rewards. Later, if the company thrives, you can sell your shares for whatever somebody else will pay for your current share in the thriving company's earnings. Or, you lose your money, when the company fails. (Much of it has then ended up in the company's employees' pockets, much of the rest with the government as taxes that the company paid). If the stockmarket did not exist, people would be far less willing to put their money into a new company, because selling shares would be far harder. This in turn would mean that fewer new things were tried out, and less progress would be made. Communists insist that central state planning would make better decisions than random people linked by a market. I suggest that the historical record proves otherwise. Historically, limited liability companies came first, then dividing them up into larger numbers of \"\"bearer\"\" shares, and finally creating markets where such shares were traded. On the other hand if you trade in the short or medium term, you are betting that your opinion that XYZ shares are undervalued against other investors who think otherwise. But there again, you may be buying from a person who has some other reason for selling. Maybe he just needs some cash for a new car or his child's marriage, and will buy back into XYZ once he has earned some more money. You can't tell who you are buying from, and the seller can only tell if his decision to sell was good with the benefit of a good few years of hindsight. I bought shares hand over fist immediately after the Brexit vote. I was putting my money where my vote went, and I've now made a decent profit. I don't feel that I harmed the people who sold out in expectation of the UK economy cratering. They got the peace of mind of cash (which they might then reinvest in Euro stocks or gold or whatever). Time will tell whether my selling out of these purchases more recently was a good decision (short term, not my best, but a profit is a profit ...) I never trade using borrowed money and I'm not sure whether city institutions should be allowed to do so (or more reasonably, to what extent this should be allowed). In a certain size and shortness of holding time, they cease to contribute to an orderly market and become a destabilizing force. This showed up in the financial crisis when certain banks were \"\"too big to fail\"\" and had to be bailed out at the taxpayer's expense. \"\"Heads we win, tails you lose\"\", rather than trading with us small guys as equals! Likewise it's hard to see any justification for high-frequency trading, where stocks are held for mere milliseconds, and the speed of light between the trader's and the market's computers is significant.\"",
"title": ""
},
{
"docid": "8b1beda0b15210605f037b2adfa37803",
"text": "I assume you are talking about a publicly traded company listed on a major stock exchange and the buyer resides in the US. (Private companies and non-US locations can change the rules really a lot.) The short answer is no, because the company does not own the stock, various investors do. Each investor has to make an individual decision to sell or not sell. But there are complications. If an entity buys more than about 10% of the company they have to file a declaration with the SEC. The limit can be higher if they file an assertion that they are buying it solely for investment and are not seeking control of the company. If they are seeking control of the company then more paperwork must be filed and if they want to buy the whole company they may be required to make a tender offer where they offer to buy any and all shares at a specific price. If the company being bought is a financial institution, then the buyer may have to declare as a bank holding company and more regulations apply. The company can advise shareholders not to take the tender offer, but they cannot forbid it. So the short answer is, below 10% and for investment purposes only, it is cash and carry: Whoever has the cash gets to carry the stock away. Above that various regulations and declarations apply, but the company still does not have the power prevent the purchase in most circumstances.",
"title": ""
},
{
"docid": "5db2500544c713428b4b849702c8e351",
"text": "In order to see whether you can buy or sell some given quantity of a stock at the current bid price, you need a counterparty (a buyer) who is willing to buy the number of stocks you are wishing to offload. To see whether such a counterparty exists, you can look at the stock's order book, or level two feed. The order book shows all the people who have placed buy or sell orders, the price they are willing to pay, and the quantity they demand at that price. Here is the order book from earlier this morning for the British pharmaceutical company, GlaxoSmithKline PLC. Let's start by looking at the left-hand blue part of the book, beneath the yellow strip. This is called the Buy side. The book is sorted with the highest price at the top, because this is the best price that a seller can presently obtain. If several buyers bid at the same price, then the oldest entry on the book takes precedence. You can see we have five buyers each willing to pay 1543.0 p (that's 1543 British pence, or £15.43) per share. Therefore the current bid price for this instrument is 1543.0. The first buyer wants 175 shares, the next, 300, and so on. The total volume that is demanded at 1543.0p is 2435 shares. This information is summarized on the yellow strip: 5 buyers, total volume of 2435, at 1543.0. These are all buyers who want to buy right now and the exchange will make the trade happen immediately if you put in a sell order for 1543.0 p or less. If you want to sell 2435 shares or fewer, you are good to go. The important thing to note is that once you sell these bidders a total of 2435 shares, then their orders are fulfilled and they will be removed from the order book. At this point, the next bidder is promoted up the book; but his price is 1542.5, 0.5 p lower than before. Absent any further changes to the order book, the bid price will decrease to 1542.5 p. This makes sense because you are selling a lot of shares so you'd expect the market price to be depressed. This information will be disseminated to the level one feed and the level one graph of the stock price will be updated. Thus if you have more than 2435 shares to sell, you cannot expect to execute your order at the bid price in one go. Of course, the more shares you are trying to get rid of, the further down the buy side you will have to go. In reality for a highly liquid stock as this, the order book receives many amendments per second and it is unlikely that your trade would make much difference. On the right hand side of the display you can see the recent trades: these are the times the trades were done (or notified to the exchange), the price of the trade, the volume and the trade type (AT means automatic trade). GlaxoSmithKline is a highly liquid stock with many willing buyers and sellers. But some stocks are less liquid. In order to enable traders to find a counterparty at short notice, exchanges often require less liquid stocks to have market makers. A market maker places buy and sell orders simultaneously, with a spread between the two prices so that they can profit from each transaction. For instance Diurnal Group PLC has had no trades today and no quotes. It has a more complicated order book, enabling both ordinary buyers and sellers to list if they wish, but market makers are separated out at the top. Here you can see that three market makers are providing liquidity on this stock, Peel Hunt (PEEL), Numis (NUMS) and Winterflood (WINS). They have a very unpalatable spread of over 5% between their bid and offer prices. Further in each case the sum total that they are willing to trade is 3000 shares. If you have more than three thousand Dirunal Group shares to sell, you would have to wait for the market makers to come back with a new quote after you'd sold the first 3000.",
"title": ""
},
{
"docid": "d52617a3b93fb720163e424395e3032a",
"text": "Absolutely. In fact, all stock purchases of more than 5% of a company's stock must be reported to the SEC, so assuming A and B are publicly traded companies in the US, the purchase would likely be a matter of public record. There are probably special cases where this could cause problems, however; any case where A's purchase of B's stock (or vice versa) runs afoul of regulation would be one such case. For example, if company A wants to own a controlling interest in company B and appoint members of its board of directors and both companies were in the same heavily-concentrated market, regulators may frown on the potential for decreased competition. Such regulations may apply to any purchase of a controlling interest in a company, though.",
"title": ""
},
{
"docid": "4fdc05017bf72e9d071694448159aa6c",
"text": "If you prefer the stock rather than cash, you might find it easier to take the cash, report it, and then buy the same stock from within your own country.",
"title": ""
},
{
"docid": "f3cdb856877006ce8e902213aa1551b6",
"text": "The more the stock is worth, the more it needs to rise to make a profit. You can buy some stock from Google or amazon, but that's about all the stock you'd have... Start small with companies you know and trust that have an upward trend.",
"title": ""
},
{
"docid": "c0882afa2daa5a742a7c8776b1dfbe50",
"text": "No, you shouldn't buy it. The advice here is to keep any existing holdings but not make new purchases of the stock.",
"title": ""
},
{
"docid": "0a5caacca9c03cc06f281e38db8dad98",
"text": "\"This is a complicated subject, because professional traders don't rely on brokers for stock quotes. They have access to market data using Level II terminals, which show them all of the prices (buy and sell) for a given stock. Every publicly traded stock (at least in the U.S.) relies on firms called \"\"market makers\"\". Market makers are the ones who ultimately actually buy and sell the shares of companies, making their money on the difference between what they bought the stock at and what they can sell it for. Sometimes those margins can be in hundreds of a cent per share, but if you trade enough shares...well, it adds up. The most widely traded stocks (Apple, Microsoft, BP, etc) may have hundreds of market makers who are willing to handle share trades. Each market maker sets their own price on what they'll pay (the \"\"bid\"\") to buy someone's stock who wants to sell and what they'll sell (the \"\"ask\"\") that share for to someone who wants to buy it. When a market maker wants to be competitive, he may price his bid/ask pretty aggressively, because automated trading systems are designed to seek out the best bid/ask prices for their trade executions. As such, you might get a huge chunk of market makers in a popular stock to all set their prices almost identically to one another. Other market makers who aren't as enthusiastic will set less competitive prices, so they don't get much (maybe no) business. In any case, what you see when you pull up a stock quote is called the \"\"best bid/ask\"\" price. In other words, you're seeing the highest price a market maker will pay to buy that stock, and the lowest price that a market maker will sell that stock. You may get a best bid from one market maker and a best ask from a different one. In any case, consumers must be given best bid/ask prices. Market makers actually control the prices of shares. They can see what's out there in terms of what people want to buy or sell, and they modify their prices accordingly. If they see a bunch of sell orders coming into the system, they'll start dropping prices, and if people are in a buying mood then they'll raise prices. Market makers can actually ignore requests for trades (whether buy or sell) if they choose to, and sometimes they do, which is why a limit order (a request to buy/sell a stock at a specific price, regardless of its current actual price) that someone places may go unfilled and die at the end of the trading session. No market maker is willing to fill the order. Nowadays, these systems are largely automated, so they operate according to complex rules defined by their owners. Very few trades actually involve human intervention, because people can't digest the information at a fast enough pace to keep up with automated platforms. So that's the basics of how share prices work. I hope this answered your question without being too confusing! Good luck!\"",
"title": ""
},
{
"docid": "d0fb36029eb1131f806287710d316031",
"text": "First: the question is irrelevant for purchases on exchange, mostly. Majority of sales on stock exchanges is between shareholders. If however you buy directly from the company (in a IPO, or direct share purchase program of some kind, like ESPP), then it does end up showing in the company account ledgers one way or another. It then become part of company's total assets, and the newly sold shares add to the equity.",
"title": ""
},
{
"docid": "2ca73cc0c28838ed1dafb94c0b3cf5db",
"text": "\"Shares sold to private investors are sold using private contracts and do not adhere to the same level of strict regulations as publicly traded shares. You may have different classes of shares in the company with different strings attached to them, depending on the deals made with the investors at the time. Since public cannot negotiate, the IPO prospectus is in fact the investment contract between the company and the public, and the requirements to what the company can put there are much stricter than private sales. Bob may not be able to sell his \"\"special\"\" stocks on the public exchange, as the IPO specifies which class of stock is being listed for trading, and Bob's is not the same class. He can sell it on the OTC market, which is less regulated, and then the buyer has to do his due diligence. Yes, OTC-sold stocks may have strings attached to them (for example a buy back option at a preset time and price).\"",
"title": ""
}
] |
fiqa
|
a0b4012f31944cf1290eeabc105f8770
|
How much of my capital should I spend on subscribing to a stock research company?
|
[
{
"docid": "09a181e98d0d812ceafcab683de5db76",
"text": "\"You should spend zero on your stock research company. If the management of the company actually had persistent skill in picking stocks, they would not be peddling their knowledge to the retail market for a few hundred dollars. They would rake in millions and billions by running a huge hedge fund and buy themselves a private island or something. Unfortunately for them, hedge fund investors are not as gullible as retail investors and are more likely to sue when they discover they have been lied to. Many stock \"\"research\"\" companies are trying to manipulate you into paying too high a price for stocks. They buy a small stock, recommend it, and then sell it at the artificially (and temporarily) high price. Others are simply recommending stocks pretty much at random. You could do that just as well as they can, and for free. Portfolio performance evaluation is a complex problem. The research company knows that its recommendations will \"\"make good money\"\" about half the time and that's enough to bring in a lot of uninformed people. To know whether your portfolio actually did well you need to know how much risk there was in the portfolio and how a competing \"\"dumb\"\" portfolio with similar characteristics fared over the same time period. And you need to repeat the experiment enough times (or long enough) to know the outcome wasn't luck. I can say confidently that your portfolio performance doesn't back up the claim that the research company has skill above and beyond luck. Much less $599 worth of skill. I can also say very confidently that there are no investors with a total of 20 thousand dollars to invest for whom purchasing stock recommendations is worth the cost, even if those recommendations do have some value. Real stock information is valuable only to large investors because the per-dollar value is low. Please do not give money to or otherwise support a semi-criminal \"\"stock research\"\" enterprise.\"",
"title": ""
},
{
"docid": "9ab606921ac142b915d0bb2d892e276a",
"text": "To complement farnsy's answer, I want to warn people against market prediction scams. If they give uniformly distributed buy/sell predictions to 256 people, one of them will get eight correct predictions in a row. They are trading a few cents of Amazon server time for 3% of your capital.",
"title": ""
}
] |
[
{
"docid": "ae148a4b9aca1e2103a1c57a04f56f16",
"text": "This is great, thank you. Can you think of any cases where expected return is greater than interest payments (like in #2) but the best choice would still be raise money through equity issuing? My intuition tells me this may be possible for an expensive company.",
"title": ""
},
{
"docid": "6c045370f584af27f067804285d8c044",
"text": "It's hard to say for smaller cap firms because they are all so different. Take a look at SandP or other rating agencies at about the BB range. Then decide how much of a buffer you'd like. If all goes to hell, do you want to be able to cover all you salaries, debt etc for three months? Six? What kind of seasonal volatility does your industry face? Do you plan on any significant investment or FTE uplift any time soon? This will all play into how much retained earnings you will chose to have.",
"title": ""
},
{
"docid": "33e15059a5e28e54be6dd939f1b030b8",
"text": "The idea is you would also have a cash allowance in the portfolio originally - say 25%. So in this scenario, 375K in stock and 125k in cash. and assuming the goal is 1K increase in stock value you would buy 38.5K of stock at the now lower price.",
"title": ""
},
{
"docid": "1e4aaf1697caa668813199234ae82966",
"text": "Why not figure out the % composition of the index and invest in the participating securities directly? This isn't really practical. Two indices I use follow the Russell 2000 and the S&P 500 Those two indices represent 2500 stocks. A $4 brokerage commission per trade would mean that it would cost me $10,000 in transaction fees to buy a position in 2500 stocks. Not to mention, I don't want to track 2500 investments. Index funds provide inexpensive diversity.",
"title": ""
},
{
"docid": "bf1d1ea0e3677666ea9f6e49220977f5",
"text": "\"RED FLAG. You should not be invested in 1 share. You should buy a diversified ETF which can have fees of 0.06% per year. This has SIGNIFICANTLY less volatility for the same statistical expectation. Left tail risk is MUCH lower (probability of gigantic losses) since losses will tend to cancel out gains in diversified portfolios. Moreover, your view that \"\"you believe these will continue\"\" is fallacious. Stocks of developed countries are efficient to the extent that retail investors cannot predict price evolution in the future. Countless academic studies show that individual investors forecast in the incorrect direction on average. I would be quite right to objectively classify you as a incorrect if you continued to hold the philosophy that owning 1 stock instead of the entire market is a superior stategy. ALL the evidence favours holding the market. In addition, do not invest in active managers. Academic evidence demonstrates that they perform worse than holding a passive market-tracking portfolio after fees, and on average (and plz don't try to select managers that you think can outperform -- you can't do this, even the best in the field can't do this). Direct answer: It depends on your investment horizon. If you do not need the money until you are 60 then you should invest in very aggressive assets with high expected return and high volatility. These assets SHOULD mainly be stocks (through ETFs or mutual funds) but could also include US-REIT or global-REIT ETFs, private equity and a handful of other asset classes (no gold, please.) ... or perhaps wealth management products which pool many retail investors' funds together and create a diversified portfolio (but I'm unconvinced that their fees are worth the added diversification). If you need the money in 2-3 years time then you should invest in safe assets -- fixed income and term deposits. Why is investment horizon so important? If you are holding to 60 years old then it doesn't matter if we have a massive financial crisis in 5 years time, since the stock market will rebound (unless it's a nuclear bomb in New York or something) and by the time you are 60 you will be laughing all the way to the bank. Gains on risky assets overtake losses in the long run such that over a 20-30 year horizon they WILL do much better than a deposit account. As you approach 45-50, you should slowly reduce your allocation to risky assets and put it in safe haven assets such as fixed income and cash. This is because your investment horizon is now SHORTER so you need a less risky portfolio so you don't have to keep working until 65/70 if the market tanks just before retirement. VERY IMPORTANT. If you may need the savings to avoid defaulting on your home loan if you lose your job or something, then the above does not apply. Decisions in these context are more vague and ambiguous.\"",
"title": ""
},
{
"docid": "e0011d1c9d452a858e46b0056fe52fcd",
"text": "I mean some VCs focus on technology companies, that's a sector focus, but a very broad one. Are you saying you don't want to be limited to one sector? Also keep in mind that series B investments are much more expensive then A rounds, just because there is more proof and less risk. I know of some angel investors that invest by size rather than industry, maybe you could partner up with them. All depends on how much capital you have/ how much involvement you want to have with the company.",
"title": ""
},
{
"docid": "9e6f5a82008f9330d2061b78d7cbadd5",
"text": "I spent a while looking for something similar a few weeks back and ended up getting frustrated and asking to borrow a friend's Bloombterg. I wish you the best of luck finding something, but I wasn't able to. S&P and Morningstar have some stuff on their site, but I wasn't able to make use of it. Edit: Also, Bloomberg allows shared terminals. Depending on how much you think as a firm, these questions might come up, it might be worth the 20k / year",
"title": ""
},
{
"docid": "3eba0ee9b9ecd19532789be1d9146812",
"text": "\"I find the question interesting, but it's beyond an intelligent answer. Say what you will about Jim Cramer, his advice to spend \"\"an hour per month on each stock\"\" you own appears good to me. But it also limits the number of stocks you can own. Given that most of us have day jobs in other fields, you need to decide how much time and education you can put in. That said, there's a certain pleasure in picking stocks, buying a company that's out of favor, but your instinct tells you otherwise. For us, individual stocks are about 10% of total portfolio. The rest is indexed. The amount that \"\"should be\"\" in individual stocks? None. One can invest in low cost funds, never own shares of individual stocks, and do quite well.\"",
"title": ""
},
{
"docid": "2b43fe73cf92fefdaffbeb5cfe26747b",
"text": "If you hold at least $2,000 of a company's shares for at least a year you can submit a proxy filing -- a stockholder proposal at the shareholders' meeting. Then you can use the media to agitate around that proposal. (See Hugh Fearnley-Whittingstall, mentioned here as well). Companies have been known to bow to media pressure around minority shareholder proposals. The guidelines for proxy filings are here: http://ecfr.gpoaccess.gov/cgi/t/text/text-idx?c=ecfr&sid=47b43cbb88844faad586861c05c81595&rgn=div5&view=text&node=17:3.0.1.1.1&idno=17#17:3.0.1.1.1.2.82.201 Buying enough shares to assume control of a major money center bank is not possible, regardless of the amount of money you can raise (remember: there are poison pill provisions, not to mention the fact that the more shares you want to buy, the higher the price will be). tl;dr: The way to do what you're trying to do is not by accumulating shares but by using the media. You need $2,000.",
"title": ""
},
{
"docid": "8857170018f503149b7d0033ac8cbc9f",
"text": "It's great that you have gotten the itch to learn about the stock market. There are a couple of fundamentals to understand first though. Company A has strong, growing, net earnings and minimal debt, it's trading for $100 per share. Company B has good revenue but high costs of goods and total liabilities well in excess of total assets, it's trading for $0.10 per share. There is no benefit to getting 10,000 shares or 10 shares for your $1,000. Your goal is to invest in companies that have valuable products and services run by competent management teams. Sure, the number of shares you own will dictate what percentage of the company you own, and in a number of cases, your voting power. But even a penny stock will have a market capitalization of several million dollars so voting power isn't really a concern for your $1,000 investment. There is a lot more in the three basic financial statements (Income Statement, Balance Sheet, Statement of Cash Flows) than revenue. Seasoned accountants can have a hard time parsing out where money is coming from and where it's going. In general there are obvious red flags, like a fast declining cash balance against a fast growing liabilities balance or expenses exceeding revenue. While some of these things are common among new and high growth companies, it's not the place for a new investor with a small bankroll. A micro-cap company (penny stocks are in this group) will receive rounds of financing via issuing preferred convertible shares which may include options on more shares. For a company worth $20mm a $5mm financing round can materially change the finances of a company, and will likely dilute your holdings in common stock. Small growth companies need new financing frequently to fund their growth strategies. Revenue went up, great... why? Did you open another store? Did you open another sales office? Did the revenue increase this quarter based on substantially the same operation that existed last quarter or have you increased the capacity of your operation? If you increased the capacity of your operation what was the cost of the increase and did revenue increase as expected? Can you expect revenue to continue to grow at this rate or was it a one time windfall from an unusual order? Sure, there are spectacular gains to be had in penny stocks. XYZ Pharma Research (or whatever) goes from $0.05 to $0.60 and you've turned your $1,000 in to $12,000. This is a really unlikely event... Buying penny stocks is akin to buying lottery tickets. Unless you are a high ranking employee at the company capable of making decisions, or one of the investors buying the preferred shares mentioned in point 3, or are one of the insiders of a pump and dump scam on the stock, penny common stocks are not a place to invest. One could argue that even a company insider should probably avoid buying common stock. Just to illustrate the points above, you mention: Doing some really heavy research into this stock has made me question the whole penny stock market. Based on your research what is the enterprise value of the company? What were the gross proceeds of the last financing round, how many shares were issued and were there any warrants attached? What do you perceive to be heavy research? What background do you have in finance/accounting to give weight to your ability to perform such research? Crawl. Walk. Then run. Don't kid yourself in to thinking that since you have some level of education you understand the contracts involved in enterprise finance.",
"title": ""
},
{
"docid": "663374eb1366efd15357a239d1becb56",
"text": "Thanks for the advice. I will look into index funds. The only reason I was interested in this stock in particular is that I used to work for the company, and always kept an eye on the stock price. I saw that their stock prices recently went down by quite a bit but I feel like I've seen this happen to them a few times over the past few years and I think they have a strong catalogue of products coming out soon that will cause their stock to rise over the next few years. After not being able to really understand the steps needed to purchase it though, I think I've learned that I really don't know enough about the stock system in general to make any kind of informed decisions about it and should probably stick to something lower-risk or at least do some research before making any ill-informed decisions.",
"title": ""
},
{
"docid": "167e7ba61ac8b036dc0a477a9e81d0df",
"text": "Don't start by investing in a few individual companies. This is risky. Want an example? I'm thinking of a big company, say $120 billion or so, a household name, and good consistent dividends to boot. They were doing fairly well, and were generally busy trying to convince people that they were looking to the future with new environmentally friendly technologies. Then... they went and spilled a bunch of oil into the Gulf of Mexico. Yes, it wasn't a pretty picture if BP was one of five companies in your portfolio that day. Things would look a lot better if they were one of 500 or 5000 companies, though. So. First, aim for diversification via mutual funds or ETFs. (I personally think you should probably start with the mutual funds: you avoid trading fees, for one thing. It's also easier to fit medium-sized dollar amounts into funds than into ETFs, even if you do get fee-free ETF trading. ETFs can get you better expense ratios, but the less money you have invested the less important that is.) Once you have a decent-sized portfolio - tens of thousands of dollars or so - then you can begin to consider holding stocks of individual companies. Take note of fees, including trading fees / commissions. If you buy $2000 worth of stock and pay a $20 commission you're already down 1%. If you're holding a mutual fund or ETF, look at the expense ratio. The annualized real return on the stock market is about 4%. (A real return is after adjusting for inflation.) If your fee is 1%, that's about a quarter of your earnings, which is huge. And while it's easy for a mutual fund to outperform the market by 1% from time to time, it's really really hard to do it consistently. Once you're looking at individual companies, you should do a lot of obnoxious boring stupid research and don't just buy the stock on the strength of its brand name. You'll be interested in a couple of metrics. The main one is probably the P/E ratio (price/earnings). If you take the inverse of this, you'll get the rate at which your investment is making you money (e.g. a P/E of 20 is 5%, a P/E of 10 is 10%). All else being equal, a lower P/E is a good thing: it means that you're buying the company's income really cheap. However, all else is seldom equal: if a stock is going for really cheap, it's usually because investors don't think that it's got much of a future. Earnings are not always consistent. There are a lot of other measures, like beta (correlation to the market overall: riskier volatile stocks have higher numbers), gross margins, price to unleveraged free cash flow, and stuff like that. Again, do the boring research, otherwise you're just playing games with your money.",
"title": ""
},
{
"docid": "e161b90085865041d487f930bd6e12ce",
"text": "If your question is truly just What is good growth? Is there a target return that's accepted as good? I assumed 8% (plus transaction fees). Then I'd have to point out that the S&P has offered a CAGR of 9.77% since 1900. You can buy an S&P ETF for .05%/yr expense. If your goal is to lag the S&P by 1.7%/yr over the long term, you can use a 85/15 mix of S&P and cash, sleep well at night, and avoid wasting any time picking stocks.",
"title": ""
},
{
"docid": "0e4dd0800c43b069a301a33451519f63",
"text": "\"I'd start with a Google search for \"\"best backtesting tools.\"\" Does your online brokerage offer anything? You already understand that the data is the important part. The good stuff isn't free. But yeah, if you have some money to spend you can get more than enough data to completely overwhelm you. :)\"",
"title": ""
},
{
"docid": "86c8b880726a6d9d088b0f3a56861f70",
"text": "\"Simple answer: Yes A better question to ask might be \"\"Should I invest all my savings to buy 4 shares of a single stock.\"\" My answer to that would be \"\"probably not\"\". If this is your first venture into the world of owning publicly traded companies, then you're better off starting with some sort of mutual fund or ETF. This will start your portfolio with some amount of diversification so you don't have all your eggs in one basket. If you really want to get into the world of picking individual stocks, a good rule of thumb to follow is to invest $1 in some sort of indexed fund for every $1 you invest in an individual stock. This gives you some diversification while still enabling you to scratch that itch of owning a part of Apple or whatever other company you think is going in the right direction.\"",
"title": ""
}
] |
fiqa
|
a95618c6a474f51e21b27827aaba79cf
|
What does pink-sheet mean related to stocks?
|
[
{
"docid": "792d4824bfe6b6596b3d02d9a3df30fa",
"text": "It's an over-the-counter stock quote system. Read all about it. Or visit it.",
"title": ""
}
] |
[
{
"docid": "4e353258faa2579b57954440f88d6247",
"text": "\"Doing your homework means to perform what's more accurately called \"\"fundamental analysis\"\". According to proponents of fundamental analysis (FA), it is possible to accurately determine how much a stock should trade for and then buy or sell the stock based on whether it trades above or below this target price. This target price is based on the discounted anticipated future earnings of your stock, so \"\"doing your homework\"\" means that you figure out how much future earnings you can expect from the stock and then figuring out at what rate you want to discount those future earnings (Are 1000 dollars that you'll earn next year worth $800 today or $900 or only $500? That depends on the overall economic and political climate...) So does this make any sense? Depends. I'm aware that there are a lot of anecdotes of people researching a stock, buying that stock and doing well with that stock. But poor decisions can at times lead to good outcomes... EDIT: Due to some criticism, I want to expand on a few points. So, is homework completely for naught? No!\"",
"title": ""
},
{
"docid": "822df86dfe0d05b9c15f41148d7dbda2",
"text": "\"Because they track an index. Edited: The definition of the word in this case meaning \"\"something used or serving to point out; a sign, token, or indication\"\" from Meaning #3 I presume therefore you are asking what an index is? There are many variations of what makes up an Index but in short it is a representation of some part of a market. An extremely simplistic calculation would be to take a basket of stocks, and sum their prices. If one stock moves up a dollar, and one moves down a dollar, the index has effectively not changed, as it is presumed that the loss in one is offset by the gain in the other.\"",
"title": ""
},
{
"docid": "0b9ab3d3b8b770d7d16cf7c3414314a1",
"text": "\"Not going to pretend to know what any of that actually means mate, haha! But if it involves Brownian Motion/Ito then you might find something relatable in that paper. Plenty of stuff outside that, but most not as \"\"mathematically clean\"\" (ie will involve hacks to fit observed data), or on the flipside closer to philosophical stuff like Mandelbrot and (sigh) Taleb, who more or less do a great job of explaining why the gospel models are all crap (which is reasonable), and that real world markets can't be bunged into a nice cookie-cutter model.\"",
"title": ""
},
{
"docid": "4c6b17bfa485445555a5611682e477de",
"text": "The suffix represents the stock exchange the stock is traded on. N represents the New York Stock Exchange and O represents the Nasdaq. Sometimes a stock can be listed on more than one exchange so the suffix will give you an indication of which exchange the stock is on. For example the Australian company BHP Billiton Ltd is listed on multiple exchanges so is given a different suffix for the different exchanges (especially when the code is the same for each exchange). Below are a few examples of BHP:",
"title": ""
},
{
"docid": "66c2e069c3503182b76c10aac73e22e5",
"text": "Thanks to the other answers, I now know what to google for. Frankfurt Stock Exchange: http://en.boerse-frankfurt.de/equities/newissues London Stock Exchange: http://www.londonstockexchange.com/statistics/new-issues-further-issues/new-issues-further-issues.htm",
"title": ""
},
{
"docid": "d9363e182020d78bdc5050c5969a94da",
"text": "\"The balance sheet for a bank is the list of assets and liabilities that the bank directly is responsible for. This would be things like loans the bank issues and accounts with the bank. Banks can make both \"\"balance sheet\"\" loans, meaning a loan that says on the balance sheet - one the bank gains the profits from but holds the risks for also. They can also make \"\"off balance sheet\"\" loans, meaning they securitize the loan (sell it off, such as the mortgage backed securities). Most major banks, i.e. Chase, Citibank, etc., could be called \"\"balance sheet\"\" banks because at least some portion of their lending comes from their balance sheet. Not 100% by any means, they participate in the security swaps extensively just like everyone does, but they do at least some normal, boring lending just as you would explain a bank to a five year old. Bank takes in deposits from account holders, loans that money out to people who want to buy homes or start businesses. However, some (particularly smaller) firms don't work this way - they don't take responsibility for the money or the loans. They instead \"\"manage assets\"\" or some similar term. I think of it like the difference between Wal-Mart and a consignment store. Wal-Mart buys things from its distributors, and sells them, taking the risk (of the item not selling) and the reward (of the profit from selling) to itself. On the other hand, a consignment store takes on neither: it takes a flat fee to host your items in its store, but takes no risk (you own the items) nor the majority of the profit. In this case, Mischler Financial Group is not a bank per se - they don't have accounts; they manage funds, instead. Note the following statement on their Services page for example: Mischler Financial Group holds no risk positions and no unwanted inventory of securities, which preserves the integrity of our capital and assures our clients that we will be able to obtain bids and offers for them regardless of adverse market conditions. They're not taking your money and then making their own investments; they're advising you how to invest your money, or they're helping do it for you, but it's your money going out and your risk (and reward).\"",
"title": ""
},
{
"docid": "9b42ee8b333f4eda0048aaa07d6c5a1c",
"text": "Edgar Online is the SEC's reporting repository where public companies post their forms, these forms contain financial data Stock screeners allow you to compare many companies based on many financial metrics. Many sites have them, Google Finance has one with a decent amount of utility",
"title": ""
},
{
"docid": "184e33992f587192ee5f6cbe68a089b5",
"text": "Depends on the structure of the company and what shares are outstanding. If the pink sheet stock has no voting power then buying all that stock doesn't get you any control at all. On the other hand, if the outstanding shares only represent 20% of the company's overall shares, then buying all the shares isn't likely enough to have a controlling interest. Thus, you'll have to dig into the details. If you want an example of where I'd have my doubts, look at Nestle's stock which has the ticker of NSRGY. There can be companies that are structured with stock on multiple exchanges that can also be a challenge at times. There is also something to be said if you own enough stock in a company that this has to be disclosed to the SEC when you buy more.",
"title": ""
},
{
"docid": "509193a4342651b45574262bf7a52288",
"text": "Material Information means that any information that can reasonable affect the share price of the company [upward or downward] as looked by the investors. The idea is to provide a level playing field to all investors. Hence it forces people having material information not to trade when they have this information that is not yet disclosed. Yes it happens all the time and laws are quite stringent. There is monitoring of share activity by regulators ... hence most of the times the companies come out with their own guidelines and top & senior management is prohibited from trading in their own company’s shares for pretty much round the year except few windows the company decides is safe. Now it may not be possible to monitor every small material info, but any large spike of stocks after certain announcements is investigated by regulators to verify any undue gains. For ex a person who never trades suddenly buys large qty of shares and it goes up and he sells again ... etc",
"title": ""
},
{
"docid": "f79c7af99d2e629a57f7a320f7c14eb0",
"text": "\"The penny/pink sheet stocks you tend to see promoted are the ones a) with small public floats or, b) they are thinly traded. This means that any appreciable change in buy/sell volume will have an outsized effect on the stock's share price, even when the underlying fundamentals are not so great. Promoters are frequently paid based on how much they can move a stock's price, but such moves are not long-lasting. They peter out when the trading volumes return to more normal ranges for the stock because all of the hype has died out. There are some small-cap NASDAQ stocks which can be susceptible to promotion for the same reason -- they have small floats and/or are thinly traded. Once someone figures out the best targets, they'll accumulate a position and then start posting all kinds of \"\"news\"\" on the web in an effort to drum up interest so they can sell off their position into the buying that follows. The biggest problem with penny/pink sheet stocks is that they frequently fail to publish reliable financial statements, and their ownership is of a dubious nature. In the past, these types of stocks have been targeted by organized crime syndicates, which ran their own \"\"pump and dump\"\" operations as a way to make relatively easy money. This may still be true to some extent today. Be wary of investing in any publicly-traded firm that has to use promoters to drum up investor interest, because it can be a serious red flag. Even if it means missing out on a short-term opportunity, research the company before investing. Read its financials, understand how it has behaved through its trading history, learn about the products/services it is selling. Do your homework. Otherwise you are doing the investing equivalent of taking your money and lighting it on fire. Remember, there's a good reason these companies are trading as penny/pink sheet stocks, and it generally has nothing to do with the notion (the promoters will tell you) that somehow the \"\"market has missed out on this amazing opportunity.\"\" Pump and dump schemes, which lie at the heart of almost all stock promotion, rely on convincing you, the investor, that you're smart enough to see what others haven't. I hope this helps. Good luck!\"",
"title": ""
},
{
"docid": "a3230014b1ba3c859fe79f9b1a38077e",
"text": "The meaning is quite literal - a representative stock list is a list of stocks that would reasonably be expected to have about the same results as the whole market, i.e. be representative of an investment that invests in all those stocks. Of course, you don't want to invest in all stocks individually, that would be impractical, but you can either choose a diverse array of stocks that are (should be) representative, as the article recommends, or alternatively choose to invest in an index fund which offers a practical way to invest in all the stocks in the index at once.",
"title": ""
},
{
"docid": "367f8dfe7bdd37aada151196fc7803f6",
"text": "10-Q is the quarterly report, and accordingly is filed quarterly. Similarly, 10-K is the annual report. 8-K is a general form for notification of material events. It is filed every time a material event is required to be reported to the shareholders. It may accompany the periodical reports, but doesn't have to. It can be filed on its own. If you're only interested in the financial statements, then you should be looking for the 10K/10Q forms. SEC will tell you when the forms were filed (dates), but it won't tell you what's more material and what's less. So you can plot a stock price graph on these dates, and see what was deemed more material by the investors based on the price fluctuations, but be prepared to find fluctuations that have no correlation to filings - because the market as a whole can drag the stock up or down. Also, some events may not be required to be reported to SEC, but may be deemed material by the investors. For example, a Cupertino town hall meeting discussing the zoning for the new AAPL HQ building may be deemed material by the investors, based on the sentiments, even if no decision was made to be reported to SEC.",
"title": ""
},
{
"docid": "5f66ae91750684fb0c60a2d4db4cbfe4",
"text": "1) Explicitly, how a company's share price in the secondary market affects the company's operations. (Simply: How does it matter to a company that its share price drops?) I have a vague idea of the answer, but I'd like to see someone cover it in detail. 2) Negative yield curves, or bonds/bills with negative yields Thanks!",
"title": ""
},
{
"docid": "45647bd5c16b69730e046f75a6a74533",
"text": "Link only answers aren't good, but the list is pretty long. It's a moving target, the requirement change based on a number of criteria. It usually jumps to force you to sell when you hold a losing position, or when your commodity is about to skyrocket.",
"title": ""
},
{
"docid": "4c23a61f572194b420b110c7a2af7c62",
"text": "\"This is called \"\"change\"\" or \"\"movement\"\" - the change (in points or percentage) from the last closing value. You can read more about the ticker tape on Investopedia, the format you're referring to comes from there.\"",
"title": ""
}
] |
fiqa
|
66ac0f5db6afee19bfc95d6e818cf428
|
How to hedge a long stock position that does not have options
|
[
{
"docid": "e9751acb6e9a16304e1187f41bf68f52",
"text": "If there are no traded options in a company you can get your broker to write OTC options but this may not be possible given some restrictions on accounts. Going short on futures may also be an option. You can also open a downside CFD (contract for difference) on the stock but will have to have margin posted against it so will have to hold cash (or possibly liquid assets if your AUM is large enough) to cover the margin which is unutilized cash in the portfolio that needs to be factored into any portfolio calculations as a cost. Diversifying into uncorrelated stock or shorting correlated (but low div yield) stock would also have the same effect. stop loss orders would probably not be appropriate as it is not the price of the stock that you are concerned with but mitigating all price changes and just receiving the dividend on the stock. warning: in a crash (almost) all stocks become suddenly correlated so be aware that might cause you a short term loss. CFDs are complex and require a degree of sophistication before you can trade them well but as you seem to understand options they should not be too hard to understand.",
"title": ""
},
{
"docid": "46741cccc3fe066d39bb2528a50b1d98",
"text": "You could always maintain a limit order to sell at a price you're comfortable with.",
"title": ""
}
] |
[
{
"docid": "2865984a64db25a71c7b3f2c57f1afc5",
"text": "\"Your plan already answers your own question in the best possible way: If you want to be able to make the most possible profit from a large downward move in a stock (in this case, a stock that tracks gold), with a limited, defined risk if there is an upward move, the optimal strategy is to buy a put option. There are a few Exchange Traded Funds (ETFs) that track the price of gold. think of them as stocks that behave like gold, essentially. Two good examples that have options are GLD and IAU. (When you talk about gold, you'll hear a lot about futures. Forget them, for now. They do the same essential thing for your purposes, but introduce more complexity than you need.) The way to profit from a downward move without protection against an upward move is by shorting the stock. Shorting stock is like the opposite of buying it. You make the amount of money the stock goes down by, or lose the amount it goes up by. But, since stocks can go up by an infinite amount, your possible loss is unlimited. If you want to profit on a large downward move without an unlimited loss if you're wrong and it goes up, you need something that makes money as the stock drops, but can only lose so much if it goes up. (If you want to be guaranteed to lose nothing, your best investment option is buying US Treasuries, and you're technically still exposed to the risk that US defaults on its debt, although if you're a US resident, you'll likely have bigger problems than your portfolio in that situation.) Buying a put option has the exact asymmetrical exposure you want. You pay a limited premium to buy it, and at expiration you essentially make the full amount that the stock has declined below the strike price, less what you paid for the option. That last part is important - because you pay a premium for the option, if it's down just a little, you might still lose some or all of what you paid for it, which is what you give up in exchange for it limiting your maximum loss. But wait, you might say. When I buy an option, I can lose all of my money, cant I? Yes, you can. Here's the key to understanding the way options limit risk as compared to the corresponding way to get \"\"normal\"\" exposure through getting long, or in your case, short, the stock: If you use the number of options that represent the number of shares you would have bought, you will have much, much less total money at risk. If you spend the same \"\"bag 'o cash\"\" on options as you would have spent on stock, you will have exposure to way more shares, and have the same amount of money at risk as if you bought the stock, but will be much more likely to lose it. The first way limits the total money at risk for a similar level of exposure; the second way gets you exposure to a much larger amount of the stock for the same money, increasing your risk. So the best answer to your described need is already in the question: Buy a put. I'd probably look at GLD to buy it on, simply because it's generally a little more liquid than IAU. And if you're new to options, consider the following: \"\"Paper trade\"\" first. Either just keep track of fake buys and sells on a spreadsheet, or use one of the many online services where you can track investments - they don't know or care if they're real or not. Check out www.888options.com. They are an excellent learning resource that isn't trying to sell you anything - their only reason to exist is to promote options education. If you do put on a trade, don't forget that the most frustrating pitfall with buying options is this: You can be basically right, and still lose some or all of what you invest. This happens two ways, so think about them both before you trade: If the stock goes in the direction you think, but not enough to make back your premium, you can still lose. So you need to make sure you know how far down the stock has to be to make back your premium. At expiration, it's simple: You need it to be below the strike price by more than what you paid for the option. With options, timing is everything. If the stock goes down a ton, or even to zero - free gold! - but only after your option expires, you were essentially right, but lose all your money. So, while you don't want to buy an option that's longer than you need, since the premium is higher, if you're not sure if an expiration is long enough out, it isn't - you need the next one. EDIT to address update: (I'm not sure \"\"not long enough\"\" was the problem here, but...) If the question is just how to ensure there is a limited, defined amount you can lose (even if you want the possible loss to be much less than you can potentially make, the put strategy described already does that - if the stock you use is at $100, and you buy a put with a 100 strike for $5, you can make up to $95. (This occurs if the stock goes to zero, meaning you could buy it for nothing, and sell it for $100, netting $95 after the $5 you paid). But you can only lose $5. So the put strategy covers you. If the goal is to have no real risk of loss, there's no way to have any real gain above what's sometimes called the \"\"risk-free-rate\"\". For simplicity's sake, think of that as what you'd get from US treasuries, as mentioned above. If the goal is to make money whether the stock (or gold) goes either up or down, that's possible, but note that you still have (a fairly high) risk of loss, which occurs if it fails to move either up or down by enough. That strategy, in its most common form, is called a straddle, which basically means you buy a call and a put with the same strike price. Using the same $100 example, you could buy the 100-strike calls for $5, and the 100-strike puts for $5. Now you've spent $10 total, and you make money if the stock is up or down by more than $10 at expiration (over 110, or under 90). But if it's between 90 and 100, you lose money, as one of your options will be worthless, and the other is worth less than the $10 total you paid for them both.\"",
"title": ""
},
{
"docid": "544edd3bd1f3734a332ddf9166bad4ae",
"text": "I use over half my buying power of my portfolio for options, and I'm not a fan of any of the strategies listed above either (I stay away from negative theta trades for the most part), but I just listed them to point out that saying the reason someone wouldn't enter a short position is for fear of infinite losses is asinine. It's easy enough to make any trade risk defined if that is something the trader cares about.",
"title": ""
},
{
"docid": "94bc6ab37faff03c2d0469edd874382b",
"text": "\"I'm adding to @Dilip's basic answer, to cover the additional points in your question. I'll assume you are referring to publicly traded stock options, such as those found on the CBOE, and not an option contract entered into privately between two specific counterparties (e.g. as in an employer stock option plan). Since you are not obligated to exercise a call option you purchased on the market, you don't need to maintain funds on account for possible exercising. You could instead let the option expire, or resell the option, neither of which requires funds available for purchase of the underlying shares. However, should you actually choose to exercise the call option (and usually this is done close to expiration, if at all), you will be required to fund your account much like if you bought the underlying shares in the first place. Call your broker to determine the exact rules and timing for when they need the money for a call-option exercise. And to expand on the idea of \"\"cancelling\"\" an option you purchased: No, you cannot \"\"cancel\"\" an option contract, per se. But, you are permitted to sell the call option to somebody else willing to buy, via the market. When you sell your call option, you'll either make or lose money on the sale – depending on the price of the underlying shares at the time (are they in- or out- of the money?), volatility in the market, and remaining time value. Once you sell, you're back to \"\"no position\"\". That's not the same as \"\"cancelled\"\", but you are out of the trade, whether at profit or loss. Furthermore, the option writer (i.e. the seller who \"\"sold to open\"\" a position, in writing the call in the first place) is also not permitted to cancel the option he wrote. However, the option writer is permitted to close out the original short position by simply buying back a matching call option on the market. Again, this would occur at either profit or loss based on market prices at the time. This second kind of buy order – i.e. made by someone who initially wrote a call option – is called a \"\"buy to close\"\", meaning the purchase of an offsetting position. (The other kind of buy is the \"\"buy to open\"\".) Then, consider: Since an option buyer is free to re-sell the option purchased, and since an option writer (who \"\"sold to open\"\" the new contract) is also free to buy back an offsetting option, a process known as clearing is required to match remaining buyers exercising the call options held with the remaining option writers having open short positions for the contract. For CBOE options, this clearing is performed by the Options Clearing Corporation. Here's how it works (see here): What is the OCC? The Options Clearing Corporation is the sole issuer of all securities options listed at the CBOE, four other U.S. stock exchanges and the National Association of Securities Dealers, Inc. (NASD), and is the entity through which all CBOE option transactions are ultimately cleared. As the issuer of all options, OCC essentially takes the opposite side of every option traded. Because OCC basically becomes the buyer for every seller and the seller for every buyer, it allows options traders to buy and sell in a secondary market without having to find the original opposite party. [...] [emphasis above is mine] When a call option writer must deliver shares to a call option buyer exercising a call, it's called assignment. (I have been assigned before, and it isn't pleasant to see a position called away that otherwise would have been very profitable if the call weren't written in the first place!) Also, re: \"\"I know my counter party cannot sell his shares\"\" ... that's not strictly true. You are thinking of a covered call. But, an option writer doesn't necessarily need to own the underlying shares. Look up Naked call (Wikipedia). Naked calls aren't frequently undertaken because a naked call \"\"is one of the riskiest options strategies because it carries unlimited risk\"\". The average individual trader isn't usually permitted by their broker to enter such an order, but there are market participants who can do such a trade. Finally, you can learn more about options at The Options Industry Council (OIC).\"",
"title": ""
},
{
"docid": "6840ddecbf02e8c564ec38036cce7563",
"text": "You can execute block trades on the options market and get exercised for shares to create a very large position in Energy Transfer Partners LP without moving the stock market. You can then place limit sell orders, after selling directly into the market and keep an overhang of low priced shares (the technical analysis traders won't know what you specifically are doing, and will call this 'resistance'). If you hit nice even numbers (multiples of 5, multiples of 10) with your sell orders, you can exacerbate selling as many market participants will have their own stop loss orders at those numbers, causing other people to sell at lower and lower prices automatically, and simultaneously keep your massive ask in effect. If your position is bigger than the demand then you can keep a stock lower. The secondary market doesn't inherently affect a company in any way. But many companies have borrowed against the price of their shares, and if you get the share price low enough they can get suddenly margin called and be unable to service their existing debt. You will also lose a lot of money doing this, so you can also buy puts along the way or attempt to execute a collar to lower your own losses. The collar strategy is nice because it is unlikely that other traders and analysts will notice what you are doing, since there are calls, puts and share orders involved in creating it. One person may notice the block trade for the calls initially, but nobody will notice it is part of a larger strategy with multiple legs. With the share position, you may also be able to vote on some things, but that solely depends on the conditions of the shares.",
"title": ""
},
{
"docid": "fcd9990896be0b5c627ec5da25a4af72",
"text": "I think George's answer explains fairly well why the brokerages don't allow this - it's not an exchange rule, it's just that the brokerage has to have the shares to lend, and normally those shares come from people's margin, which is impossible on a non-marginable stock. To address the question of what the alternatives are, on popular stocks like SIRI, a deep In-The-Money put is a fairly accurate emulation of an actual short interest. If you look at the options on SIRI you will see that a $3 (or higher) put has a delta of -$1, which is the same delta as an actual short share. You also don't have to worry about problems like margin calls when buying options. The only thing you have to worry about is the expiration date, which isn't generally a major issue if you're buying in-the-money options... unless you're very wrong about the direction of the stock, in which case you could lose everything, but that's always a risk with penny stocks no matter how you trade them. At least with a put option, the maximum amount you can lose is whatever you spent on the contract. With a short sale, a bull rush on the stock could potentially wipe out your entire margin. That's why, when betting on downward motion in a microcap or penny stock, I actually prefer to use options. Just be aware that option contracts can generally only move in increments of $0.05, and that your brokerage will probably impose a bid-ask spread of up to $0.10, so the share price has to move down at least 10 cents (or 10% on a roughly $1 stock like SIRI) for you to just break even; definitely don't attempt to use this as a day-trading tool and go for longer expirations if you can.",
"title": ""
},
{
"docid": "7b9eedb32654953aa200daa767763194",
"text": "A long put - you have a small initial cost (the option premium) but profit as the stock goes down. You have no additional risk if the shock rises, even a lot. Short a stock - you gain if the stock drops, but have unlimited risk if it rises, the call mitigates this, by capping that rising stock risk. The profit/loss graph looks similar to the long put when you hold both the short position and the long call. You might consider producing a graph or spreadsheet to compare positions. You can easily sketch put, call, long stock, short stock, and study how combinations of positions can synthetically look like other positions. Often, when a stock has no shares to short, the synthetic short can help you put your stock position in place.",
"title": ""
},
{
"docid": "c1bbfa7ea4432fb5415348ae089e5bd6",
"text": "Any portfolio, even one composed of risk-free assets is subject to risk. That said, to short an equity without margin risk, puts can provide. To replicate a short without excess margin, an at the money put should be used. To take on less leverage, a deep in the money put can be used. Puts are not available on equities deemed illiquid by regulation. A long/short portfolio can help mitigate variance risk, but then the problem becomes the risk of a lack of volatility since options decline in value over time and without a beneficial change in the underlying.",
"title": ""
},
{
"docid": "bc1d9c53e06aa2581dd26be0b3020fd1",
"text": "This depends on a combination of factors: What are you charged (call it margin interest) to hold the position? How does this reduce your buying power and what are the opportunity costs? What are the transaction costs alternative ways to close the position? What are your risks (exposure while legging out) for alternative ways to close? Finally, where is the asset closing relative to the strike? Generally, If asset price is below the put strike then the call expires worthless and you need to exercise the put. If asset is above the call strike then put expires worthless and you'll likely get assigned. Given this framework: If margin interest is eating up your profit faster than you're earning theta (a convenient way to represent the time value) then you have some urgency and you need to exit that position before expiry. I would not exit the stock until the call is covered. Keep minimal risk at all times. If you are limited by the position's impact on your buying power and probable value of available opportunities is greater than the time decay you're earning then once again, you have some urgency about closing instead of unwinding at expiry. Same as above. Cover that call, before you ditch your hedge in the long stock. Playing the tradeoff game of expiration/exercise cost against open market transactions is tough. You need sub-penny commissions on stock (and I would say a lot of leverage) and most importantly you need options charges much lower than IB to make that kind of trading work. IB is the cheapest in the retail brokerage game, but those commissions aren't even close to what the traders are getting who are more than likely on the other side of your options trades.",
"title": ""
},
{
"docid": "d1bb785e84fb3f4fac087330d824357d",
"text": "There are a number reasons to hedge a position. Here are some of the more common:",
"title": ""
},
{
"docid": "966466d52e4f69435e9bd353a0e53e7d",
"text": "You are long the puts. By exercising them you force the underlying stock to be bought from you at your strike price. Let's say your strike it $100 and the stock is currently $25. Buy 100 shares and exercise 1 (bought/long) put. That gives you $7500 of new money, so do the previous sentence over again in as many 'units' as you can.",
"title": ""
},
{
"docid": "2502f030fa961b4e3a9fc48d7cbecae3",
"text": "Sounds like an illiquid option, if there are actually some bidders, market makers, then sell the option at market price (market sell order). If there are not market makers then place a really low limit sell order so that you can sit at the ask in the order book. A lot of time there is off-book liquidity, so there may be a party looking for buy liquidity. You can also exercise the option to book the loss (immediately selling the shares when they get delivered to you), if this is an American style option. But if the option is worthless then it is probably significantly underwater, and you'd end up losing a lot more as you'd buy the stock at the strike price but only be able to sell at its current market value. The loss could also be increased further if there are even MORE liquidity issues in the stock.",
"title": ""
},
{
"docid": "1b0871b2fe01a0bb4d88877eabf6bcbf",
"text": "I guess the opposite of being hedged is being unhedged. Typically, a hedge is an additional position that you would take on in order to mitigate the potential for losses on another position. I'll give an example: Say that I purchase 100 shares of stock XYZ at $10 per share because I believe its price will increase in the future. At that point, my full investment of $1000 is at risk, so the position is not hedged. If the price of XYZ decreases to $8, then I've lost $200. If the price of XYZ increases to $12, then I've gained $200; the profit/loss curve has a linear relationship to the future stock price. Suppose that I decide to hedge my XYZ position by purchasing a put option. I purchase a single option contract (corresponding to my 100 shares) with a strike price of $10 and an expiration date in January 2013 for a price of $0.50/share. This means that until the contract expires, I can always sell my XYZ shares for a minimum of $10. Therefore, if the price of XYZ decreases to $8, then I've only lost $50 (the price of the option contract), compared to the $200 that I would have lost if the position was unhedged. Likewise, however, if the price increases to $12, then I've only gained a net total of $150 due to the money I spent on the hedge. (the details of how much money you would actually lose in the hedged scenario are simplified out above; even out-of-the-money options retain some value before expiration, but pricing of options is outside of the scope of this post) So, as a more pointed answer to your question, I would say that the hedged/unhedged status of a position can be characterized by its potential for loss. If you don't have any other assets that will increase in value to offset losses on your position of interest, I would call it unhedged.",
"title": ""
},
{
"docid": "6624eb2ad2488e72f86201f096a0e884",
"text": "You are probably right that using a traditional buy and hold strategy on common equities or funds is very unlikely to generate the types of returns that would make you a millionaire in short order. However, that doesn't mean it isn't possible. You just have to accept a more risk to become eligible for such incredible returns that you'd need to do that. And by more risk I mean a LOT more risk, which is more likely to put you in the poorhouse than a mansion. Mostly we are talking about highly speculative investments like commodities and real estate. However, if you are looking for potential to make (or more likely lose) huge amounts of money in the stock market without a very large cache of cash. Options give you much more leverage than just buying a stock outright. That is, by buying option contracts you can get a much larger return on a small movement in the stock price compared to what you would get for the same investment if you bought the stock directly. Of course, you take on additional risk. A normal long position on a stock is very unlikely to cause you to lose your entire investment, whereas if the stock doesn't move far enough and in the right direction, you will lose your entire investment in option contracts.",
"title": ""
},
{
"docid": "5255d150c1443af666c5c63f8400a873",
"text": "Long Straddle: \\\\/ Assuming you're trying to straddle the spot price, it will be more expensive to set up than a strangle as options strikes near the spot are more costly. Any price movement will regain against what was spent to acquire the options. Long Strangle: \\\\_/ Assuming you're trying to strangle the spot price, it will be less expensive to set up than a straddle as the options strikes are away from the spot. It will require a larger price movement than the straddle to begin to regain value against what you spent, as there is a dead zone between the strikes where both expire worthless. The / is the gain from a price movement up from the increase in value of calls; the \\\\ is the gain from a price movement down from the increase in value of puts.",
"title": ""
},
{
"docid": "74206a17e0eb05d721f1a05df3c2c69a",
"text": "I have held an in the money long position on an option into expiration, on etrade, and nothing happened. (Scalping expiring options - high risk) The option expired a penny or two ITM, and was not worth exercising, nor did I have the purchasing power to exercise it. (AAPL) From etrade's website: Here are a few things to keep in mind about exercises and assignments: Equity options $0.01 or more in the money will be automatically exercised for you unless you instruct us not to exercise them. For example, a September $25 call will be automatically exercised if the underlying security's closing price is $25.01 or higher at expiration. If the closing price is below $25.01, you would need to call an E*TRADE Securities broker at 1-800-ETRADE-1 with specific instructions for exercising the option. You would also need to call an E*TRADE Securities broker if the closing price is higher than $25.01 at expiration and you do not wish to exercise the call option. Index options $0.01 or more in the money will be automatically exercised for you unless you instruct us not to exercise them. Options that are out of the money will expire worthless. You may request to exercise American style options anytime prior to expiration. A request not to exercise options may be made only on the last trading day prior to expiration. If you'd like to exercise options or submit do-not-exercise instructions, call an E*TRADE Securities broker at 1-800-ETRADE-1. You won't be charged our normal fee for broker-assisted trades, but the regular options commission will apply. Requests are processed on a best-efforts basis. When equity options are exercised or assigned, you'll receive a Smart Alert message letting you know. You can also check View Orders to see which stock you bought or sold, the number of shares, and the strike price. Notes: If you do not have sufficient purchasing power in your account to accept the assignment or exercise, your expiring options positions may be closed, without notification, on the last trading day for the specific options series. Additionally, if your expiring position is not closed and you do not have sufficient purchasing power, E*TRADE Securities may submit do-not-exercise instructions without notification. Find out more about options expiration dates.",
"title": ""
}
] |
fiqa
|
7f46e6a9e0c493fc7b7dbba2c7698390
|
How do you get your Canadian stock information?
|
[
{
"docid": "1fe450796d9b1ff9b3f8b3ef7be554ee",
"text": "\"I only follow the news of stocks I already own. I use the GlobeInvest Watchlist http://www.theglobeandmail.com/globe-investor/my-watchlist/ each Friday night. In the drop-down views choose ALL NEWS I believe that there is a strong \"\"grass is greaner ..\"\" effect from always looking at what other stock are doing - leading to switching just before your first stock takes off. It is only when I sell some position that I go looking at other possibilities.\"",
"title": ""
}
] |
[
{
"docid": "ae55680dde8e88e3fe87424ee733de5e",
"text": "I personally spoke with a Questrade agent about my question. To make a long story short: in a margin account, you are automatically issued a loan when buying U.S. stock with a Canadian money. Whereas, in a registered account (e.g. RRSP), the amount is converted on your behalf to cover the debit balance. Me: What happens if I open an account and I place an order for U.S. stocks with Canadian money? Is the amount converted at the time of transfer? How does that work? Agent: In a margin account, you are automatically issued a loan for a currency you do not have, however, if you have enough buying power, it will go through. The interest on the overnight balance is calculated daily and is charged on a monthly basis. We do not convert funds automatically in a margin account because you can have a debit cash balance. Agent: In a registered account, the Canada Revenue Agency does not allow a debit balance and therefore, we must convert your funds on your behalf to cover the debit balance if possible. We convert automatically overnight for a registered account. Agent: For example, if you buy U.S. equity you will need USD to buy it, and if you only have CAD, we will loan you USD to cover for that transaction. For example, if you had only $100 CAD and then wanted to buy U.S. stock worth $100 USD, then we will loan you $100 USD to purchase the stock. In a margin account we will not convert the funds automatically. Therefore, you will remain to have a $100 CAD credit and a $100 USD debit balance (or a loan) in your account. Me: I see, it means the longer I keep the stock, the higher interest will be? Agent: Well, yes, however, in a registered account there will be not be any interest since we convert your funds, but in a margin account, there will be interest until the debit balance is covered, or you can manually convert your funds by contacting us.",
"title": ""
},
{
"docid": "34850d40bb716863aebc4ff88cffa577",
"text": "Flash Boys was kind of full of shit, though. And it was basically an ad for another guy trying to make it with his exchange. Canada is actually heating up from an algo/HFT perspective. Does that affect you at all? I'm seeing a lot more of this type of activity and the lack of dark pools creates for an interesting environment. I always look forward to RBC's coverage on the topic, given the general lack of info.",
"title": ""
},
{
"docid": "07e19c760a476464c617d8cdf8002f85",
"text": "At the time of writing, the Canadian dollar is worth roughly $0.75 U.S. Now, it's not possible for you to accurately predict what it'll be worth in, say, ten years. Maybe it'll be worth $0.50 U.S. Maybe $0.67. Maybe $1.00. Additionally, you can't know in advance if the Canadian economy will grow faster than the U.S., or slower, or by how much. Let's say you don't want to make a prediction. You just want to invest 50% of your money in Canadian stocks, 50% in U.S. Great. Do that, and don't worry about the current interest rates. Let's say that you do want to make a prediction. You are firmly of the belief that the Canadian dollar will be worth $1.00 U.S. dollar in approximately ten years. And furthermore, the Canadian economy and the U.S. economy will grow at roughly equal rates, in their local currencies. Great. You should put more of your money in Canadian stocks. Let's say that you want to make a prediction. The Canadian economy is tanking. It's going to be worth $0.67 or less in ten years. And on top of that, the U.S. economy is primed for growth. It's going to grow far faster than the Canadian economy. In that case, you want to invest mostly in U.S. stocks. Let's get more complicated. You think the Canadian dollar is going to recover, but boy, maple syrup futures are in trouble. The next decade is all about Micky Mouse. Now what should you do? Well, it depends on how fast the U.S. economy expands, compared to the currency difference. What should you do? I can't tell you that because I can't predict the future. What did I do? I bought 25% Canadian stocks, 25% U.S. stocks, 25% world stocks, and 25% Canadian bonds (roughly), back when the Canadian dollar was stronger. What am I doing now? Same thing. I don't know enough about the respective economies to judge. If I had a firm opinion, though, I'd certainly be happy to change my percentages a little. Not a lot, but a little.",
"title": ""
},
{
"docid": "9840638aad3cf96aee25bd53d600d8d4",
"text": "\"Shares do not themselves carry any identity. Official shareholders are kept at the registrar. In the UK, this may be kept up to date and publicly accessible. In the US, it is not, but this doesn't matter because most shares are held \"\"in street name\"\". For a fully detailed history, one would need access to all exchange records, brokerage records, and any trades transacted off exchange. These records are almost totally unavailable.\"",
"title": ""
},
{
"docid": "fb67ec3740545851f323621075d7a83c",
"text": "There are about 250 trading days in a year. There are also about 1,900 stocks listed on the NYSE. What you're asking for would require about 6.2M rows of data. Depending on the number of attributes you're likely looking at a couple GB of data. You're only getting that much information through an API or an FTP.",
"title": ""
},
{
"docid": "b1fb0823ce32c596a1f3590d7c2e7c0c",
"text": "For Canada No distinction is made in the regulation between “naked” or “covered” short sales. However, the practice of “naked” short selling, while not specifically enumerated or proscribed as such, may violate other provisions of securities legislation or self-regulatory organization rules where the transaction fails to settle. Specifically, section 126.1 of the Securities Act prohibits activities that result or contribute “to a misleading appearance of trading activity in, or an artificial price for, a security or derivative of a security” or that perpetrate a fraud on any person or company. Part 3 of National Instrument 23-101 Trading Rules contains similar prohibitions against manipulation and fraud, although a person or company that complies with similar requirements established by a recognized exchange, quotation and trade reporting system or regulation services provider is exempt from their application. Under section 127(1) of the Securities Act, the OSC also has a “public interest jurisdiction” to make a wide range of orders that, in its opinion, are in the public interest in light of the purposes of the Securities Act (notwithstanding that the subject activity is not specifically proscribed by legislation). The TSX Rule Book also imposes certain obligations on its “participating organizations” in connection with trades that fail to settle (see, for example, Rule 5-301 Buy-Ins). In other words, shares must be located by the broker before they can be sold short. A share may not be locatable because there are none available in the broker's inventory, that it cannot lend more than what it has on the books for trade. A share may not be available because the interest rate that brokers are charging to borrow the share is considered too high by that broker, usually if it doesn't pass on borrowing costs to the customer. There could be other reasons as well. If one broker doesn't have inventory, another might. I recommend checking in on IB's list. If they can't get it, my guess would be that no one can since IB passes on the cost to finance short sales.",
"title": ""
},
{
"docid": "8b0a6de7bf0ba2094d7070be5d056716",
"text": "\"What is a stock? A share of stock represents ownership of a portion of a corporation. In olden times, you would get a physical stock certificate (looking something like this) with your name and the number of shares on it. That certificate was the document demonstrating your ownership. Today, physical stock certificates are quite uncommon (to the point that a number of companies don't issue them anymore). While a one-share certificate can be a neat memento, certificates are a pain for investors, as they have to be stored safely and you'd have to go through a whole annoying process to redeem them when you wanted to sell your investment. Now, you'll usually hold stock through a brokerage account, and your holdings will just be records in a database somewhere. You'll pick a broker (more on that in the next question), instruct them to buy something, and they'll keep track of it in your account. Where do I get a stock? You'll generally choose a broker and open an account. You can read reviews to compare different brokerages in your country, as they'll have different fees and pricing. You can also make sure the brokerage firm you choose is in good standing with the financial regulators in your country, though one from a major national bank won't be unsafe. You will be required to provide personal information, as you are opening a financial account. The information should be similar to that required to open a bank account. You'll also need to get your money in and out of the account, so you'll likely set up a bank transfer. It may be possible to request a paper stock certificate, but don't be surprised if you're told this is unavailable. If you do get a paper certificate, you'll have to deal with considerably more hassle and delay if you want to sell later. Brokers charge a commission, which is a fee per trade. Let's say the commission is $10/trade. If you buy 5 shares of Google at $739/share, you'd pay $739 * 5 + $10 = $3705 and wind up with $3695 worth of stock in your account. You'd pay the same commission when you sell the stock. Can anyone buy/own/use a stock? Pretty much. A brokerage is going to require that you be a legal adult to maintain an account with them. There are generally ways in which a parent can open an account on behalf of an underage child though. There can be different types of restrictions when it comes to investing in companies that are not publicly held, but that's not something you need to worry about. Stocks available on the public stock market are available to, well, the public. How are stocks taxed? Taxes differ from country to country, but as a general rule, you do have to provide the tax authorities with sufficient information to determine what you owe. This means figuring out how much you purchased the stock for and comparing that with how much you sold it for to determine your gain or loss. In the US (and I suspect in many other countries), your brokerage will produce an annual report with at least some of this information and send it to the tax authorities and you. You or someone you hire to do your taxes will use that report to compute the amount of tax owed. Your brokerage will generally keep track of your \"\"cost basis\"\" (how much you bought it for) for you, though it's a good idea to keep records. If you refuse to tell the government your cost basis, they can always assume it's $0, and then you'll pay more tax than you owe. Finding the cost basis for old investments can be difficult many years later if the records are lost. If you can determine when the stock was purchased, even approximately, it's possible to look back at historical price data to determine the cost. If your stock pays a dividend (a certain amount of money per-share that a company may pay out of its profits to its investors), you'll generally need to pay tax on that income. In the US, the tax rate on dividends may be the same or less than the tax rate on normal wage income depending on how long you've held the investment and other rules.\"",
"title": ""
},
{
"docid": "c9be0cb23f9aeab59aeb64fa9d46670c",
"text": "\"To expand on the above, go to the \"\"Investor Relations\"\" part of the website if they're public, and take a look at how they explain themselves to their shareholders. You'll learn a lot very quickly about everything you'd need for the interview.\"",
"title": ""
},
{
"docid": "26ac04325e93adbb2693d5e71f5e6c09",
"text": "Log in to your Scottrade account, and goto Markets --> Analyst Views --> Click the PDF link for the company. Also, there is also the 'Views and News' part of the web page which has additional information beyond what exist in the reports.",
"title": ""
},
{
"docid": "21b890429ad52c9daf27275afc511a82",
"text": "I personally am from Canada and use my local bank to trade stocks. Contact your local bank and they will tell you how to do it, since rules depend on country of residency. If you are not close to a bank, e-mail the major bank in the country of your residence.",
"title": ""
},
{
"docid": "b891f946fa4bcd62c8d9379a78d169d9",
"text": "I agree that a random page on the internet is not always a good source, but at the same time I will use Google or Yahoo Finance to look up US/EU equities, even though those sites are not authoritative and offer zero guarantees as to the accuracy of their data. In the same vein you could try a website devoted to warrants in your market. For example, I Googled toronto stock exchange warrants and the very first link took me to a site with all the information you mentioned. The authoritative source for the information would be the listing exchange, but I've spent five minutes on the TSX website and couldn't find even a fraction of the information about that warrant that I found on the non-authoritative site.",
"title": ""
},
{
"docid": "37a1e67549592b0ff3bda0dcc97552a7",
"text": "I don't know answers that would be specific to Canada but one of the main ETF funds that tracks gold prices is GLD (SPDR Gold Trust) another is IAU (iShares Gold Trust). Also, there are several ETF's that combine different precious metals together and can be traded. You can find a fairly decent list here on the Stock Encylopedia site.",
"title": ""
},
{
"docid": "d9c4775c8e83b672909f450949e6dca2",
"text": "You might consider calling the broker you invest with. At mine, you can see the room left to contribute each year in the TFSA. The CRA might just have old/bad data.",
"title": ""
},
{
"docid": "7883e2d280b6f58e8966be6b1ae7cdc3",
"text": "No matter how a company releases relevant information about their business, SOMEBODY will be the first to see it. I mean, of all the people looking, someone has to be the first. I presume that professional stock brokers have their eyes on these things closely and know exactly who publishes where and when to expect new information. In real life, many brokers are going to be seeing this information within seconds of each other. I suppose if one sees it half a second before everybody else, knows what he's looking for and has already decided what he's going to do based on this information, he might get a buy or sell order in before anybody else. Odds are that if you're not a professional broker, you don't know when to expect new information to be posted, and you probably have a job or a family or like to eat and sleep now and then, so you can't be watching somebody's web site constantly, so you'll be lagging hours or days behind the full-time professionals.",
"title": ""
},
{
"docid": "4746c7f0338bf0b473f7030d7e6dc408",
"text": "You can obtain a stocklist if you file a lawsuit as a shareholder against the company demanding that you receive the list. It's called an inspection case. The company then has to go to Cede and/or the Depository Trust Company who then compiles the NOBO COBO list of beneficiary stockholders. SEC.gov gives you a very limited list of people who have had to file 13g or 13d or similar filings. These are large holders. To get the list of ALL stockholders you have to go through Cede.",
"title": ""
}
] |
fiqa
|
ba2e7e5bca3ce9d74976a410344b7c52
|
What are the pros and cons of investing in a closed-end fund?
|
[
{
"docid": "f66b45bbd4eac23510e19e9dbe422029",
"text": "Pro: - Faces less redemption pressure and hence the Fund Manager can focus more on long term gains rather than immediate gains. - Works well in emerging markets. - Less churn out in case the market falls sharply, there by making more money in long run. Cons: - No additional money to invest/take advantage of market situation. - Less liquid for investor as he is locked in for a period.",
"title": ""
},
{
"docid": "45821c46f5f9611ea6033aa53b284870",
"text": "\"The pros and cons of investing in a closed end fund both stem from the fact that the price per share is likely to differ from the net asset value (NAV) of the underlying assets. That could work to your advantage if the fund is selling for LESS than NAV, or at a discount. Then you get the \"\"benefit of the bargain\"\" and hope to sell the shares in the future for \"\"par\"\" or even a premium (MORE than NAV). On the other hand, if you buy such a fund at a premium, you stand to have a RELATIVE loss if the value of the fund goes back to par (or a discount) compared to NAV. That's because a closed end fund has a FIXED number of shares, with the assets continually being reinvested. In essence, you are \"\"buying out\"\" an existing shareholder of the fund at a price determined by supply and demand. This differs from an OPEN end fund, in which your contribution creates NEW shares (all other things being equal). Then the fund, has to invest YOUR money (and charges you a fee for the service) on exactly a pro rata basis with other investors in the fund, meaning that you will enter and exit such a fund at \"\"par.\"\" In either case, your return depends mainly on the performance of the underlying assets. But there are premium/discount issues for investing in a closed end fund.\"",
"title": ""
},
{
"docid": "daccd8ca0d17624588d8df91bea8c332",
"text": "One advantage not pointed out yet is that closed-end funds typically trade on stock exchanges, whereas mutual funds do not. This makes closed-end funds more accessible to some investors. I'm a Canadian, and this particular distinction matters to me. With my regular brokerage account, I can buy U.S. closed-end funds that trade on a stock exchange, but I cannot buy U.S. mutual funds, at least not without the added difficulty of somehow opening a brokerage account outside of my country.",
"title": ""
}
] |
[
{
"docid": "2617ec8c8bfb74e2a51084110c5c8bd6",
"text": "@JoeTaxpayer gave a great response to your first question. Here are some thoughts on the other two... 2) Transaction fees for mutual funds are tied to the class of shares you're buying and will be the same no matter where you buy them. A-shares have a front-end 'load' (the fee charged), and the lowest expenses, and can be liquidated without any fees. B-shares have no up-front load, but come with a 4-7 year period where they will charge you a fee to liquidate (technically called Contingent Deferred Sales Charge, CDSC), and slightly higher management fees, after which they often will convert to A-shares. C-shares have the highest management fees, and usually a 12- to 18-month period where they will charge a small percentage fee if you liquidate. There are lots of other share classes available, but they are tied to special accounts such as managed accounts and 401-K plans. Not all companies offer all share classes. C-shares are intended for shorter timeframes, eg 2-5 years. A and B shares work best for longer times. Use a B share if you're sure you won't need to take the money out until after the fee period ends. Most fund companies will allow you to exchange funds within the same fund family without charging the CDSC. EDIT: No-load funds don't charge a fee in or out (usually). They are a great option if they are available to you. Most self-service brokerages offer them. Few full-service brokerages offer them. The advantage of a brokerage versus personal accounts at each fund is the brokerage gives you a single view of things and a single statement, and buying and selling is easy and convenient. 3) High turnover rates in bond funds... depending on how actively the portfolio is managed, the fund company may deliver returns as a mix of both interest and capital gains, and the management expenses may be high with a lot of churn in the underlying portfolio. Bond values fall as interest rates rise, so (at least in the USA) be prepared to see the share values of the fund fall in the next few years. The biggest risk of a bond fund is that there is no maturity date, so there is no point in time that you have an assurance that your original investment will be returned to you.",
"title": ""
},
{
"docid": "546792aa87a8fc9803b6e52a578eb73c",
"text": "The main advantage of commodities to a largely stock and bond portfolio is diversification and the main disadvantages are investment complexity and low long-term returns. Let's start with the advantage. Major commodities indices and the single commodities tend to be uncorrelated to stocks and bonds and will in general be diversifying especially over short periods. This relationship can be complex though as Supply can be even more complicated (think weather) so diversification may or may not work in your favor over long periods. However, trading in commodities can be very complex and expensive. Futures need to be rolled forward to keep an investment going. You really, really don't want to accidentally take delivery of 40000 pounds of cattle. Also, you need to properly take into account roll premiums (carry) when choosing the closing date for a future. This can be made easier by using commodities index ETFs but they can also have issues with rolling and generally have higher fees than stock index ETFs. Most importantly, it is worth understanding that the long-term return from commodities should be by definition (roughly) the inflation rate. With stocks and bonds you expect to make more than inflation over the long term. This is why many large institutions talk about commodities in their portfolio they often actually mean either short term tactical/algorithmic trading or long term investments in stocks closely tied to commodities production or processing. The two disadvantages above are why commodities are not recommended for most individual investors.",
"title": ""
},
{
"docid": "afb2b27ef5043f88ddb4453d7898f1c5",
"text": "\"If you're talking about a single stock, you greatly underestimate the chances of it dropping, even long-term. Check out the 12 companies that made up the first Dow Jones Industrial Average in 1896. There is probably only one you've heard of: GE. Many of the others are long gone or have since been bought up by larger companies. And remember these were 12 companies that were deemed to be the most representative of the stock market around the turn of the 20th century. Now, if you're talking about funds that hold many stocks (up to thousands), then your question is a little different. Over the long-term (25+ years), we have never experienced a period where the overall market lost value. Of course, as you recognize, the psychology of investors is a very important factor. If the stock market loses half of its value in a year (as it has done a few times), people will be inundated with bad news and proclamations of \"\"this time it's different!\"\" and explanations of why the stock market will never recover. Perhaps this may be true some day, but it never has been thus far. So based on all the evidence we have, if you hold a well-diversified fund, the chances of it going down long-term (again, meaning 25+ years) are basically zero.\"",
"title": ""
},
{
"docid": "e4e31795af415c177c865881565520b2",
"text": "(After seeing your most recent comment on the original question, it looks like others have answered the question you intended, and described the extreme difficulty of getting the timing right the way you're trying to. Since I've already typed it up, what follows answers what I originally thought your question was, which was asking if there were drawbacks to investing entirely in money market funds to avoid stock volatility altogether.) Money market funds have the significant drawback that they offer low returns. One of the fundamental principles in finance is that there is a trade-off between low risk and high returns. While money market funds are extremely stable, their returns are paltry; under current market conditions, you can consider them roughly equivalent to cash. On the other hand, though investing in stocks puts your money on a roller coaster, returns will be, on average, substantially higher. Since people often invest in order to achieve personal financial stability, many feel naturally attracted to very stable investments like money market funds. However, this tendency can be a big mistake. The higher returns of the stock market don't merely serve to stoke an investor's greed, they are necessary for achieving most people's financial goals. For example, consider two hypothetical investors, saving for retirement over the course of a 40-year career. The first investor, apprehensive Adam, invests $10k per year in a money market fund. The second investor, brave Barbara, invests $10k per year in an S&P 500 index fund (reinvesting dividends). Let's be generous and say that Adam's money market fund keeps pace with inflation (in reality, they typically don't even do that). At the end of 40 years, in today's money, Adam will have $10,000*40 = $400,000, not nearly enough to retire comfortably on. On the other hand, let's assume that Barbara gets returns of 7% per year after inflation, which is typical (though not guaranteed). Barbara will then have, using the formula for the future value of an annuity, $10,000 * [(1.07)^40 - 1] / 0.07, or about $2,000,000, which is much more comfortable. While Adam's strategy produces nearly guaranteed results, those results are actually guaranteed failure. Barbara's strategy is not a guarantee, but it has a good chance of producing a comfortable retirement. Even if her timing isn't great, over these time scales, the chances that she will have more money than Adam in the end are very high. (I won't produce a technical analysis of this claim, as it's a bit complicated. Do more research if you're interested.)",
"title": ""
},
{
"docid": "9ba51d2d9ec2c4cf2b1e53d4321ceaf5",
"text": "\"Funds - especially index funds - are a safe way for beginning investors to get a diversified investment across a lot of the stock market. They are not the perfect investment, but they are better than the majority of mutual funds, and you do not spend a lot of money in fees. Compared to the alternative - buying individual stocks based on what a friend tells you or buying a \"\"hot\"\" mutual fund - it's a great choice for a lot of people. If you are willing to do some study, you can do better - quite a bit better - with common stocks. As an individual investor, you have some structural advantages; you can take significant (to you) positions in small-cap companies, while this is not practical for large institutional investors or mutual fund managers. However, you can also lose a lot of money quickly in individual stocks. It pays to go slow and to your homework, however, and make sure that you are investing, not speculating. I like fool.com as a good place to start, and subscribe to a couple of their newsletters. I will note that investing is not for the faint of heart; to do well, you may need to do the opposite of what everybody else is doing; buying when the market is down and selling when the market is high. A few people mentioned the efficient market hypothesis. There is ample evidence that the market is not efficient; the existence of the .com and mortgage bubbles makes it pretty obvious that the market is often not rationally valued, and a couple of hedge funds profited in the billions from this.\"",
"title": ""
},
{
"docid": "6fe0703305a3f003fdb6704d235718cf",
"text": "\"First, congratulations on choosing to invest in low cost passively managed plans. If you choose any one of these options and stick with it, you will already be well ahead of most individual investors. Almost all plans will allow you to re-balance between asset classes. With some companies, sales agents will encourage you to sell your overweighted assets and buy underweighted assets as this generates brokerage commissions for them, but when you only need to make minor adjustments, you can simply change the allocation of the new money going into your account until you are back to your target weights. Most plans will let you do this for free, and in general, you will only need to do this every few years at most. I don't see much reason for you to be in the Target funds. The main feature of these plans is that they gradually shift you to a more conservative asset allocation over time, and are designed to prevent people who are close to retirement from being too aggressive and risking a major loss just before retirement. It's very likely that at your age, most plans will have very similar recommendations for your allocation, with equities at 80% or more, and this is unlikely to change for the next few decades. The main benefits of betterment seems to be simplicity and ease of use, but there is one concern I would have for you with betterment. Precisely because it is so easy to tweak your allocation, I'm concerned that you might hurt your long-term results by reacting to short-term market conditions: I know I said I wanted a hands off account, but what if the stock market crashes and I want to allocate more to bonds??? One of the biggest reasons that stock returns are better than bond returns on average is that you are being paid to accept additional risk, and living with significant ups and downs is part of what it means to be in the stock market. If you are tempted to take money out of an asset class when it has been \"\"losing/feels dangerous\"\" and put more in when it is \"\"winning/feels safe\"\", my concerns is that you will end up buying high and selling low. I'd recommend taking a look at this article on the emotional cycle of investing. My point is simply that it's very likely that if you are moving money in and out of stocks based on volatility, you're much less likely to get the full market return over the long term, and might be better off putting more weight in asset classes with lower volatility. Either way, I'd recommend taking one or more risk tolerance assessments online and making sure you're committed to sticking with a long-term plan that doesn't involve more risk than you can really live with. I tend to lean toward Vanguard Life Strategy simply because Vanguard as a company has been around longer, but betterment does seem very accessible to a new investor. Best of luck with your decision!\"",
"title": ""
},
{
"docid": "07f7202017432ca3558e5ec9494595bc",
"text": "Current evidence is that, after you subtract their commission and the additional trading costs, actively managed funds average no better than index funds, maybe not as well. You can afford to take more risks at your age, assuming that it will be a long time before you need these funds -- but I would suggest that means putting a high percentage of your investments in small-cap and large-cap stock indexes. I'd suggest 10% in bonds, maybe more, just because maintaining that balance automatically encourages buy-low-sell-high as the market cycles. As you get older and closer to needing a large chunk of the money (for a house, or after retirement), you would move progressively more of that to other categories such as bonds to help safeguard your earnings. Some folks will say this an overly conservative approach. On the other hand, it requires almost zero effort and has netted me an average 10% return (or so claims Quicken) over the past two decades, and that average includes the dot-bomb and the great recession. Past results are not a guarantee of future performance, of course, but the point is that it can work quite well enough.",
"title": ""
},
{
"docid": "2c44d62e3ce8df5859c2428ecb00f5a3",
"text": "Note that many funds just track indexes. In that case, you essentially don't have to worry about the fund manager making bad decisions. In general, the statistics are very clear that you want to avoid any actively managed fund. There are many funds that are good all-in-one investments. If you are in Canada, for example, Canadian Couch Potato recommends the Tangerine Investment Funds. The fees are a little high, but if you don't have a huge investment, one of these funds would be a good choice and appropriate for 100% of your investment. If you have a larger investment, to the point that Tangerine's MER scares you a little, you still may well look at a three or four fund (or ETF) portfolio. You may choose to use an actively-managed fund even though you know there's virtually no chance it'll beat a fund that just tracks an index, long-term. In that case, I'd recommend devoting only a small portion of your portfolio to this fund. Many people suggest speculating with no more than 10% of your combined investment. Note that other people are more positive on actively-managed funds.",
"title": ""
},
{
"docid": "0293c56e8290ecce3606fdb9ca285fe9",
"text": "http://www.efficientfrontier.com/ef/104/stupid.htm would have some data though a bit old about open-end funds vs an ETF that would be one point. Secondly, do you know that the Math on your ETF will always work out to whole numbers of shares or do you plan on using brokers that would allow fractional shares easily? This is a factor as $3,000 of an open-end fund will automatically go into fractional shares that isn't necessarily the case of an ETF where you have to specify a number of shares when you purchase as well as consider are you doing a market or limit order? These are a couple of things to keep in mind here. Lastly, what if the broker you use charges account maintenance fees for your account? In buying the mutual fund from the fund company directly, there may be a lower likelihood of having such fees. I don't know of any way to buy shares in the ETF directly without using a broker.",
"title": ""
},
{
"docid": "0d849e6342a1478e971674313bc8184a",
"text": "\"TBF - Proshares short 20+ Year Treasury The TBF fund is designed to track (hopefully) 100 percent of the inverse daily returns of the Barclays Capital 20+ Year U.S. Treasury Index. there's some risk of tracking error, and also a compounding effect if it's down several days in a row. (invest with care) There's also a TBT fund, but the risks are even greater since it is leveraged, potentially you could make the right long term call, but lose a lot in the short term due to tracking error and effect of compounding) (that would tend to make this one more appropriate for short term 'bets' on interest rates, and less so for a long term investor) There are also quite a few floating rate closed-end funds (Click here, then click on \"\"loan participation funds\"\") that should do well in a rising rate environment. Just beware that these funds seem to incorporate a substantial amount of credit risk as well as floating interest rate exposure. Closed end funds trade a lot like securities, since the fund is closed, you have to buy shares from another owner that is selling (just like with stocks), that means the shares can sometimes trade above or below the underlying value of the actual assets held by the fund depending on buying/selling pressure and the relative liquidity of a given fund.\"",
"title": ""
},
{
"docid": "17d8c9ce8333dce95012229164d8535b",
"text": "This is probably the best, most concise and yet detailed answer to this oft-posed question I've seen on this sub. Have an upvote. Only thing I'd add is that HFs' comparatively more active approach creates a moat vs. mutual funds, which are seen as more long-term, passive investments. This means they can charge fees and have higher expense ratios (though obviously anyone in finance who has been conscious in the last five years knows that this is changing)",
"title": ""
},
{
"docid": "8b4d4b2faa01a03c992d0834a7b6d2f1",
"text": "Stock index funds are likely, but not certainly, to be a good long-term investment. In countries other than the USA, there have been 30+ year periods where stocks either underperformed compared to bonds, or even lost value in absolute terms. This suggests that it may be an overgeneralization to assume that they always do well in the long term. Furthermore, it may suggest that they are persistently overvalued for the risk, and perhaps due for a long-term correction. (If everybody assumes they're safe, the equity risk premium is likely to be eaten up.) Putting all of your money into them would, for most people, be taking an unnecessary risk. You should cover some other asset classes too. If stocks do very well, a portfolio with some allocation to more stable assets will still do fairly well. If they crash, a portfolio with less risky assets will have a better chance of being at least adequate.",
"title": ""
},
{
"docid": "1499fff1bb487b3e47ef0a42749a9ee4",
"text": "\"My original plan was to wait for the next economic downturn and invest in index funds. These funds have historically yielded 6-7% annually when entered at any given time, but maybe around 8-9% annually when entered during a recession. These numbers have been adjusted for inflation. Questions or comments on this strategy? Educate yourself as index funds are merely a strategy that could be applied to various asset classes such as US Large-cap value stocks, Emerging Market stocks, Real Estate Investment Trusts, US Health Care stocks, Short-term bonds, and many other possibilities. Could you be more specific about which funds you meant as there is some great work by Fama and French on the returns of various asset classes over time. What about a Roth IRA? Mutual fund? Roth IRA is a type of account and not an investment in itself, so while I think it is a good idea to have Roth IRA, I would highly advise researching the ins and outs of this before assuming you can invest in one. You do realize that index funds are just a special type of mutual fund, right? It is also worth noting that there are a few kinds of mutual funds: Open-end, exchange-traded and closed-end. Which kind did you mean? What should I do with my money until the market hits another recession? Economies have recessions, markets have ups and downs. I'd highly consider forming a real strategy rather than think, \"\"Oh let's toss it into an index fund until I need the money,\"\" as that seems like a recipe for disaster. Figure out what long-term financial goals do you have in mind, how OK are you with risk as if the market goes down for more than a few years straight, are you OK with seeing those savings be cut in half or worse?\"",
"title": ""
},
{
"docid": "e1b1556891c640ff506cac3ad191e843",
"text": "Investopedia has a nice article on this here The Key benefit looks like better returns with lower capital. The disadvantage is few brokers offering that can be trusted. Potentially lower return due to margins / spreads. Higher leverage and can become an issue.",
"title": ""
},
{
"docid": "9a56cf08aa0055bd8866c3a1cc7284ba",
"text": "Our company does a lot of research on the self-directed IRA industry. We also provide financial advice in this area. In short, we have seen a lot in this industry. You mentioned custodian fees. This can be a sore spot for many investors. However, not all custodians are expensive, you should do your research before choosing the best one. Here is a list of custodians to help with your research Here are some of the more common pros and cons that we see. Pros: 1) You can invest in virtually anything that is considered an investment. This is great if your expertise is in an area that cannot be easily invested in with traditional securities, such as horses, private company stock, tax liens and more. 2) Control- you have greater control over your investments. If you invest in GE, it is likely that you will not have much say in the running of their business. However, if you invest in a rental property, you will have a lot of control over how the investment should operate. 3) Invest in what you know. Peter lynch was fond of saying this phrase. Not everyone wants to invest in the stock market. Many people won't touch it because they are not familiar with it. Self-directed IRAs allow you to invest in assets like real estate that you know well. Cons: 1) many alternative investments are illiquid. This can present a problem if you need to access your capital for withdrawals. 2) Prohibited transactions- This is a new area for many investors who are unfamiliar with how self-directed IRAs work 3) Higher fees- in many cases, the fees associated with self-directed IRA custodians and administrators can be higher. 4) questionable investment sponsors tend to target self-directed IRA owners for fraudulent investments. The SEC put out a good PDF about the risks of fraud with self-directed IRAs. Self Directed IRAs are not the right solution for everyone, but they can help certain investors focus on the areas they know well.",
"title": ""
}
] |
fiqa
|
067a05824d1863eb9e99d242d9a7e35e
|
Questrade - What happens if I buy U.S. stock with Canadian money?
|
[
{
"docid": "ae55680dde8e88e3fe87424ee733de5e",
"text": "I personally spoke with a Questrade agent about my question. To make a long story short: in a margin account, you are automatically issued a loan when buying U.S. stock with a Canadian money. Whereas, in a registered account (e.g. RRSP), the amount is converted on your behalf to cover the debit balance. Me: What happens if I open an account and I place an order for U.S. stocks with Canadian money? Is the amount converted at the time of transfer? How does that work? Agent: In a margin account, you are automatically issued a loan for a currency you do not have, however, if you have enough buying power, it will go through. The interest on the overnight balance is calculated daily and is charged on a monthly basis. We do not convert funds automatically in a margin account because you can have a debit cash balance. Agent: In a registered account, the Canada Revenue Agency does not allow a debit balance and therefore, we must convert your funds on your behalf to cover the debit balance if possible. We convert automatically overnight for a registered account. Agent: For example, if you buy U.S. equity you will need USD to buy it, and if you only have CAD, we will loan you USD to cover for that transaction. For example, if you had only $100 CAD and then wanted to buy U.S. stock worth $100 USD, then we will loan you $100 USD to purchase the stock. In a margin account we will not convert the funds automatically. Therefore, you will remain to have a $100 CAD credit and a $100 USD debit balance (or a loan) in your account. Me: I see, it means the longer I keep the stock, the higher interest will be? Agent: Well, yes, however, in a registered account there will be not be any interest since we convert your funds, but in a margin account, there will be interest until the debit balance is covered, or you can manually convert your funds by contacting us.",
"title": ""
},
{
"docid": "8ed8bf7342dacdca59824555d53f7ff7",
"text": "The reason it's not automatic is that Questrade doesn't want to force you to convert in margin accounts at the time of buying the stock. What if you bought a US stock today and the exchange rate happened to be very unfavorable (due to whatever), wouldn't you rather wait a few days to exchange the funds rather than lose on conversion right away? In my opinion, Questrade is doing you a favor by letting you convert at your own convenience.",
"title": ""
},
{
"docid": "aa718696681523ba8b60263c70784ca7",
"text": "I don't believe from reading the responses above that Questrade is doing anything 'original' or 'different' much less 'bad'. In RRSPs you are not allowed to go into debt. So the costs of all trades must be covered. If there is not enough USD to pay the bill then enough CAD is converted to do so. What else would anyone expect? How margin accounts work depends on whether the broker sets up different accounts for different currencies. Some do, some don't. The whole point of using 'margin' is to buy securities when you don't have the cash to cover the cost. The result is a 'short' position in the cash. Short positions accrue interest expense which is added to the balance once a month. Every broker does this. If you buy a US stock in a USD account without the cash to cover it, you will end up with USD margin debt. If you buy US stock in an account that co-mingles both USD and CAD assets and cash, then there will be options during the trade asking if you want to settle in USD or CAD. If you settle in CAD then obviously the broker will convert the necessary CAD funds to pay for it. If you settle in US funds, but there is no USD cash in the account, then again, you have created a short position in USD.",
"title": ""
}
] |
[
{
"docid": "e02071ab89a6dee5f340df41096bdd12",
"text": "Say a stock is listed in Nasdaq, and the same company has a stock listed in Tsx. Does the Nasdaq price affect the Tsx price as trading commences? Not directly. Basically, an exchange is a market, and the price is defined only by supply and demand in that market. However, any substantial price differential for a commodity traded in multiple market creates an arbitrage opportunity, and there are many traders whose job it is exactly to find and use such opportunities. Their activity in turn has the effect of reducing the price differentials to the point where transaction costs make them unprofitable. With high-frequency traders around, the time for a price differential to disappear is nowadays measured in milliseconds. If a trader buys from one exchange, will it affect the price of the other? Only through the mechanism mentioned above. Are there any benefits to being listed in two exchanges? It increases the liquidity of a stock.",
"title": ""
},
{
"docid": "c12bc3175fa0e13e7583371e1891a8ba",
"text": "In theory, when you obtained ownership of your USD cash as a Canadian resident [*resident for tax purposes, which is generally a quicker timeline than being resident for immigration purposes], it is considered to have been obtained by you for the CAD equivalent on that date. For example if you immigrated on Dec 31, 2016 and carried $10k USD with you, when the rate was ~1.35, then Canada deems you to have arrived with $13.5k CAD. If you converted that CAD to USD when the rate was 1.39, you would have received 13.9k CAD, [a gain of $400 to show as income on your tax return]. Receiving the foreign inheritances is a little more complex; those items when received may or may not have been taxable on that day. However whether or not they were taxable, you would calculate a further gain as above, if the fx rate gave you more CAD when you ultimately converted it. If the rate went the other way and you lost CAD-value, you may or may not be able to claim a loss. If it was a small loss, I wouldn't bother trying to claim it due to hassle. If it's a large loss, I would be very sure to research thoroughly before claiming, because something like that probably has a high chance of being audited.",
"title": ""
},
{
"docid": "45c359c54214ce7498cdb47c65729dbc",
"text": "I have had accounts at both IB and Questrade. Whatever you've heard about Questrade, sadly much of it is true pertaining to 2007-2009. I have not had any issues with their service, and making the few trades I do with the QuestraderWEB service has been flawless. In the time that I've had the account, their service has constantly been improving (statements are easier to read, customer service is more responsive). You should read what FrugalTrader and Canadian Capitalist have to say along with the combined 1000+ comments before deciding. Interactive Brokers is a whole different world. Those guys are the definition of real-time. You can get daily and weekly statements, along with the typical monthly statements. Buying power, margin, etc, is all updated in real-time and viewable in their TWS software. Trading fees are definitely lower than Questrade unless you're routinely trading 800-1000+ shares. Most of my trades cost $1. Options have a lower limit before Questrade makes more sense. And nothing beats IB for forex. Ultimately it really depends on what you will be doing. Note that IB charges a minimum monthly fee of $10 ($3 if you're young and foolish). If you don't hit that with commissions, the balance is taken from your account. Also, all other fees are passed on to you (e.g. data, order cancellation). IB also doesn't have any registered accounts such as TFSA or RRSP, and doesn't plan to. If you'll be doing a bunch of hefty trading, IB offers a trading platform free of charge, but charges for everything else. Questrade instead has a monthly fee for its QuestraderPRO and QuestraderELITE services, but that includes data and flat rate commissions. If you're just looking for a place to invest cheaply without extra fees and plan on making a few trades a year, Questrade might be the right choice.",
"title": ""
},
{
"docid": "c105271ea44023f16edadc12797a3405",
"text": "The stockholders of company A vote to approve or disapprove the buy out. That is the only control you have on the price: Vote to approve or disapprove. If the deal is approved then you get the money, or stock in B, or both, in accordance with the terms of the deal. It will arrive into your account automatically.",
"title": ""
},
{
"docid": "fe88f147ee1185df8e18652d0ffef41a",
"text": "You'll have to take cash from your Credit Card account and use that to trade. I doubt any brokerage house will take credit cards as it's trading without any collateral (since credit cards are an unsecured credit)",
"title": ""
},
{
"docid": "55a87eedad4ce03ccbaaf80c43cd3869",
"text": "Yes, you still need to pay income tax on your capital gain regardless of whether you converted your USD proceeds back into CAD. When you calculate your gains for tax purposes, you'll need to convert all of your gains to Canadian dollars. Generally speaking, CRA will expect you to use a historical USD to CAD exchange rate published by the Bank of Canada. At that page, notice the remark at right: Are the Exchange Rates Shown Here Accepted by Canada Revenue Agency? Yes. The Agency accepts Bank of Canada exchange rates as the basis for calculations involving income and expenses that are denominated in foreign currencies.",
"title": ""
},
{
"docid": "e92a5e3cfe7db5a782b9931710ff389d",
"text": "\"You might find some of the answers here helpful; the question is different, but has some similar concerns, such as a changing economic environment. What approach should I take to best protect my wealth against currency devaluation & poor growth prospects. I want to avoid selling off any more of my local index funds in a panic as I want to hold long term. Does my portfolio balance make sense? Good question; I can't even get US banks to answer questions like this, such as \"\"What happens if they try to nationalize all bank accounts like in the Soviet Union?\"\" Response: it'll never happen. The question was what if! I think that your portfolio carries a lot of risk, but also offsets what you're worried about. Outside of government confiscation of foreign accounts (if your foreign investments are held through a local brokerage), you should be good. What to do about government confiscation? Even the US government (in 1933) confiscated physical gold (and they made it illegal to own) - so even physical resources can be confiscated during hard times. Quite a large portion of my foreign investments have been bought at an expensive time when our currency is already around historic lows, which does concern me in the event that it strengthens in future. What strategy should I take in the future if/when my local currency starts the strengthen...do I hold my foreign investments through it and just trust in cost averaging long term, or try sell them off to avoid the devaluation? Are these foreign investments a hedge? If so, then you shouldn't worry if your currency does strengthen; they serve the purpose of hedging the local environment. If these investments are not a hedge, then timing will matter and you'll want to sell and buy your currency before it does strengthen. The risk on this latter point is that your timing will be wrong.\"",
"title": ""
},
{
"docid": "76def0924a473ee8754ddbcfa1ab06b3",
"text": "If possible, I would open a Canadian bank account with a bank such as TD Canada Trust. You can then have your payments wired into that account without incurring costs on receipt. They also allow access to their US ATM network via TD Bank without additional costs. So you could use the American Affiliate to pull the funds out via a US teller while only bearing the cost of currency conversion. If that option can't work then the best route would be to choose a US bank account that doesn't charge for incoming wire transfers and request that the money be wired to your account (you'll still get charged the conversion rate when the wire is in CAD and the account is in USD).",
"title": ""
},
{
"docid": "9e424bb3b0e7f90e3c589ee4b3890f1e",
"text": "\"When you hold units of the DLR/DLR.U (TSX) ETF, you are indirectly holding U.S. dollars cash or cash equivalents. The ETF can be thought of as a container. The container gives you the convenience of holding USD in, say, CAD-denominated accounts that don't normally provide for USD cash balances. The ETF price ($12.33 and $12.12, in your example) simply reflects the CAD price of those USD, and the change is because the currencies moved with respect to each other. And so, necessarily, given how the ETF is made up, when the value of the U.S. dollar declines vs. the Canadian dollar, it follows that the value of your units of DLR declines as quoted in Canadian dollar terms. Currencies move all the time. Similarly, if you held the same amount of value in U.S. dollars, directly, instead of using the ETF, you would still experience a loss when quoted in Canadian dollar terms. In other words, whether or not your U.S. dollars are tied up either in DLR/DLR.U or else sitting in a U.S. dollar cash balance in your brokerage account, there's not much of a difference: You \"\"lose\"\" Canadian dollar equivalent when the value of USD declines with respect to CAD. Selling, more quickly, your DLR.U units in a USD-denominated account to yield U.S. dollars that you then directly hold does not insulate you from the same currency risk. What it does is reduce your exposure to other cost/risk factors inherent with ETFs: liquidity, spreads, and fees. However, I doubt that any of those played a significant part in the change of value from $12.33 to $12.12 that you described.\"",
"title": ""
},
{
"docid": "2ebc7fc2fe6982e3c3c583336b0bc7fb",
"text": "There's a possibility to lose money in exchange rate shifts, but just as much chance to gain money (Efficient Market Hypothesis and all that). If you're worried about it, you should buy a stock in Canada and short sell the US version at the same time. Then journal the Canadian stock over to the US stock exchange and use it to settle your short sell. Or you can use derivatives to accomplish the same thing.",
"title": ""
},
{
"docid": "661faa4d48f96d63ec1a4467fefc9842",
"text": "The catch is that you're doing a form of leveraged investing. In other words, you're gambling on the stock market using money that you've borrowed. While it's not as dangerous as say, getting money from a loan shark to play blackjack in Vegas, there is always the chance that markets can collapse and your investment's value will drop rapidly. The amount of risk really depends on what specific investments you choose and how diversified they are - if you buy only Canadian stocks then you're at risk of losing a lot if something happened to our economy. But if your Canadian equities only amount to 3.6% of your total (which is Canada's share of the world market), and you're holding stocks in many different countries then the diversification will reduce your overall risk. The reason I mention that is because many people using the Smith Maneuver are only buying Canadian high-yield dividend stocks, so that they can use the dividends to accelerate the Smith Maneuver process (use the dividends to pay down the mortgage, then borrow more and invest it). They prefer Canadian equities because of preferential tax treatment of the dividend income (in non-registered accounts). But if something happened to those Canadian companies, they stand to lose much of the investment value and suddenly they have the extra debt (the amount borrowed from a HELOC, or from a re-advanceable mortgage) without enough value in the investments to offset it. This could mean that they will not be able to pay off the mortgage by the time they retire!",
"title": ""
},
{
"docid": "a2835b6174f6b3e73ae2a2cdda2658eb",
"text": "Quite a few stock broker in India offer to trade in US markets via tie-up brokers in US. As an Indian citizen, there are limits as to how much FX you can buy, generally very large, should be an issue. The profits will be taxed in US as well as India [you can claim relief under DTAA]",
"title": ""
},
{
"docid": "26e287a091fd702c5e5f6a22d8b26381",
"text": "If you want to convert more than a few thousand dollars, one somewhat complex method is to have two investment accounts at a discount broker that operations both in Canada and the USA, then buy securities for USD on a US exchange, have your broker move them to the Canadian account, then sell them on a Canadian exchange for CAD. This will, of course, incur trading fees, but they should be lower than most currency conversion fees if you convert more than a few thousand dollars, because trading fees typically have a very small percentage component. Using a currency ETF as the security to buy/sell can eliminate the market risk. In any case, it may take up to a week for the trades and transfer to settle.",
"title": ""
},
{
"docid": "1bb0e529a8f9a98d69d5d1581916f030",
"text": "Investors who are themselves Canadian and already hold Canadian dollars (CAD) would be more likely to purchase the TSX-listed shares that are quoted in CAD, thus avoiding the currency exchange fees that would be required to buy USD-quoted shares listed on the NYSE. Assuming Shopify is only offering a single class of shares to the public in the IPO (and Shopify's form F-1 only mentions Class A subordinate voting shares as being offered) then the shares that will trade on the TSX and NYSE will be the same class, i.e. identical. Consequently, the primary difference will be the currency in which they are quoted and trade. This adds another dimension to possible arbitrage, where not only the bare price could deviate between exchanges, but also due to currency fluctuation. An additional implication for a company to maintain such a dual listing is that they'll need to adhere to the requirements of both the TSX and NYSE. While this may have a hard cost in terms of additional filing requirements etc., in theory they will benefit from the additional liquidity provided by having the multiple listings. Canadians, in particular, are more likely to invest in a Canadian company when it has a TSX listing quoted in CAD. Also, for a company listed on both the TSX and NYSE, I would expect the TSX listing would be more likely to yield inclusion in a significant market index—say, one based on market capitalization, and thus benefit the company by having its shares purchased by index ETFs and index mutual funds that track the index. I'll also remark that this dual U.S./Canadian exchange listing is not uncommon when it comes to Canadian companies that have significant business outside of Canada.",
"title": ""
},
{
"docid": "0cbd3fa0278d381e5d7433908775a40a",
"text": "Your question is unanswerable as you haven't provided enough information. I.e. If those shares cost $1000 and you have $50000 ( or any number above $1000) of cash available in the account then you can't possibly free ride. I think your understanding of the free ride rule is incorrect. Basically what this rule is stating is that you have to have the cash when the trade is placed in order to settle the trade. Otherwise you are taking on margin (which you can't do in a cash account). So at order entry you have to have the cash to cover the purchase so it's able to be settled. If you do, no problem and you can sell that stock before trade settlement. There is no law that says you have to hold it past trade settlement. However, you cannot spend the same dollar more than once before it settles. This site does a good job explaining this more throughly with examples: http://www.invest-faq.com/articles/trade-day-free-ride.html",
"title": ""
}
] |
fiqa
|
c8b9f8ad3ee7a29d7643e1d1dd338cc3
|
How much percent of my salary should I use to invest in company stock?
|
[
{
"docid": "1b95dc966e98ff7d01f8d66c5876f50b",
"text": "You're talking about ESPP? For ESPP it makes sense to utilize the most the company allows, i.e.: in your case - 15% of the paycheck (if you can afford deferring that much, I assume you can). When the stocks are purchased, I would sell them immediately, not hold. This way you have ~10% premium as your income (pretty much guaranteed, unless the stock falls significantly on the very same day), and almost no exposure. This sums up to be a nice 1.5% yearly guaranteed bonus, on top of any other compensation. As to keeping the stocks, this depends on how much you believe in your company and expect the stocks to appreciate. Being employed and dependent on the company with your salary, I'd avoid investing in your company, as you're invested in it deeply as it is.",
"title": ""
},
{
"docid": "0019555ef274c2e193d32f3d80809eb6",
"text": "I would not hold any company stock for the company that provides your income. This is a too many eggs in one basket kind of problem. With a discounted stock purchase plan, I would buy the shares at a 10% discount and immediately resell for a profit. If the company prevents you from immediately reselling, I don't know if I would invest. The risk is too great that you'll see your job lost and your 401k/investments emptied due to a single cause.",
"title": ""
},
{
"docid": "81146ae8ddc4ee0ecdccdd23d3e016a5",
"text": "One such strategy I have heard for those who have this opportunity is to purchase the maximum allowed. When the window to sell opens, sell all of your shares and repurchase the most you can with the amount you gained (or keep an equivalent to avoid another transaction fee). This allows you to buy at a discount, and spread out the risk by investing elsewhere. This way you are really only exposing yourself to lose money which you wouldn't have had access to without the stock discount.",
"title": ""
},
{
"docid": "527abd6a746747a2ddcd1187414a9dec",
"text": "\"Does your company offer a 401k? or similar pre-tax retirement plans? Is your company a publicly traded company? These questions are important, basically the key to any of your investments should be diversification. This means buying more than one kind of investment, amongst stock(s), bonds, real estate or more. The answer to \"\"How Much\"\" of your salary should go to company stock, is subjective. I personally would contribute the max toward a retirement plan or even post-tax savings, which would be invested in a variety of public companies. Hope that helps.\"",
"title": ""
},
{
"docid": "5113b7444d0fc0998ef14da59956b5ec",
"text": "I agree with the other comments that you should not buy/hold your company stock even if given at a discount. If equity is provided as part of the compensation package (Options/Restrictive Stock Units RSU)then this rule does not apply. As a matter of diversification, you should not have majority equity stake of other companies in the same sector (e.g. technology) as your employer. Asset allocation and diversification if done in the right way, takes care of the returns. Buying and selling on the same day is generally not allowed for ESPP. Taxation headaches. This is from personal experience (Cisco Systems). I had options issued in Sept 2008 at 18$ which vested regularly. I exited at various points - 19$,20$,21$,23$ My friend held on to all of it hoping for 30$ is stuck. Options expire if you leave your employment. ESPP shares though remain.",
"title": ""
},
{
"docid": "364522c1c91bc24141f5ae554ae35516",
"text": "What most respondents are forgetting, is when a company allows its employees to purchase its shares at a discount with their salary, the employee is usually required to hold the stock for a number of years before they can sell them. The reason the company is allowing or promoting its employees to purchase its shares at a discount is to give the employees a sense of ownership of the company. Being a part owner in the company, the employee will want the company to succeed and will tend to be more productive. If employees were allowed to purchase the shares at a discount and sell them straight away, it would defeat this purpose. Your best option to decide whether or not to buy the shares is to work out if the investment is a good one as per any other investment you would undertake, i.e. determine how the company is currently performing and what its future prospects are likely to be. Regarding what percentage of pay to purchase the shares with, if you do decide to buy them, you need to work that out based on your current and future budgetary needs and your savings plan for the future.",
"title": ""
},
{
"docid": "8dd55b46d9c07218fb9f8baf97aa6c57",
"text": "There is Free employer money on both sides of the tax fence for some employees. On the pretax side, your employer may provide you a match. If so, invest the maximum to get 100% of the match. On the after tax side, many companies offers a 15% discount on ESPP plans and a one year hold. My wife has such an employer. The one year hold is fine because it allows us to be taxed at Long Term Capital gains if the stock goes up which is lower than our current income bracket. After creating a seasoned pool of stocks that we could sell after the one year hold, we are then able to sell the same number of stocks purchased each month. This provides a 17.6% guaranteed gain on a monthly basis. How much would you purchase if you had a guaranteed 17.6% return. Our answer is 15% (our maximum allowed). The other trick is that while the employer is collecting the money, you will purchase the stock at the lowest day of the period. You will usually sell for even more than the purchase price unless the day purchased was the lowest day of month. The trick is to reinvest the money in tax free investments to balance out the pretax investing. Never leave the money in the plan. That is too much risk.",
"title": ""
}
] |
[
{
"docid": "0dac24e12eefbe65efdfe988ff4c2aa6",
"text": "\"If you sold the stock for a profit, you will owe tax on that profit. Whether it is taxed as short-term or long-term capital gains depends on how long you held the stock before selling it. Presumably you're going to invest this money into mutual funds or something of that sort. Those may pay dividends which can be reinvested, and will grow in value (you hope) just as the individual stock shares would (you hope). Assuming the advice you've been given is at all reasonable, there's no need for buyer's remorse here; you're just changing your investing style to a different point on the risk-versus-return curve. (If you have to ask this question, I tend to agree that you should do more homework before playing with shares in individual companieS ... unless you're getting thess shares at employee discount, in which case you should still seriously consider selling them fairly quickly and reinvesting the money in a more structured manner. In a very real sense your job is itself an \"\"investment\"\" in your employer; if they ever get into trouble you don't want that to hit both your income and investments.)\"",
"title": ""
},
{
"docid": "26939aa6eeca2b834916babe29f760bf",
"text": "At this stage of the game your best investment is yourself. Rather than putting it in stocks, use any spare money you have to get yourself the best education you can. See if you can drop that part-time job and give yourself more time to study. Or maybe you can go to a better, more expensive college. Or maybe college will give you some opportunity to travel and learn more that way. You don't want to exclude yourself from those opportunities by not having enough spare cash. So in short, spend what you need to get yourself the best education you can, and keep any spare money you have somewhere you can use it to take advantage of any opportunities that come your way.",
"title": ""
},
{
"docid": "8006d851062e84cea059ce200dfbe31e",
"text": "such analysis helps you keep track of the percentage of income that you invest You could apply 1:1:1 ratio. i.e spend 1/3, save 1/3 and invest 1/3. Hope that helps",
"title": ""
},
{
"docid": "7656ef45cba6e4625dec01393a52132b",
"text": "My employer matches 1 to 1 up to 6% of pay. They also toss in 3, 4 or 5 percent of your annual salary depending on your age and years of service. The self-directed brokerage account option costs $20 per quarter. That account only allows buying and selling of stock, no short sales and no options. The commissions are $12.99 per trade, plus $0.01 per share over 1000 shares. I feel that's a little high for what I'm getting. I'm considering 401k loans to invest more profitably outside of the 401k, specifically using options. Contrary to what others have said, I feel that limited options trading (the sale cash secured puts and spreads) can be much safer than buying and selling of stock. I have inquired about options trading in this account, since the trustee's system shows options right on the menus, but they are all disabled. I was told that the employer decided against enabling options trading due to the perceived risks.",
"title": ""
},
{
"docid": "9b0e2c743bdc4740acb73ed504dd53f6",
"text": "In Switzerland you should have access to many brokers with fair rates, e.g. Interactive Brokers. Going through them you then put the money in various Swiss stocks like Roche, Novartis, Swisscom, Credit Suisse, Logitech, etc. No stock should be more than 10% of the total. Since you pay 0% taxes on investment profits, you really should invest. By going through a broker instead of your bank, you can cash out at any time without losing outrageous fees for the stock commissions (often 2% for banks, around 0% for brokers). If you're employed you can also ask your employer to increase the amount of your salary that goes to the pension (2. Säule), which is not limited like the 7000 you mentioned (3.Säule).",
"title": ""
},
{
"docid": "c141ed7cdf8cab6bfcb015570724f327",
"text": "With a 1/4 million you should be looking at staying fully invested and doing income draw down you can safely take 3 or 4 % Basing your retirement income 100% on cash investments is very risky I can remember when inflation hit 15% in the UK and it has been at similar levels in the usa around 14% in 79.",
"title": ""
},
{
"docid": "798f80156a8c795c90d4ca2e79efc918",
"text": "Too much fiddling with your portfolio if the difference is 3-4% or less (as it's become in recent months). Hands off is the better advice. As for buying shares, go for whichever is the cheapest (i.e. Goog rather than Googl) because the voting right with the latter is merely symbolic. And who attends shareholders' meetings, for Pete's sake? On the other hand, if your holdings in the company are way up in the triple (maybe even quadruple) figures, then it might make sense to do the math and take the time to squeeze an extra percentage point or two out of your Googl purchases. The idle rich occupying the exclusive club that includes only the top 1% of the population needs to have somethinng to do with its time. Meanwhile, the rest of us are scrambling to make a living--leaving only enough time to visit our portfolios as often as Buffett advises (about twice a year).",
"title": ""
},
{
"docid": "52d826b925842aa604e0b295fcd54608",
"text": "\"No, the stock market is not there for speculation on corporate memorabilia. At its base, it is there for investing in a business, the point of the investment being, of course, to make money. A (successful) business earns money, and that makes it valuable to its owners since that money can be distributed to them. Shares of stock are pieces of business ownership, and so are valuable. If you knew that the business would have profit of $10,000,000 every year, and would distribute that to the owners of each of its 10,000,000 shares each year, you would know to that each share would receive $1 each year. How much would such a share be worth to you? If you could instead put money in a bank and get 5% a year back, to get $1 a year back you would have to put $20 into the bank. So maybe that share of stock is worth about $20 to you. If somebody offers to sell you such a share for $18, you might buy it; for $23, maybe you pass up the offer. But business is uncertain, and how much profit the business will make is uncertain and will vary through time. So how much is a share of a real business worth? This is a much harder call, and people use many different ways to come up with how much they should pay for a share. Some people probably just think something like \"\"Apple is a good company making money, I'll buy a share at whatever price it is being offered at right now.\"\" Others look at every number available, build models of the company and the economy and the risks, all to estimate what a share might be worth, more or less. There is no indisputable value for a share of a successful business. So, what effect does a company's earnings have on the price of its stock? You can only say that for some of the people who might buy or sell shares, higher earnings will, all other thing being equal, have them be willing to spend more to buy it or demand more when selling it. But how much more is not quantifiable but depends on each person's approach to the problem. Higher earnings would tend to raise the price of the stock. Yet there are other factors, such as people who had expected even higher earnings, whose actions would tend to lower the price, and people who are OK with the earnings now, but suspect trouble for the business is appearing on the horizon, whose actions would also tend to lower the price. This is why people say that a stock's price is determined by supply and demand.\"",
"title": ""
},
{
"docid": "33a18214048d00ec5c14fc9655f16b82",
"text": "If you are an entrepreneur, and you are looking forward to strike on your own ( the very definition of entrepreneur) then I suggest that you don't invest in anything except your business and yourself. You will need all the money you have when you launch your business. There will be times when your revenue won't be able to cover your living costs, and that's when you need your cash. At that point of time, do you really want to have your cash tie up in stock market/property? Some more, instead of diverting your attention to learn how the stock market/property works, focus on your business. You will find that the reward is much, much greater. The annual stock market return is 7% to 15%. But the return from entrepreneurship can be many times higher than that. So make sure you go for the bigger prize, not the smaller gains. It's only when your business no longer requires your capital then you can try to find other means of investment.",
"title": ""
},
{
"docid": "542e54fdfbba57b040255579d834efb7",
"text": "The question is for your HR department, or administrator of the plan. How long must you hold the employee shares before you are permitted to sell? Loyalty to your company is one thing, but after a time, you will be too heavily invested in one company, and you need to diversify out. One can cite any number they wish, 5%, 10%. All I know is that when Enron blew up, it only added insult to injury that not only did these people lose their job, they lost a huge chunk of their savings as well.",
"title": ""
},
{
"docid": "f0e9b6eb1bb4818486d9d4637a157a6c",
"text": "It appears your company is offering roughly a 25% discount on its shares. I start there as a basis to give you a perspective on what the 30% matching offer means to you in terms of value. Since you are asking for things to consider not whether to do it, below are a few considerations (there may be others) in general you should think about your sources of income. if this company is your only source of income, it is more prudent to make your investment in their shares a smaller portion of your overall investment/savings strategy. what is the holding period for the shares you purchase. some companies institute a holding period or hold duration which restricts when you can sell the shares. Generally, the shorter the duration period the less risk there is for you. So if you can buy the shares and immediately sell the shares that represents the least amount of relative risk. what are the tax implications for shares offered at such a discount. this may be something you will need to consult a tax adviser to get a better understanding. your company should also be able to provide a reasonable interpretation of the tax consequences for the offering as well. is the stock you are buying liquid. liquid, in this case, is just a fancy term for asking how many shares trade in a public market daily. if it is a very liquid stock you can have some confidence that you may be able to sell out of your shares when you need. personally, i would review the company's financial statements and public statements to investors to get a better understanding of their competitive positioning, market size and prospects for profitability and growth. given you are a novice at this it may be good idea to solicit the opinion of your colleagues at work and others who have insight on the financial performance of the company. you should consider other investment options as well. since this seems to be your first foray into investing you should consider diversifying your savings into a few investments areas (such as big market indices which typically should be less volatile). last, there is always the chance that your company could fail. Companies like Enron, Lehman Brothers and many others that were much smaller than those two examples have failed in the past. only you can gauge your tolerance for risk. As a young investor, the best place to start is to use index funds which track a broader universe of stocks or bonds as the first step in building an investment portfolio. once you own a good set of index funds you can diversify with smaller investments.",
"title": ""
},
{
"docid": "a90aba0d9207276fd2fe9e3902a3e306",
"text": "\"Check how long you have to hold the stock after buying it. If you can sell reasonably soon and your company is reasonably stable, you're unlikely to lose and/or be taxed and/or pay enough in fees to lose more than the 30% \"\"free money\"\" they're giving you. Whether you hold it longer than the minimum time depends partly on whether you think you can better invest the money elsewhere, and partly on how you feel about having both your salary and (part of) your investments tied to the company's success? The company would like you to \"\"double down\"\" that way, in the theory that it may make you mors motivated... but some investment councelors would advise keeping that a relatively small part of your total investments, basically for the same reasons you are always advised to diversify.\"",
"title": ""
},
{
"docid": "17fe244e271b26488189fb303501cb61",
"text": "I think it depends entirely on your risk tolerance. Putting money in individual stocks obviously increases your risk and potentially increases your reward. Personally (as a fairly conservative investor) I'd only invest in individual stocks if I could afford to lose the entire investment (maybe I'd end up buying Enron or Nortel). If you enjoy envesting and feel 10% is an acceptable loss I think you have your answer",
"title": ""
},
{
"docid": "adcb7cb80bc15e69a3f853fbeb045fd2",
"text": "Even with a good investment strategy, you cannot expect more than 8-10% per year in average. Reducing this by a 3% inflation ratio leaves you with 5 - 7%, which means 15k$ - 21k$. Consider seriously if you could live from that amount as annual income, longterm. If you think so, there is a second hurdle - the words in average. A good year could increase your capital a bit, but a bad year can devastate it, and you would not have the time to wait for the good years to average it out. For example, if your second year gives you a 10% loss, and you still draw 15k$ (and inflation eats another 3%), you have only 247k$ left effectively, and future years will have to go with 12k$ - 17k$. Imagine a second bad year. As a consequence, you either need to be prepared to go back to work in that situation (tough after being without job for years), or you can live on less to begin with: if you can make it on 10k$ to begin with (and do, even in good years), you have a pretty good chance to get through your life with it. Note that 'make it with x' always includes taxes, health care, etc. - nothing is free. I think it's possible, as people live on 10k$ a year. But you need to be sure you can trust yourself to stay within the limit and not give in and spent more - not easy for many people.",
"title": ""
},
{
"docid": "65f7cecbb29b4cef157e86f531be6a7d",
"text": "\"In the UK, one quirky option in this area (OK, admittedly it's not a passive) is the \"\"Battle Against Cancer Investment Trust\"\" (BACIT). Launched in 2012, it's basically a fund-of-funds where the funds held charge zero management charges or performance fees to the trust, but the trust then donates 1% of NAV to charity each year (half to cancer research, investors decide the other half).\"",
"title": ""
}
] |
fiqa
|
5bbc09763db033d0579fa3628ed78778
|
Optimal balence of 401K and charitable savings
|
[
{
"docid": "8b65038f796cf60a83e9f2345291878b",
"text": "Two things I would recommend doing: I would save a minimum of 15% into retirement. By young I will assume that you are under 30. 15K/year + company match will grow into a sick amount of money by the time you are in your 60s. So you have a net worth that is north of 5 million. What kind of charitable giving can you do then? Answer: What ever you want! Also it could be quite a bit more then that. Get a will. It will cost a little bit of money, but for someone like you it is important to have your wishes known.",
"title": ""
}
] |
[
{
"docid": "5a33bbdef2b4959cf73e8714d21e6725",
"text": "Is there a better vehicle for this than an index fund? Seems like a good choice to me, unless you want to protect it from market risk since it's in essence an emergency fund, in which case maybe you'd want to keep some of it in CD's. Are significant downsides to keeping the money in our name until he needs it? The main downside would be if you had need to dole out more than the maximum annual gift exclusion amount in a single year (currently $14,000), you'd have to report it as a taxable gift on your tax return and it'd count toward your lifetime gift exclusion. You and your wife can each give a gift, and if your brother were married you and your wife could each give to both he and his spouse, so 2-4x the annual gift limit before this becomes an issue. Additionally you can pay medical/education expenses directly and that is not counted toward the annual exclusion. Are there any other considerations that we are overlooking? There's always a risk that gift-giving can create expectation and/or resentment. I'd think you'd want to make instances of giving not sound like something you planned for, but something you are sacrificing for. Not sure what the best strategy is there, every family is different when it comes to dealing with finances.",
"title": ""
},
{
"docid": "577d17a91d08a46f7c4dc389251b2675",
"text": "This creates incentive for the employee to contribute more and increases the funds under management of the 401(k) plan. The size of the plan influences the fees that are charged in each of the funds offered. (The more assets under management, the better for those in the plan.) More importantly, 401(k) plans are not allowed to discriminate in favor of highly compensated employees. That discrimination is determined by calculating the average deferrals by your lower compensated employees and comparing them to the average deferrals of your highly compensated employees. If highly compensated employees are saving too much compared to the rest of the pack, they will have some of their contributions returned the next year (with all the tax implications of that). Forcing everyone to contribute 6% to get the full match helps the plan to not fail the discrimination test and protects the highly compensated employees from losing some of their tax deferrals.",
"title": ""
},
{
"docid": "876a9afbec24369bf05e5fbbf8a0ed8f",
"text": "I think you're not applying the right time scale here. ESPP (Employee Stock Purchase Plan) is usually vesting every 6 months. So every half a year you receive a chunk of stocks based on your salary deduction, with the 15% discount. Every half a year you have a chunk of money from the sale of these stocks that you're going to put into your long term investment portfolio. That is dollar cost averaging. You're investing periodically (every 6 months in this case), same (based on your salary deferral) amount of money, regardless of the stock market behavior. That is precisely what dollar cost averaging is.",
"title": ""
},
{
"docid": "3902ff75b95b17d3da9bb9b7e00e3bdb",
"text": "\"If you have enough earned income to cover this amount you should be all set. If I understand you correctly you proposed two transactions. The first, a withdrawal from the beneficiary IRA. Some of which is an RMD the rest is an extra withdrawal of funds. Next, you propose to make a deposit to a combination of your IRA and your wife's IRA. As long as there's earned income to cover this deposit, your plan is fine. To be clear, you can't \"\"take a bene IRA and deposit the RMD to an IRA.\"\" But, money is fungible, the dollars you deposit aren't traceable, only need to be justified by enough earned income. A bene IRA is a great way to get the money to increase your own IRA or 401(k) deposits. Further details - The 2016 contribution limit is $5,500 per person, so I did make the assumption you knew the $9000 deposit need to be split between the 2 IRAs, with no more than $5500 going into either one.\"",
"title": ""
},
{
"docid": "2eb5e5bdd4912cf03a38d7a6987476bd",
"text": "\"Your real question, \"\"why is this not discussed more?\"\" is intriguing. I think the media are doing a better job bringing these things into the topics they like to ponder, just not enough, yet. You actually produced the answer to How are long-term capital gains taxed if the gain pushes income into a new tax bracket? so you understand how it works. I am a fan of bracket topping. e.g. A young couple should try to top off their 15% bracket by staying with Roth but then using pretax IRA/401(k) to not creep into 25% bracket. For this discussion, 2013 numbers, a blank return (i.e. no schedule A, no other income) shows a couple with a gross $92,500 being at the 15%/25% line. It happens that $20K is exactly the sum of their standard deduction, and 2 exemptions. The last clean Distribution of Income Data is from 2006, but since wages haven't exploded and inflation has been low, it's fair to say that from the $92,000 representing the top 20% of earners, it won't have many more than top 25% today. So, yes, this is a great opportunity for most people. Any married couple with under that $92,500 figure can use this strategy to exploit your observation, and step up their basis each year. To littleadv objection - I imagine an older couple grossing $75K, by selling stock with $10K in LT gains just getting rid of the potential 15% bill at retirement. No trading cost if a mutual fund, just $20 or so if stocks. The more important point, not yet mentioned - even in a low cost 401(k), a lifetime of savings results in all gains being turned in ordinary income. And the case is strong for 'deposit to the match but no no more' as this strategy would let 2/3 of us pay zero on those gains. (To try to address the rest of your questions a bit - the strategy applies to a small sliver of people. 25% have income too high, the bottom 50% or so, have virtually no savings. Much of the 25% that remain have savings in tax sheltered accounts. With the 2013 401(k) limit of $17,500, a 40 year old couple can save $35,000. This easily suck in most of one's long term retirement savings. We can discuss demographics all day, but I think this addresses your question.) If you add any comments, I'll probably address them via edits, avoiding a long dialog below.\"",
"title": ""
},
{
"docid": "8cc580ba6436559c6830165d5702216b",
"text": "I was thinking to do mix of ELSS and Tax Saving FDs. But is my choice correct? Also what other options I am left with? This depends on individual's choice and risk appetite. Generally at younger age, investment in ELSS / PPF is advisable. Other options are Life Insurance, Retirement Plans by Mutual Funds, NSC, etc",
"title": ""
},
{
"docid": "74ccaa6350c9ba08aed19a0257ccad94",
"text": "In the United States investing towards donation is a great idea because you can donate appreciated securities directly rather than donating cash. Notice how much this can benefit you: So you get to both (a) donate untaxed money and then (b) deduct that unrealized money from your income total on your tax return. With the above in mind, a good strategy for investing towards this type of donation would be to pick securities that are likely to increase in market value but not likely to produce any other sort of income. So bonds (which produce lots of interest income), or stocks with dividends, or equity mutual funds (which distribute dividends as capital gains) would all be suboptimal for this purpose. Of course, an even better strategy would be to establish a widely diversified investment portfolio without thought to future donations. Then, once a year (or whenever), evaluate all your investments and find some where the market value has increased. Then donate some of those shares. No special advance planning necessary. Note that your tax consequences could be more complicated depending on your exact situation. Read the section about Capital Gain Property in IRS Pub. 26 for all the details. There may be special limits on the amount you can deduct. Also, donations of short term capital gains are treated much less favorably, so make sure you donate only long term capital gain property.",
"title": ""
},
{
"docid": "fb9d030ac35296ba5c9fae89e43b890a",
"text": "Once upon a time, money rolled over from a 401k or 403b plan into an IRA could not be rolled into another 401k or 403b unless the IRA account was properly titled as a Rollover IRA (instead of Traditional IRA - Roth IRAs were still in the future) and the money kept separate (not commingled) with contributions to Traditional IRAs. Much of that has fallen by the way side as the rules have become more relaxed. Also the desire to roll over money into a 401k plan at one's new job has decreased too -- far too many employer-sponsored retirement plans have large management fees and the investments are rarely the best available: one can generally do better keeping ex-401k money outside a new 401k, though of course new contributions from salary earned at the new employer perforce must be put into the employer's 401k. While consolidating one's IRA accounts at one brokerage or one fund family certainly saves on the paperwork, it is worth keeping in mind that putting all one's eggs in one basket might not be the best idea, especially for those concerned that an employee might, like Matilda, take me money and run Venezuela. Another issue is that while one may have diversified investments at the brokerage or fund family, the entire IRA must have the same set of beneficiaries: one cannot leave the money invested in GM stock (or Fund A) to one person and the money invested in Ford stock (or Fund B) to another if one so desires. Thinking far ahead into the future, if one is interested in making charitable bequests, it is the best strategy tax-wise to make these bequests from tax-deferred monies rather than from post-tax money. Since IRAs pass outside the will, one can keep separate IRA accounts with different companies, with, say, the Vanguard IRA having primary beneficiary United Way and the Fidelity IRA having primary beneficiary the American Cancer Society, etc. to achieve the appropriate charitable bequests.",
"title": ""
},
{
"docid": "9d80f72238439599b06de7da0a422228",
"text": "While the 55 exception noted by Joe and JB makes this less of a worry, it's worth noting that to retire early most people would need additional investments beyond a maxed out 401(k). As most people make more money later in life it is generally worth putting what you can in a 401(k) now and later when your savings would max out a 401(k) then you can start adding money to accounts that are not tax-advantaged. These additional funds can be used during the bridge period. Run the numbers yourself as these assumptions won't be true for all individuals, but this may be the piece you are missing.",
"title": ""
},
{
"docid": "bbb043138c397f744b965e44a89abb5f",
"text": "\"I wrote a spreadsheet (<< it may not be obvious - this is a link to pull down the spreadsheet) a while back that might help you. You can start by putting your current salary next to your age, adjust the percent of income saved (14% for you) and put in the current total. The sheet basically shows that if one saves 15% from day one of working and averages an 8% return, they are on track to save over 20X their final income, and at the 4% withdrawal rate, will replace 80% of their income. (Remember, if they save 15% and at retirement the 7.65% FICA /medicare goes away, so it's 100% of what they had anyway.) For what it's worth, a 10% average return drops what you need to save down to 9%. I say to a young person - try to start at 15%. Better that when you're 40, you realize you're well ahead of schedule and can relax a bit, than to assume that 8-9% is enough to save and find you need a large increase to catch up. To answer specifically here - there are those who concluded that 4% is a safe withdrawal rate, so by targeting 20X your final income as retirement savings, you'll be able to retire well. Retirement spending needs are not the same for everyone. When I cite an 80% replacement rate, it's a guess, a rule of thumb that many point out is flawed. The 'real' number is your true spending need, which of course can be far higher or lower. The younger investor is going to have a far tougher time guessing this number than someone a decade away from retiring. The 80% is just a target to get started, it should shift to the real number in your 40s or 50s as that number becomes clear. Next, I see my original answer didn't address Social Security benefits. The benefit isn't linear, a lower wage earner can see a benefit of as much as 50% of what they earned each year while a very high earner would see far less as the benefit has a maximum. A $90k earner will see 30% or less. The social security site does a great job of giving you your projected benefit, and you can adjust target savings accordingly. 2016 update - the prior 20 years returned 8.18% CAGR. Considering there were 2 crashes one of which was called a mini-depression, 8.18% is pretty remarkable. For what it's worth, my adult investing life started in 1984, and I've seen a CAGR of 10.90%. For forecasting purposes, I think 8% long term is a conservative number. To answer member \"\"doobop\"\" comment - the 10 years from 2006-2015 had a CAGR of 7.29%. Time has a way of averaging that lost decade, the 00's, to a more reasonable number.\"",
"title": ""
},
{
"docid": "9d97b61377d579ffc5a6e1e2422f53aa",
"text": "The math works out so that the 401k is still a better deal in the long term over a taxable account because of the tax-deferred growth. Let's assume you invest in an S&P 500 index fund in either a taxable investment account or a 401k and the difference in fees is .5%. I used an online calculator and a hypothetical 1k/year investment over 30 years with 4.5% tax-deferred growth vs 5% taxable and a 25% tax bracket. After 30 years the tax-deferred 401k account will have $67k and the taxable account will have $58k. The math isn't perfect -- I'm sure I'm missing some intricacies with dividends/capital gains distributions and that you'll then pay income tax on the 401k upon retirement as you drawn down, but it still seems pretty clear that the 401k will win in the long run, especially if you invest more than the 1k/year used in my example. But yeah, .84% expenses on an index fund is robbery. Can you bring that to the attention of the HR department? Maybe they'll want to look for a lower-fee provider and it's in their best interest too, if they also participate.",
"title": ""
},
{
"docid": "c4ec080f48901e5d1591782ca087bcba",
"text": "The Trinity study looked at 'safe' withdrawal rates from retirement portfolios. They found it was safe to withdraw 4% of a portfolio consisting of stocks and bonds. I cannot immediately find exactly what specific investment allocations they used, but note that they found a portfolio consisting largely of stocks would allow for the withdrawal of 3% - 4% and still keep up with inflation. In this case, if you are able to fund $30,000, the study claims it would be safe to withdraw $900 - $1200 a year (that is, pay out as scholarships) while allowing the scholarship to grow sufficiently to cover inflation, and that this should work in perpetuity. My guess is that they invest such scholarship funds in a fairly aggressive portfolio. Most likely, they choose something along these lines: 70 - 80% stocks and 20 - 30% bonds. This is probably more risky than you'd want to take, but should give higher returns than a more conservative portfolio of perhaps 50 - 60% stocks, 40 - 50% bonds, over the long term. Just a regular, interest-bearing savings account isn't going to be enough. They almost never even keep up with inflation. Yes, if the stock market or the bond market takes a hit, the investment will suffer. But over the long term, it should more than recover the lost capital. Such scholarships care far more about the very long term and can weather a few years of bad returns. This is roughly similar to retirement planning. If you expect to be retired for, say, 10 years, you won't worry too much about pulling out your retirement funds. But it's quite possible to retire early (say, at 40) and plan for an infinite retirement. You just need a lot more money to do so. $3 million, invested appropriately, should allow you to pull out approximately $90,000 a year (adjusted upward for inflation) forever. I leave the specifics of how to come up with $3 million as an exercise for the reader. :) As an aside, there's a Memorial and Traffic Safety Fund which (kindly and gently) solicited a $10,000 donation after my wife was killed in a motor vehicle accident. That would have provided annual donations in her name, in perpetuity. This shows you don't need $30,000 to set up a scholarship or a fund. I chose to go another way, but it was an option I seriously considered. Edit: The Trinity study actually only looked at a 30 year withdrawal period. So long as the investment wasn't exhausted within 30 years, it was considered a success. The Trinity study has also been criticised when it comes to retirement. Nevertheless, there's some withdrawal rate at which point your investment is expected to last forever. It just may be slightly smaller than 3-4% per year.",
"title": ""
},
{
"docid": "3bfc7e4b55c9d114db072e3df57b51da",
"text": "With painful 20/20 hindsight, I earnestly say - max it out hard. The reason is the sheer opportunity of it. As a young person you have time on your side - you have so many years for the earnings to compound! It is many times more advantageous to max it out now, than fail to do so and be in your 40s trying to catch up. Use the Roth 401K if your company supports that. After that, max out a Roth IRA if your income is low enough to use them. Otherwise, max out a traditional IRA (this will not be tax deductible because your income is too high), and the next day, convert it to Roth. That conversion will be tax-free since you already paid taxes on that money. 401K money is untouchable. No one can ever take it from you - not with a lawsuit, not with bankruptcy. As such, never give it up willingly by borrowing from it or cashing it out early, no matter how serious the problem seems in the short term. How do you invest a 401K when the market is so scary? I found out when I became a Board member overseeing management of an endowment. Turns out there's a professional gold standard for ultra-long-term, high growth, volatility-be-damned investing. Who knew?",
"title": ""
},
{
"docid": "6c7ca691ed2d32e8795ff763be3063fb",
"text": "What is the question? Are you just trying to confirm that for self-employed, a Solo 401(k) is flexible, and a great tool to level out your tax rates? Sure. A W2 employee can turn on and off his 401(k) deduction any time, and bump the holding on each check as high as 75% in some cases. So in a tight stretch, I'd save to the match, but later on, top off the maximum for the year. To the points you listed - Your observation is interesting, but a bit long for what you seem to be asking. Keep in mind, there are 2 great features that you don't mention - a Roth Solo 401(k) flavor which offers even more flexibility for variable income, and loan provisions, up to $50,000 available to borrow from the account. My fellow blogger The Financial Buff offered an article Solo 401k Providers and Their Scope of Services that did a great job addressing this.",
"title": ""
},
{
"docid": "c12058171af902326a00c451983694d1",
"text": "\"I think \"\"optimal\"\" is a term that needs to be better qualified - what's optimal investment for one person is not necessary optimal for another, as it depends on the investor's time horizon, risk tolerance, and investment knowledge. I would personally put fix-income (or products that generates incomes that CRA considers as \"\"interest\"\") products in the TFSA so the gains aren't taxed at all. I would consider putting preferred shares in this account as well, since dividend incomes are taxed higher than capital gain and preferred shares don't usually change in price unless the company's ability to pay the dividends are in-doubt. I don't want to put common equities in TFSA as that would take away your ability to leverage past losses to reduce future capital gains. If you are using TFSA as a way to accelerate saving for a near-term purchase, then you definitely want to employ fix-income products as the underlying saving vehicle, since market volatility would be your enemy (unless you are feeling very lucky). If you are using TFSA as a way to supplement your registered retirement saving account, then you can treat it the same way you would invest in your RRSP.\"",
"title": ""
}
] |
fiqa
|
9f2b9cfc84b97724e8f039e49a4aaed4
|
More money towards down payment versus long-term investments
|
[
{
"docid": "6bd0f4fb65ecc39d9507ec35125ae6e1",
"text": "There are two components to any non-trivial financial decision: Assuming that all things remain equal, borrowing money at a low rate while investing for a higher return is a no-brainer. The problem is, all things do not remain equal. For example: I think that you need to assess your position and preferences. I'd err on the side of being in less debt.",
"title": ""
},
{
"docid": "7cb850e4b3a69b8ba068c19cf2fc4a80",
"text": "\"One thing that's often overlooked is that cash reserves are also a long-term investment. Anything can be a long-term investment if it's expected to appreciate or pay interest/dividends. So it's not either/or. Stocks are but one way to do long-term investments. Having said that, taking on less debt for a consumer good is never a bad idea. Your primary residence is a consumer good, regardless of those who would say that \"\"your home is your biggest investment.\"\" So, there's my vote for a larger down-payment. Beyond that, a couple of outside-the-box comments:\"",
"title": ""
},
{
"docid": "d9dec73a23253f112c5ba37c1bca7d90",
"text": "I'd put the 20% down, close on the house, live in it for a year, and save the difference. If you find your cash flow is fine, run a calculation and start on a program of prepaying a bit of principal each month as an extra payment. If you study how amortization works, you'll understand that an extra payment of about 1/6 the amount due will knock off a full payment at the end. This is how a 30 year mortgage starts out. Meanwhile, you should keep in mind, it's easy to prepay the mortgage, but there's really no getting it back. So, before letting go of your money, I'd do a few things; I may be stating the obvious, but consider - No matter how low the payment on your mortgage, a payment is due each and every month until it's paid off. You put 80% down, take a 10 year mortgage, you still have payments for 10 years. You want to insure yourself against needing to sell in a hurry if you both lose your jobs, so whatever you put down, I'd recommend a healthy emergency account, 9-12 months worth of expenses.",
"title": ""
},
{
"docid": "b2c1b4cf7165848bcc59d2356d58217a",
"text": "Every payment you make on your house will already be increasing your equity in it. For that reason alone, I'd recommend moving additional savings into other long-term funds.",
"title": ""
},
{
"docid": "9af55094839c6d10fccdf320dad52f9c",
"text": "Another vote for a bigger downpayment, for the reasons Benjamin mentions. Also, from experience, I would save up at least a small pile as a separate house emergency fund because you will find things that are wrong and/or that got bodged by the previous owner and it's probably not going to last past the first few months of home ownership. In my case, the home inspector missed - amongst other things - that the shower on the 2nd floor was leaking both into the adjoining bedroom and the living room below. That added a little unexpected expenditure as you might guess.",
"title": ""
}
] |
[
{
"docid": "80ccc6f1c6b0f9d238426febd4303db4",
"text": "\"Generally investing in index-tracking funds in the long term poses relatively low risk (compared to \"\"short term investment\"\", aka speculation). No-one says differently. However, it is a higher risk than money-market/savings/bonds. The reason for that is that the return is not guaranteed and loss is not limited. Here volatility plays part, as well as general market conditions (although the volatility risk also affects bonds at some level as well). While long term trend may be upwards, short term trend may be significantly different. Take as an example year 2008 for S&P500. If, by any chance, you needed to liquidate your investment in November 2008 after investing in November 1998 - you might have ended up with 0 gain (or even loss). Had you waited just another year (or liquidated a year earlier) - the result would be significantly different. That's the volatility risk. You don't invest indefinitely, even when you invest long term. At some point you'll have to liquidate your investment. Higher volatility means that there's a higher chance of downward spike just at that point of time killing your gains, even if the general trend over the period around that point of time was upward (as it was for S&P500, for example, for the period 1998-2014, with the significant downward spikes in 2003 and 2008). If you invest in major indexes, these kinds of risks are hard to avoid (as they're all tied together). So you need to diversify between different kinds of investments (bonds vs stocks, as the books \"\"parrot\"\"), and/or different markets (not only US, but also foreign).\"",
"title": ""
},
{
"docid": "e4bf0dcb96ce68979ca1b604142bb2d7",
"text": "\"Forget the math's specifics for a moment: here's some principles. Additional housing for a renter gives you returns in the form of money. Additional housing for yourself pays its returns in the form of \"\"here is a nice house, live in it\"\". Which do you need more of? If you don't need the money, get a nicer house for yourself. If you need (or want) the money, get a modest house for yourself and either use the other house as a rental property, or invest the proceeds of its sale in the stock market. But under normal circumstances (++) don't expect that buying more house for yourself is a good way to increase how much money you have. It's not. (++ the exception being during situations where land/housing value rises quickly, and when that rise is not part of a housing bubble which later collapses. Generally long-term housing values tend to be relatively stable; the real returns are from the rent, or what economists call imputed rent when you're occupying it yourself.)\"",
"title": ""
},
{
"docid": "e82749a12bb0dc7acbcdae7eb3ee76e6",
"text": "\"For most people \"\"home ownership\"\" is a long term lifestyle strategy (i.e. the intention is to own a home for several decades, regardless of how many times one particular house might be \"\"swapped\"\" for a different one. In an economic environment with steady monetary inflation, taking out a long-term loan backed by a tangible non-depreciating \"\"permanent\"\" asset (e.g. real estate) is in practice a form of investing not borrowing, because over time the monetary value of the asset will increase in line with inflation, but the size of the loan remains constant in money terms. That strategy was always at risk in the short term because of temporary falls in house prices, but long-term inflation running at say 5% per year would cancel out even a 20% fall in house prices in 4 years. Downturns in the economy were often correlated with rises in the inflation rate, which fixed the short-term problem even faster. Car and student loans are an essentially different financial proposition, because you know from the start that the asset will not retain its value (unless you are \"\"investing in a vintage car\"\" rather than \"\"buying a means of personal transportation\"\", a new car will lose most of its monetary value within say 5 years) or there is no tangible asset at all (e.g. taking out a student loan, paying for a vacation trip by credit card, etc). The \"\"scariness\"\" over home loans was the widespread realization that the rules of the game had been changed permanently, by the combination of an economic downturn plus national (or even international) financial policies designed to enforce low inflation rates - with the consequence that \"\"being underwater\"\" had been changed from a short term problem to a long-term one.\"",
"title": ""
},
{
"docid": "5a7975f7b904e476239cf8f0dc1eb4de",
"text": "\"If I buy property when the market is in a downtrend the property loses value, but I would lose money on rent anyway. So, as long I'm viewing the property as housing expense I would be ok. This is a bit too rough an analysis. It all depends on the numbers you plug in. Let's say you live in the Boston area, and you buy a house during a downtrend at $550k. Two years later, you need to sell it, and the best you can get is $480k. You are down $70k and you are also out two years' of property taxes, maintenance, insurance, mortgage interest maybe, etc. Say that's another $10k a year, so you are down $70k + $20k = $90k. It's probably more than that, but let's go with it... In those same two years, you could have been living in a fairly nice apartment for $2,000/mo. In that scenario, you are out $2k * 24 months = $48k--and that's it. It's a difference of $90k - $48k = $42k in two years. That's sizable. If I wanted to sell and upgrade to a larger property, the larger property would also be cheaper in the downtrend. Yes, the general rule is: if you have to spend your money on a purchase, it's best to buy when things are low, so you maximize your value. However, if the market is in an uptrend, selling the property would gain me more than what I paid, but larger houses would also have increased in price. But it may not scale. When you jump to a much larger (more expensive) house, you can think of it as buying 1.5 houses. That extra 0.5 of a house is a new purchase, and if you buy when prices are high (relative to other economic indicators, like salaries and rents), you are not doing as well as when you buy when they are low. Do both of these scenarios negate the pro/cons of buying in either market? I don't think so. I think, in general, buying \"\"more house\"\" (either going from an apartment to a house or from a small house to a bigger house) when housing is cheaper is favorable. Houses are goods like anything else, and when supply is high (after overproduction of them) and demand is low (during bad economic times), deals can be found relative to other times when the opposite applies, or during housing bubbles. The other point is, as with any trend, you only know the future of the trend...after it passes. You don't know if you are buying at anything close to the bottom of a trend, though you can certainly see it is lower than it once was. In terms of practical matters, if you are going to buy when it's up, you hope you sell when it's up, too. This graph of historical inflation-adjusted housing prices is helpful to that point: let me just say that if I bought in the latest boom, I sure hope I sold during that boom, too!\"",
"title": ""
},
{
"docid": "673ef9d7a042b643fa2d062c000f88ed",
"text": "I believe this argument is most often used when considering which debts to pay back first, or when there are other options available such as investment options, building up an emergency fund, or saving for a large purchase. In that case, it's simply justifying making minimum payments and paying more over the life of the loan in exchange for larger liquidity in the present. Unfortunately, when it comes to choosing between which debts to pay (e.g. My mom pays more than the minimum on her car because she can't deduct auto loan interest, despite her mortgage carrying a higher interest rate), it's only beneficial if the tax savings offsets the interest savings difference. The formula for that is: tax bracket > (1 - (target loan interest rate / mortgage interest rate)) That said, most people don't think in the long term, either by natural shortsightedness, or by necessity (need to have an emergency fund).",
"title": ""
},
{
"docid": "a7e82acf77e5091b7bcac9655fad7156",
"text": "Often times the commission fees add up a lot. Many times the mundane fluctuations in the stock market on a day to day basis are just white noise, whereas long term investing generally lets you appreciate value based on the market reactions to actual earnings of the company or basket of companies. Day trading often involves leverage as well.",
"title": ""
},
{
"docid": "e5b01e50e6f73f80d903dde6d07e53a0",
"text": "You can look at buying a house as being a long term investment in not paying rent. In the short time there are costs to buying (legal, taxes, etc). This depends on only buying house of the size/location you need e.g. no better then what you would have rented. House buying tent to work out best when there is high inflation, as the rent you would otherwise be paying goes up with inflation – provided you can live with the short term pain of high interest rates.",
"title": ""
},
{
"docid": "291ef739389b414110b5d02538f9e616",
"text": "\"I think, the top three answers by Joe, Anthony and Bigh are giving you all the detail that you need on a technical sense. Although I would like to add a simple picture that underlines, that you can not really compare day trading to long-term trading and that the addictive and psychologic aspect that you mentioned can not be taken out of consideration. The long term investor is like someone buying a house for investment. You carefully look at all offers on the market. You choose by many factors, price, location, quality, environment, neighborhood and extras. After a long research, you pick your favorites and give them a closer look until you finally choose the object of desire, which will pay off in 10 years and will be a wise investment in your future. Now this sounds like a careful but smart person, who knows what he wants and has enough patience to have his earnings in the future. The short term investor is like someone running into the casino for a game of black-jack, roulette or poker. He is a person that thinks he has found the one and only formula, the philosopher's stone, the money-press and is seeking immense profits in just one night. And if it does not work, he is sure, that this was just bad coincidence and that his \"\"formula\"\" is correct and will work the next night. This person is a pure gambler and running the risk of becoming addicted. He is seeking quick and massive profits and does not give up, even though he knows, that the chances of becoming a millionaire in a casino are quite unrealistic and not better than playing in a lottery. So if you are a gamer, and the profit is less important than the \"\"fun\"\", then short term is the thing for you. If you are not necessarily seeking tons of millions, but just want to keep your risk of loss to a minimum, then long term is your way to go. So it is a question of personality, expectations and priorities. The answer why losses are bigger on high frequency signals is answered elsewhere. But I am convinced in reality it is a question of what you want and therefore very subjective. I have worked for both. I have worked for a portfolio company that has gone through periods of ups and downs, but on the long term has made a very tempting profit, which made me regret, that I did not ask for shares instead of money as payment. These people are very calm and intelligent people. They spend all their time investigating and searching for interesting objects for their portfolio and replace losers with winners. They are working for your money and investors just relax and wait. This has a very serious taste to it and I for my part would always prefer this form of investment. I have worked for an investment broker selling futures. I programmed the account management for their customers and in all those years I have only seen one customer that made the million. But tons of customers that had made huge losses. And this company was very emotional, harsh, unpersonal - employees changing day by day, top sellers coming in corvettes. All the people working there where gamblers, just like their customers. Well, it ended one day, when the police came and confiscated all computers from them, because customers have complained about their huge losses. I am glad, that I worked as a remote developer for them and got paid in money and not in options. So both worlds are so different from each other. The chances for bigger profits are higher on day trading, but so are the chances for bigger losses - so it is pure gambling. If you like gambling, split your investment: half in long term and other half in short term, that is fun and wise in one. But one thing is for sure: in over ten years, I have seen many customers loosing loads of money in options in the future markets or currencies. But I have never seen anyone making a loss in long term portfolio investment. There have been hard years, where the value dropped almost 30%, but that was caught up by the following years, so that the only risk was minimizing the profit.\"",
"title": ""
},
{
"docid": "d1472c65dc003b8301b259da45632449",
"text": "Have you changed how you handle fund distributions? While it is typical to re-invest the distributions to buy additional shares, this may not make sense if you want to get a little cash to use for the home purchase. While you may already handle this, it isn't mentioned in the question. While it likely won't make a big difference, it could be a useful factor to consider, potentially if you ponder how risky is it having your down payment fluctuate in value from day to day. I'd just think it is more convenient to take the distributions in cash and that way have fewer transactions to report in the following year. Unless you have a working crystal ball, there is no way to definitively predict if the market will be up or down in exactly 2 years from now. Thus, I suggest taking the distributions in cash and investing in something much lower risk like a money market mutual fund.",
"title": ""
},
{
"docid": "516c2d122e4ea621f52e35fbf8647cce",
"text": "My figuring (and I'm not an expert here, but I think this is basic math) is: Let's say you had a windfall of $1000 extra dollars today that you could either: a. Use to pay down your mortgage b. Put into some kind of equity mutual fund Maybe you have 20 years left on your mortgage. So your return on investment with choice A is whatever your mortgage interest rate is, compounded monthly or daily. Interest rates are low now, but who knows what they'll be in the future. On the other hand, you should get more return out of an equity mutual fund investment, so I'd say B is your better choice, except: But that's also the other reason why I favour B over A. Let's say you lose your job a year from now. Your bank won't be too lenient with you paying your mortgage, even if you paid it off quicker than originally agreed. But if that money is in mutual funds, you have access to it, and it buys you time when you really need it. People might say that you can always get a second mortgage to get the equity out of it, but try getting a second mortgage when you've just lost your job.",
"title": ""
},
{
"docid": "2d49a4e5f015ac0b5769238ec8257d36",
"text": "In day trading, you're trying to predict the immediate fluctuations of an essentially random system. In long-term investing, you're trying to assess the strength of a company over a period of time. You also have frequent opportunities to assess your position and either add to it or get out.",
"title": ""
},
{
"docid": "9c892be2cb153295e4f3586012c8d0c8",
"text": "It is important to consider your overall financial goals (especially in the 3-5 year range). If you have another financial goal which cannot be met without that additional money then meeting that financial goal might take priority over what I am about to say. Your mortgage rate is another important factor to consider when answering this question. Extra mortgage payments are equivalent to investing that money in a VERY low risk investment with an equivalent yield of the mortgage rate because you will be paying that much less per year in interest. (Actually, when you consider that mortgage interest is often tax-deductible the equivalent yield should be reduced by your income tax rate.) Typically it is not possible to find such a low risk investment with a yield as high as your mortgage rate. For example current mortgage rates are over twice as high as the yield of a one year CD. Also keep in mind that additional mortgage payments help you build equity. This equity will most likely be applied to your next home purchase. If so their effect will be in place throughout the life of your next mortgage too.",
"title": ""
},
{
"docid": "5c4552d9a151aba8324f246f5b6d05e0",
"text": "It depends on the terms. Student loans are often very low interest loans which allow you to spread your costs of education over a long time without incurring too much interest. They are often government subsidized. On the other hand, you often get better mortgage rates if you can bring a down payment for the house. Therefore, it might be more beneficial for you to use money for a down payment than paying off the student load.",
"title": ""
},
{
"docid": "f02b70e2127301b9138ff10812ebf62b",
"text": "Staying with your numbers - a 7% long term return will have a tax of 15% (today's long term cap gain tax) resulting in a post tax of 5.95%. On the other hand, even if the student loan interest remains deductible, it's subject to phaseout and a really successful grad will quickly lose the deduction. There's a similar debate regarding mortgage debt. When I've commented on my 3.5% mortgage costing 2.5% post tax, there's no consensus agreeing that this loan should remain as long as possible in favor of investing in the market for its long term growth. And in this case the advantage is a full 3.45%/yr. While I've made my decision, Ben's points remain, the market return isn't guaranteed, while that monthly loan payment is fixed and due each month. In the big picture, I'd prioritize to make deposits to the 401(k) up to the match, if offered, pay down any higher interest debt such as credit cards, build an emergency account, and then make extra payments to the student loan. Keep in mind, also - if buying a house is an important goal, the savings toward the downpayment might take priority. Student Loans and Your First Mortgage is an article I wrote which describes the interaction between that loan debt and your mortgage borrowing ability. It's worth understanding the process as paying off the S/L too soon can impact that home purchase.",
"title": ""
},
{
"docid": "ae797d88c5b76adca7b12362c7fd28a9",
"text": "Yes you should invest; and yes you should save for the house down payment. These should be two separate pools of money and the goals and time frames for them are different. With a 3 year time frame for the down payment on the house, the risk you should accept should be essentially zero. That means it is less of an investment and more plain vanilla savings account, or maybe a higher interest account, or a CD. The worst thing to have happen would be to try and save for the house while the value of your investment keeps dropping. You have to decide how to allocate your income between retirement accounts and saving for the house, while still meeting all your other obligations. The exact balance depends on how much you need to save for retirement, and things such as rules for the company match.",
"title": ""
}
] |
fiqa
|
8d166f35786241d1f16a3147835252bf
|
Which mutual funds is Dave Ramsey talking about in The Total Money Makeover? [duplicate]
|
[
{
"docid": "d36523369ec95cd476b356b42b3d32a2",
"text": "See the Moneychimp site. From 1934 to 2006, the S&P returned an 'average' 12.81%. But the CAGR was 11.26%. I wrote an article Average Return vs Compound Annual Growth to address this issue. Interesting that over time only a few funds have managed to get anywhere near this return, but the low cost indexer can get the long term CAGR minus .05% or so, if they wish.",
"title": ""
}
] |
[
{
"docid": "bc8f593c174368c4c817cd8ea5e13e90",
"text": "Picking yourself is just what all the fund managers are trying to do, and history shows that the majority of them fails the majority of the time to beat the index fund. That is the core reason of the current run after index funds. What that means is that although it doesn’t sound so hard, it is not easy at all to beat an index consistently. Of course you can assume that you are better than all those high-paid specialists, but I would have some doubt. You might be luckier, but then you might be not.",
"title": ""
},
{
"docid": "998cdb835e72e71a8e6eda6945032911",
"text": "Debt is evil according to Dave, but investing in companies that profit from debt is never shunned. In fact, he loves broad basket ETFs and mutual funds. How many industries would grind to a halt without the liquidity provided by consumer credit?",
"title": ""
},
{
"docid": "371ea9b6870951489d6eac85856c50f1",
"text": "\"common sentiment that no investor can consistently beat the market on returns. I guess its more like very few investor can beat the market, a vast Majority cannot / do not. What evidence exists for or against this? Obviously we can have a comparison of all investors. If we start taking a look at some of the Actively Managed Funds. Given that Fund Managers are experts compared to common individual investors, if we compare this, we can potentially extend it more generically to others. Most funds beat the markets for few years, as you keep increasing the timeline, i.e. try seeing 10 year 15 year 20 year return; this is easy the data is available, you would realize that no fund consistently beat the index. Few years quite good, few years quite bad. On Average most funds were below market returns especially if one compares on longer terms or 10 - 20 years. Hence the perception Of course we all know Warren Buffet has beat the market by leaps and bounds. After the initial success, people like Warren Buffet develop the power of \"\"Self Fulfilling Prophecy\"\". There would be many other individuals.\"",
"title": ""
},
{
"docid": "c9cca61cae3777367618be2016ea092d",
"text": "Dave Ramsey has a list of ELPs (Endorsed Local Providers) of which I've only heard good things. You can request an investment ELP here.",
"title": ""
},
{
"docid": "f6098bada08d41d7fd8943cd63346d6f",
"text": "From The Prospectus for VTIVX; as compared to the Total Stock Market Fund; You can see how the Target date fund is a 'pass through' type of expense. It's not an adder. That's how I read this.",
"title": ""
},
{
"docid": "1797deca663558fec70143129bd9e34b",
"text": "\"I would highly recommend the Dave Ramsey book \"\"The Total Money Makeover\"\". I read it about 5 years ago and my financial situation has slowly but steadily been improving ever since.\"",
"title": ""
},
{
"docid": "2bcdda60f3b4d3e30dc4ab0a0479d764",
"text": "\"Dave Ramsey would tell you to pay the smallest debt off first, regardless of interest rate, to build momentum for your debt snowball. Doing so also gives you some \"\"wins\"\" sooner than later in the goal of becoming debt free.\"",
"title": ""
},
{
"docid": "17d8c9ce8333dce95012229164d8535b",
"text": "This is probably the best, most concise and yet detailed answer to this oft-posed question I've seen on this sub. Have an upvote. Only thing I'd add is that HFs' comparatively more active approach creates a moat vs. mutual funds, which are seen as more long-term, passive investments. This means they can charge fees and have higher expense ratios (though obviously anyone in finance who has been conscious in the last five years knows that this is changing)",
"title": ""
},
{
"docid": "2b61c5a5c10181068fa87709c6c4ddf5",
"text": "Just sticking to equities: If you are investing directly in a share/stock, depending on various factors, you may have picked up a winner or to your dismay a loser. Say you just have Rs 10,000/- to invest, which stock would you buy? If you don't know, then it’s better to buy a Mutual Fund. Now if you say you would buy a few of everything, then even to purchase say Rs 5000/- worth of each stock in the NIFTY Index [50 companies] you would require at least an investment of 250,000/-. When you are investing directly you always have to buy in whole numbers, i.e. you can't buy 1/2 share or 1.6 share of some stock. The way Mutual funds work is they take 10,000 from 250 people and invest in all the stocks. There are fund managers who's job is to pick good stocks, however even they cannot predict winners all the time. Normally a few of the picks become great winners, most are average, and a few are losers; this means that overall your returns are average VS if you had picked the winning stock. The essential difference between you investing on your own and via mutual funds are: It is good to begin with a Mutual Fund, and once you start understanding the stocks better you can invest directly into the equities. The same logic holds true for Debt as well.",
"title": ""
},
{
"docid": "6dbb192aac9096a004b081e5518c1263",
"text": "There are a few ETFs that fall into the money market category: SHV, BIL, PVI and MINT. What normally looks like an insignificant expense ratio looks pretty big when compared to the small yields offered by these funds. The same holds for the spread and transaction fees. For that reason, I'm not sure if the fund route is worth it.",
"title": ""
},
{
"docid": "87257c9e7676b1f5e305e8799e0c1dba",
"text": "\"Let me start with something you might dismiss as trite - Correlation does not mean Causation. A money manager charging say, 1%, isn't likely to take on clients below a minimum level. On the other hand, there's a long debate regarding how, on average, managed funds don't beat the averages. I think that you should look at it this way. People that have money tend to be focused on other things. A brain surgeon making $500K/yr may not have the time, nor the inclination to want to manage her own money. I was always a numbers person. I marveled at the difference between raising 1.1 to the 40th power, getting 45.3 (i.e. Getting 45.3 times your investment after 40 years at 10%) vs 31.4 at 9%. That 1% difference feels like nothing, but after a lifetime, 1/3 of your money has been skimmed off the top. the data show that one can do better by simply putting their money into a mix of S&P index and cash, and beat the average money manager over time, regardless of convoluted 12 asset class allocations. Similarly - There are people who use a 'tax guy.' In quotes because I mean this as an individual whom they go to, year after year, not a storefront. My inlaws used to go to one, and I was curious what they got for their money. Each year he sent them a form. 3 pages they needed to fill in. Every cell made its way into the guy's tax program. The last year, I went with them to pick up the tax return. I asked him if he noticed that they might benefit from small Roth conversions each year, or by making some of their IRA RMD directly to charity. He kindly told me \"\"That's not what we do here\"\" and whisked us away. I planned both questions in advance. The Roth conversion was a strategy that one could agree made sense or dismiss as convoluted for some clients. But. The RMD issue was very different. They didn't have enough Schedule A deductions to itemize. Therefore the $3000 they donated each year wasn't impacting their return. By donating directly from their IRAs, this money would avoid tax. It would have saved them more than the cost of the tax guy, who charged a hefty fee, in my opinion. It seemed to me, this particular strategy should be obvious to one whose business is preparing returns.\"",
"title": ""
},
{
"docid": "33c9b30f9dd396f4707a11d4ea5e3afb",
"text": "Fisher Capital Management: Leading 10 Monetary Suggestions Posted on 17/10/2011 by fcminvestment Even though resolutions boost financial condition a great idea to accomplish in any period for year is for numerous persons discover this less difficult from the starting of the New Year. Irrespective of any time one start, the fundamentals stay identical. Fisher Capital Management shares recommendations in order to be in advance monetarily. 1. Be Compensated How Much you are worth and Save Some Part of It This appears easy; however countless individuals have difficulty having this specific initial fundamental principle. Be positive and understand exactly what your task is worth within the industry, through executing the assessment of your expertise, productiveness, career responsibilities, involvement to the firm, and the current fee, equally within and beyond the organization, regarding what you perform. Becoming under compensated actually a thousand bucks a year may possess a substantial collective result more than the actual process of one’s employment existence. Irrespective of the amount or perhaps how small you are compensated, you will in no way obtain be advance in case one devote far more compared to a person gain. Frequently it is less difficult to invest much less compared to this will be to make much more, and the small efforts within the amount of places may outcome in large savings. This will not usually have that which includes producing large sacrifices. 2. Adhere to the Price Range How many people understand when the funds will be heading when one never budget? How does a person can easily established investing and saving targets when one never understands in which the cash is actually heading? People require the budget whether or not a person creates thousands or perhaps hundreds of thousands of bucks a year. 3. Settle Credit Card Accounts Credit card financial obligation is actually the number one hindrance to becoming ahead monetarily. These small items of plastic tend to be so convenient to utilize, it is therefore very easy to overlook that it is actual cash we are coping with whenever you whip these away to pay out for any transaction, big or even little. In spite of the great resolves in order to shell out balance away swiftly, the truth is that it usually will not, and wind up having to pay much more regarding issues compared to make paid off when you made use of money. 4. Chip in towards the Pension Program When the company has a 401(k) plan and a person do not contribute to this, you are running away through one of the finest discounts right there. Request the boss if they have the 401(k) plan (or even comparable program), and sign up right now. In the event that you happen to be contributing, attempt to increase the contribution. In case the company will not provide the pension program, think about the Individual retirement account. 5. Make Financial Savings Program You might have discovered this before: Pay for yourself first! If perhaps a person delay till you have satisfied most ones monetary commitments prior to finding what is remaining around for saving, probabilities tend to be you will in no way possess a wholesome financial savings accounts or perhaps opportunities. Deal with it in order to fix apart the minimal for 5% to 10% of the income to get savings prior to shelling out the expenses. More desirable however, get cash instantly taken off through the income and deposit straight into a distinct account. 6. Make Investments! Should you are contributing the pension program and the savings account as well as one may also handle to set a number of funds in to some other ventures, all the far better. 7. Improve Ones Career Rewards Work benefits such as the 401(k) program, flexible expenditure consideration, healthcare as well as dental care coverage, and so on. are usually valued at huge money. Try to make certain you will be making the most of your own and also getting benefit of these kinds which can easily help save cash through lowering taxation or perhaps out-of-pocket expenditures. 8. Evaluate Ones Coverage Protections Overly numerous individuals tend to be though in to spending a lot regarding life and impairment coverage, no matter if it is through incorporating all these protections to automobile mortgages, purchasing whole-life insurance if term-life creates a lot more feeling, or perhaps purchasing life insurance any time one possess absolutely no dependents. In the different side, it really is essential to an individual get sufficient insurance coverage to be able to safeguard the loved ones and also the earnings in the event of fatality or possibly impairment. 9. Revise Your Current Will 70% of American citizens do not possess a will. In case a person have dependents, irrespective of just how small or what amount a person own, an individual need a will. When the predicament is not very difficult a person may actually carry out the personal plan just like WillMaker through Nolo Press. Safeguard your own cherished family members. Create your will. 10. Maintain Suitable Data When a person do not maintain useful data, you are most likely in no way proclaiming all the allowable revenue taxes deductions as well as credits. Established a method today and utilize this each of the year. It is a lot simpler compared to rushing in order to discover all the things from taxes period, just to skip things which may have rescued a person capital.",
"title": ""
},
{
"docid": "747228de68d50eeb53a114dfcfce24a9",
"text": "\"I think it's great that you want to contribute. Course Instructor You may want to take a look at becoming an instructor for a course like Dave Ramsey's Financial Peace University. These are commonly offered through churches and other community venues for a fee. This may be a good fit if you want to focus on basic financial literacy, setting up and sticking to a budget, and getting their financial \"\"house\"\" in order. It may not be a good fit if you don't want to teach an existing curriculum, or if you find the tenets of the course too unpalatable. A significant number of the people in Dave's audience are close to or in the middle of a financial meltdown, and so his advice includes controversial ideas such as avoiding credit altogether, often because that's how they got into their current mess. Counselor If you want to run your own show, I know of several people who have built their own practice that is run along the lines of a counselor charging hourly rates, and they work with couples who are having money problems. Building a reputation and a network of referring counselors and professionals is key here, and definitely seems like it would require a full-time commitment. I would avoid \"\"credit counseling\"\" and the like. Most of these organizations are focused on restructuring credit card debt, not spending signficant time on behavioral change. You don't need a series 7, 63, 65 etc. or even a CFA. I've previously acquired a number of these and can confirm that they are investment credentials that are intended to help you get a job and/or get more business as a broker or conventional financial planner, i.e. salesperson of securities. The licensure process is necessary to protect consumers from advice that serves the investment sales force but is bad for the consumer, and because you must be licensed to provide investment advice. There is a class of fee-only financial planners, but they primarily deal with complex issues that allow them to make money, and often give away basic personal finance advice for free in the form of articles, podcasts, etc. Charity For part-time or free work, in my area there are also several charity organizations that help people do their taxes and provide basic budgeting and personal finance instruction, but this is very localized and may vary quite a bit depending on where you live. However, if there are none near you, you can always start one! Journalism If you have an interest in writing, there are also people who work as journalists and write columns, books, or newsletters, and it is much easier now to publish and build a network online, either on your own, through a blog or contributing to a website. Speaker at Community events There are also many opportunities to speak to a specific community such as a church or social organization. For example, where I live there are local organizations for Spanish speaking, Polish speaking, elderly, young professional, young mother and retiree groups for example, all of who might be interested in your advice on issues that specifically address their needs. Good luck!\"",
"title": ""
},
{
"docid": "81ca4199d6d1d441451212d1c3ce93cd",
"text": "\"That's weird, because I think of money managers as people who \"\"manage money\"\". Based on the history of the Medallion Fund, the fund seems to consistently turn money into \"\"more\"\" money, and rarely seems to turn it into \"\"less\"\" money, which seems to indicate that it's pretty good at \"\"managing\"\" the \"\"money\"\" that it's been entrusted with.\"",
"title": ""
},
{
"docid": "c0c0d39f8df8c4b635315554a55d549e",
"text": "\"Sure, it doesn't, but realistically they can't/shouldn't do anything about it in their index funds, because then they're just another stock picker, trying to gauge which companies are going to do best. Their funds not all being indexes is what I was getting at with my original question. How much leeway do they have in their definitions of other funds? IE, if they had a dividend fund that included all large cap dividend paying stocks above 3% yield, they couldn't take out Shell just because of climate risk without fundamentally changing what the fund is. But if it's just \"\"income fund\"\" then they can do whatever in that space.\"",
"title": ""
}
] |
fiqa
|
fc29b84cfc32ae53d802edabf5b2d09c
|
Why can I see/trade VIX but not S&P/TSX 60 VIX?
|
[
{
"docid": "04f8c79101781d940bc848bc38ac0671",
"text": "S&P/TSX 60 VIX (CAD) is an equation and as the implied volatility of two close to the money TSX 60 options change, the output changes. This is why the intra-day price fluctuates on a graph like a traded product. Although VIXC can't be traded, it can still be used as an important signal for traders. The excerpt is from slide 12, more information can be found here. https://www.m-x.ca/f_publications_en/vixc_presentation_en.pdf Futures (stage 2) Options, ETFs, OTC Products (stage 3) have not been implemented.",
"title": ""
},
{
"docid": "1649515073aaa06f4dd5ac3ab440d8f9",
"text": "You can trade VXX, but VIX is only an index. http://www.marketwatch.com/investing/stock/VXX?CountryCode=US",
"title": ""
}
] |
[
{
"docid": "de6c4401e481d9f660c967f3307c4199",
"text": "My logic for prices was this: S&P500/indexes price is based on the overall market for S&P500, generally. So my thought was that it should be correlated to the price of the Vix because as market volatility occurred, the price of the Vix would go up and vice Versa when the market goes down. However, I just started running these analyses as a side project and am still learning the right measures to make better observations. So I'm all for any advice in that regard.",
"title": ""
},
{
"docid": "d69b34cd3c5aa3e5c546f1041170a59a",
"text": "I'm still short UVXY since a couple reverse splits ago, but I start to worry when everyone is shorting VIX, with VIX now under 10, and even VIX futures a few months out around 13. As far as VIX calls; I wouldn't play VIX options myself unless it's very near term (weeklies) and done as a quick trade at opportune times. This big trade however was an interesting approach.",
"title": ""
},
{
"docid": "0cfd6e811ae6aff8da01acafa664047e",
"text": "Because someone smarter than you by 50 IQ points (a quant) will depart their larger position long before you have a chance to see it coming. Your stop losses are useless as the market will open with the issue below your sell price. Your trade even if place at the same mine would settle after theirs. don't piss in the tall grass with the big dogs. If they are wrong or right does not matter you will be haircut or whipsawed.",
"title": ""
},
{
"docid": "66530672adfb39be5f65813dc9f0922a",
"text": "Here's the 2009-2014 return of the S&P 500 (SPY) vs. Vanguard FTSE ex-US (VEU) (higher returns bolded) Another argument for them is their low correlation to U.S stocks. Looking at history however, I don't see it. Most times U.S stocks have done badly, foreign stocks have also done badly. Looking at the last 6 years (and current YTD), 1 in 3 years have international stocks doing better. I invest a portion of my investments in international because they aren't well correlated.",
"title": ""
},
{
"docid": "0821dcd83a9983f7199d0359f5617117",
"text": "\"There is no good proxy for VIX, because it is a completely made-up value. Most listed options trade on an underlying security. I can therefore choose to buy either the stock, or a future or option on that stock. In this way, the future and option are derivatives in that they derive their value (in part) based on something else, in this case the stock price as of now. VIX is a different entity altogether. It is based on the volatility of the market, using \"\"market expectation of near term volatility conveyed by stock index option prices\"\". But the FAQ goes on to state that they are adding factors into the formula. So right away there is no one equity/stock that you can hold that will necessarily match the VIX in any significant way, because it is not directly based on stocks, but indirectly through other options and computations. In effect, therefore, the VIX in indeed only available through its options, and is not observable (tradable) in and of itself.\"",
"title": ""
},
{
"docid": "dac3ab9bcfeaad65bc3bac901876b8ee",
"text": "In a simple statement, no doesn't matter. Checked on my trade portal, everything lines up. Same ISIN, same price(after factoring in FX conversions, if you were thinking about arbitrage those days are long gone). But a unusual phenomenon I have observed is, if you aren't allowed to buy/sell a stock in one market and try to do that in a different market for the same stock you will still not be allowed to do it. Tried it on French stocks as my current provider doesn't allow me to deal in French stocks.",
"title": ""
},
{
"docid": "2b23681c3322b5595b3103d3e8839086",
"text": "\"Generally, ETFs work on the basis that there exists a pair of values that can be taken at any moment in time: A Net Asset Value of each share in the fund and a trading market price of each share in the fund. It may help to picture these in baskets of about 50,000 shares for the creation/redemption process. If the NAV is greater than the market price, then arbitrageurs will buy up shares at the market price and do an \"\"in-kind\"\" transaction that will be worth the NAV value that the arbitrageurs could turn around and sell for an immediate profit. If the market price is greater than the NAV, then the arbitrageurs will buy up the underlying securities that can be exchanged \"\"in-kind\"\" for shares in the fund that can then be sold on the market for an immediate profit. What is the ETF Creation/Redemption Mechanism? would be a source on this though I imagine there are others. Now, in the case of VXX, there is something to be said for how much trading is being done and what impact this can have. From a July 8, 2013 Yahoo Finance article: At big option trade in the iPath S&P 500 VIX Short-Term Futures Note is looking for another jump in volatility. More than 250,000 VXX options have already traded, twice its daily average over the last month. optionMONSTER systems show that a trader bought 13,298 August 26 calls for the ask price of $0.24 in volume that was 6 times the strike's previous open interest, clearly indicating new activity. Now the total returns of the ETF are a combination of changes in share price plus what happens with the distributions which could be held as cash or reinvested to purchase more shares.\"",
"title": ""
},
{
"docid": "98ec62c00c0dccd391719cde2f4c95bc",
"text": "When there is a difference between the two ... no trading occurs. Let's look at an example: Investor A, B, C, and D all buy/sell shares of company X. Investor A wants to sell 10 shares at $20 a share (Ask price $20 x10). Investor B wants to buy 15 shares at $10 a share (Bid price $10 x15). Since the bid price and ask price are different, no sale is made. Next Investor C comes along and wants to sell 5 shares at $14 (Ask price $14 x5). Still no sale. Investor D comes along and wants to buy 5 shares for $14 each. So a sale is finally made. At this point, the stock quote moves to $14. The ask price is $20 x10 and the bid price is $10 x15. No further trading will occur until another investor is willing to buy at $20 or sell at $10. Another discussion of this topic is shown on this post.",
"title": ""
},
{
"docid": "a6b6f34e6af19228c13d0ee80944cdd1",
"text": "Interesting, but I don't think we are talking the same thing. This seems to say that that the fund itself doesn't have the rule applied: I.E. the MF can't get hit with the 5% commission when you buy it. That makes sense. What I'm asking though is that when my (say) American Fund that I own already does a rebalance, the constituent holdings change. Those securities are not exempt from the rule and thus when they are transacted can have commissions applied. As a matter of fact the broker for those securities has no idea if the fund is eligible or not. Where did you get this from? As I'm. It studying for a series 7 I'm probably missing some foundational sources.",
"title": ""
},
{
"docid": "32ca0287dec65ed058c50e3065c832de",
"text": "\"Suppose the stock is $41 at expiry. The graph says I will lose money. I think I paid $37.20 for (net debit) at this price. I would make money, not lose. What am I missing? The `net debit' doesn't have anything to do with your P/L graph. Your graph is also showing your profit and loss for NOW and only one expiration. Your trade has two expirations, and I don't know which one that graph is showing. That is the \"\"mystery\"\" behind that graph. Regardless, your PUTs are mitigating your loss as you would expect, if you didn't have the put you would simply lose more money at that particular price range. If you don't like that particular range then you will have to consider a different contract. it was originally a simple covered call, I added a put to protect from stock going lower.. Your strike prices are all over the place and NBIX has a contract at every whole number.... there is nothing simple about this trade. You typically won't find an \"\"always profitable\"\" combination of options. Also, changes in volatility can distort your projects greatly.\"",
"title": ""
},
{
"docid": "33ac39972a1a57646b9f5348a6da011c",
"text": "\"The shares available to short are a portion of those shares held by the longs. This number is actually much easier to determine outside of active trading hours, but either way doesn't really impact the matter at hand since computers are pretty good at counting things. If your broker is putting up obstacles to your issuing sell short limit orders in the pre-market then there is likely some other reason (maybe they reserve that function to \"\"premium\"\" account holders?)\"",
"title": ""
},
{
"docid": "e54c4372e2aa2d8e207a2711cf44c3e6",
"text": "I stumbled on the same discrepancy, and was puzzled by a significant difference between the two prices on ETR and FRA. For example, today is Sunday, and google shows the following closing prices for DAI. FRA:DAI: ETR:DAI: So it looks like there are indeed two different exchanges trading at different prices. Now, the important value here, is the last column (Volume). According to Wikipedia, the trading on Frankfort Stock Exchange is done today exclusively via Xetra platform, thus the volume on ETR:DAI is much more important than on FRA:DAI. Obviously, they Wikipedia is not 100% accurate, i.e. not all trading is done electronically via Xetra. According to their web-page, Frankfort exchange has a Specialist Trading on Frankfurt Floor service which has slightly different trading hours. I suspect what Google and Yahoo show as Frankfort exchange is this manual trading via a Specialist (opposed to Xetra electronic trading). To answer your question, the stock you're having is exactly the same, meaning if you bought an ETR:BMW you can still sell it on FRA (by calling a FRA Trading Floor Specialist which will probably cost you a fee). On the other hand, for the portfolio valuation and performance assessments you should only use ETR:BMW prices, because it is way more liquid, and thus better reflect the current market valuation.",
"title": ""
},
{
"docid": "e62ebceda240f5ef519556619d7c84bf",
"text": "interesting and good points BUT, 1- the S&P e-mini has plenty of liquidity for me and all of us here at reddit. idont think that we could move/influence its price with our trades. 2- i dont have the historical of bid-ask or tick by tick, it is backtested on 1min chart, entering the trade at a close of a 1min bar and subtracting a commission/slippage of a tick or two per trade. your thoughts ?",
"title": ""
},
{
"docid": "510141ac2504a9acc193963a04ec046d",
"text": "\"In the US there is only one stock market (ignoring penny stocks) and handfuls of different exchanges behind it. NYSE and NASDAQ are two different exchanges, but all the products you can buy on one can also be bought on the other; i.e. they are all the same market. So a US equities broker cannot possibly restrict access to any \"\"markets\"\" in the US because there is only one. (Interestingly, it is commonplace for US equity brokers to cheat their customers by using only exchanges where they -- the brokers -- get the best deals, even if it means your order is not executed as quickly or cheaply as possible. This is called payment for order flow and unfortunately will probably take an Act of Congress to stop.) Some very large brokers will have trading access to popular equity markets in other countries (Toronto Stock Exchange, Mexico Stock Exchange, London Stock Exchange) and can support your trades there. However, at many brokers or in less popular foreign markets this is usually not the case; to trade in the average foreign country you typically must open an account with a broker in that country.\"",
"title": ""
},
{
"docid": "43b3828038e246be1a8a086d1e9172df",
"text": "\"The key for your friends is a robust and detailed form of budgeting. There are plenty of website resources to help them through that process and you should steer them there rather than go through it with them yourself. Of course you should show willing to answer questions and help if asked. The budgeting exercise will require quite some effort and diligence to track historical and current actual expenditure (keeping a detailed spending diary is an excellent way to start). This must be coupled with a lot thought about ways to trim at various degrees of severity. For example it means analysing all utilities deals to make sure they're on the most suitable package. It is also an ongoing, iterative process - not a one-off. The only way in which you giving money to them would be of help is if they have borrowings and the cost of servicing that debt via interest is what's tipping their budget from positive to negative. Only if they are averaging a cash surplus each month can they make headway. Otherwise, the underlying causes of their woes are not being addressed, existing spending habits continue and they are merely deferring the changes they need to make. Your friends have to adopt LBYM - Living Below Your Means. That's simply a modern version of Mr Micawber's famous, and oft-quoted, recipe for happiness: \"\"Annual income twenty pounds, annual expenditure nineteen [pounds] nineteen [shillings] and six [pence], result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.\"\" Discussion forums like this make interesting reading: http://boards.fool.com/living-below-your-means-100158.aspx?mid=30971651&sort=collapsed\"",
"title": ""
}
] |
fiqa
|
c828d0dc01485599d01b8cb8f3ec670a
|
Any difficulties in doing deceased relative's taxes?
|
[
{
"docid": "de6d73ac37ae2ca215b4608df4231746",
"text": "There are two different tax returns you'll be doing: one is for her, until the day of her death. The other is for the estate. The personal one you could probably do on your own, it's nothing different from the one for a living person, except for the cut-off date in the middle of the year. The estate tax return may be a bit more nuanced, since it is a trust return and not an individual return, and is done under a different set of rules. I'd suggest talking to a tax professional who'd help you. Your estate executioner should be doing the estate tax return (or hiring someone to do it). Sorry for your loss.",
"title": ""
}
] |
[
{
"docid": "5980be7c0d9e69f125b921f78cbe28a5",
"text": "Distributions from an inherited IRA will be taxed as ordinary income and there are required minimum distributions for the inherited account. Assuming you were 55 at the time of your mother's death, your life expectancy according to the IRS is 29.6 years. Your required yearly distributions on $200,000 would be roughly $6800. For each year that you didn't withdraw that, you would owe a 50% penalty of the distribution amount (~$3400). That's probably better than the tax hit you would take if you pulled it all in as income in a 5 year window (ie. all right now since you're at the end of the window).",
"title": ""
},
{
"docid": "9a730624c13434ec84e3a67975f3dd2a",
"text": "First, the basis is what was paid for the house along with any documented upgrades, any improvements not consider maintenance. Any gain from that point is taxable. This is the issue with gifting a house before one passes. It's an awful mistake. The fact that there was a mortgage doesn't come into play here nor does the $15K given away. Your question is great, and the only missing piece is what the house cost. Keep in mind, depending on the state, you MIL may have gotten a step-up on the passing of her husband. On a very personal note - my grandparents bough a family house. 4 apartments. 1938 at a cost of $4000. My grandmother transferred 1/2 share to my father well before she died. And before my father's death it was put into my mother's name. Now that she's in her last years, I explained that since moved it to my sister's name already, there's no step up in basis. This share is now worth over $600,000, and after 4 deaths, no step up. When my sister sells, she will have a gain on nearly 100% of the sale price. In my opinion, there's a special place in hell for lawyers that quit claim property like this. For a bit of paperwork, the house could have been put into a trust to avoid probate, avoid being an asset for medicaid, and still get the step up. Even a $2000 cost for a good lawyer to set up a trust would yield a return of nearly $100,000 in taxes avoided. (And as my sister's keeper, I'd have paid the $2,000 myself, no issue that she gets the house. She needs it, I don't. And when the money's gone, I'm all she has anyway.)",
"title": ""
},
{
"docid": "b31b79ea910bbf70ddab9ee8a95344ae",
"text": "You don't get any tax benefit. When you are helping a relative or a friend in such situations the income is just gone. The only way to get around this is if you contribute to a charity, and they give it to your mom. You can then deduct the contributions to that charity. However, the IRS has cracked down on such situations and it probably is not worth pursuing. By the recent tax rules, that charity can use those contributions in which every way they choose, they cannot guarantee they go to your mom. Given that you are closed to your allowed exclusion (14K for 2017), I would work to keep your number under that. If you are married, you each get that exclusion so you can give up to 28K. I can't really speak to the reduction of benefits part as I am knowledgeable and more details on the type of transfer payments she receives would be germane to the discussion.",
"title": ""
},
{
"docid": "61bca5eaadfad484bdc2f9c3fa39eb81",
"text": "You should talk to a tax professional in your area. It seems like you should start filing your returns. In the US there are certain income thresholds that need to be attained before a return is required, though it's often thought of as best practice to file anyway. Also in the US there are programs designed to encourage delinquent filers to begin filing again, which may include penalty/fee reduction for voluntarily filing. Somehow I suspect Canada has similar programs. If you stand to inherit a sizable amount of money it seems that you should have a history of tax returns in order to minimize the number of questions that are asked should the money come your way. I'd talk to a tax person before consulting an attorney. From the tone of your question the Canadian tax authority hasn't initiated anything against you. You just want to understand the best course of action regarding your tax situation.",
"title": ""
},
{
"docid": "fc9fd1c7f5733f8ea8a01abe87f8afb8",
"text": "No tax consequences to you. Tax consequences to your sister. From your comment: My sister is single, but my wife and I have a son. So we can avail $14000 x3 = $42000 without the need to report it. The remainder ($70000-$42000) = $28000 will be reported against the lifetime exclusion by my sister on her return. Per my understanding, the $28000 is also not subject to any gift tax It is subject to gift tax, and she must submit gift tax return (form 709) to the IRS. On that return she can choose to apply part of the lifetime exemption and reduce the lifetime limit, or pay the tax and keep the lifetime limit. If she applies the exemption, she needs to keep track of it, so that it could be properly applied next time, or when she passes away. The lifetime exemption is in fact intended for the estate tax. But people can chose and apply it to gifts during lifetime and reduce the exemption for estate. This is something of consequence to take into account. Yearly $14K cap is not related to the lifetime exemption and is for gifts per donor per donee. Breaking the gift into several occasions over several years helps reducing the tax burden on the donor without touching the lifetime exclusion and affecting the estate tax. But if you don't have the time...",
"title": ""
},
{
"docid": "db891ceccd6d732350b0ba8b68d85cfe",
"text": "\"This forum is not intended to be a discussion group, but I would like to add a different perspective, especially for @MrChrister, on @littleadv's rhetorical question \"\"... estates are after-tax money, i.e.: income tax has been paid on them, yet the government taxes them again. Why?\"\" For the cash in an estate, yes, that is after-tax money, but consider other assets such as stocks and real estate. Suppose a rich man bought stock in a small computer start-up company at $10 a share about 35 years ago, and that stock is now worth $500 a share. The man dies and his will bequeaths the shares to his son. According to US tax law, the son's basis in the shares is $500 per share, that is, if the son sells the shares, his capital gains are computed as if he had purchased the shares for $500 each. The son pays no taxes on the inheritance he receives. The deceased father's last income tax return (filed by the executor of the father's will) does not list the $490/share gain as a capital gain since the father did not sell the stock (the gain is what is called an unrealized gain), and so there is no income tax due from the father on the $490/share. Now, if there is no estate tax whatsoever, the father's estate tax return pays no tax on that gain of $490 per share either. Would this be considered an equitable system? Should the government not tax the gain at all? It is worth noting that it would be possible for a government to eliminate estate taxes entirely, but instead have tax laws that say that unrealized gains on the deceased's property would be taxed (as capital gains) on the deceased's final tax return.\"",
"title": ""
},
{
"docid": "d80a1f181bcb140f204904d92426bb01",
"text": "\"The legal term for this is \"\"intestate succession\"\". The 1990 Uniform Probate Code form the basis for intestate succession, though implementation and supplementary provisions will vary from state to state. Under the Probate Code, the estate will be distributed as follows : The Probate Code does not appear to state what happens if no such beneficiaries are found. I suspect the estate would be taken by the IRS after a suitable period of time has passed to allow for relatives to come forward. The source for this answer is the FindLaw website. The law will apply equally to US citizens and foreign nationals.\"",
"title": ""
},
{
"docid": "cd8357d402dd8084d8d89d0fc81cd792",
"text": "Of course, you've already realized that some of that is that smaller estates are more common than larger estates. But it seems unlikely that there are four times as many estates between $10 and $11 million as above that range. People who expect to die with an estate subject to inheritance tax tend to prepare. I don't know how common it is, but if the surviving member of a couple remarries, then the new spouse gets a separate exemption. And of course spouses inherit from spouses without tax. In theory this could last indefinitely. In practice, it is less likely. But if a married couple has $20 million, the first spouse could leave $15 million to the second and $5 million to other heirs. The second spouse could leave $10 million to a third spouse (after remarrying) and another $5 million to children with the first spouse. All without triggering the estate tax. People can put some of their estate into a trust. This can allow the heirs to continue to control the money while not paying inheritance tax. Supposedly Ford (of Ford Motor Company) took that route. Another common strategy is to give the maximum without gift tax each year. That's at least $14k per donor and recipient per year. So a married couple with two kids can transfer $56k per year. Plus $56k for the kids' spouses. And if there are four grandchildren, that's another $112k. Great-grandchildren count too. That's more than a million every five years. So given ten years to prepare, parents can transfer $2 million out of the estate and to the heirs without tax. Consider the case of two wealthy siblings. They've each maxed out their gifts to their own heirs. So they agree to max out their gifts to their sibling's heirs. This effectively doubles the transfer amount without tax implication. Also realize that they can pretransfer assets at the current market rate. So if a rich person has an asset that is currently undervalued, it may make sense to transfer it immediately as a gift. This will use up some of the estate exemption. But if you're going to transfer the asset eventually, you might as well do so when the value is optimal for your purpose. These are just the easy things to do. If someone wants, they can do more complicated things that make it harder for the IRS to track value. For example, the Bezos family invested in Amazon.com when Jeff Bezos was starting it. As a result, his company could survive capital losses that another company might not. The effect of this was to make him fabulously rich and his parents richer than they were. But he won't pay inheritance tax until his parents actually transfer the estate to him (and I believe they actually put it in a charitable trust). If his company had failed instead, he still would have been supported by the capital provided by his parents while it was open (e.g. his salary). But he wouldn't have paid inheritance tax on it. There are other examples of the same pattern: Fred Smith of FedEx; Donald Trump; Bill Gates of Microsoft; etc. The prime value of the estate was not in its transfer, but in working together while alive or through a family trust. The child's company became much more valuable as a result of a parent's wealth. And in two of those examples, the child was so successful that the parent became richer as a result. So the parent's estate does count. Meanwhile, another company might fail, leaving the estate below the threshold despite a great deal of parental support. And those aren't even fiddles. Those children started real companies and offered their parents real investment opportunities. A family that wants to do so can do a lot more with arrangements. Of course, the IRS may be looking for some of them. The point being that the estate might be more than $11 million earlier, but the parents can find ways to reduce it below the inheritance tax exemption by the time that they die.",
"title": ""
},
{
"docid": "17441a42424a6b6152323f38da43d5e5",
"text": "\"From the UK side, the estate may be liable to \"\"inheritance tax\"\" depending on its size - but this will be paid by the estate itself before any payment is made to you, so if the estate makes a payment to you, the whole of it is yours to keep. The tax thresholds are a bit complicated and due to become more so, but at a minimum any estate under £325,000 will be exempt. If your spouse died first without using their entire allowance, or for deaths after 6th April 2017 where a family home is being left to direct descendants, the allowance is higher. Anything above the threshold is subject to 40% tax, which will be paid be the person dealing with the estate before they can distribute anything else.\"",
"title": ""
},
{
"docid": "735c8ce05f91b7ded0f1db14eb87d381",
"text": "If it's in your name and you don't live there, there's a number of issues. If you charge her rent, it needs to be at fair value to treat it as a rental property. If she lives there for the next 20 years, it will (or we hope) gain value. If she passes while it's in her name you get to step up the basis, and avoid tax. If in your name , the gain would be taxable.",
"title": ""
},
{
"docid": "de51eed7f206f76e441b80852ed3401e",
"text": "Up to RS50,000 is exempt from gift taxes. In the US, if one provides more than half the expenses for a relative, they may be a dependent. I don't know the India rules.",
"title": ""
},
{
"docid": "05585c2b30750ac051d36e53534a43c2",
"text": "I am not going to discuss legality, because with family members you are able to give a lot of guidance and assistance without running into legal issues. The biggest problem is that when they transfer the funds to you and you invest the money, all the tax rates and tax limits are determined by your situation; plus you have more investments than you should have so you hit those limits and brackets quicker. For example: In the United states a person can put $5,500 or $6,500 into a IRA or Roth IRA each year. If you combine the funds for three with your funds then you are giving up three quarters of the amount that you can invest in that type of account. The decision regarding Roth or not depends on age and income level. But now their decision is related to what is best based on your situation. The ability to even deduct IRA deposits would be based on your situation. Of course for taxable accounts the tax rate is determined by your income, not theirs. If they want you to have the ability to make investment decisions for them, then power of attorney is the way to go. The money is deposited in their name, and all the rules and tax rates are determined by their situation. You make sure they have all the information they need to login and review the accounts, but you make the all the moves within and between accounts.",
"title": ""
},
{
"docid": "4e558dd105c55cfe2bf640bea41e97a7",
"text": "I know the money isn't taxable when I send it to my parents Yes this is right they send it to their nephew as it will count as a gift No this is incorrect Yes. Refer to Income Tax guide on relations exempt under gifts. Gifts received from relatives are not charged to tax. Relative for this purpose means: (a) Spouse of the individual; (b) Brother or sister of the individual; (c) Brother or sister of the spouse of the individual; (d) Brother or sister of either of the parents of the individual; (e) Any lineal ascendant or descendent of the individual; (f) Any lineal ascendant or descendent of the spouse of the individual; (g) Spouse of the persons referred to in (b) to (f). Friend is not a relative as defined in the above list and hence, gift received from friends will be charged to tax (if other criteria of taxing gift are satisfied). Even if you assumption were true, i.e. your dad gives it to his brother and his brother gives it to his son ... But if this is done sequentially and soon one after the other, is it taxable? The intent is important. One can do it immediately or after few years; if the intent is established that this was done to evade taxes, then you will have to pay the tax as well as penalty.",
"title": ""
},
{
"docid": "e36a351d4efe978cf76e3a10cd0cd0ff",
"text": "A gift between spouses has no tax implications. If one spouse dies the inheritance tax is always zero no matter how much of the estate passes to the surviving spouse. Gift taxes are actually related to estate taxes, so a gift no matter how large never requires filing any tax forms or paying any taxes.",
"title": ""
},
{
"docid": "164754ff32a53d90a39c6fbc20049715",
"text": "I can't answer from the Indian side but on the UK side, if you and your friend are not related then there is no tax implication - you are effectively giving each other gifts - other than a possible inheritance tax liability if one of you dies within 7 years of the transfer and has an estate above the IHT allowance.",
"title": ""
}
] |
fiqa
|
de600a1adcefb3105f0b80a6e180f358
|
What is a decent rate of return for investing in the markets?
|
[
{
"docid": "1aa5f1b430093745597a20ae6f4fba86",
"text": "Don't ever, ever, ever let someone else handle your money, unless you want somebody else have your money. Nobody can guarantee a return on stocks. That's utter bullshit. Stock go up and down according to market emotions. How can your guru predict the market's future emotions? Keep your head cool with stocks. Only buy when you are 'sure' you are not going to need the money in the next 10 years. Buy obligations before stocks, invest in 'defensive' stocks before investing in 'aggressive' stocks. Keep more money in obligations and defensive stock than in aggressive stocks. See how you can do by yourself. Before buying (or selling) anything, think about the risks, the market, the expert's opinion about this investment, etc. Set a target for selling (and adjust the target according to the performance of the stock). Before investing, try to learn about investing, really. I've made my mistakes, you'll make yours, let's hope they're not the same :)",
"title": ""
},
{
"docid": "40de156024258d2a41ab5c1dfddef82e",
"text": "Seems like you should be aiming to beat the professionals, otherwise why not let them handle it? So 4.01% is a logical start. Perhaps round that up to 4.05%",
"title": ""
},
{
"docid": "365f3ac9b47ee04cd35b18cf28973dd1",
"text": "\"If someone is guaranteeing X%, then clearly you can borrow money for less than X% (otherwise his claim wouldn't be remotely impressive). So why not do that if his 4% is guaranteed? :) Anyway, my answer would be that beating the market as a whole is a \"\"decent\"\" rate of return. I've always used the S&P 500 as a benchmark but you can use other indices or funds.\"",
"title": ""
},
{
"docid": "157f8b5a3aff4e0575f83adcd9bdc5da",
"text": "\"What do you think is a reasonable rate of return? A reasonable rate really breaks down into three things: opportunity cost, what you need, and risk appetite. Opportunity cost comes into play because whatever returns you make should at least exceed, after expenses, the next best option. Typically the \"\"next best option\"\" is the risk free return you can get somewhere else, which is typically a savings account or some other (safe) investment vehicle (e.g. a guaranteed investment certificate/GIC, bonds, etc). But, this opportunity cost could also be an alternative investment (e.g. an index ETF), which is not necessarily risk free (but it may represent the next best option). Risk appetite comes down to the amount of risk you are willing to take on any investment, and is completely subjective. This is typically \"\"how much can you sleep with losing\"\" amount. What you need is the most subjective element. All things being equal (e.g. identical risk profiles, access to same next-best-thing to invest in), if your cost of living expenses are only expected to go up 2% per year, but mine are expected to go up 3% per year, then my reasonable rate of return must exceed 3%, but yours must only exceed 2%. That said, an appropriate return is whatever works for you, period. Nobody can tell you otherwise. For your own investing, what you can do is measure yourself against a benchmark. E.g. if your benchmark is the S&P 500, then the S&P 500 SPDR ETF is your opportunity cost (e.g. what you would have made if you didn't do your own investing). In that way, you are guaranteed the market return (caveat: the market return is not guaranteed to be positive). As an aside.. Don't ever, ever, ever let someone else handle your money, unless you want somebody else have your money. There is nothing wrong with letting someone else handle your money, provided you can live with the triple constraint above. Investing takes time and effort, and time and effort equals opportunity. If you can do something better with the time and effort you would spend to do your own investing, then by all means, do it. Think about it: if you have to spend 1 day a month managing your own investments, but that day costs you $100 in foregone income (e.g. you are a sole proprietor, so every day is a working day), that is $1,200 per year. But if you can find an investment advisor who will manage your books for you, and costs you only $500 per year, what is the better investment? If you do it yourself, you are losing $1,200. If you pay someone, you are losing $500. Clearly, it is cheaper to outsource. Despite what everyone says, not everyone can be an investor. Not everyone wants to live with the psychological, emotional, and mental effort of looking up stocks, buying them, and then second guessing themselves; they are more than happy to pay someone to do that (which also lets them point the finger at that person later, if things go sideways).\"",
"title": ""
}
] |
[
{
"docid": "d3fa67f6d512004eb69580e49b12485e",
"text": "\"Do you recall where you read that 25% is considered very good? I graduated college in 1984 so that's when my own 'investing life' really began. Of the 29 years, 9 of them showed 25% to be not quite so good. 2013 32.42, 2009 27.11, 2003 28.72, 1998 28.73, 1997 33.67, 1995 38.02, 1991 30.95, 1989 32.00, 1985 32.24. Of course this is only in hindsight, and the returns I list are for the S&P index. Even with these great 9 years, the CAGR (compound annual growth) of the S&P from 1985 till the end of 2013 was 11.32% Most managed funds (i.e. mutual funds) do not match the S&P over time. Much has been written on how an individual investor's best approach is to simply find the lowest cost index and use a mix with bonds (government) to match their risk tolerance. \"\"my long term return is about S&P less .05%\"\" sounds like I'm announcing that I'm doing worse than average. Yes, and proud of it. Most investors (85-95% depending on survey) lag by far more than this, many percent in fact)\"",
"title": ""
},
{
"docid": "3ab2573cad4bde03574e290f5e8ed6ac",
"text": "\"I think this is a good question with no single right answer. For a conservative investor, possible responses to low rates would be: Probably the best response is somewhere in the middle: consider riskier investments for a part of your portfolio, but still hold on to some cash, and in any case do not expect great results in a bad economy. For a more detailed analysis, let's consider the three main asset classes of cash, bonds, and stocks, and how they might preform in a low-interest-rate environment. (By \"\"stocks\"\" I really mean mutual funds that invest in a diversified mixture of stocks, rather than individual stocks, which would be even riskier. You can use mutual funds for bonds too, although diversification is not important for government bonds.) Cash. Advantages: Safe in the short term. Available on short notice for emergencies. Disadvantages: Low returns, and possibly inflation (although you retain the flexibility to move to other investments if inflation increases.) Bonds. Advantages: Somewhat higher returns than cash. Disadvantages: Returns are still rather low, and more vulnerable to inflation. Also the market price will drop temporarily if rates rise. Stocks. Advantages: Better at preserving your purchasing power against inflation in the long term (20 years or more, say.) Returns are likely to be higher than stocks or bonds on average. Disadvantages: Price can fluctuate a lot in the short-to-medium term. Also, expected returns are still less than they would be in better economic times. Although the low rates may change the question a little, the most important thing for an investor is still to be familiar with these basic asset classes. Note that the best risk-adjusted reward might be attained by some mixture of the three.\"",
"title": ""
},
{
"docid": "4cef894cebded926516253134c852d03",
"text": "For the period 1950 to 2009, if you adjust the S&P 500 for inflation and account for dividends, the average annual return comes out to exactly 7.0%. Source. Currently inflation is around 2%. So your 2% APY is a 0% real return where the stock market return is 7%. I.e. on average, stocks have a return that is higher by 7. If you mix in bonds, 70% stocks to 30% bonds, your real returns will drop to around 5.5%, but you are safer in individual years (bonds often have good years when stocks have bad years). We're making a bit of a false dichotomy here. We're talking about returns on stocks in retirement accounts versus returns on CDs in regular accounts. You can buy stocks in regular accounts and it is legally possible to have a CD in a retirement account. So you can get bankruptcy protection and tax advantages with a CD.",
"title": ""
},
{
"docid": "cfb8eb76f144b9bc12d00e547c5e16c9",
"text": "\"I'd refer you to Is it true that 90% of investors lose their money? The answer there is \"\"no, not true,\"\" and much of the discussion applies to this question. The stock market rises over time. Even after adjusting for inflation, a positive return. Those who try to beat the market, choosing individual stocks, on average, lag the market quite a bit. Even in a year of great returns, as is this year ('13 is up nearly 25% as measured by the S&P) there are stocks that are up, and stocks that are down. Simply look at a dozen stock funds and see the variety of returns. I don't even look anymore, because I'm sure that of 12, 2 or three will be ahead, 3-4 well behind, and the rest clustered near 25. Still, if you wish to embark on individual stock purchases, I recommend starting when you can invest in 20 different stocks, spread over different industries, and be willing to commit time to follow them, so each year you might be selling 3-5 and replacing with stocks you prefer. It's the ETF I recommend for most, along with a buy and hold strategy, buying in over time will show decent returns over the long run, and the ETF strategy will keep costs low.\"",
"title": ""
},
{
"docid": "5f45d01927c79b6f74f74be100f036a2",
"text": "Instead of buying in bulk, I invest the money in equity mutual funds, for an expected return of 12%, which is more than inflation. So, I make more returns. But at the cost of a slight risk, which I'm comfortable with.",
"title": ""
},
{
"docid": "9cb8d2713786a67c691618f992ccd148",
"text": "The assumption that house value appreciates 5% per year is unrealistic. Over the very long term, real house prices has stayed approximately constant. A house that is 10 years old today is 11 years old a year after, so this phenomenon of real house prices staying constant applies only to the market as a whole and not to an individual house, unless the individual house is maintained well. One house is an extremely poorly diversified investment. What if the house you buy turns out to have a mold problem? You can lose your investment almost overnight. In contrast to this, it is extremely unlikely that the same could happen on a well-diversified stock portfolio (although it can happen on an individual stock). Thus, if non-leveraged stock portfolio has a nominal return of 8% over the long term, I would demand higher return, say 10%, from a non-leveraged investment to an individual house because of the greater risks. If you have the ability to diversify your real estate investments, a portfolio of diversified real estate investments is safer than a diversified stock portfolio, so I would demand a nominal return of 6% over the long term from such a diversified portfolio. To decide if it's better to buy a house or to live in rental property, you need to gather all of the costs of both options (including the opportunity cost of the capital which you could otherwise invest elsewhere). The real return of buying a house instead of renting it comes from the fact that you do not need to pay rent, not from the fact that house prices tend to appreciate (which they won't do more than inflation over a very long term). For my case, I live in Finland in a special case of near-rental property where you pay 15% of the building cost when moving in (and get the 15% payment back when moving out) and then pay a monthly rent that is lower than the market rent. The property is subsidized by government-provided loans. I have calculated that for my case, living in this property makes more sense than purchasing a market-priced house, but your situation may be different.",
"title": ""
},
{
"docid": "bab7bb817344b8591a92849a473ed6a7",
"text": "I beg to differ: Israel has an incredibly well managed central bank, and the usury market is wonderfully competitive. It's a shame Stanley Fischer has retired. His management is the case study in central bank management. Rates are low because inflation is low. The nominal rate is irrelevant to return because a 2% nominal return with 1% inflation is superior to a 5% nominal return with 9% inflation. A well-funded budget is the best first step, so now a tweak is necessary: excess capital beyond budgeting should be moved quickly to internationally diversified equities after funding, discounted and adjusted, longer term budgets. Credit will not pay the rate necessary for long term investment. Higher variance is the price to pay for higher returns.",
"title": ""
},
{
"docid": "b0575c565aa94e748005a4f23005bb3b",
"text": "Markets tend to go up over time, so most things you could buy would make money. A benchmark is meant to represent the market as a whole (or a subset that is relevant to what you are trading), so you can tell if your specific choices helped or hurt your return. As an example, say you pick two financial stocks, Citi and Goldman. They get you a return of 10% for the year, so you think you made good choices. But if the financial sector as a whole had a return of 20%, your choices weren't actually that great.",
"title": ""
},
{
"docid": "193fcf22ed5e553406178908183e95ff",
"text": "To figure this out, you need to know the price per share then vs the price per share now. Google Finance will show you historical prices. For GOOG, the closing price on January 5, 2015 was $513.87. The price on December 31, 2015 was $758.88. Return on Investment (ROI) is calculated with this formula: ROI = (Proceeds from Investment - Cost of Investment) / Cost of Investment Using this formula, your return on investment would be 47.7%. Since the time period was one year, this number is already an annualized return. If the time period was different than one year, you would normally convert it to an annualized rate of return in order to compare it to other investments.",
"title": ""
},
{
"docid": "ac9f7b63a8aeed15b0707167a24ed8b3",
"text": "Well that depends on how far down it goes. If someone calls for a 75% decline in the market next year, and instead it happens in 3 years, well it's still a good call in my books. If you listend and moved your money out of the market until that 75% fall hit, then invested in the market as it was very low, you'd be looking at an overall return of at least ~30% as the market rebounded which is decent for a 4 year return. On the other hand if the market rose up 60% over 3 years, then fell 25%, the return on sitting on the sidelines wouldn't be worth it. **EDIT** Appreciate any comments onto why I was downvoted. When I'm wrong I like to learn why!",
"title": ""
},
{
"docid": "1ec54a8c54ec30ce5f44f84bf3f18a2a",
"text": "none of which give a good return if the underlying economy is shit. the underlying economy will be shit if there hasn't been sufficient investment in more productive endeavors. if the underlying economy hasn't been sufficiently capitalized, that will present juicy returns to investors. it's a complete substance-less threat that if we fail to continue to coddle the rentiers, the economy will collapse because they'll do X with their money (X being something other than maximizing return)",
"title": ""
},
{
"docid": "04d940078dcec99600dfe5f9d54d4f39",
"text": "\"In some respects the analysis for this question is similar to comparing a \"\"safe\"\" return on a government bond vs. holding the stock market. Typically, the stock market's expected return will be higher -- i.e., there's a positive equity risk premium -- vs. a government bond (assuming it's held to maturity). There's no guarantee that the stock market will outperform, although the probability of outperformance rises (some analysts argue) the longer the holding period for equities beyond, say, 10 years. That's why there's generally a positive equity risk premium, otherwise no one (or relatively few investors) would hold equities.\"",
"title": ""
},
{
"docid": "a5c828411013510f191bb0f58be880db",
"text": "I'm not 100% familiar with the index they're using to measure hedge fund performance, but based on the name alone, comparing market returns to *market neutral* hedge fund returns seems a bit disingenuous. That doesn't mean the article is wrong, and they have a point about the democratization of data, but still.",
"title": ""
},
{
"docid": "60c9eac57d227944f7dd9dfc37899a80",
"text": "\"First, to mention one thing - better analysis calls for analyzing a range of outcomes, not just one; assigning a probability on each, and comparing the expected values. Then moderating the choice based on risk tolerance. But now, just look at the outcome or scenario of 3% and time frame of 2 days. Let's assume your investable capital is exactly $1000 (multiply everything by 5 for $5,000, etc.). A. Buy stock: the value goes to 103; your investment goes to $1030; net return is $30, minus let's say $20 commission (you should compare these between brokers; I use one that charges 9.99 plus a trivial government fee). B. Buy an call option at 100 for $0.40 per share, with an expiration 30 days away (December 23). This is a more complicated. To evaluate this, you need to estimate the movement of the value of a 100 call, $0 in and out of the money, 30 days remaining, to the value of a 100 call, $3 in the money, 28 days remaining. That movement will vary based on the volatility of the underlying stock, an advanced topic; but there are techniques to estimate that, which become simple to use after you get the hang of it. At any rate, let's say that the expected movement of the option price in this scenario is from $0.40 to $3.20. Since you bought 2500 share options for $1000, the gain would be 2500 times 2.8 = 7000. C. Buy an call option at 102 for $0.125 per share, with an expiration 30 days away (December 23). To evaluate this, you need to estimate the movement of the value of a 102 call, $2 out of the money, 30 days remaining, to the value of a 102 call, $1 in the money, 28 days remaining. That movement will vary based on the volatility of the underlying stock, an advanced topic; but there are techniques to estimate that, which become simple to use after you get the hang of it. At any rate, let's say that the expected movement of the option price in this scenario is from $0.125 to $ 1.50. Since you bought 8000 share options for $1000, the gain would be 8000 times 1.375 = 11000. D. Same thing but starting with a 98 call. E. Same thing but starting with a 101 call expiring 60 days out. F., ... Etc. - other option choices. Again, getting the numbers right for the above is an advanced topic, one reason why brokerages warn you that options are risky (if you do your math wrong, you can lose. Even doing that math right, with a bad outcome, loses). Anyway you need to \"\"score\"\" as many options as needed to find the optimal point. But back to the first paragraph, you should then run the whole analysis on a 2% gain. Or 5%. Or 5% in 4 days instead of 2 days. Do as many as are fruitful. Assess likelihoods. Then pull the trigger and buy it. Try these techniques in simulation before diving in! Please! One last point, you don't HAVE to understand how to evaluate projected option price movements if you have software that does that for you. I'll punt on that process, except to mention it. Get the general idea? Edit P.S. I forgot to mention that brokers need love for handling Options too. Check those commission rates in your analysis as well.\"",
"title": ""
},
{
"docid": "7f40db430f8f8ee4666972af247ef285",
"text": "\"they said the expected returns from the stock market are around 7-9%(ish). (emphasis added) The key word in your quote is expected. On average \"\"the market\"\" gains in the 7-9% range (more if you reinvest dividends), but there's a great deal of risk too, meaning that in any given year the market could be down 20% or be up 30%. Your student loan, on the other hand, is risk free. You are guaranteed to pay (lose) 4% a year in interest. You can't directly compare the expected return of a risk-free asset with the expected return of a risky asset. You can compare the risks of two assets with equal expected returns, and the expected returns of assets with equal risks, but you can't directly compare returns of assets with different risks. So in two years, you might be better off if you had invested the money versus paying the loan, or you might be much worse off. In ten years, your chances of coming out ahead are better, but still not guaranteed. What's confusing is I've heard that if you're investing, you should be investing in both stocks and bonds (since I'm young I wouldn't want to put much in bonds, though). So how would that factor in? Bonds have lower risk (uncertainty) than stocks, but lower expected returns. If you invest in both, your overall risk is lower, since sometimes (not always) the gain in stocks are offset by losses in bonds). So there is value in diversifying, since you can get better expected returns from a diversified portfolio than from a single asset with a comparable amount of risk. However, there it no risk-free asset that will have a better return than what you're paying in student loan interest.\"",
"title": ""
}
] |
fiqa
|
2c984c824c6dfe620755369f911c5e55
|
Why do stock brokers charge fees
|
[
{
"docid": "c0b4a16853e059b4703ca3ef02c691b3",
"text": "They are providing you a service and they charge you for it. The service includes giving you a trading platform(website and the infrastructure), doing all the background work for setting up services for you, relaying your orders to the market or as a broker fulfilling your orders, doing settlement when an order is matched, giving you access to the stock market(the costs are quite high to get a license to relay orders to the market and I believe it needs to be renewed every year). There are transaction fees which the stock exchanges charge the brokers to use the stock markets infrastructure and connect to it. And then interfacing with banks for monetary transactions and also doing according to the law in the jurisdiction they are located in. Most of it is an one time cost, but they are a private enterprise out to make profit so they will charge for their services.",
"title": ""
},
{
"docid": "9adf292a5fb58e5fed098aa9bcd6d516",
"text": "Retail brokers and are generally not members of exchanges and would generally not be members of exchanges unless they are directly routing orders to those exchanges. Most retail brokers charging $7 are considered discount brokers and such brokers route order to Market Makers (who are members of the exchanges). All brokers and market makers must be members of FINRA and must pay FINRA registration and licensing fees. Discount brokers also have operational costs which include the cost of their facilities, technology, clearing fees, regulation and human capital. Market makers will have the same costs but the cost of technology is probably much higher. Discount brokers will also have market data fees which they will have to pay to the exchanges for the right to show customer real time quotes. Some of their fees can be offset through payment for order flow (POF) where market makers pay routing brokers a small fee for sending orders to them for execution. The practice of POF has actually allowed retail brokers to keep their costs lower but to to shrinking margins and spread market makers POF has significantly declined over the years. Markets makers generally do not pass along Exchange access fees which are capped at $.003 (not .0035) to routing brokers. Also note that The SEC and FINRA charges transactions fees. SEC fee for sales are generally passed along to customers and noted on trade confirms. FINRA TAF is born by the market makers and often subtracted from POF paid to routing firms. Other (full service brokers) charging higher commissions are charging for the added value of their brokers providing advice and expertise in helping investors with investment strategies. They will generally also have the same fees associated with membership of all the exchanges as they are also market makers subject to some of the list of cost mentioned above. One point of note is that Market Making technology is quite sophisticates and very expensive. It has driven most of wholesale market makers of the 90s into consolidation. Retail routing firm's save a significant amount of money for not having to operate such a system (as well as worry about the regulatory headaches associated with running such a system). This allows them to provide much lower commissions that the (full service) or bulge bracket brokers.",
"title": ""
}
] |
[
{
"docid": "7e5ef408b369bd0e58561c847ea9d703",
"text": "\"Other than the brokerage fee you should also consider the following: Some brokerages provide extra protection against the these and as you guessed it for a fee. However, there could be a small bonus associated with your trading at scale: You are probably qualified for rebates from the exchanges for generating liquidity. \"\"Fees and Credits applicable to Designated Market Makers (“DMMs”)\"\" https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Price_List.pdf All in all, I will say that it will be really hard for you to avoid paying brokerage fee and yes, even Buffet pays it.\"",
"title": ""
},
{
"docid": "2a299334dcf6600c0e5f2e0f087fa951",
"text": "You'd need millions of dollars to trade the number of shares it would take to profit from these penny variations. What you bring up here is the way high frequency firms front-run trades and profit on these pennies. Say you have a trade commission of $5. Every time you buy you pay $5, every time you sell you pay $5. So you need a gain in excess of $10, a 10% gain on $100. Now if you wanted to trade on a penny movement from $100 to $100.01, you need to have bought 1,000 shares totaling $100,000 for the $0.01 price movement to cover your commission costs. If you had $1,000,000 to put at risk, that $0.01 price movement would net you $90 after commission, $10,000,000 would have made you $990. You need much larger gains at the retail level because commissions will equate to a significant percentage of the money you're investing. Very large trading entities have much different arrangements and costs with the exchanges. They might not pay a fee on each transaction but something that more closely resembles a subscription fee, and costs something that more closely resembles a house. Now to your point, catching these price movements and profiting. The way high frequency trading firms purportedly make money relates to having a very low latency network connection to a particular exchange. Their very low latency/very fast network connection lets them see orders and transact orders before other parties. Say some stock has an ask at $101 x 1,000 shares. The next depth is $101.10. You see a market buy order come in for 1,000 shares and place a buy order for 1,000 shares at $101 which hits the exchange first, then immediately place a sell order at $101.09, changing the ask from $101.00 to $101.09 and selling in to the market order for a gain of $0.09 per share.",
"title": ""
},
{
"docid": "e3b31f6ff09ba86956fe3909c37414b4",
"text": "\"As the other answer said, the person who owns the lent stock does not benefit directly. They may benefit indirectly in that brokers can use the short lending profits to reduce their fees or in that they have the option to short other stocks at the same terms. Follow-up question: what prevents the broker lending the shares for a very short time (less than a day), pocketing the interest and returning the lenders their shares without much change in share price (because borrowing period was very short). What prevents them from doing that many times a day ? Lack of market. Short selling for short periods of time isn't so common as to allow for \"\"many\"\" times a day. Some day traders may do it occasionally, but I don't know that it would be a reliable business model to supply them. If there are enough people interested in shorting the stock, they will probably want to hold onto it long enough for the anticipated movement to happen. There are transaction costs here. Both fees for trading at all and the extra charges for short sale borrowing and interest. Most stocks do not move down by large enough amounts \"\"many\"\" times a day. Their fluctuations are smaller. If the stock doesn't move enough to cover the transaction fees, then that seller lost money overall. Over time, sellers like that will stop trading, as they will lose all their money. All that said, there are no legal blocks to loaning the stock out many times, just practical ones. If a stock was varying wildly for some bizarre reason, it could happen.\"",
"title": ""
},
{
"docid": "e518dc8abac3f5ab685656cd8efff5b7",
"text": "\"Largely, because stock markets are efficient markets, at least mostly if not entirely; while the efficient market hypothesis is not necessarily 100% correct, for the majority of traders it's unlikely that you could (on the long term) find significant market inefficiencies with the tools available to an individual of normal wealth (say, < $500k). That's what frequent trading intends to do: find market inefficiencies. If the market is efficient, then a stock is priced exactly at what it should be worth, based on risk and future returns. If it is inefficient, then you can make more money trading on that inefficiency versus simply holding it long. But in stating that a stock is inefficient, you are stating that you know something the rest of the market doesn't - or some condition is different for you than the other million or so people in the market. That's including a lot of folks who do this for a living, and have very expensive modelling software (and hardware to run it on). I like to think that I'm smarter than the far majority of people, but I'm probably not the smartest guy in the room, and I certainly don't have that kind of equipment - especially with high frequency trading nowadays. As such, it's certainly possible to make a bit of money as a trader versus as a long-term investor, but on the whole it's similar to playing poker for a living. If you're smarter than most of the people in the room, you might be able to make a bit of money, but the overhead - in the case of poker, the money the house charges for the game, in the case of stocks, the exchange fees and broker commissions - means that it's a losing game for the group as a whole, and not very many people can actually make money. Add to that the computer-based trading - so imagine a poker game where four of the eight players are computer models that are really good (and actively maintained by very smart traders) and you can see where it gets to be very difficult to trade at a profit (versus long term investments, which take advantage of the growth in value in the company). Finally, the risk because of leverage and option trading (which is necessary to really take advantage of inefficiencies) makes it not only hard to make a profit, but easy to lose everything. Again to the poker analogy, the guys I've known playing poker for a living do it by playing 10-20 games at once - because one game isn't efficient enough, you wouldn't make enough money. In poker, you can do that fairly safely, especially in limit games; but in the market, if you're leveraging your money you risk losing a lot. Every action you take to make it \"\"safer\"\" removes some of your profit.\"",
"title": ""
},
{
"docid": "d70b1f6ea23c653659e2ab13df81f468",
"text": "\"Because ETFs, unlike most other pooled investments, can be easily shorted, it is possible for institutional investors to take an arbitrage position that is long the underlying securities and short the ETF. The result is that in a well functioning market (where ETF prices are what they should be) these institutional investors would earn a risk-free profit equal to the fee amount. How much is this amount, though? ETFs exist in a very competitive market. Not only do they compete with each other, but with index and mutual funds and with the possibility of constructing one's own portfolio of the underlying. ETF investors are very cost-conscious. As a result, ETF fees just barely cover their costs. Typically, ETF providers do not even do their own trading. They issue new shares only in exchange for a bundle of the underlying securities, so they have almost no costs. In order for an institutional investor to make money with the arbitrage you describe, they would need to be able to carry it out for less than the fees earned by the ETF. Unlike the ETF provider, these investors face borrowing and other shorting costs and limitations. As a result it is not profitable for them to attempt this. Note that even if they had no costs, their maximum upside would be a few basis points per year. Lots of low-risk investments do better than that. I'd also like to address your question about what would happen if there was an ETF with exorbitant fees. Two things about your suggested outcome are incorrect. If short sellers bid the price down significantly, then the shares would be cheap relative to their stream of future dividends and investors would again buy them. In a well-functioning market, you can't bid the price of something that clearly is backed by valuable underlying assets down to near zero, as you suggest in your question. Notice that there are limitations to short selling. The more shares are short-sold, the more difficult it is to locate share to borrow for this purpose. At first brokers start charging additional fees. As borrowable shares become harder to find, they require that you obtain a \"\"locate,\"\" which takes time and costs money. Finally they will not allow you to short at all. Unlimited short selling is not possible. If there was an ETF that charged exorbitant fees, it would fail, but not because of short sellers. There is an even easier arbitrage strategy: Investors would buy the shares of the ETF (which would be cheaper than the value of the underlying because of the fees) and trade them back to the ETF provider in exchange for shares of the underlying. This would drain down the underlying asset pool until it was empty. In fact, it is this mechanism (the ability to trade ETF shares for shares of the underlying and vice versa) that keeps ETF prices fair (within a small tolerance) relative to the underlying indices.\"",
"title": ""
},
{
"docid": "2497dced1eee532e6563c6de5196b408",
"text": "It's not necessarily the case that HFT acts as a tax on small traders. I haven't seen any studies demonstrating that HFT increases the average cost of shares; if anything small investors will be largely unaffected by HFT as it will be random noise to them, sometimes creating a slight increase, sometimes a slight decrease. The people most affected by HFT are institutional investors, whom HFT desks are pretty good at predicting the order pattern of and hence exploiting. They have no interest or capacity to exploit the small guys.",
"title": ""
},
{
"docid": "278efda8a6786744df54a490658599ba",
"text": "There are lots of provisos, but in general you are correct. The provisos, off the top of my head: The only fees will be any brokerage fees when you purchase the stock. I haven't seen any handling fees when you get the dividend, but it may depend on how you hold the stock.",
"title": ""
},
{
"docid": "28e6edb222832385511dea101954d223",
"text": "\"The broker will charge borrowing fees and sometimes a charge called \"\"hard-to-borrow fee\"\". Other than that you will earn interest on the cash you get from selling the stocks, but you will have to pay dividends. This is because someone else (the party you sold the stocks off to) will now get the dividends and the party who lent you the stocks will miss out on these, that's why you have to remunerate them. The type of account you need is entirely up to your broker (and besides, it depends on what a 'normal' account for you is, you should at least mention your country or your broker).\"",
"title": ""
},
{
"docid": "a466255400ad63956a96c33886d5dda3",
"text": "\"You don't \"\"deduct\"\" transaction fees, but they are included in your cost basis and proceeds, which will affect the amount of gain/loss you report. So in your example, the cost basis for each of the two lots is $15 (10$ share price plus $5 broker fee). Your proceeds for each lot are $27.50 (($30*2 - $5 )/2). Your gain on each lot is therefore $12.50, and you will report $12.50 in STCG and $12.50 in LTCG in the year you sold the stock (year 3). As to the other fees, in general yes they are deductible, but there are limits and exceptions, so you would need to consult a tax professional to get a correct answer in your specific situation.\"",
"title": ""
},
{
"docid": "65cf9a90015e47167757486425ce4587",
"text": "\"Oftentimes, the lender (the owner of the security) is not explicitly involved in the lending transaction. Let's say the broker is holding a long-term position of 1MM shares from Client A. It is common for Client A's agreement with Broker A to include a clause that allows the broker to lend out the 1MM shares for its own profit (\"\"rehypothecation\"\"). Client A may be compensated for this in some form (e.g. baked into their financing rates), but they do not receive any compensation that is directly tied to lending activities. You also have securities lending agents that lend securities for an explicit fee. For example, the borrower's broker may not have sufficient inventory, in which case they would need to find a third-party lending agent. This happens both on-demand as well as for a fixed-terms (typically a large basket of securities). SLB (securities lending and borrowing) is a business in its own right. I'm not sure I follow your follow-up question but oftentimes there is no restriction that prevents the broker from lending out shares \"\"for a very short time\"\". Unless there is a transaction-based fee though, the number of times you lend shares does not affect \"\"pocketing the interest\"\" since interest accrues as a function of time.\"",
"title": ""
},
{
"docid": "ef841824b35605bbee281fd8f51e2f52",
"text": "I buy or sell a few shares whenever I have a small amount of money to transfer into out of my mutual funds. Since I'm not paying transaction fees, there is no reason not to, when that is what makes sense. If you are paying a fee for each transaction, of course it makes sense to try to wait until you have a larger amount to move so the overhead per share is lower.",
"title": ""
},
{
"docid": "f0a6ae037fbb51b1c3c62cad032ee4ce",
"text": "I'm not positive my answer is complete, but from information on my broker's website, the following fees apply to a US option trade (which I assume you're concerned with given fee in dollars and the mention of the Options Clearing Corporation): They have more detail for other countries -- see https://www.interactivebrokers.co.uk/en/index.php?f=commission&p=options1 for North America. Use the sub-menu near the top of the page to pick Europe or Asia. The brokerage-charged commission for this broker is as low as $0.25 per contract with a $1.00 minimum. Though I've been charged less than $1 to STO an options position, as well as less than $1 to BTC an options position, so not sure about that minimum. Regarding what I read as your overall underlying question (why are option fees so high), in my research this broker has one of the cheapest commission rates on options I've ever seen. When I participate in certain discussions, I'm routinely told that these fees are unbelievable and that $5.95, $7.95, or even $9.95 are considered low fees. I've heard this so much, and discussed commissions with enough people who've refused to switch brokers, that I conclude there just isn't enough competition to drive prices lower. If most people won't switch brokers to go from $9.95 to $1 per trade, there simply isn't a reason to lower rates.",
"title": ""
},
{
"docid": "ffbcdf2c785589d3691d7e7b1ae061e3",
"text": "Every brokerage is different, on all of their websites they have an actual list of fees. There are tons of different charges you may encounter.",
"title": ""
},
{
"docid": "c067f60aa6afa4f6133377c0af24b9eb",
"text": "Fiduciary They are obligated by the rules of the exchanges they are listed with. Furthermore, there is a strong chance that people running the company also have stock, so it personally benefits them to create higher prices. Finally, maybe they don't care about the prices directly, but by being a good company with a good product or service, they are desirable and that is expressed as a higher stock price. Not every action is because it will raise the stock price, but because it is good for business which happens to make the stock more valuable.",
"title": ""
},
{
"docid": "1f8421896b37039de836eda9cc517182",
"text": "Because the HFT bought them in response to the guy buying. The HFT was only able to get them faster because his server and internet connection were faster. That in combination with the fact that they intentionally just spray the exchange with a huge combination of buys. If they don't have anyone on the hook, they just cancel. So the HFT sends the exchange a bunch of buy orders. They know 99.9 won't match up with a guy who's looking to buy and cancel them. However, when they get a guy on the hook they let that one go through and don't cancel it. A traditional market maker doesn't do that. They let all the orders go through and charge a higher price when someone wants it. However, this is accepted as fair because they're providing volume. They're making sure that buyers and sellers will have an active market. So it's expect that they should be able to profit for having that convenience. When a HFT can cancel their orders at will they're not providing volume. It's not uncommon for a market maker to buy as many shares as possible and then force you to pay more for it. However, they give people the ability to buy or sell shares. HFT don't do this. They are fast enough to cancel buy orders unless they have a buyer on the hook. As a result they can be a market maker without any losses. That would be one thing, but they don't provide the market with liquidity. They just dump the shares as soon as they're done taking their haircut (tax).",
"title": ""
}
] |
fiqa
|
80ab451d70537ad28cfa4aaf66a22b12
|
How does the value of an asset (valued in two different currencies) change when the exchange rate changes?
|
[
{
"docid": "b69187cb5be0290794bbdd55916a4d36",
"text": "Gold is traded on the London stock exchange (LSE) and the New York stock exchange (NYSE) under various separate asset tickers, mainly denominated in sterling and US dollars respectively. These stocks will reflect FX changes very quickly. If you sold LSE gold and foreign exchanged your sterling to dollars to buy NYSE gold you would almost certainly lose on the spreads upon selling, FX'ing and re-buying. In short, the same asset doesn't exist in multiple currencies. It may have the same International Securities Identification Number (ISIN), but it can trade with different Stock Exchange Daily Official List (SEDOL) identifiers, reflecting different currencies and/or exchanges, each carrying a different price at any one time.",
"title": ""
},
{
"docid": "5d0b360de7d5745d006ae345e6072492",
"text": "The value of the asset doesn't change just because of the exchange rate change. If a thing (valued in USD) costs USD $1 and USD $1 = CAN $1 (so the thing is also valued CAN $1) today and tomorrow CAN $1 worth USD $0.5 - the thing will continue being worth USD $1. If the thing is valued in CAN $, after the exchange rate change, the thing will be worth USD $2, but will still be valued CAN $1. What you're talking about is price quotes, not value. Price quotes will very quickly reach the value, since any deviation will be used by the traders to make profits on arbitrage. And algo-traders will make it happen much quicker than you can even notice the arbitrage existence.",
"title": ""
},
{
"docid": "00d49f052fb781ee71a1495d8231ff6e",
"text": "It depends on the asset and the magnitude of the exchange rate change relative to the inflation rate. If it is a production asset, the prices can be expected to change relative to the changes in exchange rate regardless of magnitude, ceteris paribus. If it is a consumption asset, the prices of those assets will change with the net of the exchange rate change and inflation rate, but it can be a slow process since all of the possessions of the country becoming relatively poorer cannot immediately be shipped out and the need to exchange wants for goods will be resisted as long as possible.",
"title": ""
},
{
"docid": "cef4fa3efefe86f85f703ff4e020704f",
"text": "\"If there is a very sudden and large collapse in the exchange rate then because algorithmic trades will operate very fast it is possible to determine “x” immediately after the change in exchange rate. All you need to know is the order book. You also need to assume that the algorithmic bot operates faster than all other market participants so that the order book doesn’t change except for those trades executed by the bot. The temporarily cheaper price in the weakened currency market will rise and the temporarily dearer price in the strengthened currency market will fall until the prices are related by the new exchange rate. This price is determined by the condition that the total volume of buys in the cheaper market is equal to the total volume of sells in the dearer market. Suppose initially gold is worth $1200 on NYSE or £720 on LSE. Then suppose the exchange rate falls from r=0.6 £/$ to s=0.4 £/$. To illustrate the answer lets assume that before the currency collapse the order book for gold on the LSE and NYSE looks like: GOLD-NYSE Sell (100 @ $1310) Sell (100 @ $1300) <——— Sell (100 @ $1280) Sell (200 @ $1260) Sell (300 @ $1220) Sell (100 @ $1200) ————————— buy (100 @ $1190) buy (100 @ $1180) GOLD-LSE Sell (100 @ £750) Sell (100 @ £740) ————————— buy (200 @ £720) buy (200 @ £700) buy (100 @ £600) buy (100 @ £550) buy (100 @ £530) buy (100 @ £520) <——— buy (100 @ £500) From this hypothetical example, the automatic traders will buy up the NYSE gold and sell the LSE gold in equal volume until the price ratio \"\"s\"\" is attained. By summing up the sell volumes on the NYSE and the buy volumes on the LSE, we see that the conditions are met when the price is $1300 and £520. Note 800 units were bought and sold. So “x” depends on the available orders in the order book. Immediately after this, however, the price of the asset will be subject to the new changes of preference by the market participants. However, the price calculated above must be the initial price, since otherwise an arbitrage opportunity would exist.\"",
"title": ""
}
] |
[
{
"docid": "be5a343ff06889ca387adaed1aed3f15",
"text": "From an investor's standpoint, if the value of crude oil increases, economies that are oil dependent become more favourable (oil companies will be more profitable). Therefore, investors will find that country's currency more attractive in the foreign exchange market.",
"title": ""
},
{
"docid": "a784e06e0738e08af5368a14b5afae86",
"text": "There's another dimension here as currency conversion isn't necessarily the final answer. As stated by others, converting money between the three should theoretically end up with the exact same value, less transactional costs. However the kink is that the price of most products are not updated as the currencies change. In many cases the price difference is such that even accounting for shipping and exchange fees, purchasing a product from a distributor in a foreign country can be cheaper than just picking it up at the local store. You might even be able to take advantage of this when purchasing at a single store. If that store is set up to accept multiple currencies then it's a matter of looking at the conversion rates the moment you are buying and deciding which one is the cheapest route for you. Of course, this generally will not work for smaller purchases like a cup of coffee or a meal. Primarily because the fee for the exchange might eclipse any savings.",
"title": ""
},
{
"docid": "b9519def6c7e63f920f85fde8901def5",
"text": "If I understand what you're asking, I think you're looking at the relationship wrong. Yes, when one currency has a higher interest rate relative to another, it's value should, theoretically, appreciate. For example, if the USD interest rate is 10% and the EUR is 5%, the USD should appreciate in value against the EUR. However, the parity relationship tells you the price at which an investor would be indifferent to the difference in interest rates. So using the formula for interest rate parity: (1+r(USD))/(1+r(EUR)) = F/S and plugging in the interest rates from above and a spot rate of $1.5/EUR: (1.1)/(1.05) = F/(1.5) The 1 year forward rate would have to be $1.5714/EUR in order for the investor to be INDIFFERENT between holding USD or EUR. All this assuming interest rate parity holds. I'm not big on Econ but this is how I understood it when studying for the CFA exam the past few months. So please, someone correct me if I'm wrong.",
"title": ""
},
{
"docid": "c293eedb83f25dabcb22559f40ee799b",
"text": "\"The basic idea is that money's worth is dependent on what it can be used to buy. The principal driver of monetary exchange (using one type of currency to \"\"buy\"\" another) is that usually, transactions for goods or services in a particular country must be made using that country's official currency. So, if the U.S. has something very valuable (let's say iPhones) that people in other countries want to buy, they have to buy dollars and then use those dollars to buy the consumer electronics from sellers in the U.S. Each country has a \"\"basket\"\" of things they produce that another country will want, and a \"\"shopping list\"\" of things of value they want from that other country. The net difference in value between the basket and shopping list determines the relative demand for one currency over another; the dollar might gain value relative to the Euro (and thus a Euro will buy fewer dollars) because Europeans want iPhones more than Americans want BMWs, or conversely the Euro can gain strength against the dollar because Americans want BMWs more than Europeans want iPhones. The fact that iPhones are actually made in China kind of plays into it, kind of not; Apple pays the Chinese in Yuan to make them, then receives dollars from international buyers and ships the iPhones to them, making both the Yuan and the dollar more valuable than the Euro or other currencies. The total amount of a currency in circulation can also affect relative prices. Right now the American Fed is pumping billions of dollars a day into the U.S. economy. This means there's a lot of dollars floating around, so they're easy to get and thus demand for them decreases. It's more complex than that (for instance, the dollar is also used as the international standard for trade in oil; you want oil, you pay for it in dollars, increasing demand for dollars even when the United States doesn't actually put any oil on the market to sell), but basically think of different currencies as having value in and of themselves, and that value is affected by how much the market wants that currency.\"",
"title": ""
},
{
"docid": "a32103579ed3ba3b8902f81d055cf3ca",
"text": "There are two impacts: First, if the pound is dropping, then buying houses becomes cheaper for foreign investors, so they will tend to buy more houses as investments, which will drive house prices up. Second, in theory you might be able to get a mortgage in a foreign country, let's say in Euro, and you might hope that over the next few years the pound would go up again, and the Euros that you owe the foreign bank become worth less.",
"title": ""
},
{
"docid": "9ae6bb4df00454b020003c9348baf8aa",
"text": "QE2 will mean that there are about $500 billion dollars in existence which weren't there before. These dollars will all be competing with the existing dollars for real goods and services, so each dollar will be worth a little less, and prices will rise a little. This is inflation. You can probably expect 1.5%-2% annual inflation for the US dollar over the next several years (the market certainly does in the aggregate, anyway). This is in terms of US-based goods and services. QE2 will also reduce the amount of other currencies you can get for the same dollar amount. The extent to which this will occur is less clear, in part because other currencies are also considering quantitative easing. Your long-term savings should probably not be in cash anyway, because of the low returns; this will probably affect you far more than the impact of quantitative easing. As for your savings which do remain in cash, what you should do with them depends on how you plan to dispose of them. The value of a currency is usually pretty stable in terms of the local economy's output of goods and services - it's the value in international trade which tends to fluctuate wildly. If you keep your savings in the same currency you plan to spend them in, they should be able to maintain their value decently well in the intermediate term.",
"title": ""
},
{
"docid": "f223389ac294be1c02dff830429e81dd",
"text": "First question: Any, probably all, of the above. Second question: The risk is that the currency will become worth less, or even worthless. Most will resort to the printing press (inflation) which will tank the currency's purchasing power. A different currency will have the same problem, but possibly less so than yours. Real estate is a good deal. So are eggs, if you were to ask a Weimar Germany farmer. People will always need food and shelter.",
"title": ""
},
{
"docid": "615d936fbe8731c2a40bba364141b151",
"text": "A currency that is strong right now is one that is expensive for you to buy. The perfect one would be a currency that is weak now but will get stronger; the worst currency is one that is strong today and gets weak. If a currency stays unchanged it doesn't matter whether it is weak or strong today as long as it doesn't get weaker / stronger. (While this advice is correct, it is useless for investing since you don't know which currencies will get weaker / stronger in the future). Investing in your own currency means less risk. Your local prices are usually not affected by currency change. If you safe for retirement and want to retire in a foreign country, you might consider in that country's currency.",
"title": ""
},
{
"docid": "93ed9100864a8c4146441b8c7bc0dab5",
"text": "Now, is there any clever way to combine FOREX transactions so that you receive the US interest on $100K instead of the $2K you deposited as margin? Yes, absolutely. But think about it -- why would the interest rates be different? Imagine you're making two loans, one for 10,000 USD and one for 10,000 CHF, and you're going to charge a different interest rate on the two loans. Why would you do that? There is really only one reason -- you would charge more interest for the currency that you think is less likely to hold its value such that the expected value of the money you are repaid is the same. In other words, currencies pay a higher interest when their value is expected to go down and currencies pay a lower interest when their value is expected to go up. So yes, you could do this. But the profits you make in interest would have to equal the expected loss you would take in the devaluation of the currency. People will only offer you these interest rates if they think the loss will exceed the profit. Unless you know better than them, you will take a loss.",
"title": ""
},
{
"docid": "28a0e1b5359a14a50a5383e06c2e5531",
"text": "The big risk for a bank in country X is that they would be unfamiliar with all the lending rules and regulations in country Y. What forms and disclosures are required, and all the national and local steps that would be required. A mistake could leave them exposed, or in violation of some obscure law. Plus they wouldn't have the resources in country Y to verify the existence and the actual ownership of the property. The fear would be that it was a scam. This would likely cause them to have to charge a higher interest rate and higher fees. Not to mention that the currency ratio will change over the decades. The risks would be large.",
"title": ""
},
{
"docid": "02ecc79bbe98859380636df1e95a5c82",
"text": "Yes, the ADR will trade on a separate exchange from the underlying one, and can (and does) see fluctuations in price that do not match the (exchange corrected) fluctuations that occur in the original market. You are probably exposing yourself to additional risk that is related to:",
"title": ""
},
{
"docid": "29a5b9b7c7a689f29316967e920bc18f",
"text": "\"Lmao so the fact that the government \"\"could possibly switch currency\"\" negates the current demand they create? The government creates a demand for USD. That alone is enough to say dollars have intrinsic value. Add to that the fact that there are trillions of dollars in outstanding government bonds that are required to be paid out in USD when they mature. Changing the currency would be considered a form of default by many and could have massive negative consequence far outweighing the benefits of the rapid adoption of blockchain. Even if they stopped issuing bonds today they would still have ones maturing until 2047. It's like saying bananas don't have monetary value because people might decide to stop buying them. Yeah, it's true they would lose value if that happened but as of today it's just not true\"",
"title": ""
},
{
"docid": "3f97d35bd94c664205c2929914af3cc9",
"text": "Stocks, gold, commodities, and physical real estate will not be affected by currency changes, regardless of whether those changes are fast or slow. All bonds except those that are indexed to inflation will be demolished by sudden, unexpected devaluation. Notice: The above is true if devaluation is the only thing going on but this will not be the case. Unfortunately, if the currency devalued rapidly it would be because something else is happening in the economy or government. How these asset values are affected by that other thing would depend on what the other thing is. In other words, you must tell us what you think will cause devaluation, then we can guess how it might affect stock, real estate, and commodity prices.",
"title": ""
},
{
"docid": "8568a818f3a0c4a7473017be99a53d48",
"text": "\"I found an answer by Peter Selinger, in two articles, Tutorial on multiple currency accounting (June 2005, Jan 2011) and the accompanying Multiple currency accounting in GnuCash (June 2005, Feb 2007). Selinger embraces the currency neutrality I'm after. His method uses \"\"[a]n account that is denominated as a difference of multiple currencies... known as a currency trading account.\"\" Currency trading accounts show the gain or loss based on exchange rates at any moment. Apparently GnuCash 2.3.9 added support for multi-currency accounting. I haven't tried this myself. This feature is not enabled by default, and must be turned on explicity. To do so, check \"\"Use Trading Accounts\"\" under File -> Properties -> Accounts. This must be done on a per-file basis. Thanks to Mike Alexander, who implemented this feature in 2007, and worked for over 3 years to convince the GnuCash developers to include it. Older versions of GnuCash, such as 1.8.11, apparently had a feature called \"\"Currency Trading Accounts\"\", but they behaved differently than Selinger's method.\"",
"title": ""
},
{
"docid": "a69695d9a2baa5b76983d167c5eca45e",
"text": "\"Congratulations on your graduation and salary. You are in a great career field (I know from experience.) As a background, I would feel pretty confident in your salary as demand for SE is pretty high right now. During my career there were times that demand was pretty to very low. Somehow I survived 2001 & 2002, but 2003 was a pretty rough year for me. Here is what I would do if I were you. Paying off the smallest loans first gives you some great \"\"wind in the sails\"\", and encourages you to keep going. I really like this approach despite being not the most mathematically efficient. I'd reduce my car loan payment back to $200/mo. and put that as the last one to pay off. With the tax refund, and any money left over, I pay off the student loans smallest to largest. I would also consider reducing your savings to something around the 1K->2k range, and use that to pay down debt. If you use your tax refund, and some of the savings you'd have like 34K left to pay off. Could you do that in like 14 months? I think you could depending on your other expenses. No more than 18 months, and if you really worked hard and picked up some work on the side maybe a year. That is what I would do.\"",
"title": ""
}
] |
fiqa
|
5f09d593819806d727bdf0b17e9cec08
|
How to acquire skills required for long-term investing?
|
[
{
"docid": "4ca0852fdce161b965d5715975eb9a33",
"text": "\"As foundational material, read \"\"The Intelligent Investor\"\" by Benjamin Graham. It will help prepare you to digest and critically evaluate other investing advice as you form your strategy.\"",
"title": ""
},
{
"docid": "985843af5980c74327c42862abed9ffc",
"text": "\"I feel that OP's question is fundamentally wrong and an understanding of why is important. The stock market, as a whole, in the USA has an average annualized return of 11%. That means that a monkey, throwing darts at a board, can usually turn 100K into over three million in thirty-five years. (The analog I'm drawing is a 30-year old with 100K randomly picking stocks will be a multi-millionaire at 65). So to be \"\"good\"\" at investing in the stock market, you need to be better than a monkey. Most people aren't. Why? What mistakes do people make and how do you avoid them? A very common mistake is to buy high, sell low. This happened before and after the 08's recession. People rushed into the market beforehand as it was reaching its peak, sold when the market bottomed out then ignored the market in years it was getting 20+% returns. A Bogle approach for this is to simply consistently put a part of your income into the market whether it is raining or shining. Paying high fees. Going back to the monkey example, if the monkey charges you a 2% management fees, which is low by Canadian standards, the monkey will cost you one million dollars over the course of the thirty-five years. If the monkey does a pretty good job it is a worthy expenditure. But most humans, including professional stock pickers, are worst than a monkey at picking stocks. Another mistake is adjusting your plan. Many people, when the market was giving bull returns before the 08's crash happily had a large segment of their wealth in stocks. They thought they were risk tolerant. Crash happened, they moved towards bonds. Then bonds returns were comically low while stocks soared. Had they had a plan, almost any consistent plan, they'd have done better. Another genre of issues is just doing stupid things. Don't buy that penny stock. Don't trade like crazy. Don't pay 5$ commission on a 200$ stock order. Don't fail to file your taxes. Another mistake, and this burdens a lot of people, is that your long-term investments are for long-term investing. What a novel idea. You're 401K doesn't exist for you to get a loan for a home. Many people do liquidate their long-term savings. Don't. Especially since people who do make these loans or say \"\"I'll pay myself back later\"\" don't.\"",
"title": ""
},
{
"docid": "032727148d0414856eb878773cb18819",
"text": "Far and away the most valuable skill in investing, in my opinion, is emotional fortitude. You need to have the emotional stability and confidence to trust your decision making and research to hold on down days.",
"title": ""
},
{
"docid": "a9fbecc1d92c0b3bd76afe5bde24a1a8",
"text": "The key to good investing is you need to understand what you are investing in. That is, if you are buying a company that makes product X, you need to understand that. It is a good idea to buy stock in good companies but that is not sufficient. You need to buy stock in good companies at good prices. That means you need to understand things like price to earnings, price to revenue and price to book. Bob",
"title": ""
},
{
"docid": "f808b8d1725ffbfba52d761ec9baee52",
"text": "I would say that the three most important skills are: Note that some costs are hidden. So, for example, a mutual fund investing in other countries than where you live in may mean the investment target country charges a certain percentage of dividends going to the mutual fund. The mutual fund company doesn't usually want to tell you this. There may be clever financial instruments (derivatives) that can be used to avoid this, but they are not without their problems. If you diversify into equities at low cost, you will have a very wealthy future. I would recommend you to compare two options: ...and pick from these options the cheaper one. If your time has a high value, and you wish to take this value into account, I would say it is almost always far better option to choose an index fund. Whatever you do, don't pay for active management! It is a mathematical truth that before costs, actively managed investments will yield the same return than indexed investments. However, the costs are higher in active management, so you will have less total return. Don't believe that good historical return would imply good future return. However, if for some reason you see an index fund that continuously loses to the index more than by the amount of stated costs, beware!",
"title": ""
}
] |
[
{
"docid": "73f7c99297db58913b0afca914cccbdd",
"text": "-Get a job doing it. -Try the CFA curriculum if you want the base financial knowledge - but only if you don't have that knowledge already. -Check out coursera -Try writing some pricing tools or trading algo, depending on what area you're interested in. The future is not options pricing, the future is in data aggregation and prediction. Yes it's possible to learn if you have the mathematical foundation. It's really no as complicated as the world believes. Remember that most people go finance -> math and find it hard whereas you're going math -> finance.",
"title": ""
},
{
"docid": "0602eb2408df6d73c04c5a0a08efd72a",
"text": "\"If that's your goal. Watch the entire webinar on warren buffet books by Preston Pysh first for a good intro into stocks bonds etc: https://m.youtube.com/watch?list=PLECECA66C0CE68B1E&v=KfDB9e_cO4k Read Dale Carnegies book \"\"How to Win Friends and Influence People\"\" in order to learn how to communicate to people effectively and create networks. The most important skill in any field you choose to go into. Read \"\"The Everything Store\"\" for essentially an MBA in business. Read \"\"The Intelligent Investor\"\" by Benjamin graham for a bachelors in finance. Then take classes that get you the very best professors in the field of finance, economics, and business at your school and make sure you never stop asking questions. Continue to develop your skills and create good saving & communication habits. And if you want great jobs, get internships. To get internships be involved in as much as you can in campus and take leadership roles (especially when you think you can't handle it) you will grow quickly as a leader and businessman if you do it right. If reading is a bit much for you, try audiobooks. And make sure you enjoy college and surround yourself with ambitious youngsters like yourself. It will help you grow. Enjoy school and be social, make mistakes and do whatever it takes to get a minimum 3.5 GPA (get old tests study groups easy teachers or GPA boosting classes if you need to) Aight that's all I got haha\"",
"title": ""
},
{
"docid": "81dc5a3ab1f76785932744c1f2a511a9",
"text": "\"I get the sense that this is a \"\"the world is unfair; there's no way I can succeed\"\" question, so let's back up a few steps. Income is the starting point to all of this. That could be a job (or jobs), or running your own business. From there, you can do four things with your income: Obviously Spend and Give do not provide a monetary return - they give a return in other ways, such as quality of life, helping others, etc. Save gives you reserves for future expenses, but it does not provide growth. So that just leaves Invest. You seem to be focused on stock market investments, which you are right, take a very long time to grow, although you can get returns of up to 12% depending on how much volatility you're willing to absorb. But there are other ways to invest. You can invest in yourself by getting a degree or other training to improve your income. You can invest by starting a business, which can dramatically increase your income (in fact, this is the most common path to \"\"millionaire\"\" in the US, and probably in other free markets). You can invest by growing your own existing business. You can invest in someone else's business. You can invest in real estate, that can provide both value appreciation and rental income. So yes, \"\"investment\"\" is a key aspect of wealth building, but it is not limited to just stock market investment. You can also look at reducing expenses in order to have more money to invest. Also keep in mind that investment with higher returns come with higher risk (both in terms of volatility and risk of complete loss), and that borrowing money to invest is almost always unwise, since the interest paid directly reduces the return without reducing the risk.\"",
"title": ""
},
{
"docid": "82cce7e98f05e442a949f64095925756",
"text": "\"I compared investing in real estate a few years ago to investing in stocks that paid double digit dividends (hard to find, however, managing and maintaining real estate is just as hard). After discussing with many in the real estate world, I counted the average and learned that most averaged about 6 - 8% on real estate after taxes. This does not include anything else like Dilip mentions (maintenance, insurance, etc). For those who want to avoid that route, you can buy some companies that invest in real estate or REIT funds like Dilip mentions. However, they are also susceptible to the problems mentioned above this. In terms of other investment opportunities like stocks or funds, think about businesses that will always be around and will always be needed. We won't outgrow our need for real estate, but we won't outgrow our need for food or tangible goods either. You can diversify into these companies along with real estate or buy a general mutual fund. Finally, one of your best investments is your career field - software. Do some extra work on the side and see if you can get an adviser position at a start-up (it's actually not that hard and it will help you build your skill set) or create a site which generates passive revenue (again, not that hard). One software engineer told me a few years ago that the stock market is a relic of the past and the new passive income would be generated by businesses that had tools which did all the work through automation (think of a smart phone application that you build once, yet continues to generate revenue). This was right before the crash, and after it, everyone talked about another \"\"lost decade.\"\" While it does require extra work initially, like all things software related, you'll be discovering tools in programming that you can use again and again in other applications - meaning your first one may be the most difficult. All it takes in this case is one really good idea ...\"",
"title": ""
},
{
"docid": "ba932ab7edd82cd583be7d0ce813cdbc",
"text": "The most significant capability that an investor must have is the knowledge on the way to look for the high dividend stocks. Through accumulating good information relating to towards the stocks that you are finding is the better way of getting the perfect and profitable investments. It is really important to learn what makes a particular stock better and superior compared to other. Traders are essential to start a complete analysis and investigation before getting their money on any business projects. Obviously, investors certainly want to have an investment that could guarantee an effective expense for a very reasonable cost the moment of getting it. The chances of crucial to invest in a market that you might be aware and qualified about. So, creating a comparison and compare in one business to a different is totally essential so as to find the high dividend stock.",
"title": ""
},
{
"docid": "6e581c27f5031f5164a7926715fae4f3",
"text": "Whey protein, coffee, skills, skills, skills did I mention skills? Learn useful things and no debt. As for actual investment vehicles.. I have bad views of what is going to happen of the next 10 years.. I doubt you'll be allowed to own anything you invested in....",
"title": ""
},
{
"docid": "7c5be3dbd13122d2e21c279a8f484c0f",
"text": "\"The Investment Management Certificate (IMC) is the base level certification for Asset Management. Should be relatively easy to pass and might get you a leg up on other candidates. Something that demonstrates competence in VBA would also be beneficial. However if you want to get ahead in the City, I would suggest you focus on human psychology rather than qualifications. A book such as \"\"How to Win Friends and Influence People\"\" is going to be more beneficial than another piece of paper.\"",
"title": ""
},
{
"docid": "111de6df3df42876a7f6eef78c8ef089",
"text": "Can you say a little more about how you want to use your new skills? For instance, machine learning to help make picks? Then I think the answer would be python. But if you’re thinking you’d like to write high speed trading algorithms, that’d be something else.",
"title": ""
},
{
"docid": "2a6cd61ce8fa41b425943eed0b91bad2",
"text": "Investing is really about learning your own comfort level. You will make money and lose money. You will make mistakes but you will also learn a great deal. First off, invest in your own financial knowledge, this doesn't require capital at all but a commitment. No one will watch or care for your own money better than yourself. Read books, and follow some companies in a Google Finance virtual portfolio. Track how they're doing over time - you can do this as a virtual portfolio without actually spending or losing money. Have you ever invested before? What is your knowledge level? Investing long term is about trying to balance risk while reducing losses and trying not to get screwed along the way (by people). My personal advice: Go to an independent financial planner, go to one that charges you per hour only. Financial planners that don't charge you hourly get paid in commissions. They will be biased to sell you what puts the most money in their pockets. Do not go to the banks investment people, they are employed by the banks who have sales and quota requirements to have you invest and push their own investment vehicles like mutual funds. Take $15k to the financial planner and see what they suggest. Keep the other $5K in something slow and boring and $1k under your mattress in actual cash as an emergency. While you're young, compound interest is the magic that will make that $25k increase hand over fist in time. But you need to have it consistently make money. I'm young too and more risk tolerant because I have time. While I get older I can start to scale back my risk because I'm nearing retirement and preserve instead of try to make returns.",
"title": ""
},
{
"docid": "8ad7d678ea2a8cd9ec2bc9762983dc37",
"text": "Coolness - It's not only a matter of staying calm when being up or down. You must keep yourself from chasing a stock that appears to be running away. Or from betting all your money that something(like say a crash) will happen tomorrow because that would be great for you. Use your head not your heart. Empathy - You need to understand what other speculators, investors, institutions and algorithms are going to do when there is a new development or technical signal. And why. For publicly traded corporations, fundamentals and technical indicators only have the value that people(and their algorithms) choose to assign to them at that particular moment. And every stock has a different population trading it. There is no rule of thumb. Patience - To trade successfully, you must avoid trading at all costs. Heh. If you can't find any good trade to do, don't open positions in order to meet your targets, buy a new smartphone, or to fight boredom. Diligence - If your strategy relies on tight stops, don't make exceptions. If your strategy relies on position sizing, don't close when you are a few points down. Luck - In the end almost every trade can turn against you very badly. You must prepare for the worst and hope for the best. You can't buy luck, or get luckier, but you can attempt to stack probabilities: diversify, buy options to insure your positions, reduce holding time, avoid known volatility events, etc.",
"title": ""
},
{
"docid": "89d0451472da336c5b36dca90f59adb4",
"text": "Many good sources on YouTube that you can find easily once you know what to look for. Start following the stock market, present value / future value, annuities & perpetuities, bonds, financial ratios, balance sheets and P&L statements, ROI, ROA, ROE, cash flows, net present value and IRR, forecasting, Monte Carlo simulation (heavy on stats but useful in finance), the list goes on. If you can find a cheap textbook, it'll help with the concepts. Investopedia is sometimes useful in learning concepts but not really on application. Khan Academy is a good YouTube channel. The Intelligent Investor is a good foundational book for investing. There are several good case studies on Harvard Business Review to practice with. I've found that case studies are most helpful in learning how to apply concept and think outside the box. Discover how you can apply it to aspects of your everyday life. Finance is a great profession to pursue. Good luck on your studies!",
"title": ""
},
{
"docid": "a1c94491cc27aa9195b884d40836d527",
"text": "\"You've laid out a strategy for deciding that the top of the market has passed and then realizing some gains before the market drops too far. Regardless of whether this strategy is good at accomplishing its goal, it cannot by itself maximize your long-term profits unless you have a similar strategy for deciding that the bottom of the market has passed. Even if you sell at the perfect time at the top of the market, you can still lose lots of money by buying at the wrong time at the bottom. People have been trying to time the market like this for centuries, and on average it doesn't work out all that much better than just plopping some money into the market each week and letting it sit there for 40 years. So the real question is: what is your investment time horizon? If you need your money a year from now, well then you shouldn't be in the stock market in the first place. But if you have to have it in the market, then your plan sounds like a good one to protect yourself from losses. If you don't need your money until 20 years from now, though, then every time you get in and out of the market you're risking sacrificing all your previous \"\"smart\"\" gains with one mistimed trade. Sure, just leaving your money in the market can be psychologically taxing (cf. 2008-2009), but I guarantee that (a) you'll eventually make it all back (cf. 2010-2014) and (b) you won't \"\"miss the top\"\" or \"\"miss the bottom\"\", since you're not doing any trading.\"",
"title": ""
},
{
"docid": "ac0222f92e01b641b4751aaa2e080175",
"text": "\"My master's thesis was on using genetic algorithms and candle stick method. If you are familiar, the AI was used to answer questions like \"\"what is a long day\"\", which is not formally defined in most candle stick texts. So in theory unlimited potential for learning including teaching machines to learn. Wall street pays pretty well for such developers, and if you are young and single man Manhattan is pretty sweet place to be. In practicality your formula for building wealth is the same as everyone else's: get out of debt, build an emergency fund, and invest. Initially invest in growth stock mutual funds through a 401K (assuming US).\"",
"title": ""
},
{
"docid": "b677b2d0d99879a1ad3cf2e40d13b37a",
"text": "Try this as a starter - my eBook served up as a blog (http://www.sspf.co.uk/blog/001/). Then read as much as possible about investing. Once you have money set aside for emergencies, then make some steps towards investing. I'd guide you towards low-fee 'tracker-style' funds to provide a bedrock to long-term investing. Your post suggests it will be investing over the long-term (ie. 5-10 years or more), perhaps even to middle-age/retirement? Read as much as you can about the types of investments: unit trusts, investment trusts, ETFs; fixed-interest (bonds/corporate bonds), equities (IPOs/shares/dividends), property (mortgages, buy-to-let, off-plan). Be conservative and start with simple products. If you don't understand enough to describe it to me in a lift in 60 seconds, stay away from it and learn more about it. Many of the items you think are good long-term investments will be available within any pension plans you encounter, so the learning has a double benefit. Work a plan. Learn all the time. Keep your day-to-day life quite conservative and be more risky in your long-term investing. And ask for advice on things here, from friends who aren't skint and professionals for specific tasks (IFAs, financial planners, personal finance coaches, accountants, mortgage brokers). The fact you're being proactive tells me you've the tools to do well. Best wishes to you.",
"title": ""
},
{
"docid": "395e4a466026a14fb6261c61f25969b5",
"text": "\"A lot of people have already explained that your assumptions are the issue, but I'll throw in my 2¢. There are a lot of people who do the opposite of long term investing. It's called high frequency trading. I'd recommend reading the Wikipedia article for more info, but very basically, high frequency traders use programs to determine which stocks to buy and which ones to sell. An example program might be \"\"buy if the stock is increasing and sell if I've held it more than 1 second.\"\"\"",
"title": ""
}
] |
fiqa
|
ed9f4168e7d077a763a293c63b60df1d
|
If there's no volume discount, does buying in bulk still make sense?
|
[
{
"docid": "fbbf17c08d1c70f87858bd019e6db31c",
"text": "If they don't spoil, you can still get some marginal benefit if buying in bulk means you avoid the need for a trip to the shops to get a replacement. If the item is a commodity that you will use eventually you are unlikely to lose out as the prices tend to remain fairly stable. There's also the inconvenience factor, I like to have plenty of some items so I'm not caught short, consider how important your furnace is in mid winter, or the inconvenience of running out of an item right when you need it.",
"title": ""
},
{
"docid": "c065166e3a6d83e4e3ac275058ad5c1e",
"text": "Let me add a counterpoint. I don't know about you, but for some psychological reason, when I know I have an abundance of something I tend to be less frugal about the way I consume it. For example: When there is a six pack of cokes in the fridge I feel like I am more prone to not drink them up so quickly so I have some for later on. However, if I knew I had 3 more cases in the pantry, I seem to go through a lot more of them.",
"title": ""
},
{
"docid": "88a2d51f419e81d6a12e4a4562394826",
"text": "As with everything else, it's a question of trade-offs. Pros For Buying In Bulk Cons For Buying In Bulk Inventory cost. You need to purchase more shelving/cupboards to stock the goods. This is a real cost. The psychological effect of having more means you are more likely to use more, thus costing you more. Deflation of the cost of the item should occur over time in a well-functioning market economy. A $10 item today might be $9.50 in one year in real terms. There is a real opportunity cost associated with overbuying. Granted, an extra $100 in your bank account won't be earning too much if you have to spend it one month later, but it does mean you have less financial independence for that month. Risk of spoilage. There is a nonzero risk that your goods could be ruined by flood/fire/toddler/klutz damage. You need to decide which of these pros and cons are more important to you. Financially, you should only buy what you need between shopping trips. In reality the convenience of holding goods in storage for when you need them may outweigh the costs.",
"title": ""
},
{
"docid": "92aae426ee68422aff26b6aff0b0e66c",
"text": "To Rich Seller's point, we live 1/2 gallon of gas and 30 minute round trip from the supermarket. For the items that are non-perishable, such as bathroom or facial tissue, paper towels, shampoo,soap, toothpaste, etc, there's value in never running out of it. (@JohnFx - your point is well taken. When my daughter was a toddler, I found her covered in band-aids. One tiny scratch, 9 band-aids. My wife asked why I was concerned, we had hundreds in the pantry. I can see how some items might just encourage over-use)",
"title": ""
},
{
"docid": "d04ea03f85539b6333e362dd052c945c",
"text": "I agree with Rich Seller. Avoiding a trip to the store is a benefit. Not only do you save the time and hassle, but there's real money saved if a car trip is avoided: I maintain a spreadsheet for all of my car expenses – depreciation, maintenance, insurance, license & registration, gas, etc. Combined with starting & ending odometer readings for the year, I can see exactly what it costs me to drive one kilometre. Granted, some costs are fixed simply by virtue of having the car, but gasoline is a variable cost avoided when a trip is avoided.",
"title": ""
},
{
"docid": "35999830dc40fda91e188a35c3830bd0",
"text": "It could be a sunk cost. If you buy 5 gallons of vegetable oil it costs $50. Until you use up all the vegetable oil you dollars are tied up and cannot be spent on popcorn or any other good. So weigh if the convenience is more important than having the cash on hand for other purchases is another factor to consider",
"title": ""
},
{
"docid": "9b25714fbffd5af4c9341fcfe86440f8",
"text": "There is a trade-off. It can be worthwhile because you save those extra trips. (On the other hand, don't you need to go shopping all the time for perishable items anyway?) On the other hand, having those items on stock implies inventory costs (the space they take up might be limited, the money they represent is sleeping and cannot be put to other usage, some of them might break...). This trade-off gives you the economic order quantity. Your stock levels over time based on that would look like a saw-blade. In addition, you might want to keep a safety stock for emergencies (if you use them faster than expected, if there is a supply shortage...).",
"title": ""
},
{
"docid": "5f45d01927c79b6f74f74be100f036a2",
"text": "Instead of buying in bulk, I invest the money in equity mutual funds, for an expected return of 12%, which is more than inflation. So, I make more returns. But at the cost of a slight risk, which I'm comfortable with.",
"title": ""
}
] |
[
{
"docid": "3fae4c68eefa430d508e7f017c8fe80b",
"text": "You're correct. Amazon literally doesn't give a shit if they don't make profits for a while on this business. Hell it's potentially possible that their 1P business is still in the red and just used for the platform. Amazon isn't looking at whole foods for profit in the short term or even on a 5 year time horizon. They're looking to expand their presence into the fresh market, give people a local touch point to pick up online orders, and get more people into their platform. It's completely likely you'll see some form of price decline. Edit: just wanted to add, this is far from new.",
"title": ""
},
{
"docid": "986483aca79fc08b760992585b15ae69",
"text": "Only select items. First - I agree, beware the Goldfish Factor - any of those items may very well lead to greater consumption, which will impact your waistline worse than your bottom line. And, in this category, chips, and snacks in general, you'll typically get twice the size bag for the same price as supermarket. For a large family, this might work ok. If one is interested in saving on grocery items, the very first step is to get familiar with the unit cost (often cents per ounce) of most items you buy. Warehouse store or not, this knowledge will make you a better buyer. In general, the papergoods/toiletries are cheaper than at the store but not as cheap as the big sale/coupon cost at the supermarket or pharmacy (CVS/RiteAid). So if you pay attention you may always be stocked up from other sources. All that said, there are many items that easily cover our membership cost (for Costco). The meat, beef tenderloin, $8.99, I can pay up to $18 at the supermarket or butcher. Big shrimp (12 to the lb), $9.50/lb, easily $15 at fish dept. Funny, I buy the carrots JCarter mentioned. They are less than half supermarket price per lb, so I am ahead if we throw out the last 1/4 of the bag. More often than not, it's used up 100%. Truth is, everyone will have a different experience at these stores. Costco will refund membership up to the very end, so why not try it, and see if the visit is worth it? Last year, I read and wrote a review of a book titled The Paradox of Choice. The book's premise was the diminishing return that come with too many things to choose from. In my review, I observed how a benefit of Costco is the lack of choice, there's one or two brands for most items, not dozens. If you give this a bit of thought, it's actually a benefit.",
"title": ""
},
{
"docid": "47b97f141baea0df9f1827f55502835c",
"text": "\"Like most other things, this is \"\"sometimes,\"\" but not always true. Sometimes banks will be willing to sell at a discount, sometimes they will hold out for \"\"full price.\"\" But if you want a discount, this is a good place to \"\"look.\"\"\"",
"title": ""
},
{
"docid": "764f0915779b6649c2953dc26dd52d87",
"text": "No. Busts are very infrequent, and if an equity were illiquid enough to be affected, the bust cost would be enormous. For a liquid equity, the amount of busted volume is insignificant except during a flash crash or flash spike. Then it would be reasonable to redownload.",
"title": ""
},
{
"docid": "45fed3fdfefc389c5e6a939ea75b0d38",
"text": "83(b) election requires you to pay the current taxes on the discount value. If the discount value is 0 - the taxes are also 0. Question arises - why would someone pay FMV for restricted stocks? That doesn't make sense. I would argue, as a devil's advocate, that the FMV is not really fair market value, since the restriction must have reduced the price you were willing to pay for the stocks. Otherwise why would you buy the stocks at full price - with strings attached that could easily cost you the whole amount you paid?",
"title": ""
},
{
"docid": "5b3d846df86ace8da22c5a5604c27b19",
"text": "If the stock has low liquidity, yes there could be times when there are no buyers or sellers at a specific price, so if you put a limit order to buy or sell at a price with no other corresponding sellers or buyers, then your order may take a while to get executed or it may not be executed at all. You can usually tell if a stock has low liquidity by the small size of the average daily volume, the lack of order depth and the large size of the gap between bids and offers. So if a stock for example has last sale price of $0.50, has a highest bid price of $0.40 and a lowest offer price of $0.60, and an average daily volume of 10000 share, it is likely to be very illiquid. So if you try to buy or sell at around the $0.50 mark it might take you a long time to buy or sell this stock at this price.",
"title": ""
},
{
"docid": "20a7eb90fb4fb80f4664b2eeed2ac630",
"text": "First, I want to point out that your question contains an assumption. Does anyone make significant money trading low volume stocks? I'm not sure this is the case - I've never heard of a hedge fund trading in the pink sheets, for example. Second, if your assumption is valid, here are a few ideas how it might work: Accumulate slowly, exit slowly. This won't work for short-term swings, but if you feel like a low-volume stock will be a longer-term winner, you can accumulate a sizable portion in small enough chunks not to swing the price (and then slowly unwind your position when the price has increased sufficiently). Create additional buyers/sellers. Your frustration may be one of the reasons low-volume stock is so full of scammers pumping and dumping (read any investing message board to see examples of this). If you can scare holders of the stock into selling, you can buy significant portions without driving the stock price up. Similarly, if you can convince people to buy the stock, you can unload without destroying the price. This is (of course) morally and legally dubious, so I would not recommend this practice.",
"title": ""
},
{
"docid": "f43a0b7b433e2b4d389c13d44e373ed1",
"text": "\"Yes... but it is a matter of balancing risks. It is wiser to keep a small amount of \"\"ready cash\"\" as an emergency/buffer -- and to suffer the gradual loss to inflation... Than it is risk becoming \"\"stuck\"\" in an emergency with zero dollars in any (low or no cost) source of funds -- those kinds of \"\"emergencies\"\" ($500 or $1,000 \"\"unexpected/unbudgeted\"\" expenses) are fairly frequent and virtually inevitable. You lose vastly MORE money when you are forced to borrow those amounts (interest -- even **low-rate** loans -- is virtually always higher than the average inflation rate).\"",
"title": ""
},
{
"docid": "0baa219bb41af5e5a69ad90c1b86fb10",
"text": "You're implying that Whole Foods' margins on many items is [in the 30% - 40% range.](http://i.imgur.com/xUG4lOw.png) That's much higher than I would have expected. My guess is they'll be scrapping the most expensive product lines, though - the whole trade organic, for example.",
"title": ""
},
{
"docid": "6fd0528dddae555f6a90b0fa7bde95f2",
"text": "Volume @ 0 doesn't mean that there are no buyers and sellers, it just means that there hasn't been any trades done yet. What you need to look for are the bids and offers (for selling and buying, respectively). For further expiration and NTM or IT options there will almost always be a bid and an offer (but it may be very wide). Now, in case where there is 0 bid (no one is willing to buy), you may still have a chance if the option has some value in it. For that - you need your broker to try to shop it to market making firms. Now, depending on who your broker is, this may or may not be possible. Alternatively, if you have DMA (direct market access) to the options exchanges, you can try to put in an offer of your own and wait for someone to execute against you, however do not expect to be traded with unless your price is out of line with the cost. However, in wide markets, you can try Lampost options (they may give you price improvement) or try to offer very close to the bid. You may save yourself a penny or two and perhaps get a rebate if you are using BATSO or NASDAQO markets (if you have DMA and pass-through exchange fees).",
"title": ""
},
{
"docid": "7f75c0771b06c01b4141fee10ae68e63",
"text": "I think your comment sounded a lot more reasonable and aware of how it goes than the writer; and yes it does makes sense that for little investors like retailers, there is not really a point to consider it, as you said. I don't think it redeems the article at all.",
"title": ""
},
{
"docid": "74f6215079cfb0dea4ab397925129f15",
"text": "\"My simple rule to avoid impulse buys is that if you see something you want, you can get it.... but not today; go back and get it tomorrow (or wait even longer, for big-ticket items). This way you'll have time to think about it rather than just doing it. That won't address all your wasteful spending, but it's a good way to avoid \"\"why did I think this would be a good idea?\"\" type situations.\"",
"title": ""
},
{
"docid": "d96eada018190b559af05e3c817086ae",
"text": "Consider the case where a stock has low volume. If the stock normally has a few hundred shares trade each minute and you want to buy 10,000 shares then chances are you'll move the market by driving up the price to find enough sellers so that you can get all those shares. Similarly, if you sell way more than the typical volume, this can be an issue.",
"title": ""
},
{
"docid": "a1ece231f4a6a24f77541da760f42283",
"text": "\"WF has trust in certain customers. I doubt that they will lose that trust by lowering prices, and they will probably gain other customers as well. The thing you should probably do before making your judgements is to realize that the CEO of Amazon is probably a pretty smart person and he has access to information that you don't. So maybe you should lean on the side of \"\"Wait and See\"\" before making any judgements to a certain move.\"",
"title": ""
},
{
"docid": "76fe6db5439db6d14ae920967b308364",
"text": "You're right to keep the oldest one. That's an asset to your credit rating. Since you're already responsible with your credit, a dip in your credit rating doesn't really matter unless you're looking for another loan, like a mortgage. I personally like the cash-back rewards because they're the most flexible, so you have a good thing going with that card. Do those reward cards give you perks on all of your purchases? If they do, then look carefully to see if you can do noticeably better with another card. If not, it may not really be worth it. Regarding cancelling one of the cards, I wouldn't, and here's why. Your cards can get compromised, and sometimes more than one gets compromised at the same time. I was glad that I had three cards, because two of them got hit the same day. Hence, having three cards hit on the same day is possible, and you'll be glad that you have the fourth.",
"title": ""
}
] |
fiqa
|
b8af058240be8b467f6fba47b208a4bb
|
Does FIFO cost basis applies across multiple accounts?
|
[
{
"docid": "af504736fd19c5cd3ff3b7ffda83e9c1",
"text": "You decide on a cost bases attribution yourself, per transaction (except for averaging for mutual funds, which if I remember correctly applies to all the positions). It is not a decision your broker makes. Broker only needs to know what you've decided to report it to the IRS on 1099, but if the broker reported wrong basis (because you didn't update your account settings properly, or for whatever else reason) you can always correct it on form 8949 (columns f/g).",
"title": ""
},
{
"docid": "065f69630f86e51394730e12b6f82f9b",
"text": "To sum up: My question came from misunderstanding what cost basis applies to. Now I get it that it applies to stocks as physical entities. Consider a chain of buys of 40 stock A with prices $1-$4-$10-$15 (qty 10 each time) then IRS wants to know exactly which stock I am selling. And when I transfer stocks to different account, that cost basis transfers with them. Cost basis is included in transfers, so that removes ambiguity which stock is being sold on the original account. In the example above, cost basis of 20 stocks moved to a new account would probably be $1 x 10 and $4 x 10, i.e. FIFO also applies to transfers.",
"title": ""
}
] |
[
{
"docid": "418c1aba4dd73fbeabded92cc00ddb0c",
"text": "The question is valid, you just need to work backwards. After how much money-time will the lower expense offset the one time fee? Lower expenses will win given the right sum of money and right duration for the investment.",
"title": ""
},
{
"docid": "001308bb6898cc328653575ba51889b7",
"text": "Not to my knowledge. Often the specific location is diversified out of the fund because each major building company or real estate company attempts to diversify risk by spreading it over multiple geographical locations. Also, buyers of these smaller portfolios will again diversify by creating a larger fund to sell to the general public. That being said, you can sometimes drill down to the specific assets held by a real estate fund. That takes a lot of work: You can also look for the issuer of the bond that the construction or real estate company issued to find out if it is region specific. Hope that helps.",
"title": ""
},
{
"docid": "69c90279a1829fd8ce58e09cb7fd2a79",
"text": "No. If you didn't specify LIFO on account or sell by specifying the shares you wish sold, then the brokers method applies. From Publication 551 Identifying stock or bonds sold. If you can adequately identify the shares of stock or the bonds you sold, their basis is the cost or other basis of the particular shares of stock or bonds. If you buy and sell securities at various times in varying quantities and you cannot adequately identify the shares you sell, the basis of the securities you sell is the basis of the securities you acquired first. For more information about identifying securities you sell, see Stocks and Bonds under Basis of Investment Property in chapter 4 of Pub. 550. The trick is to identify the stock lot prior to sale.",
"title": ""
},
{
"docid": "768d911368643c7cf2504b6ef63a28b4",
"text": "The technical feature exists to (1)block all ACH activity, (2)block all ACH credits, or (3)block all ACH debits attempting to post to the deposit account. The large financial institutions will not deviate from their company policies and won't offer something like this for a personal account. The smaller institutions and credit unions are much more willing to discuss options. Especially if you maintain a large deposit balance or have many products with the institution, you might convince them this feature is very important and insist they block all ACH activity on your account. This feature is used frequently on controlled asset accounts where the balance must be frozen for a variety of reasons.",
"title": ""
},
{
"docid": "22f551971d12e3540a68eb3a2b08b774",
"text": "Generally speaking, granting rights to one bank account (e.g. making a joint account) does not extend rights to other accounts or otherwise let one joint owner create new obligations on the other owner (e.g. opening a line of credit that the other owner must pay for), except to the extent of the joint account. I assume there are no UK rules that would change this feature. The other party can of course withdraw all the money without need for your approval. This also means that the joint account could be exposed to all the creditors of either party. If your account joint tenant has huge debts, the creditors could theoretically look to the joint account for satisfaction. At least, that would be an issue under US law. Frankly, it may be simpler to get a separate account for the other person (if possible) and make transfers with online banking. It could also make sense to get a rechargeable banking card, if those are in the UK, which works like a debit card and can be reloaded through various means (sometimes a call, sometimes online deposits, sometimes in physical stores). There may be fees to getting such a card or a second account, of course. The benefit is that the cardholder has no access to your account and you control recharging. Such cards are widely available in the US to people who otherwise would not qualify for traditional bank accounts. Note also the FATCA complication with adding a US person to your account. My understanding is that a number of non-US banks will simply close the accounts of Americans, rather than deal with FFI hassles under FATCA.",
"title": ""
},
{
"docid": "acc2e045955043c6266d5ce0d7fceb18",
"text": "The key point is from the penultimate sentence in your second paragraph: for which you have already paid taxes When you receive a dividend or realise a capital gain, you get taxed on that then, and you shouldn't have to pay taxes on it again in future. So the cost basis gets adjusted to reflect that.",
"title": ""
},
{
"docid": "445f3efc2c8bd10a811cef2d6b9aa778",
"text": "\"Nobody knows for sure what \"\"substantially identical\"\" means because the IRS hasn't officially defined it. Until they do so, it would come down to the decision of an auditor or a tax court. The rule of thumb that I have always heard is if the funds track the same index, they are probably substantially identical. I think most people wouldn't consider any pair of AGG, CMF, and NYF to be substantially identical, so you should be safe with your tax-loss harvesting strategy.\"",
"title": ""
},
{
"docid": "f469aad776f005ed531a025b282f05ad",
"text": "This is great! I'm not a CPA, but work in finance. As such, my course/professional work is focused more on the economic and profitability aspects of transfer pricing. As you might imagine, it tended to analyze corporate strategy decisions under various cost allocation models, which you thoroughly discuss. I would agree with the statement that it is based on the matching principle but would like to add that transfer pricing is interesting as it falls under several fields: accounting, finance, and economics. Fundamentally it is based on the matching principal, but it's real world applications are based on all three (it's often used to determine divisional and even individual sales peoples profitability; as is the case with bank related funds transfer pricing on stuff like time deposits). In this case, the correct accounting principal allows you to, when done properly, better understand the economics, strategy, and operations of an organization. In effect, when done correctly, it provides transparency for strategic decision making to executives. As I said, since my coursework tended to focus more on that aspect, I definitely have a natural tendency towards it. This is an amazing explanation (esp. about interest on M&A bridge loans, I get that) of the more detailed stuff! Truthfully, I'm not as familiar with it and was just trying to show more of the conceptual than nitty-gritty. Thanks for the reply!",
"title": ""
},
{
"docid": "c47715d64b4892c4e46d1e19ff168855",
"text": "Check out personal finance. But, my guess is no. Given you are married and you were prepared to contribute $x out of the entire family pot, why don't they just contribute $x from their portion of the entire family pot? Net effect should be similar or identical. (I'm not an accountant nor married, so enjoy the grain of salt).",
"title": ""
},
{
"docid": "057cdaede7b1cebf560352bec5b20082",
"text": "In the US you specify explicitly what stocks you're selling. Brokers now are required to keep track of cost basis and report it to the IRS on the 1099-B, so you have to tell the broker which position it is that you're closing. Usually, the default is FIFO (i.e.: when you sell, you're assumed to be closing the oldest position), but you can change it if you want. In the US you cannot average costs basis of stocks (you can for mutual funds), so you either do FIFO, LIFO (last position closed first), or specify the specific positions when you submit the sale order.",
"title": ""
},
{
"docid": "9a0fb227580f6297fca125fd4753dab0",
"text": "If you go through the web pages of some online brokers, you will find out that some of them allow you to manage friends/relatives accounts from your account as a trusteer. That should really solve your underlying problem, you will need only one login, etc. (Example: https://www.interactivebrokers.com/ff/en/main.php) If I understand it right it will even allow you to make one trade splitting the cost and returns among the other accounts, but you would have to verify that. Anyways, that will save you a lot of trouble and your broker can probably help you with the legal necessities.",
"title": ""
},
{
"docid": "9654bea102f4b7d56d91111f737d8cde",
"text": "Each goes to a different agency. Yes, it is normal that the lender queries more than one agency.",
"title": ""
},
{
"docid": "8018eefd837fd80fcc3c6bd9a4cb2eb5",
"text": "\"JoeTaxpayer's answer mentions using a third \"\"house\"\" account. In my comment on his answer, I mentioned that you could simply use a bookkeeping account to track this instead of the overhead of an extra real bank account. Here's the detail of what I think will work for you. If you use a tool like gnucash (probably also possible in quicken, or if you use paper tracking, etc), create an account called \"\"Shared Expenses\"\". Create two sub accounts under that called \"\"his\"\" and \"\"hers\"\". (I'm assuming you'll have your other accounts tracked in the software as well.) I haven't fully tested this approach, so you may have to tweak it a little bit to get exactly what you want. When she pays the rent, record two transactions: When you pay the electric bill, record two transactions: Then you can see at a glance whether the balances on \"\"his\"\" and \"\"hers\"\" match.\"",
"title": ""
},
{
"docid": "3c8e61f363e1965f429f120675535e36",
"text": "The $47.67 per share figure is the trading price, or fair market value, of the OLD Johnson Controls, and should not be used to figure your gain nor to figure your basis in the new Johnson Controls International. Your new basis is the total of the gross proceeds received; that is, the cash plus the fair market value of the new shares, which was $45.69 per share. (I am not referring to cash-in-lieu for fractional shares, but the $5.7293 per share received upon the merger.) A person holding 100 shares of the old Johnson Controls would have received $572.93, plus 83.57 shares of the new company. Ignoring the fractional share, for simplicity's sake, gross proceeds would equal 83 x $45.69 = $3792.72 in fair market value of shares, plus the cash of $572.93, for a total of $4365.20. This is your basis in the 83 new shares. Regarding the fractional share, since new basis is at fair market value, there should be no gain or loss recognized upon its sale.",
"title": ""
},
{
"docid": "5eeced770d8f07df301006a0c4e190ef",
"text": "\"I don't know if this is \"\"valid\"\" from a bookkeeping/accounting standpoint, but I'm just trying to keep records for myself so this works for me unless someone has another suggestion. I created two Expense accounts for the HSA (Roth, etc would work the same way): (\"\"CY\"\" meaning current year.) When I make a $50 contribution, I enter the following splits: When you look at this in the Accounts tab, it shows the parent account with a zero balance (because the subaccount balance is positive and the parent account is negative). The subaccount has the balance accumulated so far; this lets me see the YTD contributions to my HSAs. At the end of the year I will make a closing transaction in the opposite direction (for whatever the total balance of the CY account is): This will zero-balance these two accounts. The only complication I see remaining is the issue of making contributions for the prior year during the January-April time frame. I don't generally make current-year contributions followed by prior-year contributions, so I can just wait to enter the closing transaction until I know I'm done with prior-year contributions.\"",
"title": ""
}
] |
fiqa
|
a86b05ca83089fae70e4dc0f1ca61613
|
Buy stock in Canadian dollars or US?
|
[
{
"docid": "3b449602794cc259348a97fddc5cf7f8",
"text": "From a purely financial standpoint, you should invest using whatever dollars get you the best rate. The general rule of thumb that I've come across is that if you are making another person/company change your money into another nation's currency, they will likely charge a higher exchange rate than you could get yourself. However, it really depends on your situation, how easy it is for you to exchange money, what your exchange rate is, and what your broker is charging you to exchange to USD (if on the off chance this is truly nothing, then stick with CAD). Don't worry about the strength of the USD to CAD too much because converting your money before you make purchases doesn't allow you to buy more shares. For the vast majority of people, trying to work with national currency exchange rates makes things unnecessarily complex.",
"title": ""
},
{
"docid": "d74301c7507073d54fb71f94b4126d2d",
"text": "General advice for novice investors is to have the majority of your holdings be denominated in your home currency as this reduces volatility which can make people squeamish and, related to your second question, prevents all sorts of confusion. A rising CAD actually decreases the value (for you) of your current USD stock. After all, the same amount of USD now buys you less in CAD. An exception to the rule can be made if you would use USD often in your daily life yet your income is CAD. In this case owning stock denominated in USD can form a natural hedge in your life (USD goes up -> your relative income goes down but stock value goes up and visa versa). Keep in mind —as mentioned in the comments— that an US company with a listing in CAD is still going to be affected by price swings of USD.",
"title": ""
}
] |
[
{
"docid": "130818239cca1a338b7421e7bf92936d",
"text": "An option gives you an option. That is, you aren't buying any security - you are simply buying an option to buy a security. The sole value of what you buy is the option to buy something. An American option offers more flexibility - i.e. it offers you more options on buying the stock. Since you have more options, the cost of the option is higher. Of course, a good example makes sense why this is the case. Consider the VIX. Options on the VIX are European style. Sometimes the VIX spikes like crazy - tripling in value in days. It usually comes back down pretty quick though - within a couple of weeks. So far out options on the VIX aren't worth just a whole lot more, because the VIX will probably be back to normal. However, if the person could have excercised them right when it got to the top, they would have made a fortune many times what their option was worth. Since they are Euroopean style, though, they would have to wait till their option was redeemable, right when the VIX would be about back to normal. In this case, an American style option would be far more valuable - especially for something that is difficult to predict, like the VIX.",
"title": ""
},
{
"docid": "f4b2fc93da9a9d7f5c1bc8869a4c706f",
"text": "For most people, you don't want individual bonds. Unless you are investing very significant amounts of money, you are best off with bond funds (or ETFs). Here in Canada, I chose TDB909, a mutual fund which seeks to roughly track the DEX Universe Bond index. See the Canadian Couch Potato's recommended funds. Now, you live in the U.S. so would most likely want to look at a similar bond fund tracking U.S. bonds. You won't care much about Canadian bonds. In fact, you probably don't want to consider foreign bonds at all, due to currency risk. Most recommendations say you want to stick to your home country for your bond investments. Some people suggest investing in junk bonds, as these are likely to pay a higher rate of return, though with an increased risk of default. You could also do fancy stuff with bond maturities, too. But in general, if you are just looking at an 80/20 split, if you are just looking for fairly simple investments, you really shouldn't. Go for a bond fund that just mirrors a big, low-risk bond index in your home country. I mean, that's the implication when someone recommends a 60/40 split or an 80/20 split. Should you go with a bond mutual fund or with a bond ETF? That's a separate question, and the answer will likely be the same as for stock mutual funds vs stock ETFs, so I'll mostly ignore the question and just say stick with mutual funds unless you are investing at least $50,000 in bonds.",
"title": ""
},
{
"docid": "081d5ca1f1657f10952f8c55d28b9dd3",
"text": "We've been in this situation for about 10 years now. We don't have to send money back to Canada very often, but when we do, we typically just write a US$ check/cheque and send it to a relative back home to cash for us. We've found that the Canadian banks are much more familiar with US currency than vice versa, and typically have better exchange rates than many of the other options. That said, we haven't done an exhaustive search for the best deal. If you haven't left Canada yet, you might consider opening up a US funds account at the same bank as your Canadian funds account if the bank will allow you to transfer money between the accounts. I haven't priced out that option, so I don't know what the exchange rate would look like there. Also, you didn't ask about this, but if you have any RRSP accounts in Canada, make sure they're with a broker that is licensed to accept trades from US-based customers. Otherwise, you won't be able to move your money around to different investments within the RRSP. Once you're resident in the US, you will no longer be able to open any new accounts in Canada, but you will be able to maintain the ones you already have.",
"title": ""
},
{
"docid": "aeb176a02d712dd802fd6804e23b1081",
"text": "\"This page from the CRA website details the types of investments you can hold in a TFSA. You can hold individual shares, including ETFs, traded on any \"\"designated stock exchange\"\" in addition to the other types of investment you have listed. Here is a list of designated stock exchanges provided by the Department of Finance. As you can see, it includes pretty well every major stock exchange in the developed world. If your bank's TFSA only offers \"\"mutual funds, GICs and saving deposits\"\" then you need to open a TFSA with a different bank or a stock broking company with an execution only service that offers TFSA accounts. Almost all of the big banks will do this. I use Scotia iTrade, HSBC Invest Direct, and TD, though my TFSA's are all with HSBC currently. You will simply provide them with details of your bank account in order to facilitate money transfers/TFSA contributions. Since purchasing foreign shares involves changing your Canadian dollars into a foreign currency, one thing to watch out for when purchasing foreign shares is the potential for high foreign exchange spreads. They can be excessive in proportion to the investment being made. My experience is that HSBC offers by far the best spreads on FX, but you need to exchange a minimum of $10,000 in order to obtain a decent spread (typically between 0.25% and 0.5%). You may also wish to note that you can buy unhedged ETFs for the US and European markets on the Toronto exchange. This means you are paying next to nothing on the spread, though you obviously are still carrying the currency risk. For example, an unhedged S&P500 trades under the code ZSP (BMO unhedged) or XUS (iShares unhedged). In addition, it is important to consider that commissions for trades on foreign markets may be much higher than those on a Canadian exchange. This is not always the case. HSBC charge me a flat rate of $6.88 for both Toronto and New York trades, but for London they would charge up to 0.5% depending on the size of the trade. Some foreign exchanges carry additional trading costs. For example, London has a 0.5% stamp duty on purchases. EDIT One final thing worth mentioning is that, in my experience, holding US securities means that you will be required to register with the US tax authorities and with those US exchanges upon which you are trading. This just means fill out a number of different forms which will be provided by your stock broker. Exchange registrations can be done electronically, however US tax authority registration must be submitted in writing. Dividends you receive will be net of US withholding taxes. I am not aware of any capital gains reporting requirements to US authorities.\"",
"title": ""
},
{
"docid": "bdc388ae50829bf75031a59e103a78b4",
"text": "There are several possible effects: There isn't much you could do about it. If you had enough money to try to hedge by buying foreign securities, in theory you could be happy no matter what your dollar did: if it goes up, you have pain or gain from local effects (depending on whether imports or exports have a bigger effect on your life) and that is offset by your investment having gain or pain. Ditto if it goes down. In reality the amount you might have to invest to get to this point is probably not a realistic amount for an ordinary person to invest outside their country. I own a Canadian company that bills a number of US clients and I buy very little from the US (I'm big on local food, for example, and very frugal on the consumer-goods front.) When the Canadian dollar falls, I effectively get a raise, so I'm happy while all around me are wringing their hands.",
"title": ""
},
{
"docid": "cf5c0a75b1da766e7e89a48af1e5c82a",
"text": "\"First, your question contains a couple of false premises: Options in the U.S. do not trade on the NYSE, which is a stock exchange. You must have been looking at a listing from an options exchange. There are a handful of options exchanges in the U.S., and while two of these have \"\"NYSE\"\" in the name, referring to \"\"NYSE\"\" by itself still refers to the stock exchange. Companies typically don't decide themselves whether options will trade for their stock. The exchange and other market participants (market makers) decide whether to create a market for them. The Toronto Stock Exchange (TSX) is also a stock exchange. It doesn't list any options. If you want to see Canadian-listed options on equities, you're looking in the wrong place. Next, yes, RY does have listed options in Canada. Here are some. Did you know about the Montreal Exchange (MX)? The MX is part of the TMX Group, which owns both the Toronto Stock Exchange (TSX) and the Montreal Exchange. You'll find lots of Canadian equity and index options trading at the MX. If you have an options trading account with a decent Canadian broker, you should have access to trade options at the MX. Finally, even considering the existence of the MX, you'll still find that a lot of Canadian companies don't have any options listed. Simply: smaller and/or less liquid stocks don't have enough demand for options, so the options exchange & market makers don't offer any. It isn't cost-effective for them to create a market where there will be very few participants.\"",
"title": ""
},
{
"docid": "f5bc73aa50634a8e28447a7f2f5f2eb9",
"text": "My instinct says that there should be no difference. Your instincts are right. Your understanding of math is not so much. You sold $100K at the current price of 7500000RUB, but ended up buying at 3500000, you earned 3500000RUB. That's 100% in USD (50% in RUB). You bought 7500000RUB for the current price of $100K, but sold later for $200K. You earned $100K (100% in USD), which at that time was equal 3500000RUB. You earned 3500000RUB. That's 50% in RUB. So, as your instincts were saying - no difference. The reason percentages are different is because you're coming from different angles. For the first case your currency is RUB, for the second case your currency is USD, and in both cases you earned 100%. If you use the same currency for your calculations, percentages change, but the bottom line - is the same.",
"title": ""
},
{
"docid": "59f0fb24483bf24e45448509eb2c3850",
"text": "\"Even though \"\"when the U.S. sneezes Canada catches a cold\"\", I would suggest considering a look at Canadian government bonds as both a currency hedge, and for the safety of principal — of course, in terms of CAD, not USD. We like to boast that Canada fared relatively better (PDF) during the economic crisis than many other advanced economies, and our government debt is often rated higher than U.S. government debt. That being said, as a Canadian, I am biased. For what it's worth, here's the more general strategy: Recognize that you will be accepting some currency risk (in addition to the sovereign risks) in such an approach. Consistent with your ETF approach, there do exist a class of \"\"international treasury bond\"\" ETFs, holding short-term foreign government bonds, but their holdings won't necessarily match the criteria I laid out – although they'll have wider diversification than if you invested in specific countries separately.\"",
"title": ""
},
{
"docid": "76def0924a473ee8754ddbcfa1ab06b3",
"text": "If possible, I would open a Canadian bank account with a bank such as TD Canada Trust. You can then have your payments wired into that account without incurring costs on receipt. They also allow access to their US ATM network via TD Bank without additional costs. So you could use the American Affiliate to pull the funds out via a US teller while only bearing the cost of currency conversion. If that option can't work then the best route would be to choose a US bank account that doesn't charge for incoming wire transfers and request that the money be wired to your account (you'll still get charged the conversion rate when the wire is in CAD and the account is in USD).",
"title": ""
},
{
"docid": "dac3ab9bcfeaad65bc3bac901876b8ee",
"text": "In a simple statement, no doesn't matter. Checked on my trade portal, everything lines up. Same ISIN, same price(after factoring in FX conversions, if you were thinking about arbitrage those days are long gone). But a unusual phenomenon I have observed is, if you aren't allowed to buy/sell a stock in one market and try to do that in a different market for the same stock you will still not be allowed to do it. Tried it on French stocks as my current provider doesn't allow me to deal in French stocks.",
"title": ""
},
{
"docid": "ccaa9f16e3c82ad1edbf15f4e1c42191",
"text": "You probably bought the cross listed WestJet stock. If you wanted to buy shares on the TSE, I'd suspect you'd have to find a way to open a brokerage account within Canada and then you'd be able to buy the shares. However, this could get complicated to some extent as there could be requirements of Canadian tax stuff like a Social Insurance Number that may require some paperwork. In addition, you'd have to review tax law of both countries to determine how to appropriately report to each country your income as there are various rules around that. TD Waterhouse would be the Canadian subsidiary of TD Ameritrade though I haven't tried to create a Canadian brokerage account.",
"title": ""
},
{
"docid": "e61b609e18d45a5020a213ee3b447967",
"text": "The only reason other than falling stock price that I can think of for it to be cheaper to buy in year 2 is that the stock price isn't in $, but some other currency and the exchange rate changed. I don't have a finance degree or official training, just an enthusiast.",
"title": ""
},
{
"docid": "e3e7ece285f3bda48d59461cff75e626",
"text": "it looks like using an ADR is the way to go here. michelin has an ADR listed OTC as MGDDY. since it is an ADR it is technically a US company that just happens to be a shell company holding only shares of michelin. as such, there should not be any odd tax or currency implications. while it is an OTC stock, it should settle in the US just like any other US OTC. obviously, you are exposing yourself to exchange rate fluctuations, but since michelin derives much of it's income from the US, it should perform similarly to other multinational companies. notes on brokers: most US brokers should be able to sell you OTC stocks using their regular rates (e.g. etrade, tradeking). however, it looks like robinhood.com does not offer this option (yet). in particular, i confirmed directly from tradeking that the 75$ foreign settlement fee does not apply to MGDDY because it is an ADR, and not a (non-ADR) foreign security.",
"title": ""
},
{
"docid": "02c8e697d20dcb9d21f4bc92bce2ac16",
"text": "With $7 Million at stake I guess it would be prudent to take legal advise as well as advise from qualified CA. Forex trading for select currency pair [with one leg in INR] is allowed. Ex USDINR, EURINR, JPYINR, GBPINR. Forex trading for pairs without INR or not in the above list is NOT allowed.",
"title": ""
},
{
"docid": "c4b740c53cd6ff4f2ff8b29ed3c99642",
"text": "I want to shop in the currency that will be cheapest in CAD at any given time. How do you plan to do this? If you are using a debit or credit card on a CAD account, then you will pay that bank's exchange rate to pay for goods and services that are billed in foreign currency. If you plan on buying goods and services from merchants that offer to bill you in CAD for items that are priced in foreign currency (E.g. buying from Amazon.co.uk GBP priced goods, but having Amazon bill your card with equivalent CAD) then you will be paying that merchant's exchange rate. It is very unlikely that either of these scenarios would result in you paying mid-market rates (what you see on xe.com), which is the average between the current ask and bid prices for any currency pair. Instead, the business handling your transaction will set their own exchange rate, which will usually be less favorable than the mid-market rate and may have additional fees/commission bolted on as a separate charge. For example, if I buy 100 USD worth of goods from a US vendor, but use a CAD credit card to pay, the mid-market rate on xe.com right now indicates an equivalent value of 126.97 CAD. However the credit card company is more likely to charge closer to 130.00 CAD and add a foreign transaction fee of maybe $2-3, or a percentage of the transaction value. Alternatively, if using something like Amazon, they may offer to bill the CAD credit card in CAD for those 100 USD goods. No separate foreign transaction fee in this case, but they are still likely to exchange at the less favorable 130.00 rate instead of the mid-market rates. The only way you can choose to pay in the cheapest equivalent currency is if you already have holdings of all the different currencies. Then just pay using whichever currency gets you the most bang for your buck. Unless you are receiving payments/wages in multiple currencies though, you're still going to have to refill these accounts periodically, thus incurring some foreign transaction fees and being subject to the banker's exchange rates. Where can I lookup accurate current exchange rates for consumers? It depends on who will be handling your transaction. Amazon will tell you at the checkout what exchange rate they will apply if you are having them convert a bill into your local currency for you. For credit/debit card transactions processed in a different currency than the attached account, you need to look at your specific agreement or contact the bank to see which rate they use for daily transactions (and where you can obtain these rates), whether they convert on the day of the transaction vs. the day it posts to your account, and how much they add on ($ and/or %) in fees and commission.",
"title": ""
}
] |
fiqa
|
6813c3d99637d285922f7afa4df43b9b
|
How can I invest my $100?
|
[
{
"docid": "992d568e9fb89ec12d5ec9d42554e089",
"text": "What is your investing goal? And what do you mean by investing? Do you necessarily mean investing in the stock market or are you just looking to grow your money? Also, will you be able to add to that amount on a regular basis going forward? If you are just looking for a way to get $100 into the stock market, your best option may be DRIP investing. (DRIP stands for Dividend Re-Investment Plan.) The idea is that you buy shares in a company (typically directly from the company) and then the money from the dividends are automatically used to buy additional fractional shares. Most DRIP plans also allow you to invest additional on a monthly basis (even fractional shares). The advantages of this approach for you is that many DRIP plans have small upfront requirements. I just looked up Coca-cola's and they have a $500 minimum, but they will reduce the requirement to $50 if you continue investing $50/month. The fees for DRIP plans also generally fairly small which is going to be important to you as if you take a traditional broker approach too large a percentage of your money will be going to commissions. Other stock DRIP plans may have lower monthly requirements, but don't make your decision on which stock to buy based on who has the lowest minimum: you only want a stock that is going to grow in value. They primary disadvantages of this approach is that you will be investing in a only a single stock (I don't believe that can get started with a mutual fund or ETF with $100), you will be fairly committed to that stock, and you will be taking a long term investing approach. The Motley Fool investing website also has some information on DRIP plans : http://www.fool.com/DRIPPort/HowToInvestDRIPs.htm . It's a fairly old article, but I imagine that many of the links still work and the principles still apply If you are looking for a more medium term or balanced investment, I would advise just opening an online savings account. If you can grow that to $500 or $1,000 you will have more options available to you. Even though savings accounts don't pay significant interest right now, they can still help you grow your money by helping you segregate your money and make regular deposits into savings.",
"title": ""
},
{
"docid": "22b3b000de1845fc6e8c7e67f098f7dc",
"text": "\"Sure. For starters, you can put it in a savings account. Don't laugh, they used to pay noticeable interest. You know, back in the olden days. You could buy an I-bond from Treasury Direct. They're a government savings bond that pays a specified amount of interest (currently 0%, I believe), plus the amount of the inflation rate (something like 3.5% currently, I believe). You don't get paid the money -- the I-bond grows in value till you sell it. You can open a discount brokerage account, and buy 1 or more shares of stock in a company you like. Discount brokerages generally have a minimum of $500 or so, but will waive that if you set the account up as an IRA. Scot Trade, for instance. (An IRA, in case you didn't know, is a type of account that's tax free but you can't touch it till you turn 59 1/2. It's meant to help you save for retirement.) Incidentally, watch out of \"\"small account\"\" fees that some brokerages might charge you. Generally they're annual or monthly charges they'd charge you to cover their costs on your account -- since they're certainly not going to make it in commissions. That IRA at Scot Trade is no-fee. Speaking of commissions, those will be a big chunk of that $100. It'll be like $7-$10 to buy that stock -- a pretty big bite. However, many of these discount brokerages also offer some mutual funds for no commission. Those mutual funds, in turn, have minimums too, but once again if your account's an IRA many will waive the minimum or set it low -- like $100.\"",
"title": ""
},
{
"docid": "fc971a1ea6ee97d2043c6862984bb1eb",
"text": "You could also start a business. I ran a project called the Thousand Rand Challenge a few years ago in South Africa where we supported people in starting a business for about $100 each. Some of them were surprisingly profitable. You can find a few ideas at the wiki site.",
"title": ""
},
{
"docid": "8b7fa896641c253bb54b8cc490b4d8ee",
"text": "Yes, it is. Got to start somewhere. Typically directly through a company itself. Check out this site that lists a bunch of them and their minimum requirements. Not many only accept $100 but there are a few. ie. ACTIVEnergy Income Fund, CIBC, COMPASS Income Fund, Suncor Energy Inc. and a few others.",
"title": ""
},
{
"docid": "905fea99dd2ac0d9c30d4c42cbcc20a8",
"text": "\"There are websites out there that let people apply for micro-loans, and let other people fund those loans, and get a percent of the interest back as the loans are paid off. I have heard of people with spare cash \"\"investing\"\" in these sites. However, I don't think there is a guarantee of return of your money, and I have heard mixed reviews by people, so I will not link to any such sites here.\"",
"title": ""
},
{
"docid": "d792f323f05b1db6ee224d964a05ab4d",
"text": "A safe investment would be to get a 5-year CD from Ally Bank. No minimum deposit and no monthly maintenance fees. 1.74% APY at the moment. I would choose a 5-year CD since the early withdrawal penalty is only 60 days interest, which will be negligible for a $100 investment and increasing the term significantly increases your interest rate. Regarding other suggestions: Even if you find a way purchase stock commission free, it will probably cost a $5-$10 commission to sell, wiping out probably a year or two of gains. Also, I-Bonds must be held for a year minimum, which is problematic. At the end of the day, it's probably not really worth your time to do any of these. $2 a year or $5 a year, it's still fairly insignificant and your time is surely worth more than that.",
"title": ""
}
] |
[
{
"docid": "5bacfe015985d1c04fa63935730a6b79",
"text": "\"There are two ways you can \"\"cash in.\"\" 1) Buy enough additional shares to bring your share total to 100, then exercise the put. 2) Sell the put in the open market for a profit.\"",
"title": ""
},
{
"docid": "1bc6169aec3f825243440553d3ffad2b",
"text": "\"TLDR: Yes you can. That is quite a steep price to pay for a trade. I've used TradeKing previously, which would charge you $5 for that same trade. Some other brokers are more or less expensive, and it is normally representative of the service one receives. One option would be Scottrade. While they are much more expensive than TradeKing, they offer a much higher level of service. Even at $17 a trade, you'll save a lot of money over the Edward Jones trade. A big question here is who does your investing now? Most people are pretty horrible at managing their own investments. Some professional advice is probably in order. For most they discover this when their investments are small, mitigating any mistakes made. You don't have that luxury. I would highly recommend making sure you have people that can help you make good decisions. The more I think about it the more I like the move to Scottrade (no affiliation) or one like that (Charles Schwab is another option). With Scottrade you can go into a local branch and talk things over. I think they offer some professional management as well. Schwab will offer the latter but not the former. However you can call them up and talk on the phone. Another option is to go with Fidelity and have them manage at least part of your money. Of course you can always just do a professional, independent money manager. Another option is to renegotiate with Edward Jones. Something like: \"\"Sorry but this is ridiculous, you need to do much better or I am moving all my money.\"\" Its much cheaper to charge you $100 for that same trade than lose the whole account.\"",
"title": ""
},
{
"docid": "0a0f1718aaec104c21145b89efc405d4",
"text": "Investing it in what? Unless you're putting it into an account that lets you avoid taxes on the income, your $100k becomes about $74k after federal income taxes. If you take $50k of that and invest it, you're now at $24k. You're living a very barebones life at that point.",
"title": ""
},
{
"docid": "1064fdecc92155663d3b8808178a2388",
"text": "\"First off, monozok is right, at the end of the day, you should not accept what anyone says to do without your money - take their suggestions as directions to research and decide for yourself. I also do not think what you have is too little to invest, but that depends on how liquid you need to be. Often in order to make a small amount of money grow via investments, you have to be willing to take all the investment profits from that principle and reinvest it. Thus, can you see how your investment ability is governed by the time you plan to spend without that money? They mantra that I have heard from many people is that the longer you are able to wait, the more 'risk' you can take. As someone who is about the same age as you (I'm 24) I can't exactly say yet that what I have done is sure fire for the long term, but I suggest you adopt a few principles: 1) Go read \"\"A Random Walk Down Wall Street\"\" by Burton G. Malkiel. A key point for you might be that you can do better than most of these professional investors for hire simply by putting more money in a well selected index fund. For example, Vanguard is a nice online service to buy indexes through, but they may require a minimum. 2) Since you are young, if you go into any firm, bank, or \"\"financial planner,\"\" they will just think you are naive and try to get you to buy whatever is best for them (one of their mutual funds, money market accounts, annuities, some flashy cd). Don't. You can do better on your own and while it might be tempting because these options look more secure or well managed, most of the time you will barely make above inflation, and you will not have learned very much. 3) One exciting thin you should start learning now is about algorithmic trading because it is cool and super efficient. quantopian.com is a good platform for this. It is a fun community and it is also free. 4) One of the best ways I have found to watch the stock market is actually through a stock game app on my phone that has realtime stock price feed. Seeking Alpha has a good mobile app interface and it also connects you to news that has to do with the companies you are interested in.\"",
"title": ""
},
{
"docid": "f27a6c6c9dcf94808d2a9ebbab865880",
"text": "What could a small guy with $100 do to make himself not poor To answer the question directly, not much. Short of investing in something at the exact moment before it goes bananas, then reinvesting into a bigger stock and bigger etc, it's super high risk. A better way is to sacrifice some small things, less coffee, less smokes, less going out partying so that instead of having $100, you have $100 a week. This puts you into a situation where you can save enough to become a deposit on an appreciating asset (choose your own asset class, property in AU for me). Take out a loan for as much as you can for your $100 a week payment and make it interest only with an offset against it, distributions from shares can either be reinvested or put into the offset or in the case of property, rent can be put against the offset, pretty soon you end up with a scenario where you have cash offsetting a loan down to nothing but you still have access to the cash, invest into another place and revalue your asset, you can take out any equity that has grown and put that also into your offset. Keep pulling equity and using the money from the offset as deposits on other assets (it kind of works really well on property) and within 15 years you can build an empire with a passive income to retire on. The biggest thing the rich guys get that the poor guys don't is that debt is GOOD, use someone else's money to buy an appreciating asset then when you pay it back eventually, you own the growth. Use debt to buy more debt for exponential growth. Of course, you need to also invest your time to research what you are investing in, you need to know when you make the decision to buy that it will appreciate, it's no good just buying off a tip, you may as well drop your money on the horses if you want to play it like that. Fortunately, one thing we all have in common regardless of our money is time, we have time which we can invest.",
"title": ""
},
{
"docid": "f0ecb35fe0fd0cae4ccc61b8ec1b2d5f",
"text": "\"The \"\"$1000 is no money at all\"\" people are amusing me. Way back in the mists of time, a very young me invested on the order of ~$500 in a struggling electronics manufacturer I had a fondness for. An emotional investment, not much money, but enough that I could get a feel for what it was like owning stock in something. That stock's symbol was AAPL. This is admittedly a rare outcome, but $1000 invested over the long term isn't not worth doing. If for no other reason then when the OP has \"\"real\"\" money, he'll have X+$1000 invested rather than X, assuming 0% return, which I doubt. It's a small enough amount that there are special considerations, but it's a solid opportunity for learning how the market works, and making a little money. Anyway, my advice to the OP is as follows:\"",
"title": ""
},
{
"docid": "36d3ef6c7eb9dd90aba57b785b47ddf7",
"text": "With 100K, I would dump the first 95K into something lame like a tax advantaged bond or do as the others here suggested. My alternative would be to take the remaining 5K and put into something leveraged. For instance, 5K would be more than enough to buy long term LEAPS options on the SPY ETF. @ Time of post, you could get 4 contracts on the DEC 2017 leaps at the $225 strike (roughly 10% out of the money) for under $1200 apiece. Possibly $1100 if you scalp them. 4 * $1200 = $4800 at risk. 4 * $22500 = $90,000 = amount of SPY stock you control with your $4800. If the market drops, SPY never reaches $225 in the next 3 years and you are out the $4800, but can use that to reduce capital gains and still have the $95K on the sidelines earning $950 or so per year. Basically you'd be guaranteed to have $97K in the bank after two years. If the market goes up significantly before 2018, you'll still have 95K in the bank earning a measly 1%, but you've also got 4 contracts which are equal to $90K shares of S&P 500. Almost as if every single dollar was invested. Bad news, if SPY goes up 20% or more from current levels over the next three years you'll unfortunately have earned some taxable income. Boo freaking hoo. https://money.stackexchange.com/a/48958/13043",
"title": ""
},
{
"docid": "f0a717cb3d03349eff74c42a58816337",
"text": "The standard advice is that stocks are all over the place, and bonds are stable. Not necessarily true. Magazines have to write for the lowest common denominator reader, so sometimes the advice given is fortune-cookie like. And like mbhunter pointed out, the advertisers influence the advice. When you read about the wonders of Index funds, and see a full page ad for Vanguard or the Nasdaq SPDR fund, you need to consider the motivation behind the advice. If I were you, I would take advantage of current market conditions and take some profits. Put as much as 20% in cash. If you're going to buy bonds, look for US Government or Municipal security bond funds for about 10% of your portfolio. You're not at an age where investment income matters, you're just looking for some safety, so look for bond funds or ETFs with low durations. Low duration protects your principal value against rate swings. The Vanguard GNMA fund is a good example. $100k is a great pot of money for building wealth, but it's a job that requires you to be active, informed and engaged. Plan on spending 4-8 hours a week researching your investments and looking for new opportunities. If you can't spend that time, think about getting a professional, fee-based advisor. Always keep cash so that you can take advantage of opportunities without creating a taxable event or make a rash decision to sell something because you're excited about a new opportunity.",
"title": ""
},
{
"docid": "5441f74c31fd065e750dc107af1495a4",
"text": "\"This may be a great idea, or a very bad one, or it may simply not be applicable to you, depending on your personal circumstances and interests. The general idea is to avoid passive investments such as stocks and bonds, because they tend to grow by \"\"only\"\" a few percent per year. Instead, invest in things where you will be actively involved in some form. With those, much higher investment returns are common (but also the risk is higher, and you may be tied down and have to limit the traveling you want to do). So here are a few different ways to do that: Get a college degree, but only if you are interested in the field, and it ends up paying you well. If you aren't interested in the field, you won't land the $100k+ jobs later. And if you study early-childhood education, you may love the job, but it won't pay enough to make it a good investment. Of course, it also has to fit with your life plans, but that might be easier than it seems. You want to travel. Have you thought about anthropology, marine biology or archeology? Pick a reputable, hard-to-get-into, academic school rather than a vocation-oriented oe, and make sure that they have at least some research program. That's one way to distinguish between the for-profit schools (who tend to be very expensive and land you in low-paying jobs), and schools that actually lead to a well-paying future. Or if your interest runs more in a different direction: start a business. Your best bet might be to buy a franchise. Many of the fast-food chains, such as McDonalds, will let you buy as long as you have around $300k net worth. Most franchises also require that you are qualified. It may often make sense to buy not just one franchised store, but several in an area. You can increase your income (and your risk) by getting a loan - you can probably buy at least $5 million worth of franchises with your \"\"seed money\"\". BTW, I'm only using McDonalds as an example. Well-known fast food franchises used to be money-making machines, but their popularity may well have peaked. There are franchises in all kinds of industries, though. Some tend to be very short-term (there is a franchise based on selling customer's stuff on ebay), while others can be very long-lived (many real-estate brokerages are actually franchises). Do be careful which ones you buy. Some can be a \"\"license to print money\"\" while others may fail, and there are some fraudsters in the franchising market, out to separate you from your money. Advantage over investing in stocks and bonds: if you choose well, your return on investment can be much higher. That's generally true for any business that you get personally involved in. If you do well, you may well end up retiring a multimillionaire. Drawback: you will be exposed to considerable risk. The investment will be a major chunk of your net worth, and you may have to put all your eggs in none basket. If your business fails, you may lose everything. A third option (but only if you have a real interest in it!): get a commercial driver's license and buy an 18-wheeler truck. I hear that owner-operators can easily make well over $100k, and that's with having to pay off a bank loan. But if you don't love trucker culture, it is likely not worth doing. Overall, you probably get the idea: the principle is to use your funds as seed money to launch something profitable and secure, as well as enjoyable for you.\"",
"title": ""
},
{
"docid": "5625496dedd8862d5e88416d729fc2de",
"text": "\"First off, the answer to your question is something EVERYONE would like to know. There are fund managers at Fidelity who will a pay $100 million fee to someone who can tell them a \"\"safe\"\" way to earn interest. The first thing to decide, is do you want to save money, or invest money. If you just want to save your money, you can keep it in cash, certificates of deposit or gold. Each has its advantages and disadvantages. For example, gold tends to hold its value over time and will always have value. Even if Russia invades Switzerland and the Swiss Franc becomes worthless, your gold will still be useful and spendable. As Alan Greenspan famously wrote long ago, \"\"Gold is always accepted.\"\" If you want to invest money and make it grow, yet still have the money \"\"fluent\"\" which I assume means liquid, your main option is a major equity, since those can be readily bought and sold. I know in your question you are reluctant to put your money at the \"\"mercy\"\" of one stock, but the criteria you have listed match up with an equity investment, so if you want to meet your goals, you are going to have to come to terms with your fears and buy a stock. Find a good blue chip stock that is in an industry with positive prospects. Stay away from stuff that is sexy or hyped. Focus on just one stock--that way you can research it to death. The better you understand what you are buying, the greater the chance of success. Zurich Financial Services is a very solid company right now in a nice, boring, highly profitable business. Might fit your needs perfectly. They were founded in 1872, one of the safest equities you will find. Nestle is another option. Roche is another. If you want something a little more risky consider Georg Fischer. Anyway, what I can tell you, is that your goals match up with a blue chip equity as the logical type of investment. Note on Diversification Many financial advisors will advise you to \"\"diversify\"\", for example, by investing in many stocks instead of just one, or even by buying funds that are invested in hundreds of stocks, or indexes that are invested in the whole market. I disagree with this philosophy. Would you go into a casino and divide your money, putting a small portion on each game? No, it is a bad idea because most of the games have poor returns. Yet, that is exactly what you do when you diversify. It is a false sense of safety. The proper thing to do is exactly what you would do if forced to bet in casino: find the game with the best return, get as good as you can at that game, and play just that one game. That is the proper and smart thing to do.\"",
"title": ""
},
{
"docid": "7cdda4d3caa04e644bcc253415266fa0",
"text": "Yes under certain circumstances! Educate yourself first. Consider algorithmic trading when you code your strategies and implement your ideas - a bit easier for psychology. And let the computer to trade for you. Start with demo account without taking personal risk. Only after a year of experience try small amount of cash like you said 100$. Avoid trade when big news events are released. Stick to strategy, use money management, stop loss, write results in the journal... learn & improve... be careful it is very hard journey.",
"title": ""
},
{
"docid": "a7bcd917fe07b351cca0a1b88d3050c8",
"text": "\"I have money to invest. Where should I put it? Anyone who answers with \"\"Give it to me, I'll invest it for you, don't worry.\"\" needs to be avoided. If your financial advisor gives you this line or equivalent, fire him/her and find another. Before you think about where you should put your money, learn about investing. Take courses, read books, consume blogs and videos on investing in stocks, businesses, real estate, and precious metals. Learn what the risks and rewards are for each, and make an informed decision based on what you learned. Find differing opinions on each type of investment and come to your own conclusions for each. I for example, do not understand stocks, and so do not seriously work the stock market. Mutual funds make money for the folks selling them whether or not the price goes up or down. You assume all the risk while the mutual fund advisor gets the reward. If you find a mutual fund advisor who cannot recommend the purchase of a product he doesn't sell, he's not an advisor, he's a salesman. Investing in business requires you either to intimately understand businesses and how to fund them, or to hire someone who can make an objective evaluation for you. Again this requires training. I have no such training, and avoid investing in businesses. Investing in real estate also requires you to know what to look for in a property that produces cash flow or capital gains. I took a course, read some books, gained experience and have a knowledgeable team at my disposal so my wins are greater than my losses. Do not be fooled by people telling you that higher risk means higher reward. Risks that you understand and have a detailed plan to mitigate are not risks. It is possible to have higher reward without increasing risk. Again, do your own research. The richest people in the world do not own mutual funds or IRAs or RRSPs or TFSAs, they do their own research and invest in the things I mentioned above.\"",
"title": ""
},
{
"docid": "a2c8ee8ee3ef896bb3dc414204aa9de5",
"text": "Citibank just sent me a $100 check. Here's how I got it:",
"title": ""
},
{
"docid": "56941f61022dfec7fea49b5f306ff12e",
"text": "\"You can certainly try to do this, but it's risky and very expensive. Consider a simplified example. You buy 1000 shares of ABC at $1.00 each, with the intention of selling them all when the price reaches $1.01. Rinse and repeat, right? You might think the example above will net you a tidy $10 profit. But you have to factor in trade commissions. Most brokerages are going to charge you per trade. Fidelity for example, want $4.95 per trade; that's for both the buying and the selling. So your 1000 shares actually cost you $1004.95, and then when you sell them for $1.01 each, they take their $4.95 fee again, leaving you with a measly $1.10 in profit. Meanwhile, your entire $1000 stake was at risk of never making ANY profit - you may have been unlucky enough to buy at the stock's peak price before a slow (or even fast) decline towards eventual bankruptcy. The other problem with this is that you need a stock that is both stable and volatile at the same time. You need the volatility to ensure the price keeps swinging between your buy and sell thresholds, over and over again. You need stability to ensure it doesn't move well away from those thresholds altogether. If it doesn't have this weird stable-volatility thing, then you are shooting yourself in the foot by not holding the stock for longer: why sell for $1.01 if it goes up to $1.10 ten minutes later? Why buy for $1.00 when it keeps dropping to $0.95 ten minutes later? Your strategy means you are always taking the smallest possible profit, for the same amount of risk. Another method might be to only trade each stock once, and hope that you never pick a loser. Perhaps look for something that has been steadily climbing in price, buy, make your tiny profit, then move on to the next company. However you still have the risk of buying something at it's peak price and being in for an awfully long wait before you can cash out (if ever). And if all that wasn't enough to put you off, brokerages have special rules for \"\"frequent traders\"\" that just make it all the more complicated. Not worth the hassle IMO.\"",
"title": ""
},
{
"docid": "c30622bcc45adfa643b3857cd835a748",
"text": "In a system where electronic payment is well developed you can consider the following 2 scenarios: Now let us zoom in. Regardless of what costs are actually charged, it should not be hard to see which system is most (real cost) efficient once electronical payments are well developed. And so, the conclusion is not hard to reach:",
"title": ""
}
] |
fiqa
|
fc92fd4eb10b6ff1947da543f36dd9da
|
BATS/Chi-X Europe Smart Order routing
|
[
{
"docid": "1c0e32fae90ebf5998838c8aaec99163",
"text": "\"It is explained on their website. Just look for the word \"\"routing\"\" on the Features page: Choose Your Venues Liquidity Pools Group 1: Bats Europe Group 2: Liquidity Partner (LP) Add this group to access dark pool liquidity. Group 3: Exchanges and MTFs Choose to access additional Exchanges and MTFs across Europe.\"",
"title": ""
}
] |
[
{
"docid": "2cb0c9006f2d4e792506e81e91ac60f5",
"text": "Think I had to sign an NDA on pricing w them so can't get specific. Depends if you want realtime or just historical data. Historical obviously cheaper, realtime more. The prices aren't crushing though, one of cheapest tick data vendors around. You get pros and cons to that though - data is time stamped at 25ms and sent over WAN. But they also have self healing tapes w backfill etc so if your server knocks offline for a while you fill the gap when back up etc.",
"title": ""
},
{
"docid": "88facd1b2772676584a6e7c624ca3030",
"text": "Within the U.K., Third Party Resellers establish warehouses in the UK, but orders are placed overseas, and Amazon is not required to collect Value Added Tax on behalf of allegedly foreign owned resellers which rely on Amazon to sell items. Amazon also evades the payment of tax by routing all sales through Luxembourg which, thanks to Jean Claude Juncker of the EU when Prime Minister of Luxembourg negotiated a generous tax sweetheart deal for multi national corporations (incl Amazon) to establish their base in Luxembourg.",
"title": ""
},
{
"docid": "3623cb3175230cdde8f3cf5abed78175",
"text": "\"Following comments to your question here, you posted a separate question about why SPY, SPX, and the options contract don't move perfectly together. That's here Why don't SPY, SPX, and the e-mini s&p 500 track perfectly with each other? I provided an answer to that question and will build on it to answer what I think you're asking on this question. Specifically, I explained what it means that these are \"\"all based on the S&P.\"\" Each is a different entity, and different market forces keep them aligned. I think talking about \"\"technicals\"\" on options contracts is going to be too confusing since they are really a very different beast based on forward pricing models, so, for this question, I'll focus on only SPY and SPX. As in my other answer, it's only through specific market forces (the creation / redemption mechanism that I described in my other answer), that they track at all. There's nothing automatic about this and it has nothing to do with some issuer of SPY actually holding stock in the companies that comprise the SPX index. (That's not to say that the company does or doesn't hold, just that this doesn't drive the prices.) What ever technical signals you're tracking, will reflect all of the market forces at play. For SPX (the index), that means some aggregate behavior of the component companies, computed in a \"\"mathematically pure\"\" way. For SPY (the ETF), that means (a) the behavior of SPX and (b) the behavior of the ETF as it trades on the market, and (c) the action of the authorized participants. These are simply different things. Which one is \"\"right\"\"? That depends on what you want to do. In theory you might be able to do some analysis of technical signals on SPY and SPX and, for example, use that to make money on the way that they fail to track each other. If you figure out how to do that, though, don't post it here. Send it to me directly. :)\"",
"title": ""
},
{
"docid": "30aaa612684f58901097058380ef7de2",
"text": "I'm not disputing whether IB is good to start. I'm disputing that anything going through them is 'low latency.' 50-100ms is a lifetime against high frequency traders. Also, if you're co-locating w/ them and using a direct feed and still getting that latency you're getting ripped off. It should take 100ms *for a message to travel between Chicago and NY*, let alone between your computer and the exchange one at the same colo.",
"title": ""
},
{
"docid": "2b223009f6d87477300607f9cefa4b95",
"text": "BATS CHi-X Europe is a market maker. They provide liquidity to the order books of different kinds of equities on certain exchanges. So the London Stock Exchange lists equities and the order books show the orders of different market participants. Most of those market participants are market makers. They allow others to complete a trade of an equity closer to the price that persons wants, in a faster time period and in larger amounts, than if there were no market makers providing liquidity.",
"title": ""
},
{
"docid": "65249dc846a82a10509e3d93e81b8325",
"text": "\"Is there ever any ambiguity on what that that exact strike is in delta space, or does everyone back it out from the pricing model the same way? I ask, because in my product nearly everyone runs a heavier delta to the put (the severity of that varies). So on trades that are \"\"tied up\"\", everyone participating on it can have slightly different deltas that they are modeling\"",
"title": ""
},
{
"docid": "84193f349ecacfef2d57d11110941d37",
"text": "Kek. > Amazon is big enough to take full advantage of “postal injection,” and that has tipped the scales in the internet giant’s favor. **Select** high-volume shippers are able to drop off presorted packages at the local Postal Service depot for “last mile” delivery at cut-rate prices. With high volumes and warehouses near the local depots, Amazon enjoys low rates unavailable to its competitors.",
"title": ""
},
{
"docid": "a5ad4e62ea3754feea8c6957408a7830",
"text": "I'm a bot, *bleep*, *bloop*. Someone has linked to this thread from another place on reddit: - [/r/talkbusiness] [The GPS\\/GNSS system behind finance, telecommunications and transportation networks is vulnerable to terrorist jamming and criminal spoofing](https://np.reddit.com/r/talkbusiness/comments/7828xq/the_gpsgnss_system_behind_finance/) [](#footer)*^(If you follow any of the above links, please respect the rules of reddit and don't vote in the other threads.) ^\\([Info](/r/TotesMessenger) ^/ ^[Contact](/message/compose?to=/r/TotesMessenger))* [](#bot)",
"title": ""
},
{
"docid": "896caa9549fb7bd74943e6831d851a08",
"text": "Canadian Tire does this now, at least in Vancouver stores. Tells you the aisle number and saved a ton of time. Sure I don't browse the whole store but I still go back to CT for many purchases.",
"title": ""
},
{
"docid": "f98342a46aadd4f3c7192e8b9415206c",
"text": "For starters, that site shows the first 5 levels on each side of the book, which is actually quite a bit of information. When traders say the top of the book, they mean just the first level. So you're already getting 8 extra levels. If you want all the details, you must subscribe to the exchange's data feeds (this costs thousands of dollars per month) or open an account with a broker who offers that information. More important than depth, however, is update frequency. The BATS site appears to update every 5 seconds, which is nowhere near frequently enough to see what's truly going on in the book. Depending on your use case, 2 levels on each side of the book updated every millisecond might be far more valuable than 20 levels on each side updated every second.",
"title": ""
},
{
"docid": "813858cf2f0c16b3f5c4ca408f424b67",
"text": "Like in the US, more flexibility is extended to hidden orders. Australia has taken an aggressive approach to hidden orders in the direction of lower ticks. Aussies have a rich financial that evolved differently than the Dutch custom more familiarly known in the UK and US. They, like Chicago evolved out of commodities trade rather than trade. When commodities are worth nearly nothing per unit, larger precision comes naturally. For the Dutch, it was the opposite. A single ship would trade in 1/64 share or for the largest vessels, 1/128 share. Here, there's no point to high precision. New York, founded by the Dutch specialized in logistics just the same. To a man with a hammer, everything looks like a nail, so both Chicago, Australia, and other financial systems built by commodities rather than trade have extended the higher precision logic to everything else, and pricing is fantastic. It should not be a surprise why Australia has taken a lead in pushing infinite precision.",
"title": ""
},
{
"docid": "d2323f60dcf6807c1151a04b0999014a",
"text": "\"You can place the orders like you suggested. This would be useful in a market that is moving quickly where you want to be reasonably sure of execution but don't want the full exposure of a market order. This won't jump your spot in the queue though in the sense that you won't get ahead of other orders that are \"\"ready\"\" for execution just because you have crossed the spread aggressively.\"",
"title": ""
},
{
"docid": "7cefa73cfa45f438cf139281ac832089",
"text": "No. Brokers and HFT are two different entities, mostly. No HFT shops have prior information about a client order. PM me if you want to discuss more in detail. Getting beyond the scope of this post.",
"title": ""
},
{
"docid": "8bc05a91109205f52534ba5a9306deef",
"text": "\"In the first situation you describe, any intelligent routing algo will send a 1000 lot order to the lit exchange in step 1. Then you get filled 1000@$10. After the fill occurs, the matching engine tells everyone what happened. If the order book consists of 100 orders of 1 lot @ $10, and you place a \"\"buy 100 lots\"\" order, here is what happens: 1. The matching engine receives your order. 2. The matching engine matches your order against the 100 individual orders on the book. 3. The matching engine broadcasts 100 trade notifications. No one has any opportunity to cancel their orders since they only hear of the fill after it happened. The only way someone would have the opportunity to cancel is if there was 500 lots on one exchange and 500 on another. Then someone might observe a trade on exchange #1 and cancel their sell order on exchange #2 in response.\"",
"title": ""
},
{
"docid": "f9349e5a17f56799ad62bf36addb6df5",
"text": "You've said what's different in your question. There's 330 microseconds of network latency between IEX and anywhere else, so HFTs can't get information about trades in progress on IEX and use it to jump in ahead of those traders on other exchanges. All exchanges should have artificially induced latency of this kind so that if a trade is submitted simultaneously to all exchanges it reaches the furthest away one before a response can be received from the closest one, thus preventing HFT techniques.",
"title": ""
}
] |
fiqa
|
13cbb7e5dafee7f1c883c8bbca8060c7
|
Why is the stock market closed on the weekend?
|
[
{
"docid": "df4f9ad35e6130f0848cb17ea7098847",
"text": "While a lot of trading is executed by computers, a substantial amount is still done at the behest of humans. Brokers managing accounts, Portfolio Managers, and Managers of Mutual Funds doing stock picks etc. Those folks are still initiating a very large number of the trades (or at least one side of a trade). And those humans don't work 7 days a week. it's not just computers talking to computers at the behest of other computers. And even a lot of places that use computers to create models and such, there are still humans in the loop to ensure that the computers are not ordering something stupid to be done. I personally worked for a firm that managed nearly $20Billion in stock portfolios. The portfolios were designed to track indexes, or a mix of indexes and actively managed funds, but with the addition of managing for tax efficiency. A lot of complex math and complicated 'solver' programs that figured out each day what if anything to trade in each portfolio. Despite all those computers, humans still reviewed all the trades to be sure they made sense. And those humans only worked 5 days a week.",
"title": ""
},
{
"docid": "00f280b6a3bea0118a4054cc628994ab",
"text": "After-hours trading and alternate venues allow one to trade outside of regular market hours. However there are a few reasons why you would not want to: The purpose of an exchange is to improve liquidity by gathering all buyers and sellers in the same place at the same time. If trading was 24/7, not all market participants would be trading at the same time. Some markets (including NASDAQ) depend on market makers or specialists to help liquidity. These exchanges are able to mandate that the market maker actively make a market in a security during a meaningful percentage of the trading day. Requiring 24/7 active market making may not be reasonable. Trading systems, meaning both exchange infrastructure and market participant infrastructure, need maintenance time. It's nice to have the evenings and weekends for scheduled work. Post-trade clearing and settlement procedures are still somewhat manual at times. You need staff around to handle these processes.",
"title": ""
},
{
"docid": "df478de5f5bd9ffe3c1cc4b738bb4c4c",
"text": "The answer is 7-fold: BOTTOM LINES: Bubble; bursting bubble; Great Depression; Victory in WWII; All work and no play makes Jack (& Jill) very dull persons.",
"title": ""
},
{
"docid": "a141c05871b303c03043232c9c7c5bff",
"text": "The stock markets are closed on week-ends and public holidays because the Banks are closed. The Banking is a must to settle the payment obligations. So you may buy and sell as much as you wish, but unless money changes hands, nothing has really happened. Now as to why Banking itself is closed on week-ends and public holidays, well a different question :) Keeping the system 24 hrs up and running does not actually push volumes, but definately push expenses for brokers, Banks etc. There definately is some convinience to buyers and sellers.",
"title": ""
},
{
"docid": "ee3c26f1e268c510af153b96996fe8be",
"text": "There are a number of factors here. 1) It's important that there is human oversight on the system. At one level someone needs to be monitoring the computers that manage the trading to be sure they are functioning. At another level someone needs to be making judgement calls on important but rare events: when you you suspend trading in a stock? When do you close the stock exchange entirely? It is alleged that unsupervised computer trades were at least partly responsible for the May 2010 selloff. Even if that's unproven, would you really want those unsupervised computers trading with each other for a couple of days? Or even for a couple of hours? 2) Providing 24/7 trading would increase the cost of running a stock exchange, but with only a tiny improvement in liquidity. 3) If the stock exchange ran 24/7 then traders would have to run 24/7. That would add hugely to the cost of trading. 4) The people who would really suffer would be day traders - because there would no longer be such a thing as a day trader. If you were a sole trader then you would need to monitor your investments 24/7, or risk waking up in the morning to find one of your stocks had plummeted overnight.",
"title": ""
},
{
"docid": "0bec16344b49de4af6aa1e4d03c07e2e",
"text": "Simply, most of the above given 'answers' are mere 'justifications' for a practice that has become anachronistic. It did make sense once in the past, but not any more. Computers and networks can run non-stop 24/7; even though the same human beings cannot be expected to work 24/7, we have invented the beautiful concept of multiple shifts; banks may be closed during nights and weekends, but banking is never closed in the internet era; ...The answer must lie in the vested interests of a few stakeholder groups - or - it could just be our difficult to change habits.",
"title": ""
}
] |
[
{
"docid": "dd99ef5267bc2cb10f23ee1f62bc9f82",
"text": "I've never seen a dividend, split or other corporate action during the day, but I have seen trade suspended a few times when something big happened. The market opening price is not in general the same as the close of the previous day. It can gap up or down and does frequently. I don't know of an api to find out if the dividend was cash or stock, but stock dividends are a lot less common.",
"title": ""
},
{
"docid": "361023b21c7e267e455f2f7d9a7ec418",
"text": "\"During the day, market and limit orders are submitted at any time by market participants and there is a bid and an ask that move around over time. Trades occur whenever a market order is submitted or a limit order is submitted that at a price that matches or exceeds an existing limit order. If you submit a market order, it may consume all best-price limit orders and you can get multiple prices, changing the bid or ask at the same time. All that stuff happens during the trading day only. What happens at the end of the day is different. A bunch of orders that were submitted during the day but marked as \"\"on close\"\" are aggregated with any outstanding limit orders to create a single closing price according to the algorithm established by the exchange. Each exchange may handle the details of this closing event differently. For example, the Nasdaq's closing cross or the NYSE's closing auction. The close is the most liquid time of the day, so investors who are trading large amounts and not interested in intraday swings will often submit a market-on-close or limit-on-close order. This minimizes their chance of affecting the price or crossing a big spread. It's actually most relevant for smaller stocks, which may have too little volume during the day to make big trades, but have plenty at the close. In short, the volume you see is due to these on-close orders. The spike in volume most likely has no special information about what will happen overnight or the next day. It's probably just a normal part of the market for illiquid stocks.\"",
"title": ""
},
{
"docid": "f70265ed3e89fe16f52b76e56bffb18d",
"text": "It is because 17th was Friday, 18th-19th were weekends and 20th was a holiday on the Toronto Stock Exchange (Family Day). Just to confirm you could have picked up another stock trading on TMX and observed the price movements.",
"title": ""
},
{
"docid": "14a425ef8cb11db564bada29217d8e6f",
"text": "First - Google's snapshot - Then - Yahoo - I took these snapshots because they will not exist on line after the market opens, and without this context, your question won't make sense. With the two snapshots you can see, Yahoo shows the after hours trades and not just the official market close for the day. The amount it's down is exactly tracked from the close shown on Google. Now you know.",
"title": ""
},
{
"docid": "b37e26089960d75e1ba62ecb40a88e49",
"text": "It is called the Monday Effect or the Weekend Effect. There are a number of similar theories including the October Effect and January Effect. It's all pretty much bunk. If there were any truth to traders would be all over it and the resulting market forces would wipe it out. Personally, I think all technical analysis has very little value other than to fuel conversations at dinner parties about investments. You might also consider reading about Market efficiency to see further discussion about why technical approaches like this might, but probably don't work.",
"title": ""
},
{
"docid": "992b3d565cc24fabd08e53b19d812338",
"text": "Most stocks are not actively trades by lots of people. When you buy or sell a stock the price is set by the “order book” – that is the other people looking to trade in the given stock at the same time. Without a large number of active traders, it is very likely the pricing system will break down and result in widely changing prices second by second. Therefore for the market to work well, it need most people to be trading at the same time.",
"title": ""
},
{
"docid": "9e8d85d78ecbeb8f53dec0110eed30fe",
"text": "There's something very important no one else has mentioned... times when the stock market falls dramatically are often the times when you're most likely to lose your job, and when it's hardest to get loans. So if you ever do need your emergency fund, it will more than likely be related to a dip in the stock market.",
"title": ""
},
{
"docid": "018634fe9681150c8817969ad44b3afd",
"text": "During the 12 plus hours the market was closed news can change investors opinion of the stock. When the market reopens that first trade could be much different than the last trade the day before.",
"title": ""
},
{
"docid": "b991029e2677b48b8aee1e18bc92fbaf",
"text": "The two answers so far are right, but there's a third factor - for many stocks, there's after hours trading. So the official 4PM close is not what the stock's last trade was when they open again. Regardless, even that after hour price is not the starting point as Muro points out.",
"title": ""
},
{
"docid": "370bf01afd80672f58b7757144ca2871",
"text": "There are several reasons why this may happen and I will update as I get more information from you. Volumes on that stock look low (supposing that they are either in a factor between 1s and 1000s) so it could well be that there was no volume on that day. If no trades occur then open, high and low are meaningless as they are statistics based on trades that occur that day and no trades occur. Remember that there has to be volume to get a price. The stock may have been frozen by either the exchange or the company for the day. This could be for various reasons including to prevent some illegal activity. In that case no trades were made because the market for that stock was closed. Another possibility is that all trades that day were cancelled by the exchange. The exchange may cancel all trades if there is unusual, potentially fraudulent or other illegal activity on the stock. In this case the last price for that day existed but was rolled back by the exchange and never occurred. This is a rare situation. Although I can't find any holidays on that date it is possible that this is how your data provider marks market holidays. It would be valid to ignore the data in that case as being from a non-market day. I cannot tell if this is possible without knowing exchange information. There is a possibility that some data providers don't receive data for a day or that it gets corrupted. It may be worth checking another source to ensure the integrity of the data that you are receiving. Whichever reason is true, the data provider has made the close equal to the previous day's close as no price movements occurred. Strictly the closing price is the price of the last trade made for that day and so should be null (and open, high and low should be null too and not 0 otherwise the price change on day is very large!). Therefore, to keep integrity, you have a few choices:",
"title": ""
},
{
"docid": "5b046169ed068a319df90d5012e5a886",
"text": "How come when I sell stocks, the brokerage won't let me cash out for three days, telling me the SEC requires this clearance period for the transaction to clear, but they can swap shit around in under a second? Be interesting to see what would happen if *every* transaction wasn't cleared until the closing bell.",
"title": ""
},
{
"docid": "4571bbf2ec41f30bc870081d15d4d138",
"text": "Summarized article: On Friday, the Dow Jones Industrial Average dropped almost 275 points and wiped out the last of the index's gains for the year. Friday's massive selloff was triggered by a dismal US jobs report and data indicating a European and Chinese economic slowdown. Friday was the worst day of the year for the market. Worried investors moved cash to the US Treasury bond market which also dragged the yield to a record low. Some analysts believe the panic in the market may cause the Federal Reserve to plan for additional stimulus. Federal Reserve Chairman Ben Bernanke is scheduled to speak next week. *For more summarized news, subscribe to the [/r/SkimThat](http://www.reddit.com/r/SkimThat) subreddit*",
"title": ""
},
{
"docid": "52ef53da2268a37f8563da3280b54011",
"text": "Many of the major indices retreated today because of this news. Why? How do the rising budget deficits and debt relate to the stock markets? The major reason for the market retreating is the uncertainty regarding the US Dollar. If the US credit rating drops that will have an inflationary effect on the currency (as it will push up the cost of US Treasuries and reduce confidence in the USD). If this continues the loss of USD confidence could bring an end to the USD as the world's reserve currency which could also create inflation (as world banks could reduce their USD reserves). This can make US assets appear overvalued. Why is there such a large emphasis on the S&P rating? S&P is a large trusted rating agency so the market will respond to their analysis much like how a bank would respond to any change in your rating by Transunion (Consumer Credit Bureau) Does this have any major implications for the US stock markets today, in the short term and in July? If you are a day-trader I'm sure it does. There will be minor fluctuations in the market as soon as news comes out (either of its extension or any expected delays in passing that extension). What happens when the debt ceiling is reached? Since the US is in a deficit spending situation it needs to borrow more to satisfy its existing obligations (in short it pays its debt with more debt). As a result, if the debt ceiling isn't raised then eventually the US will be unable to pay its existing obligations. We would be in a default situation which could have devastating affects on the value of the USD. How hard the hit will depend on how long the default situation lasts (the longer we go without an increased ceiling after the exhaustion point the more we default on). In reality, Congress will approve a raise, but they will drag it out to the last possible minute. They want to appear as if they are against it, but they understand the catastrophic effects of not doing so.",
"title": ""
},
{
"docid": "9a82f43e62e38797137d6539f5d6b27c",
"text": "In general a stock can open at absolutely any price with no regard for the closing price or after hours price the previous day. The opening price will be determined by the best bid and offer made by people who decide to trade the next day. Some of the those people may have put orders in on a prior day that are still on the books and matter, but there's a lot of time overnight for people to cancel orders and enter new ones, which is especially likely to happen if there was substantive news overnight. As for what you can do in your case, you have the same options that you always had: Sell or hold. If you're selling, you can sell after hours, in the pre-open hours, or during the trading day. There's nothing we can say about this case that's really any different than we can say about any other stock on any other day.",
"title": ""
},
{
"docid": "326ea6960923a13468c22e20815d10cd",
"text": "\"US law dictates that you cannot buy / sell shares in a company you work for except during open trading windows. I understand lockout periods when you're in a company but what about after you quit? There's no such law. Trading lockouts are imposed by companies themselves to avoid the complexities of identifying \"\"insiders\"\". For large companies it sometimes is easier/cheaper to assume everyone is insider instead of imposing internal data flow controls and limitations. For such companies, their internal policies would also manage how the employees who are leaving should be treated.\"",
"title": ""
}
] |
fiqa
|
7905ff6ee73f2a3be89f3d0e0e87f9f2
|
How do I invest in the S&P 500?
|
[
{
"docid": "ece79e9defa1e04ab1aded3cd8711474",
"text": "The S&P 500 is a stock market index, which is a list of 500 stocks from the largest companies in America. You could open a brokerage account with a broker and buy shares in each of these companies, but the easiest, least expensive way to invest in all these stocks is to invest in an S&P 500 index mutual fund. Inside an index mutual fund, your money will be pooled together with everyone else in the fund to purchase all the stocks in the index. These types of funds are very low expense compared to managed mutual funds. Most mutual fund companies have an S&P 500 index fund; two examples are Vanguard and Fidelity. The minimum investment in most of these mutual funds is low enough that you will be able to open an account with your $4000. Something you need to keep in mind, however: investing in any stock mutual fund is not non-risk. It's not even low-risk, really. It is very possible to lose money by investing in the stock market. An S&P 500 index fund is diversified in the sense that you have money in lots of different stocks, but it is also not diversified, in a sense, because it is all in large cap American stocks. Before investing in the stock market, you should have a goal for the money you are investing. If you are investing for something several years away, an index fund can be a good place to invest, but if you will need this money within the next few years, the stock market might be too risky for you.",
"title": ""
},
{
"docid": "4fa345328cc8d114885c2f61dce4428a",
"text": "\"Buy the ETF with ticker \"\"SPY\"\". This will give you exposure to exactly the S&P 500 stocks, This is similar to the mutual fund suggestion by Ben Miller, except that the ETF has several advantages over mutual funds, especially as regards taxes. You can find information on the difference between ETF and mutual fund in other questions on this site or by searching the web.\"",
"title": ""
}
] |
[
{
"docid": "6e4f01017045a7b9ef74ebae91eacf5a",
"text": "\"I actually love this question, and have hashed this out with a friend of mine where my premise was that at some volume of money it must be advantageous to simply track the index yourself. There some obvious touch-points: Most people don't have anywhere near the volume of money required for even a $5 commission outweigh the large index fund expense ratios. There are logistical issues that are massively reduced by holding a fund when it comes to winding down your investment(s) as you get near retirement age. Index funds are not touted as categorically \"\"the best\"\" investment, they are being touted as the best place for the average person to invest. There is still a management component to an index like the S&P500. The index doesn't simply buy a share of Apple and watch it over time. The S&P 500 isn't simply a single share of each of the 500 larges US companies it's market cap weighted with frequent rebalancing and constituent changes. VOO makes a lot of trades every day to track the S&P index, \"\"passive index investing\"\" is almost an oxymoron. The most obvious part of this is that if index funds were \"\"the best\"\" way to invest money Berkshire Hathaway would be 100% invested in VOO. The argument for \"\"passive index investing\"\" is simplified for public consumption. The reality is that over time large actively managed funds have under-performed the large index funds net of fees. In part, the thrust of the advice is that the average person is, or should be, more concerned with their own endeavors than they are managing their savings. Investment professionals generally want to avoid \"\"How come I my money only returned 4% when the market index returned 7%? If you track the index, you won't do worse than the index; this helps people sleep better at night. In my opinion the dirty little secret of index funds is that they are able to charge so much less because they spend $0 making investment decisions and $0 on researching the quality of the securities they hold. They simply track an index; XYZ company is 0.07% of the index, then the fund carries 0.07% of XYZ even if the manager thinks something shady is going on there. The argument for a majority of your funds residing in Mutual Funds/ETFs is simple, When you're of retirement age do you really want to make decisions like should I sell a share of Amazon or a share of Exxon? Wouldn't you rather just sell 2 units of SRQ Index fund and completely maintain your investment diversification and not pay commission? For this simplicity you give up three basis points? It seems pretty reasonable to me.\"",
"title": ""
},
{
"docid": "d1015ffe029820bd6079017d96a071be",
"text": "Like an S&P 500 ETF? So you're getting in some cash inflow each day, cash outflows each day. And you have to buy and sell 500 different stocks, at the same time, in order for your total fund assets to match the S&P 500 index proportions, as much as possible. At any given time, the prices you get from the purchase/sale of stock is probably going to be somewhat different than the theoretical amounts you are supposed to get to match, so it's quite a tangle. This is my understanding of things. Some funds are simpler - a Dow 30 fund only has 30 stocks to balance out. Maybe that's easier, or maybe it's harder because one wonky trade makes a bigger difference? I'm not sure this is how it really operates. The closest I've gotten is a team that has submitted products for indexing, and attempted to develop funds from those indexes. Turns out finding the $25-50 million of initial investments isn't as easy as anyone would think.",
"title": ""
},
{
"docid": "1cbcf770e60f79eaa8769eba124b4658",
"text": "\"Split your contributions evenly across the funds on that list with the word \"\"core\"\" or \"\"S&P\"\" in the name. Maybe add \"\"International Large Cap Index\"\". Leave it & rebalance occasionally. Read a book on Modern Portfolio Theory sometime in the next 5 years.\"",
"title": ""
},
{
"docid": "dd01dc792e5e107c7aa7065b5a85f17e",
"text": "I would read any and all of the John Bogle books. Essentially: We know the market will rise and fall. We just don't know when specifically. For the most part it is impossible to time the market. He would advocate an asset allocation approach to investing. So much to bonds, tbills, S&P500 index, NASDAQ index. In your case you could start out with 10% of your portfolio each in S&P500 and NASDAQ. Had you done that, you would have achieved growth of 17% and 27% respectively. The growth on either one of those funds would have probably dwarfed the growth on the entire rest of your portfolio. BTW 2013 and 2014 were also very good years, with 2015 being mostly flat. In the past you have avoided risk in the market to achieve the detrimental effects of inflation and stagnant money. Don't make the same mistakes going forward.",
"title": ""
},
{
"docid": "2649f29b989d8e7f895fca5b3d7d7194",
"text": "\"At the bottom of Yahoo! Finance's S & P 500 quote Quotes are real-time for NASDAQ, NYSE, and NYSE MKT. See also delay times for other exchanges. All information provided \"\"as is\"\" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein. Fundamental company data provided by Capital IQ. Historical chart data and daily updates provided by Commodity Systems, Inc. (CSI). International historical chart data, daily updates, fund summary, fund performance, dividend data and Morningstar Index data provided by Morningstar, Inc. Orderbook quotes are provided by BATS Exchange. US Financials data provided by Edgar Online and all other Financials provided by Capital IQ. International historical chart data, daily updates, fundAnalyst estimates data provided by Thomson Financial Network. All data povided by Thomson Financial Network is based solely upon research information provided by third party analysts. Yahoo! has not reviewed, and in no way endorses the validity of such data. Yahoo! and ThomsonFN shall not be liable for any actions taken in reliance thereon. Thus, yes there is a DB being accessed that there is likely an agreement between Yahoo! and the providers.\"",
"title": ""
},
{
"docid": "6346d8e03c6b05e863b35cf95b69f5fc",
"text": "You asked some direct questions, here are some direct answers: 10% of your salary is a popular rule of thumb. An IRA account is something to consider, you can open one with any of the major discount brokers and select an S&P 500 index fund for your investment. You can let it sit. That's the beauty of an index fund, it simply matches the market and you don't have to worry about trying to beat the market because you ARE the market! The average annual return for the S&P 500 Index has been around 10% (since inception). That's no guarantee, and some years are more or less and up or down. Over the long run, it goes up.",
"title": ""
},
{
"docid": "7f1eb22c5ceb023258ce59d1b6a06a9f",
"text": "\"The S&P 500 index is maintained by S&P Dow Jones Indices, a division of McGraw Hill Financial. Changes to the index are made periodically, as needed. For Facebook, you'll find it mentioned in this December 11, 2013 press release (PDF). Quote: New York, NY, December 11 , 2013 – S&P Dow Jones Indices will make the following changes to the S&P 100, S&P 500, MidCap 400 and S&P SmallCap 600 indices after the close of trading on Friday, December 20: You can find out more about the S&P 500 index eligibility criteria from the S&P U.S. Indices methodology document (PDF). See pages 5 and 6: Market Capitalization - [...] Liquidity - [...] Domicile - [...] Public Float - [...] Sector Classification - [...] Financial Viability - Usually measured as four consecutive quarters of positive as reported earnings. [...] Treatment of IPOs - Initial public offerings should be seasoned for 6 to 12 months before being considered for addition to an index. Eligible Securities - [...] [...] Changes to the U.S. indices other than the TMIX are made as needed, with no annual or semi-annual reconstitution. [...] LabCorp may have a smaller market cap than Facebook, but Facebook didn't meet all of the eligibility criteria – for instance, see the above note about \"\"Treatment of IPOs\"\" – until recently. Note also that \"\"Initial public offerings should be seasoned for 6 to 12 months\"\" implies somebody at S&P makes a decision as to the exact when. As such, I would say, no, there is no \"\"simple rule or formula\"\", just the methodology above as applied by the decision-makers at S&P.\"",
"title": ""
},
{
"docid": "23ef52c9774a6604d07c1c6fcc51ba5c",
"text": "\"Very simple. You open an account with a broker who will do the trades for you. Then you give the broker orders to buy and sell (and the money to pay for the purchases). That's it. In the old days, you would call on the phone (remember, in all the movies, \"\"Sell, sell!!!!\"\"? That's how), now every decent broker has an online trading platform. If you don't want to have \"\"additional value\"\" and just trade - there are many online discount brokers (ETrade, ScotTrade, TD Ameritrade, and others) who offer pretty cheap trades and provide decent services and access to information. For more fees, you can also get advices and professional management where an investment manager will make the decisions for you (if you have several millions to invest, that is). After you open an account and login, you'll find a big green (usually) button which says \"\"BUY\"\". Stocks are traded on exchanges. For example the NYSE and the NASDAQ are the most common US exchanges (there's another one called \"\"pink sheets\"\", but its a different kind of animal), there are also stock exchanges in Europe (notably London, Frankfurt, Paris, Moscow) and Asia (notably Hong Kong, Shanghai, Tokyo). Many trading platforms (ETrade, that I use, for example) allow investing on some of those as well.\"",
"title": ""
},
{
"docid": "b093899a640d476dc32d6a2ae1785f4a",
"text": "\"In practice, most (maybe all) stock indices are constructed by taking a weighted average of stock prices denominated in a single currency, and so the index implicitly does have that currency - as you suggest, US dollars for the S&P 500. In principle you can buy one \"\"unit\"\" of the S&P 500 for $2,132.98 or whatever by buying an appropriate quantity of each of its constituent stocks. Also, in a more realistic scenario where you buy an index via a tracker fund, you would typically need to buy using the underlying currency of the index and your returns will be relative to that currency - if the index goes up by 10%, your original investment in dollars is up by 10%.\"",
"title": ""
},
{
"docid": "7617e14cd3d865fab29e1444486990d8",
"text": "Well i dont know of any calculator but you can do the following 1) Google S&P 500 chart 2) Find out whats the S&P index points (P1) on the first date 3) Find out whats the S&P index points (P2) on the second date 4) P1 - P2 = result",
"title": ""
},
{
"docid": "3ba8d1621ca56b41841c2c7873466254",
"text": "The Dow is the top 30 companies in the USA representing different business sectors. Companies are replaced from time to time but a math equation keeps it statistically correct. The S&P 500 is the same concept as the Dow but with a much larger base of companies.",
"title": ""
},
{
"docid": "95be0410551c4048ccab16ebb8d316c9",
"text": "Generally S&P 500 will be used as the benchmark for US investors because it represents how's the US market performs as a whole. If you've outperformed the S&P 500 during the last couple years, great. However, at the end of day, you would want to look at the total growth percent that your portfolio has achieved, as compared with that of S&P 500. Anyway, your portfolio might actually ride along with the bull market during the 2009-2010 period (more-so for the small caps).",
"title": ""
},
{
"docid": "bfb844efdcbda51b6ec1bb6a74c2bfb2",
"text": "The reports of my death have been greatly exaggerated. - Twain I use index funds in my retirement planning, but don't stick to just S&P 500 index funds. Suppose I balance my money 50/50 between Small Cap and Large Cap and say I have $10,000. I'd buy $5,000 of an S&P Index fund and $5,000 of a Russell 2000 index fund. Now, fast forward a year. Suppose the S&P Index fund has $4900 and the Russell Index fund has $5200. Sell $150 of Russell Index Fund and buy $150 of S&P 500 Index funds to balance. Repeat that activity every 12-18 months. This lets you be hands off (index fund-style) on your investment choices but still take advantage of great markets. This way, I can still rebalance to sell high and buy low, but I'm not stressing about an individual stock or mutual fund choice. You can repeat this model with more categories, I chose two for the simplicity of explaining.",
"title": ""
},
{
"docid": "e3c2583945301f8f9b14c9f8f0af19fa",
"text": "S & P's site has a methodology link that contains the following which may be of use: Market Capitalization. Unadjusted market capitalization of US$ 4.6 billion or more for the S&P 500, US$ 1.2 billion to US$ 5.1 billion for the S&P MidCap 400, and US$ 350 million to US$ 1.6 billion for the S&P SmallCap 600. The market cap of a potential addition to an index is looked at in the context of its short- and medium-term historical trends, as well as those of its industry. These ranges are reviewed from time to time to assure consistency with market conditions. Liquidity. Adequate liquidity and reasonable price – the ratio of annual dollar value traded to float adjusted market capitalization should be 1.00 or greater, and the company should trade a minimum of 250,000 shares in each of the six months leading up to the evaluation date. Domicile. U.S. companies. For index purposes, a U.S. company has the following characteristics: The final determination of domicile eligibility is made by the U.S. Index Committee.",
"title": ""
},
{
"docid": "e0ac9dd020b323b90ed515c6ee5c02ec",
"text": "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.",
"title": ""
}
] |
fiqa
|
387de7f1a35ab7747ab7c594d8cf2855
|
Class of shares specifically for retirement accounts with contribution limits
|
[
{
"docid": "195e4e8774b6992abed17ead46ab1d0e",
"text": "\"The fair price of a stock is the present value of its future payments. That means the stock you have described would have a \"\"fair\"\" value that is quite high and you wouldn't be able to put much of it in your 401(k) or IRA. The IRS requires that \"\"fair value\"\" be used for calculating the value of IRA and 401(k) assets. Of course, if the stock is not publicly traded, then there's not an obvious price for it. I'm sure in the past people have said they spent a small amount of money for assets that are actually worth much more in order to get around IRS limits. This is illegal. The IRS can and sometimes will prosecute people for this. In order to address abuses of the system by inclusion of hard to value assets in retirement accounts, the IRS has additional reporting requirements for these assets (nonpublic stock, partnerships, real estate, unusual options, etc.) and those reporting requirements became more stringent in 2015. In other words, they are trying to clamp down on it. There are also likely problems with prohibitions against \"\"self-dealing\"\" involved here, depending on the specifics of the situation you are describing.\"",
"title": ""
}
] |
[
{
"docid": "b9838f030c43ae7ef9cb5567a6f0bf48",
"text": "My understanding is that when you die, the stocks are sold and then the money is given to the beneficiary or the stock is repurchased in the beneficiaries name. This is wrong, and the conclusion you draw from michael's otherwise correct answer follows your false assumption. You seem to understand the Estate Tax federal threshold. Jersey would have its own, and I have no idea how it works there. If the decedent happened to trade in the tax year prior to passing, normal tax rules apply. Now, if the executor chooses to sell off and liquidate the estate to cash, there's no further taxable gain, a $5M portfolio can have millions in long term gain, but the step up basis pretty much negates all of it. If that's the case, the beneficiaries aren't likely to repurchase those shares, in fact, they might not even know what the list of stocks was, unless they sifted through the asset list. But, that sale was unnecessary, assets can be divvied up and distributed in-kind, each beneficiary getting their fraction of the number of shares of each stock. And then your share of the $5M has a stepped up basis, meaning if you sell that day, your gains are near zero. You might owe a few dollars for whatever the share move in the time passing between the step up date and date you sell. I hope that clarifies your misunderstanding. By the way, the IRS is just an intermediary. It's congress that writes the laws, including the tangled web of tax code. The IRS is the moral equivalent of a great customer service team working for a company we don't care for.",
"title": ""
},
{
"docid": "bf1d1ea0e3677666ea9f6e49220977f5",
"text": "\"RED FLAG. You should not be invested in 1 share. You should buy a diversified ETF which can have fees of 0.06% per year. This has SIGNIFICANTLY less volatility for the same statistical expectation. Left tail risk is MUCH lower (probability of gigantic losses) since losses will tend to cancel out gains in diversified portfolios. Moreover, your view that \"\"you believe these will continue\"\" is fallacious. Stocks of developed countries are efficient to the extent that retail investors cannot predict price evolution in the future. Countless academic studies show that individual investors forecast in the incorrect direction on average. I would be quite right to objectively classify you as a incorrect if you continued to hold the philosophy that owning 1 stock instead of the entire market is a superior stategy. ALL the evidence favours holding the market. In addition, do not invest in active managers. Academic evidence demonstrates that they perform worse than holding a passive market-tracking portfolio after fees, and on average (and plz don't try to select managers that you think can outperform -- you can't do this, even the best in the field can't do this). Direct answer: It depends on your investment horizon. If you do not need the money until you are 60 then you should invest in very aggressive assets with high expected return and high volatility. These assets SHOULD mainly be stocks (through ETFs or mutual funds) but could also include US-REIT or global-REIT ETFs, private equity and a handful of other asset classes (no gold, please.) ... or perhaps wealth management products which pool many retail investors' funds together and create a diversified portfolio (but I'm unconvinced that their fees are worth the added diversification). If you need the money in 2-3 years time then you should invest in safe assets -- fixed income and term deposits. Why is investment horizon so important? If you are holding to 60 years old then it doesn't matter if we have a massive financial crisis in 5 years time, since the stock market will rebound (unless it's a nuclear bomb in New York or something) and by the time you are 60 you will be laughing all the way to the bank. Gains on risky assets overtake losses in the long run such that over a 20-30 year horizon they WILL do much better than a deposit account. As you approach 45-50, you should slowly reduce your allocation to risky assets and put it in safe haven assets such as fixed income and cash. This is because your investment horizon is now SHORTER so you need a less risky portfolio so you don't have to keep working until 65/70 if the market tanks just before retirement. VERY IMPORTANT. If you may need the savings to avoid defaulting on your home loan if you lose your job or something, then the above does not apply. Decisions in these context are more vague and ambiguous.\"",
"title": ""
},
{
"docid": "7d6960968bae59a344da844853fb3054",
"text": "These are plans similar to 401k plans. 457(b) plans available for certain government and non-profit organizations, 403(b) available for certain educational, hospital, religious and non-profit organizations. Your school apparently fits into both classes, so it has both. These plans don't have to allow ROTH contributions, but they may, so you have to check if there's an option. The main (but not only) difference from IRA is the limit: for 401(k), 403(b) and 457(b) plans the contribution limit is $17500, while for IRA its $5500 (for 2013). Additional benefit of 457(b) plan is that there's no 10% penalty on early withdrawal, just taxes (at ordinal rates).",
"title": ""
},
{
"docid": "2051b0442778b10df3a99b7fb3ac4b96",
"text": "\"That share class may not have a ticker symbol though \"\"Black Rock MSCI ACWI ex-US Index\"\" does have a ticker for \"\"Investor A\"\" shares that is BDOAX. Some funds will have multiple share classes that is a way to have fees be applied in various ways. Mutual fund classes would be the SEC document about this if you want a government source within the US around this. Something else to consider is that if you are investing in a \"\"Fund of funds\"\" is that there can be two layers of expense ratios to consider. Vanguard is well-known for keeping its expenses low.\"",
"title": ""
},
{
"docid": "100d4f2245519dfd83b90ac0cc82d35d",
"text": "You are not allowed to pick and choose what years to take a loss once the stock/fund is sold. While I realize it might be too late for you to do anything now, in the future if members should read this, they might consider doing a Roth conversion during that year they will have $3000 in losses. This way they will show some income that can be offset by that loss, effectively getting a free conversion to the Roth.",
"title": ""
},
{
"docid": "a2c9291b466f20b6130ad21913668ec2",
"text": "Each S-corp is bound by its own plan documents, which typically do not limit or dictate where the investments are held. Your brokerage account has no tie to the company from which the funds come, however, you are still subject to maximum SIMPLE contribution rules and cannot exceed the $12,500 (if under age 50) COMBINED contribution for any and all companies. Be careful about co-mingling from both companies as there are penalties for early withdrawals made within 2-years of participating in the plan. If you started them both at the same time it's not an issue.",
"title": ""
},
{
"docid": "6d9303a97a7532a9f39858d68b75bf2a",
"text": "Without knowing the specifics it is hard to give you a specific answer, but most likely the answer is no. If they limit the participation in the site to accredited investors, this is probably not something they are doing willingly, but rather imposed by regulators. Acredited investors have access to instruments that don't have the same level of regulatory protection & scrutiny as those offered to the general public, and are defined under Regulation D. Examples of such securities are 144A Shares, or hedgefunds.",
"title": ""
},
{
"docid": "81a6ee7d7f7b8ef9e63c33641f686053",
"text": "A broker does not have to allow the full trading suite the regulations permit. From brokersXpress: Do you allow equity and index options trading in brokersXpress IRAs? Yes, we allow trading of equity and index options in IRAs based on the trading level assigned to an investor. Trading in IRAs includes call buying, put buying, cash-secured put writing, spreads, and covered calls. I understand OptionsXpress.com offers the same level of trading. Disclosure - I have a Schwab account and am limited in what's permitted just as your broker does. The trade you want is no more risky that a limit (buy) order, only someone is paying you to extend that order for a fixed time. The real answer is to ask the broker. If you really want that level of trading, you might want to change to one that permits it.",
"title": ""
},
{
"docid": "784068b2247fdc0104dae050e8a2cf51",
"text": "\"The instructions do specifically mention them, but not as exclusive plans. Pension and annuity payments include distributions from 401(k), 403(b), and governmental 457(b) plans. The instructions also mention this: An eligible retirement plan is a governmental plan that is a qualified trust or a section 403(a), 403(b), or 457(b) plan. 414(h) plans are \"\"qualified\"\" plans. Employee contribution to a 414(h) plan is qualified under 403(b). Report it there and mark it as \"\"Rollover\"\". Talk to a licensed (EA/CPA licensed in your state) professional when in doubt.\"",
"title": ""
},
{
"docid": "bf8c35c876684b114ccea0e62fb51dde",
"text": "Your brokerage might be cautious about allowing you to loan your IRA money in a Peer-to-Peer lending deal because it might result in a prohibited transaction (e.g. the other Peer is your son-in-law; for the purposes of IRAs, the spouse of a lineal descendant is treated the same as you, and the transaction will be treated as if you have borrowed money from your IRA). If you want to put the money into a lending club, then there might be issues of how the club is structured, e.g. who makes the decisions as to whom the money is loaned to. Such issues don't arise if you are putting the money into a money-market mutual fund, for example, but with new-fangled institutions such as lending clubs, your brokerage might just being cautious. If you want to open an IRA account directly with a lending club, check if the club offers IRA accounts at all. For this, they will likely need to have a custodian company that will handle all the IRA paperwork. For example, the custodian of IRA accounts in Vanguard mutual funds is not the fund or even Vanguard itself but a separate company named Vanguard Fiduciary Trust Company. I am sure other large firms have similar set-ups. Whether your pet Peer-to-Peer lending club has something similar set up already is something you should look into. This part of the answer applies to an earlier version of the question in which the OP said that he wanted to invest in precious metals. Be careful in what you invest in when you say you want to invest in precious metals; in refusing to buy precious metals for you in your IRA, your brokerage (as your fiduciary) might be refusing to engage in a prohibited transaction on your behalf. Investments in what are called collectibles are deemed to have been distributed to you by the IRA, and if this is an early distribution, then penalties also apply in addition to the income tax. Publication 590 says Collectibles. These include: Exception. Your IRA can invest in one, one-half, one-quarter, or one-tenth ounce U.S. gold coins, or one-ounce silver coins minted by the Treasury Department. It can also invest in certain platinum coins and certain gold, silver, palladium, and platinum bullion. So, make sure that your new IRA custodian does allow you to buy (say) titanium or Krugerrands in your IRA if that is your pleasure.",
"title": ""
},
{
"docid": "926bbb14f14cc331260a220cf824cfef",
"text": "Apply as many deductions as you are legally entitled to. Those are taxes you may never ever pay. Then turn around and put any more monies above the maximum retirement contributions into a taxable account. But this time invest in tax efficient investments. For example, VTI or SPY will incur very minimal taxes and when you withdraw, it will be at lower tax rate (based on current tax laws). Just as you diversify your investments, you also want to diversify your taxes.",
"title": ""
},
{
"docid": "a0a4756367c596b3fda74b485d5ea1a0",
"text": "\"See Berkshire Hathaway Inc. (BRK-A) (The Class A shares) and it will all be clear to you. IMHO, the quote for the B shares is mistaken, it used earning of A shares, but price of B. strange. Excellent question, welcome to SE. Berkshire Hathaway is a stock that currently trades for nearly US$140,000. This makes it difficult for individual investors to buy or sell these shares. The CEO Warren Buffet chose to reinvest any profits which means no dividends, and never to split the shares, which meant no little liquidity. There was great pressure on him to find a way to make investing in Berkshire Hathaway more accessible. In June '96, the B shares were issued which represented 1/30 of a share of the Class A stock. As even these \"\"Baby Berks\"\" rose in price to pass US$4500 per share, the stock split 50 to 1, and now trade in the US$90's. So, the current ratio is 1500 to 1. The class B shares have 1/10,000 the voting rights of the A. An A share may be swapped for 1500 B shares on request, but not vice-versa.\"",
"title": ""
},
{
"docid": "7dc3912bdb7e7a71ae405133330accb6",
"text": "\"Some companies issue multiple classes of shares. Each share may have different ratios applied to ownership rights and voting rights. Some shares classes are not traded on any exchange at all. Some share classes have limited or no voting rights. Voting rights ratios are not used when calculating market cap but the market typically puts a premium on shares with voting rights. Total market cap must include ALL classes of shares, listed or not, weighted according to thee ratios involved in the company's ownership structure. Some are 1:1, but in the case of Berkshire Hathaway, Class B shares are set at an ownership level of 1/1500 of the Class A shares. In terms of Alphabet Inc, the following classes of shares exist as at 4 Dec 2015: When determining market cap, you should also be mindful of other classes of securities issued by the company, such as convertible debt instruments and stock options. This is usually referred to as \"\"Fully Diluted\"\" assuming all such instruments are converted.\"",
"title": ""
},
{
"docid": "57f91d6e1152a9e578eef99aa5eb0fc4",
"text": "No, you cannot. 401k must not be discriminatory, i.e.: you cannot have different matching for different employees.",
"title": ""
},
{
"docid": "858146c09328e16b4c393d2c5d18aff6",
"text": "Simply put, that's not allowed. Outside a retirement fund, they simply do not provide a mechanism to pay that expense ratio separately. Ergo, any effort to pay that expense ratio would be classified as a new/additional purchase of the fund. You now must deal with Inside a retirement fund, paying the expense ratio of the fund with cash would be treated as an additional contribution, which may then violate contribution rules (such as going over your contribution limit, or contributing past age 70-1/2).",
"title": ""
}
] |
fiqa
|
45d8cbe3caadcf6a7817fa89dab5997e
|
How exactly is implied volatility assigned to an option's strike price?
|
[
{
"docid": "c41e61f063420043ec5dd6378082c882",
"text": "\"As I understand it, Implied Volatility represents the expected gyrations of an options contract over it's lifetime. No, it represents that expected movement of the underlying stock, not the option itself. Yes, the value of the option will move roughly in the same direction the value of the stock, but that's not what IV is measuring. I even tried staring at the math behind the Options pricing model to see if that could make more sense for me but that didn't help. That formula is correct for the Black-Scholes model - and it is not possible (or at least no one has done it yet) to solve for s to create a closed-form equation for implied volatility. What most systems do to calculate implied volatility is plug in different values of s (standard deviation) until a value for the option is found that matches the quoted market value ($12.00 in this example). That's why it's called \"\"implied\"\" volatility - the value is implied from market prices, not calculated directly. The thing that sticks out to me is that the \"\"last\"\" quoted price of $12 is outside of the bid-ask spread of $9.20 to $10.40, which tells me that the underlying stock has dropped significantly since the last actual trade. If the Implied Vol is calculated based on the last executed trade, then whatever algorithm they used to solve for a volatility that match that price couldn't find a solution, which then choose to show as a 0% volatility. In reality, the volatility is somewhere between the two neighbors of 56% and 97%, but with such a short time until expiry, there should be very little chance of the stock dropping below $27.50, and the value of the option should be somewhere around its intrinsic value (strike - stock price) of $9.18.\"",
"title": ""
}
] |
[
{
"docid": "726bcd53a303cde3ab05e01634862981",
"text": "When you buy a call option, you transfer the risk to the owner of the asset. They are risking losing out on gains that may accumulate in addition to the strike price and paid premium. For example, if you buy a $25 call option on stock XYZ for $1 per contract, then any additional gain above $26 per share of XYZ is missed out on by the owner of the stock and solely benefits the option holder.",
"title": ""
},
{
"docid": "4a80711ceb6fd70f6930a17b1ec00e4a",
"text": "In the first case, if you wish to own the stock, you just exercise the option, and buy it for the strike price. Else, you can sell the option just before expiration, it will be priced very close to its in-the-money value.",
"title": ""
},
{
"docid": "73143af4a4f1f0f7a3f85b82cb901a9f",
"text": "\"Their algorithm may be different (and proprietary), but how I would to it is to assume that daily changes in the stock are distributed normally (meaning the probability distribution is a \"\"bell curve\"\" - the green area in your chart). I would then calculate the average and standard deviation (volatility) of historical returns to determine the center and width of the bell curve (calibrating it to expected returns and implied volaility based on option prices), then use standard formulas for lognormal distributions to calculate the probability of the price exceeding the strike price. So there are many assumptions involved, and in the end it's just a probability, so there's no way to know if it's right or wrong - either the stock will cross the strike or it won't.\"",
"title": ""
},
{
"docid": "2b0fa76a9a0442270977dba332215647",
"text": "1.45 and 1.40 are the last trade prices. The last trade (1.45) for the 27 strike call must have occurred earlier than the last trade (1.40) for the 26 strike call. These options have low liquidity and don't trade very often. You have to look at the bid and ask prices to see what people are currently bidding and asking for those options. As you can see, the premium based on the bids and asks does decrease the further you go out of the money.",
"title": ""
},
{
"docid": "4b6da6db0482f0c3ee1f3176632c122c",
"text": "I frequently do this on NADEX, selling out-of-the-money binary calls. NADEX is highly illiquid, and the bid/ask is almost always from the market maker. Out-of-the-money binary calls lose value quickly (NADEX daily options exist for only ~21 hours). If I place an above-ask order, it either gets filled quickly (within a few minutes) due to a spike in the underlying, or not at all. I compensate by changing my price hourly. As Joe notes, one of Black-Scholes inputs is volatility, but price determines (implied) volatility, so this is circular. In other words, you can treat the bid/ask prices as bid/ask volatilities. This isn't as far-fetched as it seems: http://www.cmegroup.com/trading/fx/volatility-quoting-fx-options.html",
"title": ""
},
{
"docid": "a7a498ff5b209063fefb4cac4f013b83",
"text": "Use the Black-Scholes formula. If you know the current price, an options strike price, time until expiration, and risk-free interest rate, then knowing the market price of the option will tell you what the market's estimation of the volatility is. This does rely on a few assumptions, such as Gaussian random walk, but those are reasonable assumptions for most stocks. You can also get a list of past stock prices, put them in Excel, and ask Excel to calculate the standard deviation with stdev.s(), but that gives you the past volatility. The market's estimate of future volatility is more relevant.",
"title": ""
},
{
"docid": "dc8fc7455dd37b3f2c63dd9bc2c955fc",
"text": "\"How accurate is Implied Volatility in predicting future moves? How would you measure this? If the implied volatility says that there's a 1% chance that a stock will double, and it doubles, was it \"\"right\"\"? You could also say that it says there's a 99% change that it doesn't double, so was it \"\"wrong\"\"? What you could measure is the variance of daily returns over a time period, and see how well that compares to implied volatility, but there's no way to compare IV with the absolute price movement. If a stock goes up 0.01 each day, then the variance is 0 (the daily returns are the same each day), but over 250 the stock would go up $2.50.\"",
"title": ""
},
{
"docid": "e404451f53a6f064448e7dc1079355d0",
"text": "It really centers on the probability of your position falling to $0 and your level of comfort if that were to happen. There are a plethora of situations that could cause an option contract to become worthless. The application of leverage to a position also increases the risk. Zero risk would be an FDIC insured savings account, high risk would be buying options on margin, and there's a very wide grey area in between. I agree that the whole process of assigning a risk level is dubious at best. As you say, it seems using past data could help assign a risk level, look to beta values if you believe in that. The problem here is the main disclaimer in use is that past performance cannot be relied upon for future gains. As an aside, if the US government files bankruptcy you'll have a whole host of more immediate problems than the value of your t-bills. At that point dollars would have been a risky investment.",
"title": ""
},
{
"docid": "6102ca35a6adf578632c2b0f37dadc2f",
"text": "\"Below I will try to explain two most common Binomial Option Pricing Models (BOPM) used. First of all, BOPM splits time to expiry into N equal sub-periods and assumes that in each period the underlying security price may rise or fall by a known proportion, so the value of an option in any sub-period is a function of its possible values in the following sub period. Therefore the current value of an option is found by working backwards from expiry date through sub-periods to current time. There is not enough information in the question from your textbook so we may assume that what you are asked to do is to find a value of a call option using just a Single Period BOPM. Here are two ways of doing this: First of all let's summarize your information: Current Share Price (Vs) = $70 Strike or exercise price (X) = $60 Risk-free rate (r) = 5.5% or 0.055 Time to maturity (t) = 12 months Downward movement in share price for the period (d) = $65 / $70 = 0.928571429 Upward movement in share price for the period (u) = 1/d = 1/0.928571429 = 1.076923077 \"\"u\"\" can be translated to $ multiplying by Vs => 1.076923077 * $70 = $75.38 which is the maximum probable share price in 12 months time. If you need more clarification here - the minimum and maximum future share prices are calculated from stocks past volatility which is a measure of risk. But because your textbook question does not seem to be asking this - you probably don't have to bother too much about it yet. Intrinsic Value: Just in case someone reading this is unclear - the Value of an option on maturity is the difference between the exercise (strike) price and the value of a share at the time of the option maturity. This is also called an intrinsic value. Note that American Option can be exercised prior to it's maturity in this case the intrinsic value it simply the diference between strike price and the underlying share price at the time of an exercise. But the Value of an option at period 0 (also called option price) is a price you would normally pay in order to buy it. So, say, with a strike of $60 and Share Price of $70 the intrinsic value is $10, whereas if Share Price was $50 the intrinsic value would be $0. The option price or the value of a call option in both cases would be fixed. So we also need to find intrinsic option values when price falls to the lowest probable and rises to the maximum probable (Vcd and Vcu respectively) (Vcd) = $65-$60 = $5 (remember if Strike was $70 then Vcd would be $0 because nobody would exercise an option that is out of the money) (Vcu) = $75.38-$60 = $15.38 1. Setting up a hedge ratio: h = Vs*(u-d)/(Vcu-Vcd) h = 70*(1.076923077-0.928571429)/(15.38-5) = 1 That means we have to write (sell) 1 option for each share purchased in order to hedge the risks. You can make a simple calculation to check this, but I'm not going to go into too much detail here as the equestion is not about hedging. Because this position is risk-free in equilibrium it should pay a risk-free rate (5.5%). Then, the formula to price an option (Vc) using the hedging approach is: (Vs-hVc)(e^(rt))=(Vsu-hVcu) Where (Vc) is the value of the call option, (h) is the hedge ratio, (Vs) - Current Share Price, (Vsu) - highest probable share price, (r) - risk-free rate, (t) - time in years, (Vcu) - value of a call option on maturity at the highest probable share price. Therefore solving for (Vc): (70-1*Vc)(e^(0.055*(12/12))) = (75.38-1*15.38) => (70-Vc)*1.056540615 = 60 => 70-Vc = 60/1.056540615 => Vc = 70 - (60/1.056540615) Which is similar to the formula given in your textbook, so I must assume that using 1+r would be simply a very close approximation of the formula above. Then it is easy to find that Vc = 13.2108911402 ~ $13.21 2. Risk-neutral valuation: Another way to calculate (Vc) is using a risk-neutral approach. We first introduce a variable (p) which is a risk-neutral probability of an increase in share price. p = (e^(r*t)-d)/(u-d) so in your case: p = (1.056540615-0.928571429)/(1.076923077-0.928571429) = 0.862607107 Therefore using (p) the (Vc) would be equal: Vc = [pVcu+(1-p)Vcd]/(e^(rt)) => Vc = [(0.862607107*15.38)+(0.137392893*5)]/1.056540615 => Vc = 13.2071229185 ~ $13.21 As you can see it is very close to the hedging approach. I hope this answers your questions. Also bear in mind that there is much more to the option pricing than this. The most important topics to cover are: Multi-period BOPM Accounting for Dividends Black-Scholes-Merton Option Pricing Model\"",
"title": ""
},
{
"docid": "24741103ebc1802d83207a30facc9852",
"text": "\"I have traded options, but not professionally. I hadn't come across this terminology, but I expect it counts how far in-the-money, as an ordinal, an option is relative to the distinct strike prices offered for the option series — a series being the combination of underlying symbol, expiration date, and option type (call/put); e.g., all January 2015 XYZ calls, no matter the strike. For instance, if stock XYZ trades today at $11 and the available January 2015 XYZ calls have strike prices of $6, $8, $10, $12, $14, and $16, then I would expect the $10 call could be called one strike in the money, the $8 two strikes in the money, etc. Similarly, the $12 and $14 calls would be one and two strikes out of the money, respectively. However, if tomorrow XYZ moves to $13, then the $10 previously known as one strike in the money would now be two strikes in the money, and the $12 would be the new one strike in the money. Perhaps this terminology arose because many option strategies frequently involve using options that are at- or near-the-money, so the \"\"one strike in\"\" (or out) of the money contracts would tend to be those employed frequently? Perhaps it makes it easier for people to describe strategies in a more general sense, without citing specific examples. However, the software developer in me dislikes it, given that the measurement is relative to both the current underlying price (which changes quickly), and the strike prices available in the given option series. Hence, I wouldn't use this terminology myself and I suggest you eschew it, too, in favor of something concrete; e.g. specify your contract strikes in dollar terms — especially when it matters.\"",
"title": ""
},
{
"docid": "e1d0ccdbcd79490bd9195e82a5c6bd52",
"text": "No, something doesn't seem right here. There would be virtually no time value to the option 10 minutes before market close on the expiration day. What option is it, and what is the expiration? EDIT: It appears you were looking only at the ASK price. It was $2.05. However, the BID price was only $1.35 and the last transaction was $1.40. So the true value is right about $1.35 to $1.40 at this second. This is a pitfall that tends to occur when you trade options with almost no volume. For instance, the open interest in that option is only 1 contract (assuming that is yours). So the Bid and the Ask can often be very far apart as they are only being generated by computer traders or the result of outdated, irrelevant human orders.",
"title": ""
},
{
"docid": "0d77583fa8655a09f1c50a9be37d3167",
"text": "\"Options are generally viewed as having two types of value: \"\"Intrinsic value\"\" and \"\"time value.\"\" The intrinsic value is based on the difference between the strike price on the option and the spot price of the underlying. The time value is based on the volatility of the underlying and the amount of time left until expiration. As the days pass toward expiration, the time value generally decreases, and the intrinsic value may move up or down depending on the spot price of the underlying. (In theory, time value could increase at some points if the volatility is also rising.) In your case, it looks like the time value is decreasing faster than the intrinsic value is increasing. This may happen because the volatility is also going down (as suggested in the answer by CQM) or may just happen because the time to expiration is getting shorter at equal volatility. As noted by DumbCoder in a comment to the original question, the Black-Scholes formula will give you more analytical insight into this if you're interested.\"",
"title": ""
},
{
"docid": "4595749811c8e457318e38656f004889",
"text": "In the scenario you describe, and really, in any scenario, by the nature of how option contracts work: a higher strike put will necessarily be more expensive than the lower strike put (everything else being equal). the lower strike call will necessarily be more expensive than the higher strike call (everything else being equal). In put options, the buyer has the right to sell stock for the strike price. So the higher the strike price, the more money the buyer of the put option can make by selling the shares of stock at a higher price. In call options, it's the exact opposite: buyers of the call option have the right to buy stock at the strike price. The lower the strike price, the better for the buyer: they have the right to buy stock for a lower amount of money. So it must be worth more.",
"title": ""
},
{
"docid": "224aff422d16df2e577db7132e434f85",
"text": "\"You're mostly correct, although I think you're missing something essential about no-arbitrage versus an arbitrage argument. Black-Scholes makes an arbitrage argument, which is that the value of an option should be the same as any portfolio that has identical cash flows, and this is generally a sound argument. Notice, however, that BS is ultimately an equilibrium model: it tells you the \"\"correct\"\" price of an option if the assumptions of BS hold, and doesn't necessarily match observed market prices. A no-arbitrage condition or model deliberately incorporates observed prices (or yields, or whatever) into the model, so that there cannot be an arbitrage opportunity implied by the model. This comes up a lot in term structure of interest rate problems, where equilibrium models like Vasicek or Cox-Ingersoll-Ross won't perfectly reproduce the current, observed term structure, and so imply an arbitrage opportunity. No-arbitrage models like Hull-White specifically match the model's term structure to observed yields/prices, so that there is no arbitrage opportunity between the observed term structure and your model of it. It's important to note that this will still allow for arbitrage involving bonds that are *not* part of the observed term structure. As for equivalent martingale measures, you might think about it more generally. The process involves changing the probability distribution from the actual (which is hard to use for pricing) to a different one that's easier to use but will result in the same prices; this is nearly always a risk-neutral probability. You can think of equivalent martingale pricing as asking, \"\"how would this security behave, and be priced, in a world that is completely risk neutral\"\", and then making an argument that the prices are in fact equivalent. EDIT: grammar\"",
"title": ""
},
{
"docid": "9fec19f63f8c07b06338a4f9df4afe3c",
"text": "Well, yes -- you've implicitly made many assumptions (such as that the embedded option has longer maturity). The important thing to consider is when this option pays out; the premium will obviously be adjusted. For a concrete example, consider an equity option-on-an-option. The outer option has strike 110, the inner option has strike 100 (spot = forward = 100). Then the inner strike pays out when spot_T > 100, but the outer option has zero value there; the overall option only pays out if spot_T > 110, reducing the structure to a call option with strike 110.",
"title": ""
}
] |
fiqa
|
eef58d9e7944302ab0df37bf6199e540
|
Why can it be a bad idea to buy stocks after hours?
|
[
{
"docid": "22ae57c52676b06d852420a2c9538018",
"text": "There are several reasons it is not recommended to trade stocks pre- or post-market, meaning outside of RTH (regular trading hours). Since your question is not very detailed I have to assume you trade with a time horizon of at least more than a day, meaning you do not trade intra-day. If this is true, all of the above points are a non-issue for you and a different set of points becomes important. As a general rule, using (3) is the safest regardless of what and how you trade because you get price guarantee in trade for execution guarantee. In the case of mid to longer term trading (1 week+) any of those points is viable, depending on how you want to do things, what your style is and what is the most comfortable for you. A few remarks though: (2) are market orders, so if the open is quite the ride and you are in the back of the execution queue, you can get significant slippage. (1) may require (live) data of the post-market session, which is often not easy to come by for the entire US stock universe. Depending on your physical execution method (phone, fax, online), you may lack accurate information of the post-market. If you want to execute orders based on RTH and only want to do that after hours because of personal schedule constraints, this is not really important. Personally I would always recommend (3), independent of the use case because it allows you more control over your orders and their fills. TL;DR: If you are trading long-term it does not really matter. If you go down to the intra-day level of holding time, it becomes relevant.",
"title": ""
},
{
"docid": "de44418b1a4e0c4e0b86ac2e3c8cc274",
"text": "\"During market hours, there are a lot of dealers offering to buy and sell all exchange traded stocks. Dealers don't actually care about the company's fundamentals and they set their prices purely based on order flow. If more people start to buy than sell, the dealer notices his inventory going down and starts upping the price (both his bid and ask). There are also traders who may not be \"\"dealers\"\", but are willing to sell if the price goes high enough or buy if the price goes low enough. This keeps the prices humming along smoothly. During normal trading hours, if you buy something and turn around and sell it two minutes later, you'll probably be losing a couple cents per share. Outside normal market hours, the dealers who continue to have a bid and ask listed know that they don't have access to good price information -- there isn't a liquid market of continuous buying and selling for the dealer to set prices he considers safe. So what does he do? He widens the spread. He doesn't know what the market will open tomorrow at and doesn't know if he'll be able to react quickly to news. So instead of bidding $34.48 and offering at $34.52, he'll move that out to $33 and $36. The dealer still makes money sometimes off this because maybe some trader realized that he has options expiring tomorrow, or a short position that he's going to get a margin call on, or some kind of event that pretty much forces him to trade. Or maybe he's just panicking and overreacting to some news. So why not trade after hours? Because there's no liquidity, and trading when there's no liquidity costs you a lot.\"",
"title": ""
},
{
"docid": "4d43c7b31bcbbf052c8e85096b44a43c",
"text": "Unless you want to be a short term day trader, then it is not foolish to be an end of day trader. If you are looking to be a medium to long term trader/investor then it is quite acceptable to put orders in after market close. Some would say it is even less risky, because you are not watching the price fluctuate up and down and letting your emotions getting the best of you.",
"title": ""
},
{
"docid": "6c8a2f3388bbbf640add2b9191acf853",
"text": "The sentiment is because between closing and opening a lot can happen, and between opening and the time your order actually goes through, even more can happen. An after-hours trade has an extra amount of short-term risk attached; the price of a stock at the opening bell is technically the same as its price as of the closing the previous trading day, but within a tenth of a second, which is forever in a computerized exchange, that price may move drastically one way or the other, based on news and on other markets. The sentiment, therefore, is simple; if you're trading after-hours, you're trading risky. You're not trading based on what the market's actually doing, you're trading based on what you think the market will do in the morning, and there's still more math going on every second in the privately-held supercomputers in rented cubes in the NYSE basement than you could do all night, digesting this news and projecting what it's going to do to the stocks. Now, if you've done your homework and the stock looks like a good long-term buy, with or without any after-hours news, then place the order at 3 in the morning; who cares what the stock's gonna do at the opening bell. You're gonna hold that stock for the next ten years, maybe; what it does in 5 seconds of opening turmoil is relatively minor compared to the monthly trends that you should be worrying about.",
"title": ""
}
] |
[
{
"docid": "b6e009ec30f69b32a49996716bf36410",
"text": "\"The psychology of investing is fascinating. I buy a stock that's out of favor at $10, and sell half at a 400% profit, $50/share. Then another half at $100, figuring you don't ever lose taking a profit. Now my Apple shares are over $500, but I only have 100. The $10 purchase was risky as Apple pre-iPod wasn't a company that was guaranteed to survive. The only intelligent advice I can offer is to look at your holdings frequently, and ask, \"\"would I buy this stock today given its fundamentals and price?\"\" If you wouldn't buy it, you shouldn't hold it. (This is in contrast to the company ratings you see of buy, hold, sell. If I should hold it, but you shouldn't buy it to hold, that makes no sense to me.) Disclaimer - I am old and have decided stock picking is tough. Most of our retirement accounts are indexed to the S&P. Maybe 10% is in individual stocks. The amount my stocks lag the index is less than my friends spend going to Vegas, so I'm happy with the results. Most people would be far better off indexing than picking stocks.\"",
"title": ""
},
{
"docid": "e2745d7a797d99a0b61f8636ccaacd94",
"text": "One of the fundamental of technical analysis suggests that holding a security overnight represents a huge commitment. Therefore it would follow that traders would tend to close their positions prior to market close and open them when it opens.",
"title": ""
},
{
"docid": "50c1c77c490d96692be687075e977e86",
"text": "You can make a purchase at the after market price by sending an order that gets executed in after market. Often times these are called Extended orders, or EXT. With an EXT limit order it will place the bid on the after market hours order book. If you get filled, then you have the shares. This is the answer.",
"title": ""
},
{
"docid": "b991029e2677b48b8aee1e18bc92fbaf",
"text": "The two answers so far are right, but there's a third factor - for many stocks, there's after hours trading. So the official 4PM close is not what the stock's last trade was when they open again. Regardless, even that after hour price is not the starting point as Muro points out.",
"title": ""
},
{
"docid": "b42686e29df7f05ea0a9fe4bf25edfc3",
"text": "\"But speculation is absolutely intended to happen, and is considered necessary for healthy a investment environment. What I am saying, however, is that this desire to rid the world of HFT appears to be moral rather than logical. There is very little reason to eliminate HFT as it stands, although there appears to be a propensity for very emotional responses to the basic concept. Ones I can appreciate. However I am suggesting they are misguided as the people who should be upset with HFT are the hedge fund managers and day traders they are outwitting, not you or me who buy and sell shares on a whim every so often. If you want to ban day traders that is a separate argument I don't want to go into. The idea that these computer algorithms are all set to \"\"sell,sell,sell\"\" is provably nonsensical. If that were the case, all of the HFT participants would have gone massively bankrupt during the flash crashes. Also, it is quite patently the case that somebody has to be buying in order for anybody to sell. Saying \"\"this is what caused some of the crashes\"\" is just your desire for a simple explanation. It must have been more complex than this, and to my knowledge none of these crashes have been adequately explained although some poorly designed algorithms have been implicated. Note that in one of these cases IIRC a fund closed its doors due to the losses, and the market was largely unaffected. So it seems like a problem that self corrects in this case, and one that only *harms* the participant that erred. Also, to correct a basic misunderstanding, selling happens all of the time, and does not inherently drive the price down. There are by definition an *equal number of sales to purchases*. What drives the price down is *the people buying being willing to pay less*. EDIT: as another aside, a point I have made elsewhere and seems suitable to make here: flash crashes, whilst causing panic, are again something only the professional intra-day trading community are likely to be affected by. Their very name implies so. The reason being that anybody investing based on the *long term investment potential* of a company will only benefit in the temporary drop in price, as they can purchase more of the company at a bargain price. Any intelligent investor will not be fazed by the drop in price, as price has *no bearing on a company's real value*, and stocks do tend towards this value over time, whatever happens over the short term. The only case in which it could is if the company owns a large portfolio of stock that itself devalues dramatically that they intended to sell and as a result experience cash flow problems. This is so incredibly unlikely with a flash crash as to be ignored.\"",
"title": ""
},
{
"docid": "b14dd8648d5c653d81d1eed23318e43d",
"text": "This can arise with very thinly traded stocks for large blocks of shares. If the market only has a few thousand dollars available at between 8.37 and 12.5 the price is largely meaningless for people who want to invest in hundreds of thousands/millions of dollars worth, as the quoted price can't get them anywhere near the number of shares they want. How liquid is the stock in question?",
"title": ""
},
{
"docid": "9938ccde8ed3c696bcd07c8f5a680d32",
"text": "It is a general truism but the reasons are that the rules change dramatically when you simply have more capital. Here are some examples, limited to particular kinds of markets: Under $2,000 in capital Nobody is going to offer you a margin account, and if you do get one it isn't with the best broker on commissions and other capabilities. So this means cash only trading, enjoy your 3 business day settlement periods. This means no shorting, confining a trader to only buy and hold strategies, making them more dependent on luck than a more capable trader. This means it is more expensive to buy stock, since you have to put down 100% of the cash to hold a share, whereas someone with more money puts down less capital to hold the exact same number of shares. This means no covered options strategies or spreads, again limiting the market directions where a trader could earn Under $25,000 in capital In the stock market, the pattern day trader rule applies to retail margin accounts with a balance under $25,000 and this severally limits the kinds of trades you are able to take because of the limit in the number of trades you can take in a given time period. Forget managing a multi-leg option position when the market isn't moving your direction. Under $125,000 in capital Worse margin rules. You excluded portfolio margin from your post, but it is a key part of the answer Over $1,000,000 in capital Participate in private placements, regulation D offerings reserved for accredited investors. These days, as buy and hold investments, these generally have more growth potential than publicly traded offerings. Over $5,000,000 in capital You can easily get the compliance and risk manager to turn the other way on margin rules. This is not conjecture, leverage up to infinity, try not to bankrupt yourself and the trading firm.",
"title": ""
},
{
"docid": "1d459e4c58071c730fd8644734322295",
"text": "There are classes of 'traders' who close their positions out every evening, not just on fridays. But their are other types of businesses who trade shortly before or nearly right at market close with both buys and sells There are lots of theories as to how the market behaves at various times of day, days of the week, months of the year. There are some few patterns that can emerge but in general they don't provide a lot of 'lift' above pure random chance, enough so that if you 'bet' on one of these your chances of being wrong are only very slightly different from being right, enough so that it's not really fair to call any of them a 'sure thing'. And since these events are often fairly widely spaced, it's difficult to play them often enough to get the 'law of large numbers' on your side (as opposed to say card-counting at a blackjack table) which basically makes betting on them not much different from gambling",
"title": ""
},
{
"docid": "87a5f0d18bc2cb7e78e815104cdd5230",
"text": "TD will only sell the stock for you if there's a buyer. There was a buyer, for at least one transaction of at least one stock at 96.66. But who said there were more? Obviously, the stocks later fell, i.e.: there were not that many buyers as there were sellers. What I'm saying is that once the stock passed/reached the limit, the order becomes an active order. But it doesn't become the only active order. It is added to the list, and to the bottom of that list. Obviously, in this case, there were not enough buyers to go through the whole list and get to your order, and since it was a limit order - it would only execute with the limit price you put. Once the price went down you got out of luck. That said, there could of course be a possibility of a system failure. But given the story of the market behavior - it just looks like you miscalculated and lost on a bet.",
"title": ""
},
{
"docid": "8cbf437ad563eb5ccb612399e90d6d10",
"text": "One of the biggest laws in economics is that if an opportunity is very profitable and is very easily exploitable even by complete beginners, then it will very soon stop being profitable. That's how the market works. If you buy stock when it is at the lowest, then you are making money, but most of the time someone else is losing money. And if there was a magic hour of the day when buying would be the most profitable, then soon everybody would want to buy at that time and no one would want to sell anything, so the scheme would collapse.",
"title": ""
},
{
"docid": "9b120328813deca9d848fd3cb63a1698",
"text": "\"The technical term for it is \"\"timing the market\"\" and if you can pull it off correctly, you will do quite well. The problem is that it is almost impossible to consistently do well. If it were that easy there would be a lot of billionaires walking around. Even Wall street experts haven't been able to predict the market that well. This idea is almost universally considered a bad idea. Consider this: When has the stock dropped low enough that you are \"\"buying low\"\" and let's say you do buy low and it doubles in a month. When do you get out? What if you are wrong and it doubles again? Or if it drops 10% do you keep waiting? This strategy is rife with problems.\"",
"title": ""
},
{
"docid": "57b5f0d983c7a065b61c11d2854ade30",
"text": "\"You have heard the old adage \"\"Buy low, sell high\"\", right? That sounds so obvious that you'd have to wonder why they would ever bother coining such an expression. It should rank up there with \"\"Don't walk in front of a moving car\"\" on the Duh scale of advice. Well, your question demonstrates exactly why it isn't quite so obvious in the real world and that people need to be reminded of it. So, in your example, the stock prices are currently low (relative to what they have been). So per that adage, do you sell or buy when prices are low? Hint: It isn't sell. Yes. Your gut is going to tell you the exact opposite thanks to the fact that our brains are unfortunately wired to make us susceptible to the loss aversion fallacy. When the market has undergone a big drop is the WORST time to stop contributing (buying stocks). This example might help get your brain and gut to agree a little more easily: If you were talking about any other non-investment commodity, cars for instance. Your question equates to.. I really need a car, but the prices have been dropping like crazy lately. Maybe I should wait until the car dealers start raising their prices again before I buy one. Dollar Cost Averaging As littleadv suggested, if you have an automatic payroll deduction for your retirement account, you are getting the benefit of Dollar Cost Averaging. Because you are investing the same amount on a scheduled interval, you are buying more shares when they are cheap and fewer when they are expensive. It is like an automatic buy low strategy is built into the account. The alternative, which you are implying, is a market timing strategy. Under this strategy, instead of investing regularly you try to get in and out of investments right before they go up/drop. There are two MAJOR flaws with this approach: 1) Your brain will work against you (see above) and encourage you to do the exact opposite of what you should be doing. 2) Unless you are clairvoyant, this strategy isn't much better than gambling. If you are lucky it can work, but because of #1, the odds are stacked against you.\"",
"title": ""
},
{
"docid": "134b7b196dd9faf19c2261b310b50eb8",
"text": "you need minimum of 25k otherwise youll reach a limit. you have to wait 3 days for the sale to clear unless youre on margin. dont buy anything based on idiots on twitter or the internet. however, theres some good people to follow though that know what theyre doing. dont listen to this guy saying that etrade or those platforms arent fast enough. they all offer level 2 prices so i dont know what hes talking about. successful day traders arent buying and selling a stock every single day. theres not always something to buy and sell...unless youre just gambling, and in that case just go to the casino and lose your money there.",
"title": ""
},
{
"docid": "3fbbb410b7ff1fb7eba4f60c84daad3f",
"text": "There are several problems with your reasoning: if I buy one share of GOOGLE now for $830, I could have $860 within the end of tonight -- totally possible and maybe even likely. You can do the same thing with 1,000,000 shares of google, and it's just as likely to go down as go up. if I were to invest $1,000.00 in gold to have $1,000.00 worth of gold, it's no different than keeping $1,000.00 in cash It's VERY different. Gold can be just as volatile as stocks, so it certainly is different as just keeping it in cash. Benefits of a larger portfolio:",
"title": ""
},
{
"docid": "b66c76412777cbe420f47e3a4d12fe79",
"text": "I'm currently using Halifax. Pros: Cons: I'm might start using TD Waterhouse in future, as they claim to have no admin charge.",
"title": ""
}
] |
fiqa
|
69a2bbb97df6f6bfeb92b2a1a72416fa
|
P/E (or similar) for index funds?
|
[
{
"docid": "9ce676212f9a76f4a1caaaed0e929408",
"text": "\"ycharts.com has \"\"Weighted Average PE Ratio\"\" and a bunch of other metrics that are meant to correspond to well known stock metrics. Other websites will have similar ratios.\"",
"title": ""
},
{
"docid": "b7bbbba72cb8dc5b8dcf6cba5fd65700",
"text": "The S&P 500 is a market index. The P/E data you're finding for the S&P 500 is data based on the constituent list of that market index and isn't necessarily the P/E ratio of a given fund, even one that aims to track the performance of the S&P 500. I'm sure similar metrics exist for other market indexes, but unless Vanguard is publishing it's specific holdings in it's target date funds there's no market index to look at.",
"title": ""
}
] |
[
{
"docid": "96802f64aee75a2dff0c7b4c113c4323",
"text": "John Bogle never said only buy the S&P 500 or any single index Q:Do you think the average person could safely invest for retirement and other goals without expert advice -- just by indexing? A: Yes, there is a rule of thumb I add to that. You should start out heavily invested in equities. Hold some bond index funds as well as stock index funds. By the time you get closer to retirement or into your retirement, you should have a significant position in bond index funds as well as stock index funds. As we get older, we have less time to recoup. We have more money to protect and our nervousness increases with age. We get a little bit worried about that nest egg when it's large and we have little time to recoup it, so we pay too much attention to the fluctuations in the market, which in the long run mean nothing. How much to pay Q: What's the highest expense ratio that one should pay for a domestic equity fund? A: I'd say three-quarters of 1 percent maybe. Q: For an international fund? A: I'd say three-quarters of 1 percent. Q: For a bond fund? A: One-half of 1 percent. But I'd shave that a little bit. For example, if you can buy a no-load bond fund or a no-load stock fund, you can afford a little more expense ratio, because you're not paying any commission. You've eliminated cost No. 2....",
"title": ""
},
{
"docid": "73d3680c61fcca147e344498ea80ad56",
"text": "generally Forward P/E is computed as current price / forward earnings. The rationale behind this is that buying the stock costs you the current price, and it gives you a claim on the future earnings.",
"title": ""
},
{
"docid": "f104aaaa262a368acdac8f46ddc2c436",
"text": "Index funds: Some of the funds listed by US SIF are index funds. ETFs: ETFdb has a list, though it's pretty short at the moment.",
"title": ""
},
{
"docid": "86f7fb8aee91031e8893956bc83201aa",
"text": "Are you implying that Amazon is a better investment than GE because Amazon's P/E is 175 while GE's is only 27? Or that GE is a better investment than Apple because Apple's P/E is just 13. There are a lot of other ratios to consider than P/E. I personally view high P/E numbers as a red flag. One way to think of a P/E ratio is the number of years it's expected for the company to earn its market cap. (Share price divided by annual earnings per share) It will take Amazon 175 years to earn $353 billion. If I was going to buy a dry cleaners, I would not pay the owner 175 years of earnings to take control of it, I'd never see my investment back. To your point. There is so much future growth seemingly built in to today's stock market that even when a company posts higher than expected earnings, the company's stock may take a hit because maybe future prospects are a little less bright than everyone thought yesterday. The point of fundamental analysis is that you want to look at a company's management style and financial strategies. How is it paying its debt? How is it accumulating the debt? How is it's return on assets? How is the return on assets trending? This way when you look at a few companies in the same market segment you may have a better shot at picking the winner over time. The company that piles on new debt for every new project is likely to continue that path in to oblivion, regardless of the P/E ratio. (or some other equally less forward thinking management practice that you uncover in your fundamental analysis efforts). And I'll add... No amount of historical good decision making from a company's management can prepare for a total market downturn, or lack of investor confidence in general. The market is the market; sometimes it's up irrationally, sometimes it's down irrationally.",
"title": ""
},
{
"docid": "6ca55b8facce5ce4bdb899ce505e1d9c",
"text": "I think you need a diversified portfolio, and index funds can be a part of that. Make sure that you understand the composition of your funds and that they are in fact invested in different investments.",
"title": ""
},
{
"docid": "7aa54db9a4904567ac7fe6bc6c909344",
"text": "\"You could not have two stocks both at $40, both with P/E 2, but one an EPS of $5 and the other $10. EPS = Earnings Per Share P/E = Price per share/Earnings Per Share So, in your example, the stock with EPS of $5 has a P/E of 8, and the stock with an EPS of $10 has a P/E of 4. So no, it's not valid way of looking at things, because your understanding of EPS and P/E is incorrect. Update: Ok, with that fixed, I think I understand your question better. This isn't a valid way of looking at P/E. You nailed one problem yourself at the end of the post: The tricky part is that you have to assume certain values remain constant, I suppose But besides that, it still doesn't work. It seems to make sense in the context of investor psychology: if a stock is \"\"supposed to\"\" trade at a low P/E, like a utility, that it would stay at that low P/E, and thus a $1 worth of EPS increase would result in lower $$ price increase than a stock that was \"\"supposed to\"\" have a high P/E. And that would be true. But let's game it out: Scenario Say you have two stocks, ABC and XYZ. Both have $5 EPS. ABC is a utility, so it has a low P/E of 5, and thus trades at $25/share. XYZ is a high flying tech company, so it has a P/E of 10, thus trading at $50/share. If both companies increase their EPS by $1, to $6, and the P/Es remain the same, that means company ABC rises to $30, and company XYZ rises to $60. Hey! One went up $5, and the other $10, twice as much! That means XYZ was the better investment, right? Nope. You see, shares are not tokens, and you don't get an identical, arbitrary number of them. You make an investment, and that's in dollars. So, say you'd invested $1,000 in each. $1,000 in ABC buys you 40 shares. $1,000 in XYZ buys you 20 shares. Their EPS adds that buck, the shares rise to maintain P/E, and you have: ABC: $6 EPS at P/E 5 = $30/share. Position value = 40 shares x $30/share = $1,200 XYZ: $6 EPS at P/E 10 = $60/share. Position value = 20 shares x $60/share = $1,200 They both make you the exact same 20% profit. It makes sense when you think about it this way: a 20% increase in EPS is going to give you a 20% increase in price if the P/E is to remain constant. It doesn't matter what the dollar amount of the EPS or the share price is.\"",
"title": ""
},
{
"docid": "c0c0d39f8df8c4b635315554a55d549e",
"text": "\"Sure, it doesn't, but realistically they can't/shouldn't do anything about it in their index funds, because then they're just another stock picker, trying to gauge which companies are going to do best. Their funds not all being indexes is what I was getting at with my original question. How much leeway do they have in their definitions of other funds? IE, if they had a dividend fund that included all large cap dividend paying stocks above 3% yield, they couldn't take out Shell just because of climate risk without fundamentally changing what the fund is. But if it's just \"\"income fund\"\" then they can do whatever in that space.\"",
"title": ""
},
{
"docid": "baeda48ad38b88a95a6cbfd626419096",
"text": "I've looked into Thinkorswim; my father uses it. Although better than eTrade, it wasn't quite what I was looking for. Interactive Brokers is a name I had heard a long time ago but forgotten. Thank you for that, it seems to be just what I need.",
"title": ""
},
{
"docid": "db316dfa5e719b5a08e34a547ebdc03d",
"text": "See if any of the funds they offer are index funds, which will generally have MUCH lower fees and which seem to perform as well as any of the actively managed funds in the same categories.",
"title": ""
},
{
"docid": "61231aff72e9c22612339590683fd1d6",
"text": "Google 'information ratio'. It is better suited to what you want than the Sharpe or Sortino ratios because it only evaluates the *excess* return you get from your investment, ie. return from your investment minus the return from a benchmark investment. The benchmark here could be an index like the S&P500.",
"title": ""
},
{
"docid": "663374eb1366efd15357a239d1becb56",
"text": "Thanks for the advice. I will look into index funds. The only reason I was interested in this stock in particular is that I used to work for the company, and always kept an eye on the stock price. I saw that their stock prices recently went down by quite a bit but I feel like I've seen this happen to them a few times over the past few years and I think they have a strong catalogue of products coming out soon that will cause their stock to rise over the next few years. After not being able to really understand the steps needed to purchase it though, I think I've learned that I really don't know enough about the stock system in general to make any kind of informed decisions about it and should probably stick to something lower-risk or at least do some research before making any ill-informed decisions.",
"title": ""
},
{
"docid": "617a7517cb417ed7ce90bb074959be08",
"text": "On the US markets, most index options are European style. Most stock and ETF options are, as you noted, American style.",
"title": ""
},
{
"docid": "985975023a13cbcb386766fa4e23c83d",
"text": "See this link...I was also looking an answer to the same questions. This site explains with an example http://www.independent-stock-investing.com/PE-Ratio.html",
"title": ""
},
{
"docid": "b1fd88001a3ccbcc76d5d78dd5edc22e",
"text": "I'm a believer in broad index funds for the vast majority of investors. However, I'm sure someone here is more qualified than me to speak to the correct allocation. I'm mostly pointing out low-hanging fruit: you should (almost) never invest in the company that pays your wages. You could just dump it in the S&P or some broad market index and be in a better position.",
"title": ""
},
{
"docid": "a5c828411013510f191bb0f58be880db",
"text": "I'm not 100% familiar with the index they're using to measure hedge fund performance, but based on the name alone, comparing market returns to *market neutral* hedge fund returns seems a bit disingenuous. That doesn't mean the article is wrong, and they have a point about the democratization of data, but still.",
"title": ""
}
] |
fiqa
|
4d1d8f92fc7dad7acc94d7e2efdb037e
|
Where can you find historical PEs of US indices?
|
[
{
"docid": "3c9ed0056ff789546cac2040d1a25920",
"text": "Internet sites Books Academic",
"title": ""
}
] |
[
{
"docid": "bc9c402008b52c0eafe34f56502c5e48",
"text": "\"Some years ago, two \"\"academics,\"\" Ibbotson and Sinquefield did these calculations. (Roger) Ibbotson, is still around. So Google Roger Ibbotson, or Ibbotson Associates. There are a number of entries so I won't provide all the links.\"",
"title": ""
},
{
"docid": "1f71f77fc4742183d16a0d2f92ce5423",
"text": "Yes, the choice of some of the base stats to use is pretty interesting. I'm not an expert in using FRED, but I think there are better numbers for a lot of those. Mostly it's about things like the origin of the graph though - look how many of the graphs on that page start in the mid fifties, not zero, thus magnifying things drastically. Also graphing numbers that aren't calculated the same way on the same graph - FRED does not fix your poor assumptions.",
"title": ""
},
{
"docid": "fb67ec3740545851f323621075d7a83c",
"text": "There are about 250 trading days in a year. There are also about 1,900 stocks listed on the NYSE. What you're asking for would require about 6.2M rows of data. Depending on the number of attributes you're likely looking at a couple GB of data. You're only getting that much information through an API or an FTP.",
"title": ""
},
{
"docid": "432563b151d2e6afcfa8c7f9f577f54b",
"text": "I use and recommend barchart.com. Again you have to register but it's free. Although it's a US system it has a full listing of UK stocks and ETFs under International > London. The big advantage of barchart.com is that you can do advanced technical screening with Stochastics and RS, new highs and lows, moving averages etc. You're not stuck with just fundamentals, which in my opinion belong to a previous era. Even if you don't share that opinion you'd still find barchart.com useful for UK stocks.",
"title": ""
},
{
"docid": "67fe7636e0ee67c732c363fae29c6bef",
"text": "That is true. You will not be able to reconstruct the value of the index from the data returned with this script. I initially wrote this script because I wanted data for a lot of stocks and I wanted to perform PCA on the stocks currently included in the index.",
"title": ""
},
{
"docid": "684939ebba51de25344e1ff641d21134",
"text": "\"Try the general stock exchange web page. http://www.aex.nl I did a quick trial myself and was able to download historical data for the AEX index for the last few years. To get to the data, I went to the menu point \"\"Koersen\"\" on the main page and chose \"\"Indices\"\". I then entered into the sub page for the AEX index. There is a price chart window in which you have to choose the tab \"\"view data\"\". Now you can choose the date range you need and then download in a table format such as excel or csv. This should be easy to import into any software. This is the direct link to the sub page: http://www.aex.nl/nl/products/indices/NL0000000107-XAMS/quotes\"",
"title": ""
},
{
"docid": "90f3ac4042a941d61e7a35f1938326dc",
"text": "\"The Securities Industry and Financial Markets Association (SIFMA) publishes these and other relevant data on their Statistics page, in the \"\"Treasury & Agency\"\" section. The volume spreadsheet contains annual and monthly data with bins for varying maturities. These data only go back as far as January 2001 (in most cases). SIFMA also publishes treasury issuances with monthly data for bills, notes, bonds, etc. going back as far as January 1980. Most of this information comes from the Daily Treasury Statements, so that's another source of specific information that you could aggregate yourself. Somewhere I have a parser for the historical data (since the Treasury doesn't provide it directly; it's only available as daily text files). I'll post it if I can find it. It's buried somewhere at home, I think.\"",
"title": ""
},
{
"docid": "63351b4cb549ad41b342e0dbf094f410",
"text": "The Federal Reserve Bank publishes exchange rate data in their H.10 release. It is daily, not minute by minute. The Fed says this about their data: About the Release The H.10 weekly release contains daily rates of exchange of major currencies against the U.S. dollar. The data are noon buying rates in New York for cable transfers payable in the listed currencies. The rates have been certified by the Federal Reserve Bank of New York for customs purposes as required by section 522 of the amended Tariff Act of 1930. The historical EURUSD rates for the value of 1 EURO in US$ are at: http://www.federalreserve.gov/releases/h10/hist/dat00_eu.htm If you need to know USDEUR the value of 1 US$ in EUROS use division 1.0/EURUSD.",
"title": ""
},
{
"docid": "f78c7392739b1b493469ea702c6e2a40",
"text": "As BrenBarn points out in his comment, the real values are inflation adjusted values using the consumer price index (CPI) included in the spreadsheet. The nominal value adjusted by the CPI gives the real value in terms of today's dollars. For example, the CPI for the first month (Jan 1871) is given as 12.46 while the most recent month (Aug 2016) has a reported CPI of 240.45. Thus, the real price (in today's dollars) for the 4.44 S&P index level at Jan 1871 is calculated as 4.44 x 240.45 / 12.46 = 85.68 (actually reported as 85.65 due to rounding of the reported CPIs). And similarly for the other real values reported.",
"title": ""
},
{
"docid": "9ce676212f9a76f4a1caaaed0e929408",
"text": "\"ycharts.com has \"\"Weighted Average PE Ratio\"\" and a bunch of other metrics that are meant to correspond to well known stock metrics. Other websites will have similar ratios.\"",
"title": ""
},
{
"docid": "105d56c81f6e2fbc365e6571b8b8d301",
"text": "you could try [FRED](http://research.stlouisfed.org/fred2/graph/?g=HO7), or maybe try the CME and ICE's websites for some decent data.. haven't looked just suggestions - pretty sure the symbol for the Libor futures is EM, you could approximate from that so long as it's not a doctoral thesis",
"title": ""
},
{
"docid": "7d9fd9278d1df7eff6f2b32d543ed49d",
"text": "I've had luck finding old stock information in the Google scanned newspaper archives. Unfortunately there does not appear to be a way to search exactly by date, but a little browsing /experimenting should get what you want. For instance, here's a source which shows the price to be 36 3/4 (as far as I can read anyway) on that date.",
"title": ""
},
{
"docid": "e50fbda863f078d02e1be7577f198d04",
"text": "http://www.euroinvestor.com/exchanges/nasdaq/macromedia-inc/41408/history will work as DumbCoder states, but didn't contain LEHMQ (Lehman Brother's holding company). You can use Yahoo for companies that have declared bankruptcy, such as Lehman Brothers: http://finance.yahoo.com/q/hp?s=LEHMQ&a=08&b=01&c=2008&d=08&e=30&f=2008&g=d but you have to know the symbol of the holding company.",
"title": ""
},
{
"docid": "57165bce8395c150584db3d30c37a8d3",
"text": "Well, you can't really have it both ways. You said that they were both using the same method, but, in fact, they aren't. You can call the weighting biased, but in fact if appears that BPP is doing little or minimal weighting, and yet still is showing that prices, in general, are mapping similarly to the BLS published CPI. Unless you're arguing an MIT 'academic conspiracy' (and even if you are), I think you've failed to make your case. BPP is independant, it uses a different methodology, and yet the results confirm those of the BLS.",
"title": ""
},
{
"docid": "791a284b641dc2d848f1556503700ffe",
"text": "I don't know of any books, but there are a lot of good white papers on the subject if you take the time to look for them. For example, Moody's has a white paper on their LGD model (LossCalc) that explains their calibration methodology. Searching for academic papers on the subject is really the only way to go, because credit risk is a field that really is just being explored. Really only since 2006 have banks started to actively try to use a risk rating model that incorporates PD and LGD. This is because of data insufficiency - banks just didn't keep active and centralized loan level data that is required to calibrate the models. tl;dr: Use the internet - it is your friend.",
"title": ""
}
] |
fiqa
|
6271693e18b6e759c8b0e1a6ec6ea6c1
|
How are long-term/short-term capital gains tax calculated on restricted stock?
|
[
{
"docid": "82f690a6970b4b385556ab21e8dbe8ad",
"text": "Fidelity has a good explanation of Restricted Stock Awards: For grants that pay in actual shares, the employee’s tax holding period begins at the time of vesting, and the employee’s tax basis is equal to the amount paid for the stock plus the amount included as ordinary compensation income. Upon a later sale of the shares, assuming the employee holds the shares as a capital asset, the employee would recognize capital gain income or loss; whether such capital gain would be a short- or long-term gain would depend on the time between the beginning of the holding period at vesting and the date of the subsequent sale. Consult your tax adviser regarding the income tax consequences to you. So, you would count from vesting for long-term capital gains purposes. Also note the point to include the amount of income you were considered to have earned as a result of the original vesting [market value then - amount you paid]. (And of course, you reported that as income in 2015/2016, right?) So if you had 300 shares of Stock ABC granted you in 2014 for a price of $5/share, and in 2015 100 of those shares vested at FMV $8/share, and in 2016 100 of those shares vested, current FMV $10/share, you had $300 in income in 2015 and $500 of income in 2016 from this. Then in 2017 you sold 200 shares for $15/share:",
"title": ""
},
{
"docid": "75ffd20447fc3efc958c6f9cf52db524",
"text": "Is the Grant Date or the Vest Date used when determining the 12-month cutoff for long-term and short-term capital gains? You don't actually acquire the stock until it's vested, so that is the date and price used to determine your cost basis and short-term/long-term gain/loss. The grant date really has no tax bearing. If you held the stock (time between vesting and sale) for more than one year you will owe long-term CG tax, if less than one year you will owe short-term CG tax.",
"title": ""
}
] |
[
{
"docid": "4b7cd157197402aa1a8b2a3dc933137c",
"text": "\"This question and your other one indicate you're a bit unclear on how capital gains taxes work, so here's the deal: you buy an asset (like shares of stock or a mutual fund). You later sell it for more than you bought it for. You pay taxes on your profit: the difference between what you sold it for and what you bought it for. What matters is not the amount of money you \"\"withdraw\"\", but the prices at which assets are bought and sold. In fact, often you will be able to choose which individual shares you sell, which means you have some control over the tax you pay. For a simple example, suppose you buy 10 shares of stock for $100 each in January (an investment of $1000); we'll call these the \"\"early\"\" shares. The stock goes up to $200 in July, and you buy 10 more shares (investing an additional $2000); we'll call these the \"\"late\"\" shares. Then the stock drops to $150. Suppose you want $1500 in cash, so you are going to sell 10 shares. The 10 early shares you bought have increased in value, because you bought then for $100 but can now sell them for $150. The 10 late shares have decreased in value, because you bought them for $200 but can now only sell them for $150. If you choose to sell the early shares, you will have a capital gain of $500 ($1500 sale price minus $1000 purchase price), on which you may owe taxes. If you sell the late shares, you will have a capital loss of $500 ($1500 sale price minus $2000 purchase price is -$500), which you can potentially use to reduce your taxes. Or you could sell 5 of each and have no gain or loss (selling five early shares for $150 gives you a gain of $250, but selling five late shares for $150 gives you a loss of $250, and they cancel out). The point of all this is to say that the tax is not determined by the amount of cash you get, but by the difference between the sale price and the price you purchased for (known as the \"\"cost basis\"\"), and this in turn depends on which specific assets you sell. It is not enough to know the total amount you invested and the total gain. You need to know the specific cost basis (i.e., original purchase price) of the specific shares you're selling. (This is also the answer to your question about long-term versus short-term gains. It doesn't matter how much money you make on the sale. What matters is how long you hold the asset before selling it.) That said, many brokers will automatically sell your shares in a certain order unless you tell them otherwise (and some won't let you tell them otherwise). Often they will use the \"\"first in, first out\"\" rule, which means they will always sell the earliest-purchased shares first. To finally get to your specific question about Betterment, they have a page here that says they use a different method. Essentially, they try to sell your shares in a way that minimizes taxes. They do this by first selling shares that have a loss, and only then selling shares that have a gain. This basically means that if you want to cash out $X, and it is possible to do it in a way that incurs no tax liability, they will do that. What gets me very confused is if I continue to invest random amounts of money each month using Betterment, then I need to withdraw some cash, what are the tax implications. As my long answer above should indicate, there is no simple answer to this. The answer is \"\"it depends\"\". It depends on exactly when you bought the shares, exactly how much you paid for them, exactly when and how much the price rose or fell, and exactly how much you sell them for. Betterment is more or less saying \"\"Don't worry about any of this, trust us, we will handle everything so that your tax is minimized.\"\" A final note: if you really do want to track the details of your cost basis, Betterment may not be for you, because it is an automated platform that may do a lot of individual trades that a human wouldn't do, and that can make tracking the cost basis yourself very difficult. Almost the whole point of something like Betterment is that you are supposed to give them your money and forget about these details.\"",
"title": ""
},
{
"docid": "28736c47950db9528b1fd9ac554aa8c6",
"text": "If you have held the stocks longer than a year, then there is no tax apart from the STT that is already deducted when you sell the shares. If you have held the stock for less than a year, you would have to pay short term capital gains at the rate of 15% on the profit. Edit: If you buy different shares from the total amount or profits, it makes no difference to taxes.",
"title": ""
},
{
"docid": "175a9f550ec56623c289df7f2fe0dc18",
"text": "Here is how it should look: 100 shares of restricted stock (RSU) vest. 25 shares sold to pay for taxes. W2 (and probably paycheck) shows your income going up by 100 shares worth and your taxes withheld going up by 25 shares worth. Now you own 75 shares with after-tax money. If you stop here, there would be no stock sale and no tax issues. You'd have just earned W2 income and withheld taxes through your W2 job. Now, when you sell those 75 shares whether it is the same day or years later, the basis for those 75 shares is adjusted by the amount that went in to your W2. So if they were bought for $20, your adjusted basis would be 75*$20.",
"title": ""
},
{
"docid": "e1797c0491a4af3e6fa3e28b50e09be2",
"text": "The original post's $16 has two errors: Here is the first scenario: . Tax Liability($) on Net . Cash # of Price Paper Realized Value Time: ($) Shares ($/sh) Profits Profits ($) 1. Start with: 100 - n/a - - 100 2. After buy 10@10$/sh: - 10 10 - - 100 3. Before selling: - 10 12 (5) - 115 4. After sell 10@12$/sh: 120 - n/a - (5) 115 5. After buy 12@10$/sh: - 12 10 - (5) 115 6. Before selling: - 12 12 (6) (5) 133 7. After sell 12@12$/sh: 144 - n/a - (11) 133 8. After buy 14@10$/sh: 4 14 10 - (11) 133 9. Before selling: 4 14 12 (7) (11) 154 10.After sell 14@12$/sh: 172 - n/a - (18) 154 At this point, assuming that all of the transactions occurred in the same fiscal year, and the realized profits were subject to a 25% short-term capital gains tax, you would owe $18 in taxes. Yes, this is 25% of $172 - $100.",
"title": ""
},
{
"docid": "398402f51ec457500408822627b1c4f2",
"text": "Here's how capital gains are totaled: Long and Short Term. Capital gains and losses are either long-term or short-term. It depends on how long the taxpayer holds the property. If the taxpayer holds it for one year or less, the gain or loss is short-term. Net Capital Gain. If a taxpayer’s long-term gains are more than their long-term losses, the difference between the two is a net long-term capital gain. If the net long-term capital gain is more than the net short-term capital loss, the taxpayer has a net capital gain. So your net long-term gains (from all investments, through all brokers) are offset by any net short-term loss. Short term gains are taxed separately at a higher rate. I'm trying to avoid realizing a long term capital gain, but at the same time trade the stock. If you close in the next year, one of two things will happen - either the stock will go down, and you'll have short-term gains on the short, or the stock will go up, and you'll have short-term losses on the short that will offset the gains on the stock. So I don;t see how it reduces your tax liability. At best it defers it.",
"title": ""
},
{
"docid": "0bfbb3a0f9d2ac58c9bb99f9390209f7",
"text": "\"Long term: Assuming you sold stock ABC through a registered stock exchange, e.g., the Bombay Stock Exchange or the National Stock Exchange of India, and you paid the Securities Transaction Tax (STT), you don't owe any other taxes on the long term capital gain of INR 100. If you buy stock BCD afterwards, this doesn't affect the long term capital gains from the sale of stock ABC. Short term: If you sell the BCD stock (or the ABC stock, or some combination therein) within one year of its purchase, you're required to pay short term capital gains on the net profit, in which case you pay the STT and the exchange fees and an additional flat rate of 15%. The Income Tax Department of India has a publication titled \"\"How to Compute your Capital Gains,\"\" which goes into more detail about a variety of relevant situations.\"",
"title": ""
},
{
"docid": "200fcef0533e0e0a2d7806632fc623de",
"text": "\"For example, if I have an income of $100,000 from my job and I also realize a $350,000 in long-term capital gains from a stock sale, will I pay 20% on the $350K or 15%? You'll pay 20% assuming filing single and no major offsets to taxable income. Capital gains count towards your income for determining tax bracket. They're on line 13 of the 1040 which is in the \"\"income\"\" section and aren't adjusted out/excluded from your taxable income, but since they are taxed at a different rate make sure to follow the instructions for line 44 when calculating your tax due.\"",
"title": ""
},
{
"docid": "dc36a99ffea70f0b1e78475c3ad6fcb7",
"text": "Yes. You incur income tax on the RSU on they date they vest. At this point you own the actual shares and you can decide to sell them or to hold them. If you hold them for the required period, and sell them later, the difference between your price at vesting and the sales price would be taxed as long term capital gains. Caution: if you decide to hold, you are still liable to pay income tax in the year they vest. You have to pay taxes on income that you haven't made yet. This is fairly dangerous: if the stock goes down, you may lose a lot of this tax payment. Technically you could recover some of this through claiming capital losses, but that this is severely restricted: the IRS makes it much easier to increase taxes through gains than reducing taxes through losses.",
"title": ""
},
{
"docid": "d1e92a6e17ba78551b7fd1703fae444c",
"text": "\"Are these all of the taxes or is there any additional taxes over these? Turn-over tax is not for retail investors. Other taxes are paid by the broker as part of transaction and one need not worry too much about it. Is there any \"\"Income tax\"\" to be paid for shares bought/holding shares? No for just buying and holding. However if you buy and sell; there would be a capital gain or loss. In stocks, if you hold a security for less than 1 year and sell it; it is classified as short term capital gain and taxes at special rate of 15%. The loss can be adjusted against any other short term gain. If held for more than year it is long term capital gain. For stock market, the tax is zero, you can't adjust long term losses in stock markets. Will the money received from selling shares fall under \"\"Taxable money for FY Income tax\"\"? Only the gain [or loss] will be tread as income not the complete sale value. To calculate gain, one need to arrive a purchase price which is price of stock + Brokerage + STT + all other taxes. Similar the sale price will be Sales of stock - Brokerage - STT - all other taxes. The difference is the gain. Will the \"\"Dividend/Bonus/Buy-back\"\" money fall under taxable category? Dividend is tax free to individual as the company has already paid dividend distribution tax. Bonus is tax free event as it does not create any additional value. Buy-Back is treated as sale of shares if you have participated. Will the share-holder pay \"\"Dividend Distribution Tax\"\"? Paid by the company. What is \"\"Capital Gains\"\"? Profit or loss of buying and selling a particular security.\"",
"title": ""
},
{
"docid": "40d6ddaf2a9d8105062e58273b8c4919",
"text": "Your question is missing too much to be answered directly. Instead - here are some points to consider. Short term gains taxed at your marginal rates, whereas long term gains have preferable capital gains rates (up to 20% tax rate, instead of your marginal rate). So if you're selling at gain, you might want to consider to sell FIFO and pay lower capital gains tax rate instead of the short term marginal rate. If you're selling at loss and have other short term gains, you would probably be better selling LIFO, so that the loss could offset other short term gains that you might have. If you're selling at loss and don't have short term gains to offset, you can still offset your long term gains with short term losses, but the tax benefit will be lower. In this case - FIFO might be a better choice again. If you're selling at loss, beware of the wash sale rules, as you might not be able to deduct the loss if you buy/sell within too short a window.",
"title": ""
},
{
"docid": "baebd309ec2e588da4ec6750b375502a",
"text": "If the gift was stock that they have owned for years there can be one hitch: The basis of the stock doesn't reset when it is gifted. For example if grandparents have owned stock that is currently worth $10,000 today, but they bought it decades ago when it only cost them $1,000; then if the new owner sells it today they will have a gain of $9,000. The clock to determine short term/long term also doesn't reset; which is good. The basis needs to be determined now so that the gain can be accurately calculated in the future. This information should be stored in a safe place. Gains for dividends are investment income and the rules regarding the kiddie tax need to be followed.",
"title": ""
},
{
"docid": "7656f373c9e4cfffccc92e080131a065",
"text": "If the charity accepts stock, you can avoid the tax on the long term cap gain when you donate it. e.g. I donate $10,000 in value of Apple. I write off $10,000 on my taxes, and benefit with a $2500 refund. If I sold it, I'd have nearly a $1500 tax bill (bought long enough ago, the basis is sub $100). Any trading along the way, and it's on you. Gains long or short are taxed on you. It's only the final donation that matters here. Edit - to address Anthony's comment on other answer - I sell my Apple, with a near $10,000 gain (it's really just $9900) and I am taxed $1500. Now I have $8500 cash I donate and get $2125 back in a tax refund. By donating the stock I am ahead nearly $375, and the charity, $1500.",
"title": ""
},
{
"docid": "2efee2c5fd498c4cbb9139d8a8d79065",
"text": "\"Oddly enough, in the USA, there are enough cost and tax savings between buy-and-hold of a static portfolio and buying into a fund that a few brokerages have sprung up around the concept, such as FolioFN, to make it easier for small investors to manage numerous small holdings via fractional shares and no commission window trades. A static buy-and-hold portfolio of stocks can be had for a few dollars per trade. Buying into a fund involves various annual and one time fees that are quoted as percentages of the investment. Even 1-2% can be a lot, especially if it is every year. Typically, a US mutual fund must send out a 1099 tax form to each investor, stating that investors share of the dividends and capital gains for each year. The true impact of this is not obvious until you get a tax bill for gains that you did not enjoy, which can happen when you buy into a fund late in the year that has realized capital gains. What fund investors sometimes fail to appreciate is that they are taxed both on their own holding period of fund shares and the fund's capital gains distributions determined by the fund's holding period of its investments. For example, if ABC tech fund bought Google stock several years ago for $100/share, and sold it for $500/share in the same year you bought into the ABC fund, then you will receive a \"\"capital gains distribution\"\" on your 1099 that will include some dollar amount, which is considered your share of that long-term profit for tax purposes. The amount is not customized for your holding period, capital gains are distributed pro-rata among all current fund shareholders as of the ex-distribution date. Morningstar tracks this as Potential Capital Gains Exposure and so there is a way to check this possibility before investing. Funds who have unsold losers in their portfolio are also affected by these same rules, have been called \"\"free rides\"\" because those funds, if they find some winners, will have losers that they can sell simultaneously with the winners to remain tax neutral. See \"\"On the Lookout for Tax Traps and Free Riders\"\", Morningstar, pdf In contrast, buying-and-holding a portfolio does not attract any capital gains taxes until the stocks in the portfolio are sold at a profit. A fund often is actively managed. That is, experts will alter the portfolio from time to time or advise the fund to buy or sell particular investments. Note however, that even the experts are required to tell you that \"\"past performance is no guarantee of future results.\"\"\"",
"title": ""
},
{
"docid": "7ec4040c3ac8334ab36c650435360cd4",
"text": "\"As Dilip said, if you want actual concrete, based in tax law, answers, please add the country (and if applicable, state) where you pay income tax. Also, knowing what tax bracket you're in would help as well, although I certainly understand if you're not comfortable sharing that. So, assuming the US... If you're in the 10% or 15% tax bracket, then you're already not paying any federal tax on the $3k long term gain, so purposely taking losses is pointless, and given that there's probably a cost to taking the loss (commission, SEC fee), you'd be losing money by doing so. Also, you won't be able to buy back the loser for 31 days without having the loss postponed due to the wash sale that would result. State tax is another matter, but (going by the table in this article), even using the highest low end tax rate (Tennessee at 6%), the $50 loss would only save you $3, which is probably less than the commission to sell the loser, so again you'd be losing money. And if you're in a state with no state income tax, then the loss wouldn't save you anything on taxes at the state level, but of course you'll still be paying to be able to take the loss. On the high end, you'd be saving 20% federal tax and 13.3% state tax (using the highest high end tax state, California, and ignoring (because I don't know :-) ) whether they tax long-term capital gains at the same rate as regular income or not), you'd be saving $50 * (20% + 13.3%) = $50 * 33.3% = $16.65. So for taxes, you're looking at saving between nothing and $16.65. And then you have to subtract from that the cost to achieve the loss, so even on the high end (which means (assuming a single filer)) you're making >$1 million), you're only saving about $10, and you're probably actually losing money. So I personally don't think taking a $50 loss to try to decrease taxes makes sense. However, if you really meant $500 or $5000, then it might (although if you're in the 10-15% brackets in a no income tax state, even then it wouldn't). So the answer to your final question is, \"\"It depends.\"\" The only way to say for sure is, based on the country and state you're in, calculate what it will save you (if anything). As a general rule, you want to avoid letting the tax tail wag the dog. That is, your financial goal should be to end up with the most money, not to pay the least taxes. So while looking at the tax consequences of a transaction is a good idea, don't look at just the tax consequences, look at the consequences for your overall net worth.\"",
"title": ""
},
{
"docid": "9b02186c17c8d6c54dc29f81d0b2e4c9",
"text": "(All for US.) Yes you (will) have a realized long-term capital gain, which is taxable. Long-term gains (including those distributed by a mutual fund or other RIC, and also 'qualified' dividends, both not relevant here) are taxed at lower rates than 'ordinary' income but are still bracketed almost (not quite) like ordinary income, not always 15%. Specifically if your ordinary taxable income (after deductions and exemptions, equivalent to line 43 minus LTCG/QD) 'ends' in the 25% to 33% brackets, your LTCG/QD income is taxed at 15% unless the total of ordinary+preferred reaches the top of those brackets, then any remainder at 20%. These brackets depend on your filing status and are adjusted yearly for inflation, for 2016 they are: * single 37,650 to 413,350 * married-joint or widow(er) 75,300 to 413,350 * head-of-household 50,400 to 441,000 (special) * married-separate 37,650 to 206,675 which I'd guess covers at least the middle three quintiles of the earning/taxpaying population. OTOH if your ordinary income ends below the 25% bracket, your LTCG/QD income that 'fits' in the lower bracket(s) is taxed at 0% (not at all) and only the portion that would be in the ordinary 25%-and-up brackets is taxed at 15%. IF your ordinary taxable income this year was below those brackets, or you expect next year it will be (possibly due to status/exemption/deduction changes as well as income change), then if all else is equal you are better off realizing the stock gain in the year(s) where some (or more) of it fits in the 0% bracket. If you're over about $400k a similar calculation applies, but you can afford more reliable advice than potential dogs on the Internet. (update) Near dupe found: see also How are long-term capital gains taxed if the gain pushes income into a new tax bracket? Also, a warning on estimated payments: in general you are required to pay most of your income tax liability during the year (not wait until April 15); if you underpay by more than 10% or $1000 (whichever is larger) you usually owe a penalty, computed on Form 2210 whose name(?) is frequently and roundly cursed. For most people, whose income is (mostly) from a job, this is handled by payroll withholding which normally comes out close enough to your liability. If you have other income, like investments (as here) or self-employment or pension/retirement/disability/etc, you are supposed to either make estimated payments each 'quarter' (the IRS' quarters are shifted slightly from everyone else's), or increase your withholding, or a combination. For a large income 'lump' in December that wasn't planned in advance, it won't be practical to adjust withholding. However, if this is the only year increased, there is a safe harbor: if your withholding this year (2016) is enough to pay last year's tax (2015) -- which for most people it is, unless you got a pay cut this year, or a (filed) status change like marrying or having a child -- you get until next April 15 (or next business day -- in 2017 it is actually April 18) to pay the additional amount of this year's tax (2016) without underpayment penalty. However, if you split the gain so that both 2016 and 2017 have income and (thus) taxes higher than normal for you, you will need to make estimated payment(s) and/or increase withholding for 2017. PS: congratulations on your gain -- and on the patience to hold anything for 10 years!",
"title": ""
}
] |
fiqa
|
dee3fdbd9418fc3bb6a92d09e04d4e6a
|
How much money do I need to have saved up for retirement?
|
[
{
"docid": "bbb043138c397f744b965e44a89abb5f",
"text": "\"I wrote a spreadsheet (<< it may not be obvious - this is a link to pull down the spreadsheet) a while back that might help you. You can start by putting your current salary next to your age, adjust the percent of income saved (14% for you) and put in the current total. The sheet basically shows that if one saves 15% from day one of working and averages an 8% return, they are on track to save over 20X their final income, and at the 4% withdrawal rate, will replace 80% of their income. (Remember, if they save 15% and at retirement the 7.65% FICA /medicare goes away, so it's 100% of what they had anyway.) For what it's worth, a 10% average return drops what you need to save down to 9%. I say to a young person - try to start at 15%. Better that when you're 40, you realize you're well ahead of schedule and can relax a bit, than to assume that 8-9% is enough to save and find you need a large increase to catch up. To answer specifically here - there are those who concluded that 4% is a safe withdrawal rate, so by targeting 20X your final income as retirement savings, you'll be able to retire well. Retirement spending needs are not the same for everyone. When I cite an 80% replacement rate, it's a guess, a rule of thumb that many point out is flawed. The 'real' number is your true spending need, which of course can be far higher or lower. The younger investor is going to have a far tougher time guessing this number than someone a decade away from retiring. The 80% is just a target to get started, it should shift to the real number in your 40s or 50s as that number becomes clear. Next, I see my original answer didn't address Social Security benefits. The benefit isn't linear, a lower wage earner can see a benefit of as much as 50% of what they earned each year while a very high earner would see far less as the benefit has a maximum. A $90k earner will see 30% or less. The social security site does a great job of giving you your projected benefit, and you can adjust target savings accordingly. 2016 update - the prior 20 years returned 8.18% CAGR. Considering there were 2 crashes one of which was called a mini-depression, 8.18% is pretty remarkable. For what it's worth, my adult investing life started in 1984, and I've seen a CAGR of 10.90%. For forecasting purposes, I think 8% long term is a conservative number. To answer member \"\"doobop\"\" comment - the 10 years from 2006-2015 had a CAGR of 7.29%. Time has a way of averaging that lost decade, the 00's, to a more reasonable number.\"",
"title": ""
},
{
"docid": "2c4a159479aa702fd2f0e173827ea315",
"text": "\"One common rule of thumb: you can probably get 4% or better returns on your investments ('\"\"typical market rate of return is 8%, derate to allow for inflation and off years). Figure out what kind of income you will want in retirement and divide by 0.04 to get the savings you need to accumulate to support that. This doesn't allow for the fact that your needs are also going to increase with inflation; you can make a guess at that and use an inflated needs estimate. Not sophisticated, not precise, but it's a quick and dirty ballpark estimate. And sometimes it's surprisingly close to what a proper model would say.\"",
"title": ""
},
{
"docid": "6efcb078a0a804b38e2c3ad82d3f44fd",
"text": "One opinion related to savings is to save 30% of your take home salary every month, split the amount into two parts depending on your age (29) one part would be 30% of 30% and another 70% of 30%. Take the 70% and buy blue chip stock and take the 30% and buy govt. bonds. Each 10 years adjust the percentages at 40, 40% on bonds and 60% on stock. Only cash out on the day you retire, otherwise ignore all market/economic movements. With this and the statutory savings (employment retirement) you should be ok.",
"title": ""
},
{
"docid": "786ec22cacdc9b9bb03b1d5b85bd57a0",
"text": "Invest in kids, not pension - they never inflate. Without kids your retirement will be miserable anyway. And with them you'll be good. Personally, I do not believe that that our current savings will be worth it in 30 years in these times.",
"title": ""
}
] |
[
{
"docid": "d4349c26f0d1b7638e5d334c9d495060",
"text": "\"Buy term and invest the difference is certainly the standard recommendation, and for good reason. When you start looking at some sample numbers the \"\"buy term and invest the difference\"\" strategy starts to look very good. Here are the rates I found (27 yr old in Texas with good health, non-smoker, etc): $200k term life: $21/month $200k whole life: $177/month If you were to invest the difference in a retirement account for 40 years, assuming a 7% rate of return (many retirement planning estimates use 10%) you would have $411,859 at the end of that period. (If you use 10% that figure jumps to over $994k.) Needless to say, $400k in a retirement account is better than a $200k death benefit. Especially since you can't get the death benefit AND the cash value. Certainly one big difficulty is making sure you invest that difference. The best way to handle that is to set up a direct deposit that goes straight from your paycheck to the retirement account before it even touches your bank account. The next best thing would be an automatic transfer from your bank account. You may wonder 'What if I can no longer afford to invest that money?' First off, take a second and third look at your finances before you start eating into that. But if financial crisis comes and you truly can't afford to fund your own life insurance / retirement account then perhaps it will be a good thing you're not locked into a life insurance policy that forces you to pay those premiums. That extra freedom is another benefit of the \"\"buy term and invest the difference\"\" strategy. It is great that you are asking this question now while you are young. Because it is much easier to put this strategy into play now while you are young. As far as using a cash value policy to help diversify your portfolio: I am no expert in how to allocate long term investments after maxing out my IRA and 401k. (My IRA maxes out at $5k/year, another $5k for my wife's, another $16.5k for my 401k.) Before I maxed that out I would have my house paid for and kid's education saved for. And by then it would make sense to pay a financial adviser to help you manage all those investments. They would be the one to ask about using a cash value policy similar to @lux lux's description. I believe you should NEVER PUT YOUR MONEY INTO SOMETHING YOU DON'T UNDERSTAND. Cash value policies are complex and I don't fully understand them. I should add that of course my calculations are subject to the standard disclaimer that those investment returns aren't guaranteed. As with any financial decision you must be willing to accept some level of risk and the question is not whether to accept risk, but how much is acceptable. That's why I used 7% in my calculation instead of just 10%. I wanted to demonstrate that you could still beat out whole life if you wanted to reduce your risk and/or if the stock market performs poorly.\"",
"title": ""
},
{
"docid": "e155a7538f8822b59bcea7d7e2f5090d",
"text": "In addition to what others have said, I think it is important to consider that government retirement assistance (whatever it is called in each instance) is basically a promise that can be revoked. I talked to a retired friend of mine just yesterday and we got onto that subject; she mentioned that when she was young, the promise was for 90% of one's pay, paid by the government after retiring. It is very different today. Yes, you can gamble that you won't need the saved money, and thus decide not to save anything. What then if you do end up needing the money you did not set aside, but rather spent? You are just now graduating college, and assuming of course that you get a decently-paying job, are likely going to have loads more money than you are used to. If you make an agreement with yourself to set aside even just 10-15% of the difference in income right from the start, that is going to grow into a pretty sizable nest egg by the time you approach retirement age. Then, you will have the option of continuing to work (maybe part-time) or quitting in a way you would not have had otherwise. Now I'm going to pull numbers out of thin air, but suppose that you currently have $1000/month net, before expenses, and can get a job that pays $1800/month net starting out. 10-15% of the difference means you'll be saving around $100/month for retirement. In 35 years, assuming no return on investment (pessimistic, but works if returns match inflation) and no pay rises, that will still be over $40K. That's somewhere on the order of $150/month added to your retirement income for 25 years. Multiply with whatever inflation rate you think is likely if you prefer nominal values. It becomes even more noticable if you save a significant fraction of the additional pay; if you save 1/3 of the additional money (note that you still effectively get a 50% raise compared to what you have been living on before), that gives you a net income of $1500/month instead of $1800 ($500/month more rather than $800/month more) which grows into about $110K in 35 years assuming no return on investment. Nearly $400 per month for 25 years. $100 per week is hardly chump change in retirement, and it is still quite realistic for most people to save 30% of the money they did not have before.",
"title": ""
},
{
"docid": "54b44fd18a6297f0e17b5868585b8a96",
"text": "You're ignoring inflation. Even if we assume the ECB sticks to its 2% inflation target, and your salary only rises in line with inflation, you will be saving considerably more in forty years' time than you are today. In fact, an interest rate of 2% and an inflation rate of 2% make the sums exceptionally easy. You need to save €25,000 per year in 2057 euros to be a millionaire by 2057, which is €11,322 in 2017 euros. Challenging, but achievable. Of course, you'll only be a millionaire in 2057 euros, which will be worth less than half as much as a euro is worth right now.",
"title": ""
},
{
"docid": "8b839d729f83a276ef9f64f6ca8539a4",
"text": "A $250K earner might have $4M in retirement savings and $500K in available funds, but doesn't wish to spend all his liquidity on the house. In general, a house might cost 2-3 times one's annual income. It would take many years to get that saved up. They might want to have the house sooner. It all goes back to choice, priorities, personal preference.",
"title": ""
},
{
"docid": "5a37214ce39c0d60775a5bf216304cb9",
"text": "A good general rule is to save 15% of your income for retirement. As for where you put it: Put as much as it takes to maximize your employer match into your 401(k), but no more. The employer match is free money, and you can't beat free money If you still haven't put in 15%, put the rest into a Roth IRA. By historical standards, taxes are pretty low today. They are almost certainly going to be higher in retirement, especially since you likely won't have the deductions in retirement that you may have now (kids, mortgage, etc). If you've maxed our the allowed contribution for your Roth and still haven't saved 15%, put the rest in a traditional IRA.",
"title": ""
},
{
"docid": "2a1480ee3136d3cfa3c40fb998a544ef",
"text": "First, check out some of the answers on this question: Oversimplify it for me: the correct order of investing When you have determined that you are ready to invest for retirement, there are two things you need to consider: the investment and the account. These are separate items. The investment is what makes your money grow. The type of account provides tax advantages (and restrictions). Generally, these can be considered separately; for the most part, you can do any type of investment in any account. Briefly, here is an overview of some of the main options: In your situation, the Roth IRA is what I would recommend. This grows tax free, and if you need the funds for some reason, you can get out what you put in without penalty. You can invest up to $5500 in your Roth IRA each year. In addition to the above reasons, which are true for anybody, a Roth IRA would be especially beneficial for you for three reasons: For someone that is closer in age to retirement and in a higher tax bracket now, a Roth IRA is less attractive than it is for you. Inside your Roth IRA, there are lots of choices. You can invest in stocks, bonds, mutual funds (which are simply collections of stocks and bonds), bank accounts, precious metals, and many other things. Discussing all of these investments in one answer is too broad, but my recommendation is this: If you are investing for retirement, you should be investing in the stock market. However, picking individual stocks is too risky; you need to be diversified in a lot of stocks. Stock mutual funds are a great way to invest in the stock market. There are lots of different types of stock mutual funds with different strategies and expenses associated with them. Managed funds actively buy and sell different stocks inside them, but have high expenses to pay the managers. Index funds buy and hold a list of stocks, and have very low expenses. The conventional wisdom is that, in general, index funds perform better than managed funds when you take the expenses into account. I hope this overview and these recommendations were helpful. If you have any specific questions about any of these types of accounts or investments, feel free to ask another question.",
"title": ""
},
{
"docid": "dd019320e6613b5bc253cc262b746579",
"text": "First, as Dheer mentioned above, there is no right answer as investment avenues for a person is dicteted by many subjective considerations. Given that below a few of my thoughts (strictly thoughts): 1) Have a plan for how much money you would need in next 5-7 years, one hint is, do you plan you buy a house, car, get married ... Try to project this requirement 2) Related to the above, if you have some idea on point 1, then it would be possible for you to determine how much you need to save now to achieve the above (possibly with a loan thrown in). It will also give you some indication as to where and how much of your current cash holding that you should invest now 3) From an investment perspective there are many instruments, some more risky some less. The exact mix of instruments that you should consider is based on many things, one among them is your risk apetite and fund requirement projections 4) Usually (not as a rule of thumb) the % of savings corresponding to your age should go into low risk investments and 100-the % into higher risk investment 5) You could talk to some professional invetment planners, all banks offer the service Hope this helps, I reiterate as Dheer did, there is truely no right answer for your question all the answers would be rather contextual.",
"title": ""
},
{
"docid": "498b2cf651edab1629d39879c3c86686",
"text": "The absolute best advice I ever received was this: You will need three categories of savings in your life: 1) Retirement Savings This is money you put away (in 401-Ks and IRAs) for the time in your life when you can no longer earn enough income to support yourself. You do not borrow against it nor do you withdraw from it in emergencies or to buy a house. 2) Catestrophic savings This is money you put back in case of serious events. Events like: prolonged job loss, hospitalization, extended illness, loss of home, severe and significant loss of transportation, very large aplliance loss or damage. You do not take trips to the Bahamas or buy diamond rings with this money. 3) Urgent, relatively small, need savings. This is the savings you can use from time to time. Use it for bills that arise unexpectedly, unforseen shortfalls in your budget, needed repairs such as car repairs and small appliance repairs, surprising fines, fees, and bills. Put 10% of your income into each category of savings. 10% intro retirement savings, another, separate, 10% intro Catestrophic savings, and yet another 10% intro urgent, small need, savings. So, as you can see, already 30% of your income is already spoken for. Divide up the remaining 70% intro fixed (I recommend 50% toward fixed expenses) and variable expenses. Fixed includes those things that you pay once every month such as housing, utilities, car payment, debt repayment, etc. Variable includes discretionary things like eating out, gifts, and splurges. Most importantly, partner with someone who is your opposite. If you are a saver at heart partner with a spender. If you are a spender partner with a saver. There are three rules to live by regarding the budget: A) no one spends any money unless it is in the budget B) the budget only includes those things to which both the saver and the spender agree C) the budget can, and will, be modified as the pay period unfolds. A budget is a plan not a means to beat the other person up. Plans change as new information arises. A budget must be flexible. The urgent use savings will help to make the budget flexible. Edit due to comments: @enderland Perhaps you do not have children living with you. I am a saver, my wife is a spender. When it came time to do the budget I would forget things like the birthdays of my children, school fees due next pay period, shopping for Christmas gifts, needed new clothes and shoes for the children, broken small appliances that needed to be fixed or replaced, special (non reoccurring) house maintenence (like steam cleaning the carpet), gifts to relatives and friends, exceptional assistance to relatives, etc. As my wife was the spender she would remind me of these things. Perhaps you do not have these events in your life. I am glad to have these events in my life as that means that I have people in my life that I care about. What good is a fat savings account if I have no loved ones that benefit from it?",
"title": ""
},
{
"docid": "dd735511228024cbb19bb111a65a5552",
"text": "\"It depends on what kind of pension you get and your anticipated retirement income. If you have one of those nice defined benefit plans that pays 90% of your last 5 years' average salary annually, you might not want to bother with a separate RRSP and put your money into other use instead. While most Canadians should worry about not having enough to retire on, some might end up with too much and costing them in the form current purchases and entitlements to government retirement benefits. Figuring out how much you need for retirement is not trivial either. A lot of people talks about planning for needing 70% of what you made now as a way to preserve your lifestyle. Well, my opinion is that those type of generalization might work for the people in the middle of the income band and is too little for those in the low-income and possibly too much for those with high income. My own approach is estimate your retirement income requirement by listing out your anticipated expenses as if you were doing budget. I would agree that's not the best approach either (back to my comment about no one size fits all), but it's one that I feel most comfortable with. Once you have that figure, factor in what you think you will get from the government (OAS, CPP and etc) and you will have the amount of money you need for retirement. I will warn against using \"\"average life expectancy\"\" to forecast your retirement needs, 'cos 50% of the people will end up with extra money (not a bad problem) and the other 50% will run out of money (bad but very true problem) if you use that approach. Instead of going on and write an essay on this topic, I will simply say this - everyone's situation is different and, just like solving any other complex problems, you need to start with \"\"end\"\" in mind and work things backward, with a ton of different scenario to be able to cope with whatever curveballs life might throw at you. If you spend enough time in the library/bookstore looking through books on the topic of \"\"estate planning\"\" and \"\"retirement planning\"\", you will find people arguing back and fro on these topics - this is a sign that this is complex and no one has the one \"\"good\"\" answer for. Do a bit of reading by yourself and, if still unsure or just want to be sure, go spend the money and review your plan with a fee-only advisor. They will be able to provide another opinion on your situation after thoroughly studying your situation.\"",
"title": ""
},
{
"docid": "3787ce52da94e544036b6fada6b1e3a2",
"text": "\"I argued for a 15% rule of thumb here: Saving for retirement: How much is enough? Though if you'll let me, I'd refine the argument to: use a rule of thumb to set your minimum savings, then use Monte Carlo to stress-test and look at any special circumstances, and make a case to save more. You're right that the rule of thumb bakes in tons of assumptions (great list btw). A typical 15%-works scenario could include: If any of those big assumptions don't apply to you (or you don't want to rely on them) you'd have to re-evaluate. It sounds like you're assuming 4-5% investment returns? As you say that's probably the big difference, 4-5% is lower than most would assume. 6-7% (real return) is maybe a middle-of-the-road assumption and 8% is maybe an unrealistic one. Many of the assumptions you list (such as married/kids, cost of living, spouse's income, paying for college) can maybe be bundled up into one assumption (percentage of income you will spend). Set a percentage budget and as you go along, stay within your means by sacrificing as required. Also smooth out income across layoffs and things by having an emergency fund. By staying on-budget as you go you can remove some of the unpredictability. The reason I think the rule of thumb is still good, despite the assumptions, is that I don't think a \"\"more accurate\"\" number based on a lot of unpredictable guesses is really better; and it may even be harmful if you use it to justify saving less, or even if you use it to save far too much. See also http://en.wikipedia.org/wiki/Precision_bias Many (most?) important assumptions are not predictable: investment returns, health care inflation, personal health, lifestyle creep (changing spending needs/desires), irrational investment behavior. I agree with you that for many scenarios and people, 15% will not be enough, though it's a whole lot more than most save already. In particular, low investment returns over your time horizon will make 15% insufficient, and some argue that low investment returns over the coming 30 years are likely. Without a doubt, 20% or more is safer than 15%. Do consider that \"\"saving enough\"\" is not a binary thing. If you save only 15% and it turns out that doesn't completely replace your income, it's not like you're out on the street; you might have to retire a few years later, or downsize your house, or something, but perhaps that isn't a catastrophe. There's a very personal question about how much to sacrifice now for less risk of sacrifice in the future. Maybe I'd better qualify \"\"not a binary thing\"\": some savings rates (certainly, anything less than 10%), make major sacrifices pretty likely... so in that sense there is a binary distinction between \"\"plausible plan\"\" and \"\"denial.\"\" Also, precise assumptions and calculations get a lot more useful as you approach retirement age. You can pretty much answer the question \"\"is it reasonable to retire right now?\"\" or \"\"could I retire in 5 years?\"\" (though with a retirement that could last 30 years, plenty of unknowns will remain even then). I think at age 20 or 30 though, just saving 15% (20% if you're conservative), and not spending too much time on a speculative analysis would be a sound decision. That's why I like the rule of thumb. Analysis paralysis (saving nothing or near-nothing) is the real danger early in one's career. Any plausible percentage is fine as long as you save. As your life unfolds and you see what happens, you can refine and correct, adjusting your savings rate, moving your retirement age around, spending a little less or more. The important thing earlier in life is to just get in the right ballpark.\"",
"title": ""
},
{
"docid": "a0ee72e0f45538a89c714aff65edec8b",
"text": "James, money saved over the long term will typically beat inflation. There are many articles that discuss the advantage of starting young, and offer: A 21 year old who puts away $1000/yr for 10 years and stops depositing will be ahead of the 31 yr old who starts the $1000/yr deposit and continues through retirement. If any of us can get a message to our younger selves (time travel, anyone?) we would deliver two messages: Start out by living beneath your means, never take on credit card debt, and save at least 10%/yr as soon as you start working. I'd add, put half your raises to savings until your rate is 15%. I can't comment on the pension companies. Here in the US, our accounts are somewhat guaranteed, not for value, but against theft. We invest in stocks and bonds, our funds are not mingled with the assets of the investment plan company.",
"title": ""
},
{
"docid": "02b55fc28d76d96bfd32f5313f4634ed",
"text": "\"Contribute as much as you can. When do you want to retire and how much income do you think you'll need? A $1M portfolio yielding 5% will yield $50,000/year. Do some research about how to build a portfolio... this site is a good start, but check out books on retirement planning and magazines like Money and Kiplinger. If you don't speak \"\"money\"\" or are intimidated by investing, look for a fee-based financial advisor whom you are comfortable with.\"",
"title": ""
},
{
"docid": "f2f30bcca1d6f7b8e51558f851e86b28",
"text": "I see a lot of answers calculcating with incomes that are much higher than yours, here is something for your situation: If you would keep your current income for the rest of your life, here is approximately how things would turn out after 40 years: All interest is calculated relative to the amount in your portfolio. Therefore, lets start with 1 dollar for 40 years: With your current income, 15% would be 82.5 dollar. At 12% this would over 40 years get you almost 1 million dollar. I would call a required return of more than 12% not 'likely'. The good news, is that your income will likely increase, and especially if this happens fast things will start to look up. The bad news is, that your current salary is quite low. So, it basically means that you need to make some big jumps in the next few years in order to make this scenario likely. If you can quickly move your salary towards ranges that are more common in the US, then 15% of your income can build up to a million before you retire. However, if you just follow gradual growth, you would need to get quite lucky to reach a million. Note that even if reaching a million appears unlikely, it is probably still a good idea to save!",
"title": ""
},
{
"docid": "fbcc31b3b194bb4a06218bfa4438d6f3",
"text": "The stock market at large has about a 4.5% long-term real-real (inflation-fees-etc-adjusted) rate of return. Yes: even in light of the recent crashes. That means your money invested in stocks doubles every 16 years. So savings when you're 25 and right out of college are worth double what savings are worth when you're 41, and four times what they're worth when you're 57. You're probably going to be making more money when you're 41, but are you really going to be making two times as much? (In real terms?) And at 57, will you be making four times as much? And if you haven't been saving at all in your life, do you think you're going to be able to start, and make the sacrifices in your lifestyle that you may need? And will you save enough in 10 years to live for another 20-30 years after retirement? And what if the economy tanks (again) and your company goes under and you're out of a job when you turn 58? Having tons of money at retirement isn't the only worthy goal you can pursue with your money (ask anyone who saves money to send kids to college), but having some money at retirement is a rather important goal, and you're much more at risk of saving too little than you are of saving too much. In the US, most retirement planners suggest 10-15% as a good savings rate. Coincidentally, the standard US 401(k) plan provides a tax-deferred vehicle for you to put away up to 15% of your income for retirement. If you can save 15% from the age of 20-something onward, you probably will be at least as well-off when you retire as you are during the rest of your life. That means you can spend the rest on things which are meaningful to you. (Well, you should also keep around some cash in case of emergencies or sudden unemployment, and it's never a good idea to waste money, but your responsibilities to your future have at least been satisfied.) And in the UK you get tax relief on your pension contribution at your income tax rate and most employers will match your contributions.",
"title": ""
},
{
"docid": "bd1c2de074d2347fc982182af0792e6e",
"text": "\"It depends what you mean. Finance Independence and Retirement Early (FI/RE) are two overlapping ideas. If you plan to retire early and spend the same amount of money every year (adjusted for inflation), then you need to save twenty-times your yearly spending to satisfy the 4% Safe Withdrawal rule of thumb. Carefully notice I say \"\"yearly spending\"\" and not income. I'm unaware how it is in Pakistan, but in America, people who retire in their sixties tend to reduce their spending by 30%. This is for a host of reasons like not eating out as much, not driving to work, paid off mortgages, and their children being adults now. In this type of profile, a person needs to save 17.5x yearly spending. This numbers presume a person will only use their built assets as an income source. Any programs like a government pension acting as a safety net. If you factor those in, the estimates above become smaller.\"",
"title": ""
}
] |
fiqa
|
4e076ab196d273033eb83d70cc05543e
|
Research for Info
|
[
{
"docid": "4e217be4ba9fedd3a89a4f53afa71367",
"text": "quid's link should give you a definitive answer, but just to set expectations, here's an article from the UPI: Essex Chemical Corp. has agreed to be acquired by Dow Chemical Co. in a $366 million, $36-a-share deal ... Any shares that remain outstanding after the merger will be converted into the right to receive $36 each in cash, the companies said. There's no mention of exchange for Dow stock, so it's likely that you would get $36 for this share of stock, if anything.",
"title": ""
}
] |
[
{
"docid": "4c892cba300873f5baeab9eae1e8c11f",
"text": "I appreciate all the responses, but again, I have NO experience or education in the field. I haven't started any major related college courses yet and do not have a job in the field. I am looking for beginner, introduction level reading material to start reading up on to start understanding the field before I even start school.",
"title": ""
},
{
"docid": "acd0144cc7e065684b3aa8557f975d54",
"text": "We can't really get into the research design at this time, because we don't want to bias the results. I'm happy to follow up after the study with more details, if you like! Please just send me an email to [email protected] and I'll send you something, probably in the Spring.",
"title": ""
},
{
"docid": "4e25fe57e93840c480f4d9161e97175d",
"text": "Have you tried their site? Some places may have portions available though also beware that some companies may charge for some of their research pieces.",
"title": ""
},
{
"docid": "dd635c4552c760a3c33deb1f1b4ff579",
"text": "A book on the power of persuasion. The people will need you to lead them to the glory land like the Deacon* from Waterworld *Dennis Hopper. Study up.",
"title": ""
},
{
"docid": "55a0d333889d17fdcc8812906c972d7c",
"text": "Technically yes, but getting investigated also depends on the connection that can be established. If you learned something from information obtained at work or by affiliation (family/friend), you probably can't trade. If you (hypothetically) stumbled across information perhaps by eavesdropping or peeking on some stranger's conversation, it'd be hard to find the connection unless you went and told people how you came about it.",
"title": ""
},
{
"docid": "46a43e709d1e5617b251b9cad3c7df45",
"text": "\"1. (a) \"\"The Economic Aspects of Human and Child Sacrifice\"\" by Peter Rwagara Atekyereza, Justin Ayebare, and Paul Bukuluki, published in 2014: #2c at https://www.reddit.com/r/worldpolitics/comments/5bpc5x/an_update_for_my_readers_by_peter_levenda/dbob0j2 (b) \"\"Miners' magic: artisanal mining, the albino fetish and murder in Tanzania\"\" by Deborah Fahy Bryceson, Jesper Bosse Jønsson, and Richard Sherrington, published in 2010: #9 at https://www.reddit.com/r/worldpolitics/comments/5bpc5x/an_update_for_my_readers_by_peter_levenda/dbwig0v (c) \"\"Save our skins: Structural adjustment, morality and the occult in Tanzania\"\" by Todd Sanders, published in 2001: http://www.academia.edu/10412589 Source For #1 + Much More: https://www.reddit.com/r/worldpolitics/comments/5bpc5x/an_update_for_my_readers_by_peter_levenda/d9q9006 2. Human sacrifice, human mutilation, body parts, abductions, magic, occult, witchcraft, muti, muthi, Africa: #6 at https://www.reddit.com/r/Missing411/comments/41oph0/supernatural_abductions_in_japanese_folklore_by/d1tje65 Source + Much More: https://www.reddit.com/r/Missing411/comments/41oph0/supernatural_abductions_in_japanese_folklore_by/cz3we2z 3. \"\"The Rise of the Modern Charismatic Movement\"\" from the chapter \"\"Christian Magic and Diabolical Medicine\"\" in the book \"\"Raising the Devil: Satanism, New Religions, and the Media\"\" by Bill Ellis, published in 2000: #2b at https://www.reddit.com/r/worldpolitics/comments/5bpc5x/an_update_for_my_readers_by_peter_levenda/dbob0j2 Source: https://www.reddit.com/r/worldpolitics/comments/5bpc5x/an_update_for_my_readers_by_peter_levenda/d9q9006 4. Science, sorcery, occult rituals, magic, MKULTRA, United States of America (USA): #2 at https://www.reddit.com/r/worldpolitics/comments/5bpc5x/an_update_for_my_readers_by_peter_levenda/dfauxj7 Source: https://www.reddit.com/r/worldpolitics/comments/5bpc5x/an_update_for_my_readers_by_peter_levenda/d9q9006 5. \"\"The Believers: Cult Murders in Mexico\"\" by Guy Garcia, published on 29 June 1989 -- \"\"They thought their rituals of human sacrifice would make them invincible. In the end, a much stronger force prevailed.\"\": https://www.reddit.com/r/worldpolitics/comments/5q3ylf/the_believers_cult_murders_in_mexico_by_guy/dcw2kbh 6. https://www.reddit.com/r/worldpolitics/comments/721cjo/before_trying_to_cow_north_korea_with_military/dnez5oo\"",
"title": ""
},
{
"docid": "14db1fac0614f6591f771f0bf4e8793d",
"text": "\"Here are some approaches you may value: Wolfram Alpha This is a search engine with a difference. It literally is connected to thousands of searchable databases, including financial databases. http://www.wolframalpha.com/input/?i=list+of+public+companies+ Just keep clicking the \"\"more\"\" button until you have them all.You can also get great company specific information there: http://www.wolframalpha.com/input/?i=NYSE%3ADIS&lk=1&a=ClashPrefs_*Financial.NYSE%3ADIS- Just keep clicking the \"\"more\"\" button until you have them all.Then the company it'self will have great information for investors too: [http://thewaltdisneycompany.com/investors][3] (Just keep clicking the \"\"more\"\" button until you have them all.) Regards, Stephen\"",
"title": ""
},
{
"docid": "2e5b656789cda1def7e3b64b6e05e560",
"text": "Can you cite who funded it? A reddit commenter saying they say a ST commented claim something is a pretty sketchy source. Seattle Times says this is a UW study published by NBER, so I doubt its partisan propaganda as you're implying.",
"title": ""
},
{
"docid": "f7e39225ba6576f595ef8884314c08fe",
"text": "It might help the poster if you recommended some of those? I recommended the ones I know of specifically in that field I know to be good. Perhaps you could do the same? I also really like the books in this list: http://www.fool.com/Specials/2000/sp001107a.htm Note, Gorilla Game is, IMO the weakest of the bunch.",
"title": ""
},
{
"docid": "3347eb3978f4ec1bc1bdce2ddf70f5b1",
"text": "Then it sounds like all we need is an internet connection and access to search. I guess information retrieval is the organizational equivalent of accessing long-term and short-term memory. Spammers are the equivalent of intrusive thoughts and songs you can't get out of your head. And links you weren't looking for but are fascinating anyway, maybe similar to inspiration...",
"title": ""
},
{
"docid": "c4e3239818bb174c7f3700aeeeb0a1b8",
"text": "Theres loads of information on the costs of regulation to smaller businesses and larger corporations and the adverse affects its had on their ability to either go public or stay private. We learned boat loads about it this past year in my undergraduate course so I'm sure you could find quite a bit.",
"title": ""
},
{
"docid": "d64cc61d51f6e72fa565a083d8f3bf26",
"text": "MattMcA definitely gave you excellent advice and said a lot of what I would say to you. Most databases that are going to give you the most comprehensive information, but in a well formatted way, are going to require subscriptions or a fee. You should try to visit a library, especially one at a university, because they may likely have free access for you. At my alma mater the preferred database among students was LexisNexis Corporate Affiliations. http://www.corporateaffiliations.com/ With this company directory, you get public and private company profiles. You can use Corporate Affiliation’s MergerTrak™ and get full coverage on current and past mergers and acquisitions. I definitely think this is a business database you should look into. You have nothing to lose seeing as they have a free trial. Just to add, there’s always a business news feed on the homepage. As I just checked now, this one caught my interest: For Marvel Comics, A Renewed Digital Mission.",
"title": ""
},
{
"docid": "e3834023eee46345c1a76dc2fc03ec2f",
"text": "Here is one the links for Goldmansachs. Not to state the obvious, but most of their research is only available to their clients. http://www.goldmansachs.com/research/equity_ratings.html",
"title": ""
},
{
"docid": "cccc3b578e26b8a40415ddcb570733a4",
"text": "They are almost always behind paywalls. The analysts that write these reports need to get paid somehow. I'd search for reports on google by specific topic and see what you find, but no where is there a treasure trove of free information",
"title": ""
},
{
"docid": "90cd95a36310aea1abbb7c379ce64bb0",
"text": "\"I think it's very reasonable to expect a person to back up a claim they've made. Telling someone to \"\"go to Google\"\" seems rather lazy to me, or at least promoting extremely poor conversation skills. Or do you not agree that someone should support their own claims? Your suggestion doesn't even make sense, to be honest. You're telling someone to check someone else's claim using a website that both confirms and contradicts the claim. >Reading usernames would definitely be a valuable skill for you to practice going forward. Thanks for repeating what I said, I guess?\"",
"title": ""
}
] |
fiqa
|
b5f7d8eb233e3e91c1b2aa9ea79be28b
|
Selecting between investment vehicles for income
|
[
{
"docid": "c357962a2485aaf01bfc8abffacd7213",
"text": "You have a comparatively small sum to invest, and since you're presumably expecting to go to college.university soon, where you may well need the money, you also have a short timescale for your investment. I don't think anything stock-related would be good for you -- you need a longer timescale for stock market investments, at least five years and preferably ten or more. I don't know the details of Australian savings, but I'd suggest just finding a bank that is giving a good interest rate for a one-year fixed-term savings account.",
"title": ""
},
{
"docid": "4d7c296e95cd75c05300362e900b9e5b",
"text": "It sounds like you are interested in investing in the stock market but you don't want to take too much risk. Investing in an Index EFT will provide some diversification and can be less risky than investing in individual stocks, however with potentially lower returns. If you want to invest your money, the first thing you should do is learn about managing your risk. You are still young and you should spend your time now to increase your education and knowledge. There are plenty of good books to start with, and you should prepare an investment plan which incorporates a risk management strategy. $1000 is a little low to start investing in the stock market, so whilst you are building your education and preparing your plan, you can continue building up more funds for when you are ready to start investing. Place your funds in an high interest savings account for now, and whilst you are learning you can practice your strategies using virtual accounts. In fact the ASX has a share market game which is held 2 or 3 times per year. The ASX website also has some good learning materials for novices and they hold regular seminars. It is another good source for improving your education in the subject. Remember, first get educated, then plan and practice, and then invest.",
"title": ""
}
] |
[
{
"docid": "8db27ee81bd560ebffd3fb540b8b6b7c",
"text": "I think you have to refer to it (i.e. a hedge fund) as more of a legal structure rather than from an investment perspective. Hedge Funds are generally private investment vehicles that require large capital contributions (whether the hedge fund is set up as a 3c(7) or a 3c(1) structure). Doesn't matter what the relative investment strategy is (long only, long/short, levered, distressed debt, model defined, etc.) 3(c)(7) = qualified purchaser status = Min worth of $25,000,000 3(c)(1) = accredited investor status = less than qualified purchaser status, but still requires certain income limits. Just my two cents.",
"title": ""
},
{
"docid": "ce9537c51f2349ef3b2921eeeec8a658",
"text": "It's all about risk. These guidelines were all developed based on the risk characteristics of the various asset categories. Bonds are ultra-low-risk, large caps are low-risk (you don't see most big stocks like Coca-Cola going anywhere soon), foreign stocks are medium-risk (subject to additional political risk and currency risk, especially so in developing markets) and small-caps are higher risk (more to gain, but more likely to go out of business). Moreover, the risks of different asset classes tend to balance each other out some. When stocks fall, bonds typically rise (the recent credit crunch being a notable but temporary exception) as people flock to safety or as the Fed adjusts interest rates. When stocks soar, bonds don't look as attractive, and interest rates may rise (a bummer when you already own the bonds). Is the US economy stumbling with the dollar in the dumps, while the rest of the world passes us by? Your foreign holdings will be worth more in dollar terms. If you'd like to work alternative asset classes (real estate, gold and other commodities, etc) into your mix, consider their risk characteristics, and what will make them go up and down. A good asset allocation should limit the amount of 'down' that can happen all at once; the more conservative the allocation needs to be, the less 'down' is possible (at the expense of the 'up'). .... As for what risks you are willing to take, that will depend on your position in life, and what risks you are presently are exposed to (including: your job, how stable your company is and whether it could fold or do layoffs in a recession like this one, whether you're married, whether you have kids, where you live). For instance, if you're a realtor by trade, you should probably avoid investing too much in real estate or it'll be a double-whammy if the market crashes. A good financial advisor can discuss these matters with you in detail.",
"title": ""
},
{
"docid": "60dbfff8b0fc19a14a628170f4c6aa8d",
"text": "\"The question is asking for a European equivalent of the so-called \"\"Couch Potato\"\" portfolio. \"\"Couch Potato\"\" portfolio is defined by the two URLs provided in question as, Criteria for fund composition Fixed-income: Regardless of country or supra-national market, the fixed-income fund should have holdings throughout the entire length of the yield curve (most available maturities), as well as being a mix of government, municipal (general obligation), corporate and high-yield bonds. Equity: The common equity position should be in one equity market index fund. It shouldn't be a DAX-30 or CAC-40 or DJIA type fund. Instead, you want a combination of growth and value companies. The fund should have as many holdings as possible, while avoiding too much expense due to transaction costs. You can determine how much is too much by comparing candidate funds with those that are only investing in highly liquid, large company stocks. Why it is easier for U.S. and Canadian couch potatoes It will be easier to find two good funds, at lower cost, if one is investing in a country with sizable markets and its own currency. That's why the Couch Potato strategy lends itself most naturally to the U.S.A, Canada, Japan and probably Australia, Brazil, South Korea and possibly Mexico too. In Europe, pre-EU, any of Germany, France, Spain, Italy or the Scandinavian countries would probably have worked well. The only concern would be (possibly) higher equity transactions costs and certainly larger fixed-income buy-sell spreads, due to smaller and less liquid markets other than Germany. These costs would be experienced by the portfolio manager, and passed on to you, as the investor. For the EU couch potato Remember the criteria, especially part 2, and the intent as described by the Couch Potato name, implying extremely passive investing. You want to choose two funds offered by very stable, reputable fund management companies. You will be re-balancing every six months or a year, only. That is four transactions per year, maximum. You don't need a lot of interaction with anyone, but you DO need to have the means to quickly exit both sides of the trade, should you decide, for any reason, that you need the money or that the strategy isn't right for you. I would not choose an ETF from iShares just because it is easy to do online transactions. For many investors, that is important! Here, you don't need that convenience. Instead, you need stability and an index fund with a good reputation. You should try to choose an EU based fund manager, or one in your home country, as you'll be more likely to know who is good and who isn't. Don't use Vanguard's FTSE ETF or the equivalent, as there will probably be currency and foreign tax concerns, and possibly forex risk. The couch potato strategy requires an emphasis on low fees with high quality funds and brokers (if not buying directly from the fund). As for type of fund, it would be best to choose a fund that is invested in mostly or only EU or EEU (European Economic Union) stocks, and the same for bonds. That will help minimize your transaction costs and tax liability, while allowing for the sort of broad diversity that helps buy and hold index fund investors.\"",
"title": ""
},
{
"docid": "22b06c17c85ae6bd7f53ec84a3db119a",
"text": "\"Not sure what your needs are or what NIS is: However here in the US a good choice for a single fund are \"\"Life Cycle Funds\"\". Here is a description from MS Money: http://www.msmoney.com/mm/investing/articles/life_cyclefunds.htm\"",
"title": ""
},
{
"docid": "a23f46c91fb6becab2eb7e9c3f35fb56",
"text": "Life Strategy funds are more appropriate if you want to maintain a specific allocation between stocks and bonds that doesn't automatically adjustment like the Target Retirement funds which have a specific date. Thus, it may make more sense to take whichever Life Strategy fund seems the most appropriate and ride with it for a while unless you know when you plan to retire and access those funds. In theory, you could use Vanguard's Total Market funds,i.e. Total Stock Market, Total International, and Total Bond, and have your own allocations between stocks and bonds be managed pretty easily and don't forget that the fees can come in a couple of flavors as betterment doesn't specify where the transaction fees for buying the ETFs are coming out just as something to consider.",
"title": ""
},
{
"docid": "6b474a0d47dd8050a1213e49e01afbc4",
"text": "Thanks for your service. I would avoid personal investment opportunities at this point. Reason being that you can't personally oversee them if you are deployed overseas. This would rule out rentals and small businesses. Revisit those possibilities if you get married or leave the service. If you have a definite time when you would like to purchase a car, you could buy a six or twelve month CD with the funds that you need for that. That will slightly bump up your returns without taking much risk. If you don't really need to buy the car, you could invest that money in stocks. Then if the stock market tanks, you wait until it recovers (note that that can be five to ten years) or until you build up your savings again. That increases your reward at a significant increase in your risk. The risk being that you might not be able to buy a car for several more years. Build an emergency fund. I would recommend six months of income. Reason being that your current circumstances are likely to change in an emergency. If you leave the service, your expenses increase a lot. If nothing else, the army stops providing room for you. That takes your expenses from trivial to a third of your income. So basing your emergency fund on expenses is likely to leave you short of what you need if your emergency leaves you out of the service. Army pay seems like a lot because room (and board when deployed) are provided. Without that, it's actually not that much. It's your low expenses that make you feel flush, not your income. If you made the same pay in civilian life, you'd likely feel rather poor. $30,000 sounds like a lot of money, but it really isn't. The median household income is a little over $50,000, so the median emergency fund should be something like $25,000 on the income standard. On the expenses standard, the emergency fund should be at least $15,000. The $15,000 remainder would buy a cheap new car or a good used car. The $5000 remainder from the income standard would give you a decent used car. I wouldn't recommend taking out a loan because you don't want to get stuck paying a loan on a car you can't drive because you deployed. Note that if you are out of contact, in the hospital, or captured, you may not be able to respond if there is a problem with the car or the loan. If you pay cash, you can leave the car with family and let them take care of things in case of a deployment. If you invested in a Roth IRA in January of 2016, you could have invested in either 2015 or 2016. If 2015, you can invest again for 2016. If not, you can invest for 2017 in three months. You may already know all that, but it seemed worth making explicit. The Thrift Savings Plan (TSP) allows you to invest up to $18,000 a year. If you're investing less than that, you could simply boost it to the limit. You apparently have an extra $10,000 that you could contribute. A 60% or 70% contribution is quite possible while in the army. If you max out your retirement savings now, it will give you more options when you leave the service. Or even if you just move out of base housing. If your TSP is maxed out, I would suggest automatically investing a portion of your income in a regular taxable mutual fund account. Most other investment opportunities require help to make work automatically. You essentially have to turn the money over to some individual you trust. Securities can be automated so that your investment grows automatically even when you are out of touch.",
"title": ""
},
{
"docid": "2a7709617ec944e39c48a0a1bdb20146",
"text": "It's important to consider your Investor Profile when deciding the right kind of vehicle for your finances. You are a young guy, with a considerable earned income and no dependents (sorry, this was not clear from the question.) This means that you are able to take a lot of risks that people who also have a family to think about, might not. == high risk tolerance You should definitely not put your money in a Wealth Management fund or Mutual Fund or any other 'hands-off' vehicle. These typically have worse returns than the FTSE itself. Their popularity is due to an amazing marketing job and the fact that people in general want to believe there is an easy way to grow their money. Probably the best vehicle for your money is property, so the first thing you should do with the money is hire a competent accountant and solicitor.",
"title": ""
},
{
"docid": "fda874738f68f83b73d40aa1db1d01f1",
"text": "You're missing the concept of systemic risk, which is the risk of the entire market or an entire asset class. Diversification is about achieving a balance between risk and return that's appropriate for you. Your investment in Vanguard's fund, although diversified between many public companies, is still restricted to one asset class in one country. Yes, you lower your risk by investing in all of these companies, but you don't erase it entirely. Clearly, there is still risk, despite your diversification. You may decide that you want other investments or a different asset allocation that reduce the overall risk of your portfolio. Over the long run, you may earn a high level of return, but never forget that there is still risk involved. bonds seem pretty worthless, at least until I retire According to your profile, you're about my age. Our cohort will probably begin retiring sometime around 2050 or later, and no one knows what the bond market will look like over the next 40 years. We may have forecasts for the next few years, but not for almost four decades. Writing off an entire asset class for almost four decades doesn't seem like a good idea. Also, bonds are like equity, and all other asset classes, in that there are different levels of risk within the asset class too. When calculating the overall risk/return profile of my portfolio, I certainly don't consider Treasuries as the same risk level as corporate bonds or high-yield (or junk) bonds from abroad. Depending on your risk preferences, you may find that an asset allocation that includes US and/or international bonds/fixed-income, international equities, real-estate, and cash (to make rebalancing your asset allocation easier) reduces your risk to levels you're willing to tolerate, while still allowing you to achieve returns during periods where one asset class, e.g. equities, is losing value or performing below your expectations.",
"title": ""
},
{
"docid": "134a2b54f8d2ddefd07691afbcb16bc6",
"text": "The short answer is that you would want to use the net inflow or net outflow, aka profit or loss. In my experience, you've got a couple different uses for IRR and that may be driving the confusion. Pretty much the same formula, but just coming at it from different angles. Thinking about a stock or mutual fund investment, you could project a scenario with an up-front investment (net outflow) in the first period and then positive returns (dividends, then final sale proceeds, each a net inflow) in subsequent periods. This is a model that more closely follows some of the logic you laid out. Thinking about a business project or investment, you tend to see more complicated and less smooth cashflows. For example, you may have a large up-front capital expenditure in the first period, then have net profit (revenue less ongoing maintenance expense), then another large capital outlay, and so on. In both cases you would want to base your analysis on the net inflow or net outflow in each period. It just depends on the complexity of the cashflows trend as to whether you see a straightforward example (initial payment, then ongoing net inflows), or a less straightforward example with both inflows and outflows. One other thing to note - you would only want to include those costs that are applicable to the project. So you would not want to include the cost of overhead that would exist even if you did not undertake the project.",
"title": ""
},
{
"docid": "4aa7f04b3f72b185e998403e1c10bcfc",
"text": "\"I think you're on the right track with that strategy. If you want to learn more about this strategy, I'd recommend \"\"The Intelligent Asset Allocator\"\" by William Bernstein. As for the Über–Tuber portfolio you linked to, my only concern would be that it is diversified in everything except for the short-term bond component, which is 40%. It might be worth looking at some portfolios that have more than one bond allocation -- possibly diversifying more across corporate vs government, and intermediate vs short term. Even the Cheapskate's portfolio located immediately above the Über–Tuber has 20% Corporate and 20% Government. Also note that they mention: Because it includes so many funds, it would be expensive and unwieldy for an account less than $100,000. Regarding your question about the disadvantages of an index-fund-based asset allocation strategy:\"",
"title": ""
},
{
"docid": "7358436c7f3b7ea5eed8f7ad5169317d",
"text": "\"To answer your question: yes, it's often \"\"worth it\"\" to have investments that produce income. Do a Google search for \"\"income vs growth investing\"\" and you'll get a sense for two different approaches to investing in equities. In a nutshell: \"\"growth\"\" stocks (think Netflix, etc) don't pay dividends but are poised to appreciate in price more than \"\"income\"\" stocks (think banks, utilities, etc) that tend to have less volatile prices but pay a consistent dividend. In the long run (decades), growth stocks tend to outperform income stocks. That's why younger investors tend to pick growth stocks while those closer to retirement tend to stick with more stable income-producing portfolio. But there's nothing wrong with a mixed approach, either. I agree with Pete's answer, too.\"",
"title": ""
},
{
"docid": "a3e39ff25ed01dced50884cf62b30858",
"text": "\"A 'indexed guaranteed income certificate' (Market Growth GIC) fits the criteria defined in the OP. The \"\"guaranteed\"\" part of the name means that, if the market falls, your capital is guaranteed (they cover the loss and return all your capital to you); and the \"\"index linked\"\" or \"\"market growth\"\" means that instead of the ROI being fixed/determined when you buy the GIC, the ROI depends on (is linked to) the market growth, e.g. an index (so you get a fraction of profit, which you share with the fund manager). The upside is that you can't 'lose' (lose capital). The fund manager doesn't just share the losses with you, they take/cover all the losses. The downside is that you only make a fraction of whatever profit you might make by investing directly in the market (e.g. in an index fund). Another caveat is that you buy a GIC over some fixed term, e.g. you have to give them you money for a year or more, two years.\"",
"title": ""
},
{
"docid": "0d056febf8af3e97adf1ac2c9590b44d",
"text": "Lets imagine two scenarios: 1) You make 10.4k (40% of total income) yearly contributions to a savings account that earns 1% interest for 10 years. In this scenario, you put in 104k and earned 5.89k in interest, for a total of 109.9k. 2) You make the same 10.4k yearly contribution to an index fund that earns 7% on average for 10 years. In this scenario you put in the same 104k, but earned 49.7k in interest*, for a total of 153.7k. The main advantage is option 1) has more liquidity -- you can get the money out faster. Option 2) requires time to divest any stocks / bonds. So you need enough savings to get you through that divestment period. Imagine another two scenarios where you stop earning income: 1-b) You stop working and have only your 109.9k principal amount in a 1% savings account. If you withdraw 15.6k yearly for your current cost of living, you will run through your savings in 7 years. 2-b) You stop working and have only 20k (2 years of savings) in savings that earns 1% with 153.7k in stocks that earns 7%. If you withdraw your cost of living currently at 15.6k, you will run through your investments in 15 years and your savings in 2 years, for a total of 17 years. The two years of income in savings is extremely generous for how long it starts the divestment process. In summary, invest your money. It wasn't specified what currency we are talking about, but you can easily find access to an investment company no matter where you are in the world. Keep a small amount for a rainy day.",
"title": ""
},
{
"docid": "679be605950dfa4c18994648a37208cd",
"text": "So, first -- good job on making a thorough checklist of things to look into. And onto your questions -- is this a worthwhile process? Even independent of specific investing goals, learning how to research is valuable. If you decided to forgo investing in stocks directly, and chose to only invest in index funds, the same type of research skills would be useful. (Not to mention that such discipline would come in handy in other fields as well.) What other 80/20 'low hanging fruit' knowledge have I missed? While it may not count as 'low hanging fruit', one thing that stands out to me is there's no mention of what competition a company has in its field. For example, a company may be doing well today, but you may see signs that it's consistently losing ground to its competition. While that alone may not dissuade you from investing, it may give you something to consider. Is what I've got so far any good? or am I totally missing the point. Your cheat sheet seems pretty good to me. But a lot depends on what your goals are. If you're doing this solely for your education and experience, I would say you've done well. If you're looking to invest in a company that is involved in a field you're passionate about, you're on the right track. But you should probably consider expanding your cheat sheet to include things that are not 'low hanging fruit' but still matter to you. However, I'd echo the comments that have already been made and suggest that if this is for retirement investments, take the skills you've developed in creating your cheat sheet and apply that work towards finding a set of index funds that meet your criteria. Otherwise happy hunting!",
"title": ""
},
{
"docid": "30e0b1abe88e7876abe713c3300903a3",
"text": "you are discounting the cash used, the discount rate for cash should be whatever you determine is your risk premium over the risk free rate not the equity growth rate. if equity growth rate is above your determined required return the equity investment is wealth destroying and if it is above that then it is wealth increasing. The difficulty I see is that the scenario is all wrong, what you are really after is a rent vs buy decision. Do I take this money and rent a place or do I buy a house? In either case you could invest the remainder after paying your rent/mortgage in the equity market no? So what really matters is the difference in cost between renting and buying. Let (EGR)=equity growth rate Rent = rent M = Mortgage payment I = income HA = home value appreciation Now the question is is renting or buying a better decision two scenarios, renting first PMT =(I - rent) I/y = (EGR) N =Time horizon in years FV= Gain from cf left after paying rent then discount to present day at your required rate of return to find present value now scenario for buying, this is more complicated because you are investing two different cf streams at different rates and have to calculate both and add them together. 1) CF 1 the mortgage payments buy you equity in the house which appreciates (hopefully) but can be extremely volatile. This is the cf stream scenario one doesnt have, when renting the rent payments poof disappear forever and you earn nothing on them 2) The income left after mortgage payment which can be invested at the market rate measured the same way as above. **This is extremely simplistic and doesnt take into account expected maintenance, property taxes and other costs intrinsic to the investment. It also doesnt take into account the lost down payment setting you well behind the renter. TL DR: It is complicated but you determine the required return(discount rate) based on the perceived risk of the investment and your particular views and it doesnt matter what expected growth rates are since any investment with an expected growth rate below your required rate is wealth destroying since you are paying for something which returns cash flows too small for its risk level. If you use growth rates as discount rates then all your investments will net to zero",
"title": ""
}
] |
fiqa
|
8a4c969c6b4956ba087e97d5d0402ac8
|
How does selling rights issues work in practice?
|
[
{
"docid": "100b4046f9bc61c9fbe8a6b6c7ae1036",
"text": "Do you simply get call options you can sell on an options exchange? No, you don't get call options that you can sell on an options exchange. Rather, you get rights that you can (generally) sell on the stock exchange. The right issue is in essence a call option – in that it behaves like one, but it is not considered a standardized option contract. is there a special exchange where such rights issues are traded? No. It will normally be done on the stock exchange.",
"title": ""
}
] |
[
{
"docid": "a790ea76bfb4f97a68f559ad99aca210",
"text": "\"With the second example, if you continue to read on you will see that although directors must try and maximise shareholders wealth. That precedence doesn't change however the interpretation of the actions and whether they maximise shareholders wealth does. For example giving money to charity with regards to the Doge v. Ford case would probably have been blocked on the grounds that it decreases shareholder wealth, but later cases such as A. P. Smith Manufacturing Co. v. Barlow say that donations can increase shareholders wealth in the long run. So it gives a broader coverage of the actions deemed to increase shareholder wealth. The second is related to short term vs long term wealth but part of the reason for it was due to the inability of Paramount to prove that the value increase for shareholders in the long run from selling to Viacom rather than QVC would be larger than the difference between the two offers, which was 1.3 billion. Then there is also the issue of shareholders rights and the companys ability to block shareholders from selling to whomever they want. So as I said it's related, but the issue isn't solely and simply about short term vs long term wealth. Both examples are kind of weak as in the first, well the issue doesn't really exist in the present day as previous case law has broadened the definition of actions which increase shareholder wealth, and in the second, short term vs long term value is related, but mostly tagging along with a larger issue. Your original statement was \"\"in matters of cost vs. quality I'd expect publicly traded companies to prioritize short-term shareholder profit (or be sued by said shareholders.)\"\" Are there any examples where shareholders have sued simply because they wanted better short term performance over long term performance?\"",
"title": ""
},
{
"docid": "b990865408156bb2715fe8bcd64b1ad3",
"text": "A practical issue is that insider trading transfers wealth from most investors to the few insiders. If this were permitted, non-insiders would rarely make any money, and they'd stop investing. That would then defeat the purpose of the capital markets which is to attract capital. A moral issue is that managers and operators of a company should act in shareholders' interests. Insider trading directly takes money from other shareholders and transfers it to the insider. It's a nasty conflict of interest (and would allow any CEO of a public company to make ton of money quickly, regardless of their job performance). In short, shareholders and management should succeed or suffer together, so their interests are as aligned as possible and managers have the proper incentives.",
"title": ""
},
{
"docid": "a62cecae0da671113e255b080b491697",
"text": "I don't think you've worked in sales. The high paying sales jobs usually have to compete in a competitive bid process. Companies don't just select vendors. They are mandated to create a competitive process to rule out what you're talking about. Of course, there are ways around this, but the norm is for a competitive sales process.",
"title": ""
},
{
"docid": "2ffdfeac05e8f93f474b05a38df5fa60",
"text": "How hard would it be to say that a company cannot pay licensing fees to a company that it owns an X% stake in (and/or owns an X% stake of it, to cover subsidiary to parent movement? . Alternatively, such transactions could be taxed as if they were a purchase between the two companies, and taxed as such. The percentage could be set high enough so as to not discourage joint ventures, but low enough to force a company to sacrifice a major chunk of the money to another unowned company if they try to abuse it.",
"title": ""
},
{
"docid": "9a1988af40ba10e274e242856102d2cb",
"text": "\"So item 1 The two investors leading the suit say \"\"it's because we want lots of control\"\" and sue founder. The standard share holders want equal voting - as would I. Founder appoints two new board members to ensure this happens. Item 2 the suit: The suit is to remove the ability to appoint new board members from the founder correct? After he has appointed two new ones to implement the changes the other shareholders want correct? But somehow the suit is \"\"on behalf\"\" of the other share holders? Do I have you explanation right?\"",
"title": ""
},
{
"docid": "2e63881ea36b83d857d0380155a65c2d",
"text": "\"When an IPO happens, the buyers pay some price (let's say $20 per share) and the seller (the company) receives a different price ($18.60). Who paid the commission? Well, the commission caused a spread between buyer and seller. It doesn't matter who technically pays the commission because it costs both parties. In an IPO, the company technically pays the commission, but they use buyers' money to do it and the buyer must pay more than he/she would if there was no commission. The same thing happens when you buy a home. Technically the seller pays both realtors' commissions but it came from money the buyer gave the seller and the commissions pushed up the price, so didn't the buyer pay the commission? They both did. The second paragraph suggests that if the investment bankers act as a simple broker, buying public securities instead of newly issued shares for their clients, then the commissions will be much lower. Obviously. I wonder if this is really the right interpretation, though, as no broker charges 4% to a large client for this service. I would need more context to be sure that's what's meant. The gyst is that IPOs generate a lot of money for the investment bankers who act as intermediaries. If you are participating in the transaction, that money is in some way coming out of your pocket, even if it doesn't show up as a \"\"brokerage fee\"\" on your statement.\"",
"title": ""
},
{
"docid": "4b6f090327ec6cce7d14b1a6d77924e4",
"text": "Discrepancies between what the book value is reported as and what they'd fetch if sold on the open market. Legal disputes in court.",
"title": ""
},
{
"docid": "2ca73cc0c28838ed1dafb94c0b3cf5db",
"text": "\"Shares sold to private investors are sold using private contracts and do not adhere to the same level of strict regulations as publicly traded shares. You may have different classes of shares in the company with different strings attached to them, depending on the deals made with the investors at the time. Since public cannot negotiate, the IPO prospectus is in fact the investment contract between the company and the public, and the requirements to what the company can put there are much stricter than private sales. Bob may not be able to sell his \"\"special\"\" stocks on the public exchange, as the IPO specifies which class of stock is being listed for trading, and Bob's is not the same class. He can sell it on the OTC market, which is less regulated, and then the buyer has to do his due diligence. Yes, OTC-sold stocks may have strings attached to them (for example a buy back option at a preset time and price).\"",
"title": ""
},
{
"docid": "b32701eca361387d32f57d1bcda9f2b7",
"text": "I believe, I could be wrong, it has been a long day. By exercising this right you have the right to purchase the equivalent of their current share. Eg. Someone owns 50 of 100 shares. and the company does a rights offering and is expanding the shares to 200. That person has first right to purchase 50 more shares to keep his share from being diluted.",
"title": ""
},
{
"docid": "e44598dada0a8ebf91496f7b40fd3b2c",
"text": "Shares are partial ownership of the company. A company can issue (not create) more of the shares it owns at any time, to anyone, at any price -- subject to antitrust and similar regulations. If they wanted to, for example, flat-out give 10% of their retained interest to charity, they could do so. It shouldn't substantially affect the stock's trading for others unless there's a completely irrational demand for shares.",
"title": ""
},
{
"docid": "009fcc2fa640129a3c1b7c43fbab0ea5",
"text": "\"As you pointed out in reference to cost-cutting, fiduciary lawsuits come out when things go wrong. When directors successfully increase stock value, everyone including shareholders is happy. I'm not sure exactly where the best place is to look for such cases, but here's what my google-fu yielded: * [Example 1](http://www.nytimes.com/1993/11/25/business/the-media-business-excerpts-from-ruling-in-paramount-case.html): Paramount is sold to Viacom at a lower price than QVC's offer, shareholders sue. Paramount claims they were looking out for long-term but shareholders sued them for screwing them out of maximal share value. * [Example 2](http://www.professorbainbridge.com/professorbainbridgecom/2012/05/case-law-on-the-fiduciary-duty-of-directors-to-maximize-the-wealth-of-corporate-shareholders.html): Dodge v. Ford Motor Co, Ford had a majority share in his company and wanted to stop paying dividends to shareholders so he could expand his business. At trial Ford \"\"testified to his belief that the company made too much money and had an obligation to benefit the public and the firm’s workers and customers.\"\" The court disagreed, as his motor company was set up for profit, not charity. Ford was ordered to resume paying dividends. Interestingly I found many more lawsuits where corporations sacrificed long-term for short-term. It seems once incorporated this is where the internal incentives and pressures lead many managers, lawsuits are merely one of these pressures.\"",
"title": ""
},
{
"docid": "391b1a6dc29982369e55f4f55b9026fb",
"text": "If you want to use the original material then you will, essentially, need to negotiate for it. You are in ugly, muddy territory. Don't expect a simple, easy legal solution to exist; civil courts exist partly to help navigate these kinds of quagmires. A negotiated solution would, on the other hand, clean everything up nicely. Do you have your copyright ducks in a row? If the contract does not stipulate otherwise, the creator will still maintain reproduction and moral copyright to the work; i.e., the creator will continue to own the copyrights to the work and you'll be unable to license or sell them to a third party.",
"title": ""
},
{
"docid": "51131b3e10029199010d72218ec51e15",
"text": "In general, just make sure you are on the same page as them. For example, are they supplying the antlers at cost? If their product manager asks for too large a cut of the profits of the product line, they may decide it makes sense to sell the antler to the side business at a higher markup. Or they may find someone else willing to take the product manager job for a lower ownership stake. Either way, good luck and be sure to get your agreement down on paper somewhere.",
"title": ""
},
{
"docid": "9a4e7fc0bf4e90711a42264e05be3146",
"text": "I believe the appropriate recourse in this scenario is to bring a court case for breach of contract. The 1p repricing issue has been admitted as an error out of scope of the purpose of the software.",
"title": ""
},
{
"docid": "fbd6ac6cbda12c87cde19f8666f25358",
"text": "Not exactly. From OP's X-post, this appears like textbook tortious interference. If it were me, I'd demonstrate to the customer why they are getting a better deal and at the same time, I'd have my attorney send a C&D to the offending competitor.",
"title": ""
}
] |
fiqa
|
112ef3a9f8107f3d96d17470242b9465
|
How will the net assets of a bankrupt company be divided among the common share holders
|
[
{
"docid": "6c34001b866ef2645fa7f2a902a9c870",
"text": "All investors of equal standing get the same proportion of the net assets on bankruptcy but not all shareholders are of equal standing. In general, once all liabilities are covered, bond holders are paid first as that type of investment is company debt, then preferred stock holders are paid out and then common shareholders. This is the reason why preferred stock is usually cheaper - it is less risky as it has a higher claim to assets and therefore commands a lower risk premium. The exact payout schedule is very corporation dependent so needs research on a per firm basis.",
"title": ""
}
] |
[
{
"docid": "49a68751a9f581201960d7664827dc03",
"text": "\"Legally speaking, if you do close a limited company, the funds belong to the government (\"\"bona vacantia\"\"). There's some guidance on this at Companies House and there is indeed a substantial amount of administration work to get it undone. Notable excerpts: You should deal with any loose ends, such as closing the company’s bank account, the transfer of any domain names - before you apply. [...] From the date of dissolution, any assets of a dissolved company will belong to the Crown. The company’s bank account will be frozen and any credit balance in the account will pass to the Crown. [...] 4. What happens to the assets of a dissolved company? From the date of dissolution, any assets of a dissolved company will be 'bona vacantia'. Bona vacantia literally means “vacant goods” and is the technical name for property that passes to the Crown because it does not have a legal owner. The company’s bank account will be frozen and any credit balance in the account will be passed to the Crown. [...] Chapter 3 - Restoration by Court Order The registrar can only restore a company if he receives a court order, unless a company is administratively restored to the register (see chapter 4). Anyone who intends to make an application to the court to restore a company is advised to obtain independent legal advice. [...] Chapter 4 - Administrative Restoration 1. What is Administrative Restoration? Under certain conditions, where a company was dissolved because it appeared to be no longer carrying on business or in operation, a former director or member may apply to the registrar to have the company restored. [...]\"",
"title": ""
},
{
"docid": "380476c51408ac4361b1508bd290e98e",
"text": "\"During GM's Chapter 11 reorganization in 2009, a new company was formed, with new stock. The old General Motors Corporation was renamed to \"\"Motors Liquidation Company,\"\" and the new company was named \"\"General Motors Company.\"\" The new company purchased some of the assets from the old company, and the old company was left to sell off the remaining assets and settle the debts. None of the stock transferred from the old company to the new one; if you were a GM stockholder of the old company and didn't sell, it is now worthless. When the new company formed, the stock was not traded publicly. The company was primarily owned by the United States and Canadian governments; together, they owned 72.5%. In 2010, GM had an IPO, and the US government sold most of their stake. By the end of 2013, the US government sold the remaining stake; the government no longer has any ownership in GM. When we talk about voting rights for stockholders, we are mainly talking about voting for the members of the board of directors. And yes, the government did indeed have a hand in selecting the board of the new company. The Treasury Department selected 10 members of the board, and the Canadian government selected 1 member. There were 19 board members total. (Source) Unlike some companies, there are not \"\"voting\"\" and \"\"non-voting\"\" classes of GM stock. All the shares sold by the US government are voting shares. Additional Sources:\"",
"title": ""
},
{
"docid": "74025b05eba2366bf975acf56e3717e6",
"text": "\"It depends on the definition of earnings. A company could have revenue that nets in excess of expenses, so from that perspective a good cash flow or EBITDA, but have debt servicing costs, taxes, depreciation, amortization, that alters that perspective. So if a company is carrying a large debt load, then the bondholders are in the position to capture any excess revenues through debt service payments and the company is in a negative equity positions (no equity or dividends payable to shareholders) and has not produced earnings. If a company has valuable preferred shares issued and outstanding, then depending on the earnings definition, there may be no earnings (for the common stock) until the preferences are satisfied by the returns. So while the venture itself (revenues minus costs) could be cash flow positive, this may not be sufficient to produce \"\"earnings\"\" for shareholders, whose claim on the company still entitles them to zero current liquidation value (i.e. they get nothing if the company dissolves immediately - all value goes to bondholders or preferred). It could also be that taxes are eating into revenue, or the depreciation of key assets is greater than the excess of revenues over costs (e.g. a bike rental company by the beach makes money on a weekly basis but is rusting out half its stock every 3 months and replacement costs will overwhelm the operating revenues).\"",
"title": ""
},
{
"docid": "f89d2a641744984e2edbf16e4a5d12d4",
"text": "Regardless of whether a stock is owned by a retail investor or an institutional investor, it is subject to the same rules. For example, say that as part of the buyout, 1 share of Company B is equivalent to 0.75 shares of Company A and any fractional shares will be paid out in cash. This rule will apply to both the retail investor who holds 500 shares of Company B, as well as the asset manager or hedge fund holding 5,000,000 shares of Company B.",
"title": ""
},
{
"docid": "145a5decacc13be14030121db03b4578",
"text": "The (assets - liabilities)/#shares of a company is its book value, and that number is included in their reports. It's easy for a fund to release the net asset value on a daily basis because all of its assets (stocks, bonds, and cash) are given values every day by the market. It's also necessary to have a real time value for a fund as it will be bought and sold every day. A company can't really do the same thing as it will have much more diverse assets - real estate, cars, inventory, goodwill, etc. The real time value of those assets doesn't have the same meaning as a fund; those assets are used to earn cash, while a fund's business is only to maximize its net asset value.",
"title": ""
},
{
"docid": "fe7d0de6d9aca0529a5ca0680752e91b",
"text": "\"I don't know how much finance you know, but a fundamental idea is that something's value is the present value of all its future cash flows. Basically what those cash flows are worth today. So if we can predict the cash flows the equity holders will get in the future (not easy), and determine at what rate to discount the cash flows (not easy), we can value the equity. So a company will have cash flows coming in. But not all go to the equity holders. Some will go to debt holders, if any (interest payments). Some will go to preferred equity holders (dividends), if any. What's left over is what the equity holders will get. If there's no debt, preferred equity or other things like that, then the equity holders get all the cash flows. This doesn't mean the equity holders literally receive the cash - they'll get whatever is given out via dividends. But, they \"\"own\"\" the cash and it may be reinvested in the business to generate more cash in the future.\"",
"title": ""
},
{
"docid": "e676528002cfe8b03ccc1da80e4e5e91",
"text": "It may have some value! Investopedia has a well-written quick article on how stock holders may still get some portion of the liquidated assets. While there is generally little left for common shareholders if the price of those shares is tiny and some money does come back to shareholders there can still be significant profit to be made. As to why the trading volume is so high... there are many firms and hedge funds that specialize in calculating the value of and buying distressed debt and stock. They often compete with each other to by the stock/debt that common shareholders are trying to get rid of. In this particular case, there is a lot of popular interest, intellectual property at stake and pending lawsuits that probably boosts volume.",
"title": ""
},
{
"docid": "3ed36d63a9b925c315ab217b16467959",
"text": "Have you looked at what is in that book value? Are the assets easily liquidated to get that value or could there be trouble getting the fair market value as some assets may not be as easy to sell as you may think. The Motley Fool a few weeks ago noted a book value of $10 per share. I could wonder what is behind that which could be mispriced as some things may have fallen in value that aren't in updated financials yet. Another point from that link: After suffering through the last few months of constant cries from naysayers about the company’s impending bankruptcy, shareholders of Penn West Petroleum Ltd. (TSX:PWT)(NYSE:PWE) can finally look toward the future with a little optimism. Thus, I'd be inclined to double check what is on the company books.",
"title": ""
},
{
"docid": "45f35b560e5830650226f8294f064459",
"text": "\"IANAL (or an accountant), but there is a useful notion of \"\"technical insolvency\"\" which you it sounds like you probably meet, and which is a distinct concept from actual insolvency. Couple of choice quotes from that link: If a company (or person) is technically insolvent that merely means that it has a negative net asset value; its liabilities are greater than its assets. The significance of technical insolvency depends on circumstances: it may be an indicator of serious problems that may lead to actual insolvency, or it may be perfectly acceptable. ... A technically insolvent company is free to keep trading as long as the directors reasonably believe that the company will be able to pay its debts, and, again, as long as an upaid creditor does not use the courts to force a liquidation. which is basically what @keshlam's comment on your question is saying.\"",
"title": ""
},
{
"docid": "69923fb1d6e6e062c5b30216a5600c26",
"text": "Even with non-voting shares, you own a portion of the company including all of its assets and its future profits. If the company is sold, goes out of business and liquidates, etc., those with non-voting shares still stand collect their share of the funds generated. There's also the possibility, as one of the comments notes, that a company will pay dividends in the future and distribute its assets to shareholders that way. The example of Google (also mentioned in the comments) is interesting because when they went to voting and non-voting stock, there was some theoretical debate about whether the two types of shares (GOOG and GOOGL) would track each other in value. It turned out that they did not - People did put a premium on voting, so that is worth something. Even without the voting rights, however, Google has massive assets and each share (GOOG and GOOGL) represented ownership of a fraction of those assets and that kept them highly correlated in value. (Google had to pay restitution to some shareholders of the non-voting stock as a result of the deviation in value. I won't get into the details here since it's a bit of tangent, but you could easily find details on the web.)",
"title": ""
},
{
"docid": "bc4c5b81b457c266564306a0a073fab8",
"text": "Absolutely nothing, and it's not their call to make. The shareholders will want to cut it into as many parts as they can sell to recoup some of their lost investment. The judge will demand it even if they suddenly had a moral thought. This will happen when this (and all those other companies) go under, refocuses priorities, or shuts down departments.",
"title": ""
},
{
"docid": "1236af8e4e462d79ee4767c881cb6c3e",
"text": "All shares of the same class are considered equal. Each class of shares may have a different preference in order of repayment. After all company liabilities have been paid off [including bank debt, wages owing, taxes outstanding, etc etc.], the remaining cash value in a company is distributed to the shareholders. In general, there are 2 types of shares: Preferred shares, and Common shares. Preferred shares generally have 3 characteristics: (1) they get a stated dividend rate every year, sometimes regardless of company performance; (2) they get paid out first on liquidation; and (3) they can only receive their stated value on liquidation - that is, $1M of preferred shares will be redeemed for at most $1M on liquidation, assuming the corporation has at least that much cash left. Common Shares generally have 4 characteristics: (1) their dividends are not guaranteed (or may be based on a calculation relative to company performance), (2) they can vote for members of the Board of Directors who ultimately hire the CEO and make similar high level business decisions; (3) they get paid last on liquidation; and (4) they get all value remaining in the company once everyone else has been paid. So it is not the order of share subscription that matters, it is the class. Once you know how much each class gets, based on the terms listed in that share subscription, you simply divide the total class payout by number of shares, and pay that much for each share a person holds. For companies organized other-than as corporations, ie: partnerships, the calculation of who-gets-what will be both simpler and more complex. Simpler in that, generally speaking, a partnership interest cannot be of a different 'class', like shares can, meaning all partners are equal relative to the size of their partnership interest. More complex in that, if the initiation of the company was done in an informal way, it could easily become a legal fight as to who contributed what to the company.",
"title": ""
},
{
"docid": "debd5e40e3327e8ec70f403b0a65963c",
"text": "In the case you mentioned, where a private company owners will take debt with the purpose of buying out other owners, is this done through a share repurchases program (I understand private companies issue them, even though it's rare)? Thank you for the insights.",
"title": ""
},
{
"docid": "5505b568f3ca227fb45391f812adff8c",
"text": "You can look at the company separately from the ownership. The company needs money that it doesn't have, therefore it needs to borrow money from somewhere or go bankrupt. And if they can't get money from their bank, then they can of course ask people related to the company, like the two shareholders, for a loan. It's a loan, like every other loan, that needs to be repaid. How big the loan is doesn't depend on the ownership, but on how much money each one is willing and capable of giving. The loan doesn't give them any rights in the company, except the right to get their money back with interest in the future. Alternatively, such a company might have 200 shares, and might have given 75 to one owner and 25 to the other owner, keeping 100 shares back. In that case, the shareholders can decide to sell some of these 100 shares. I might buy 10 shares for $1,000 each, so the company has now $10,000 cash, and I have some ownership of the company (about 9.09%, and the 75% and 25% shares have gone down, because now they own 75 out of 110 or 25 out of 110 shares). I won't get the $10,000 back, ever; it's not a loan but the purchase of part of the company.",
"title": ""
},
{
"docid": "d22e351c9ec928739d7ed725da136615",
"text": "How is it possible that a publicly traded investment company's net asset value per share is higher than their share price? Wouldn't you (in theory) be able to buy the company and liquidate it to make a profit of (NAV/share - price/share)*number of shares, ignoring transaction costs and such? I realize that since part of their portfolio is in private equity, NAV is hard to calculate and hard to liquidate as well, but it doesn't really seem to make sense to me. Would love some input. The company I'm talking about in this instance is 180 Degree Capital Corp, but this isn't the first time I've seen this.",
"title": ""
}
] |
fiqa
|
405eafa6e3bac13f435bacbdf1b5fad3
|
When to convert employee shares in an RRSP into cash, even if there is a penalty?
|
[
{
"docid": "405b853a067c3fbd64786f8275b3a758",
"text": "The cost to you for selling is 3/8% of a years salary, this is what you won't get if you sell. Tough to calculate the what-if scenarios beyond this, since I can't quantify the risk of a price drop. Once the amount in he stock is say,10%, of a years salary, if you know a drop is coming, a sale is probably worth it, for a steep drop. My stronger focus would be on how much of your wealth is concentrated in that one stock, Enron, and all.",
"title": ""
}
] |
[
{
"docid": "7e6d7849a72dd09bd6e94185741f837a",
"text": "The Globe and Mail has an interesting article on what you can do with your RRSPs. Be aware that the article is from early 2011 and rules change. They describe holding your own mortgage inside your RRSP. That is, if you have $100,000 inside your RRSP already and your remaining mortgage is $100,000, you can use that money to pay off your mortgage, then pay back the money at interest, generating a tax-deferred profit inside your RRSP. That approach may be viable, though you'd want to talk to your accountant first. I'd be very cautious about loaning money to someone else for a second mortgage using my RRSP, though. Second mortgages are inherently risky, so this is a very speculative investment. Once you make an RRSP contribution, that space is used up (barring a couple of exceptions such as the life-long learning plan). So, let's say you used $100,000 of your RRSP to loan to someone for a second mortgage. Any interest payments should be sheltered inside the RRSP (substantial benefit), but if the person defaults on the second mortgage (which you should expect to be a significant possibility), you've lost your entire $100,000 contribution room (as well as, obviously, the $100,000 that you loaned out). I can't tell you whether or not it makes sense to invest in risky second-mortgage loans and I can't tell you whether, if you choose to do so, it definitely should be done inside an RRSP. There are substantial risks in the loan and there are both costs and benefits to doing so inside an RRSP. Hopefully, though, I've helped you understand the questions you should be asking yourself.",
"title": ""
},
{
"docid": "97bee22e50c5e9e4c608cbaf1cf7febf",
"text": "You should always always enroll in an espp if there is no lockup period and you can finance the contributions at a non-onerous rate. You should also always always sell it right away regardless of your feelings for the company. If you feel you must hold company stock to be a good employee buy some in your 401k which has additional advantages for company stock. (Gains treated as gains and not income on distribution.) If you can't contribute at first, do as much as you can and use your results from the previous offering period to finance a greater contribution the next period. I slowly went from 4% to 10% over 6 offering periods at my plan. The actual apr on a 15% discount plan is ~90% if you are able to sell right when the shares are priced. (Usually not the case, but the risk is small, there usually is a day or two administrative lockup (getting the shares into your account)) even for ESPP's that have no official lockup period. see here for details on the calculation. http://blog.adamnash.com/2006/11/22/your-employee-stock-purchase-plan-espp-is-worth-a-lot-more-than-15/ Just a note For your reference I worked for Motorola for 10 years. A stock that fell pretty dramatically over those 10 years and I always made money on the ESPP and more than once doubled my money. One additional note....Be aware of tax treatment on espp. Specifically be aware that plans generally withhold income tax on gains over the purchase price automatically. I didn't realize this for a couple of years and double taxed myself on those gains. Fortunately I found out my error in time to refile and get the money back, but it was a headache.",
"title": ""
},
{
"docid": "4ac06d29174fb08de0840360fe7e7576",
"text": "If you leave your employer at age 55 or older, you can withdraw with no penalty. Mandatory 20% withholding, but no penalty. You reconcile in April, and may get it all back. If you are sub 55, the option is a Sec 72t withdrawal. The author of the article got it right. I am a fan of his.",
"title": ""
},
{
"docid": "27a5a5296e910059e806233cc78595fd",
"text": "We need more info to give a better answer, but in short: if you assume you will make $0 in other employment income next year, there is a HUGE tax benefit in deferring 50k until next year. Total tax savings would probably be something like $15k [rough estimate]. If you took the RRSP deduction this year, you would save something like 20k this year, but then you would be taxed on it next year if you withdraw it, probably paying another 5k the year after. ie: you would get about the same net tax savings in both years, if you contributed to your RRSP and withdrew next year, vs deferring it to next year. On a non-tax basis, you would benefit by having the cash today, so you could earn investment income on your RRSP, but you would want to go low-risk as you need the money next year, so the most you could earn would be something like 1.5k @ 3%. The real benefit to the RRSP contribution is if you defer your withdrawal into your retirement, because you can further defer your taxes into the future, earning investment income in the meantime. But if you need to withdraw next year, you won't get that opportunity.",
"title": ""
},
{
"docid": "bc5d03f4ae31e5978697ba056decdfcc",
"text": "The typical deal is you can put 10% of your gross pay into the ESPP. The purchase will occur on the last deposit date, usually a 6 month period, at a 15% discount to the market price. So, the math is something like this: Your return if sold the day it's purchased is not 15%, it's 100/85 or 17.6%. Minor nitpick on my part, I suppose. Also the return is not a 6 month return, as the weekly or bi-weekly deductions are the average between the oldest (6 mo) and the most recent (uh, zero time, maybe a week.) This is closer to 3 months. The annualized rate is actually pretty meaningless since you don't have 4 opportunities to achieve this return, it's important only if the cash flow hit causes you to borrow to support the ESPP purchases. The risk is whether the stock drops the 15% before you can execute the sell to take advantage of the gain. Of course the return is gross, you need to net for taxes. Edit to respond to comment below - When I said meaningless, I meant that you can't take the 17.6%, annualize it to 91.2% per year and think your $1000 will compound to $1912. It's as meaningless as when an investor gets a 10% gain on a stock in one day, and (with 250 trading days per year) decides his $1000 will be worth $2 quadrillion dollars after a year. The 17.6% is significant in that it's available twice per year, for a true 38% return over a year, but if borrowing to help the cash flow, that rate is really over 3 months.",
"title": ""
},
{
"docid": "d04463611f1cc42a2614271873cb0e89",
"text": "I don't know the legal framework for RSUs, so I'm not sure what is mandatory and what is chosen by the company issuing them. I recently reviewed one companies offering and it basically looked like a flat purchase of stock on the VEST date. So even if I got a zillion shares for $1 GRANTED to me, if it was 100 shares that vested at $100 on the 1st, then I would owe tax on the market value on the day of vest. Further, the company would withhold 25% of the VEST for federal taxes and 10% for state taxes, if I lived in a state with income tax. The withholding rate was flat, regardless of what my actual tax rate was. Capital gains on the change from the market value on the VEST date was calculated as short-term or long-term based on the time since the VEST date. So if my 100 shares went up to $120, I would pay the $20 difference as short term or long term based on how long I had owned them since the VEST. That said, I don't know if this is universal. Your HR folks should be able to help answer at least some of these questions, though I know their favorite response when they don't know is that you should consult a tax professional. Good luck.",
"title": ""
},
{
"docid": "7455173c32b84deeccb016729e52c76d",
"text": "You don't have to wait. If you sell your shares now, your gain can be considered a capital gain for income tax purposes. Unlike in the United States, Canada does not distinguish between short-term vs. long-term gains where you'd pay different rates on each type of gain. Whether you buy and sell a stock within minutes or buy and sell over years, any gain you make on a stock can generally be considered a capital gain. I said generally because there is an exception: If you are deemed by CRA to be trading professionally -- that is, if you make a living buying and selling stocks frequently -- then you could be considered doing day trading as a business and have your gains instead taxed as regular income (but you'd also be able to claim additional deductions.) Anyway, as long as your primary source of income isn't from trading, this isn't likely to be a problem. Here are some good articles on these subjects:",
"title": ""
},
{
"docid": "4a7d07c8e2aad26127e6c1b5b6063ac9",
"text": "No. Income inside an RRSP is sheltered from income tax until you withdraw it. That is, indeed, the major benefit of RRSPs. Note that you will eventually declare this as income. Consider the following case: - in 2015, you make $1000 in income. - in 2015, you contribute $100 to your RRSPs. You store this in an account that pays interest, rather than investing it in stocks, bonds, or mutual funds. - between 2015 and 2025, your money makes an additional $100 in interest. - in 2025, you are retired and pull out the entire amount in your RRSP, i.e. $200. Now, between 2015 and 2025, you did not declare the income from interest. You'd have had to do this if the money was in a regular bank account (instead of an RRSP or a TFSA). Indeed, your bank would have issued tax forms in that case. But you don't report income sheltered in an RRSP. This is good, as it increases the power of compounding. In 2015, you pay tax on only $900 rather than the full $1000. In 2025, you pull out the entire $200. You report all $200 as income (or, actually, as a withdrawal from your RRSP, but it's the same thing). You pay tax on the initial $100 investment (which you did not do in 2015), and you also pay tax on the $100 that your investment has made (and which you are now pulling out). The hope is that your income is now lower, as you are retired. So you'll end up paying less income tax. Plus, your investment has had many years of opportunity to compound, tax-free. TL;DNR: You don't pay tax on, or report gains in, an RRSP account. The bank or investment house won't even issue tax forms, not until you withdraw the money.",
"title": ""
},
{
"docid": "9a9d932f7e317e965f944a41ec48a41d",
"text": "I can make that election to pay taxes now (even though they aren't vested) based on the dollar value at the time they are granted? That is correct. You must file the election with the IRS within 30 days after the grant (and then attach a copy to that year's tax return). would I not pay any taxes on the gains because I already claimed them as income? No, you claim income based on the grant value, the gains after that are your taxable capital gains. The difference is that if you don't use 83(b) election - that would not be capital gains, but rather ordinary salary income. what happens if I quit / get terminated after paying taxes on un-vested shares? Do I lose those taxes, or do I get it back in a refund next year? Or would it be a deduction next year? You lose these taxes. That's the risk you're taking. Generally 83(b) election is not very useful for RSUs of established public companies. You take a large risk of forfeited taxes to save the difference between capital gains and ordinary gains, which is not all that much. It is very useful when you're in a startup with valuations growing rapidly but stocks not yet publicly trading, which means that if you pay tax on vest you'll pay much more and won't have stocks to sell to cover for that, while the amounts you put at risk are relatively small.",
"title": ""
},
{
"docid": "175a9f550ec56623c289df7f2fe0dc18",
"text": "Here is how it should look: 100 shares of restricted stock (RSU) vest. 25 shares sold to pay for taxes. W2 (and probably paycheck) shows your income going up by 100 shares worth and your taxes withheld going up by 25 shares worth. Now you own 75 shares with after-tax money. If you stop here, there would be no stock sale and no tax issues. You'd have just earned W2 income and withheld taxes through your W2 job. Now, when you sell those 75 shares whether it is the same day or years later, the basis for those 75 shares is adjusted by the amount that went in to your W2. So if they were bought for $20, your adjusted basis would be 75*$20.",
"title": ""
},
{
"docid": "ea16a8a69abc637ad679b34a8b8ac311",
"text": "My friend Harry Sit wrote an excellent article No Tax Advantage In RSU. The punchline is this. The day the RSUs vested, it's pretty much you got $XXX in taxable income and then bought the stock at the price at that moment. The clock for long term gain starts the same as if I bought the stock that day. Historical side note - In the insane days of the Dotcom bubble, people found they got RSUs vested and worth, say, $1M. Crash. The shares are worth $100K. The $1M was ordinary income, the basis was $1M and the $900K loss could offset cap gains, not ordinary income above $3000/yr. Let me be clear - the tax bill was $250K+ but the poor taxpayer had $100K in stock to sell to pay that bill. Ooops. This is the origin of the 'sell the day it vests' advice. The shares you own will be long term for capital gain a year after vesting. After the year, be sure to sell those particular shares and you're all set. No different than anyone selling the LT shares of stock when owning multiple lots. But. Don't let the tax tail wag the investing dog. If you feel it's time to sell, you can easily lose the tax savings while watching the stock fall waiting for the clock to tick to one year.",
"title": ""
},
{
"docid": "d0bcfb2c0730687b9984f9bc1633952a",
"text": "There are two methods of doing this Pulling out the money and paying the penalty if any, and going on your way. Having the Roth IRA own the business, and being an employee. If you go with the second choice, you should read more about it on this question.",
"title": ""
},
{
"docid": "ce98800ddfa4c44fe836bcef62c53ab0",
"text": "\"The primary tax-sheltered investing vehicles in Canada include: The RRSP. You can contribute up to 18% of your prior year's earned income, up to a limit ($24,930 in 2015, plus past unused contribution allowance) and receive an income tax deduction for your contributions. In an RRSP, investments grow on a tax-deferred basis. No tax is due until you begin withdrawals. When you withdraw funds, the withdrawn amount will be taxed at marginal income tax rates in effect at that time. The RRSP is similar to the U.S. \"\"traditional\"\" IRA, being an individual account with pre-tax contributions, tax-deferred growth, and ordinary tax rates applied to withdrawals. Yet, RRSPs have contribution limits higher than IRAs; higher, even, than U.S. 401(k) employee contribution limits. But, the RRSP is dissimilar to the IRA and 401(k) since an individual's annual contribution allowance isn't use-it-or-lose-it—unused allowance accumulates. The TFSA. Once you turn 18, you can put in up to $5,500 each year, irrespective of earned income. Like the RRSP, contribution room accumulates. If you were 18 in 2009 (when TFSAs were introduced) you'd be able to contribute $36,500 if you'd never contributed to one before. Unlike the RRSP, contributions to a TFSA are made on an after-tax basis and you pay no tax when you withdraw money. The post-tax nature of the TFSA and completely tax-free withdrawals makes them comparable to Roth-type accounts in the U.S.; i.e. while you won't get a tax deduction for contributing, you won't pay tax on earnings when withdrawn. Yet, unlike U.S. Roth-type accounts, you are not required to use the TFSA strictly for retirement savings—there is no penalty for pre-retirement withdrawal of TFSA funds. There are also employer-sponsored defined benefit (DB) and defined contribution (DC) retirement pension plans. Generally, employees who participate in these kinds of plans have their annual RRSP contribution limits reduced. I won't comment on these kinds of plans other than to say they exist and if your employer has one, check it out—many employees lose out on free money by not participating. The under-appreciated RESP. Typically used for education savings. A lifetime $50,000 contribution limit per beneficiary, and you can put that all in at once if you're not concerned about maximizing grants (see below). No tax deduction for contributions, but investments grow on a tax-deferred basis. Original contributions can be withdrawn tax-free. Qualified educational withdrawals of earnings are taxed as regular income in the hands of the beneficiary. An RESP beneficiary is typically a child, and in a child's case the Canadian federal government provides matching grant money (called CESG) of 20% on the first $2500 contributed each year, up to age 18, to a lifetime maximum of $7200 per beneficiary. Grant money is subject to additional conditions for withdrawal. While RESPs are typically used to save for a child's future education, there's nothing stopping an adult from opening an RESP for himself. If you've never had one, you can deposit $50,000 of after-tax money to grow on a tax-deferred basis for up to 36 years ... as far as I understand. An adult RESP will not qualify for CESG. Moreover, if you use the RESP strictly as a tax shelter and don't make qualified educational withdrawals when the time comes, your original contributions still come out free of tax but you'll pay ordinary income tax plus 20% additional tax on the earnings portion. That's the \"\"catch\"\"*. *However, if at that time you have accumulated sufficient RRSP contribution room, you may move up to $50,000 of your RESP earnings into your RRSP without any tax consequences (i.e. also avoiding the 20% additional tax) at time of transfer. Perhaps there's something above you haven't considered. Still, be sure to do your own due diligence and to consult a qualified, experienced, and conflict-free financial advisor for advice particular to your own situation.\"",
"title": ""
},
{
"docid": "d8702150cebb5cc59d3152c8b1c2190d",
"text": "There are some circumstances in which it is a good idea. Chris W Rea has already mentioned the case where you expect your marginal tax rate to decrease. But there is also the case where lack of contributions might cause your marginal rate to increase. Assume your income is $20,000 over the 46% threshold, and you normally contribute $20,000 to RRSP. However this year you have only been able to contribute $10,000. If you wait until next year and contribute an extra $10,000 (making $30,000) the extra $10,000 will only bring 35% tax back. If you can borrow the money and make the contribution this year it will get 46% tax back. That makes the loan worth taking. Making the contribution now can also get you a larger rebate this year. You will have that money for twelve extra months and you can invest it. That probably isn't enough to make it worthwhile alone, but it certainly makes the damage less. However I would always recommend taking out an RRSP loan for as short a time as possible. My recommendation would always be to make the contribution as late in the period as possible, apply for your tax refund as soon as you can, and then pay off the loan with the refund. You shoulod be able to get away with having the loan only for a couple of months.",
"title": ""
},
{
"docid": "bdc4ff578f36f17f49e1d879f130ca3e",
"text": "If you received shares as part of a bonus you needed to pay income tax on the dollar valuse of those shares at the time you received them. This income tax is based on the dollar value of the bonus and has nothing to do with the shares. If you have since sold these shares you will need to report any capital gain or loss you made from their dollar value when you received them. If you made a gain you would need to pay capital gains tax on the profits (if you held them for more than a year you would get a discount on the capital gains tax you have to pay). If you made a loss you can use that capital loss to reduce any other capital gains in that income year, reduce any other income up to $3000 per year, or carry any additional capital loss forward to future income years to reduce any gains or income (up to $3000 per year) you do have in the future.",
"title": ""
}
] |
fiqa
|
6d075f793c6495ffd4163133196ceeb1
|
What to do with a 50K inheritance [duplicate]
|
[
{
"docid": "50bd800bc724032df643034909cc34a6",
"text": "\"The basic optimization rule on distributing windfalls toward debt is to pay off the highest interest rate debt first putting any extra money into that debt while making minimum payments to the other creditors. If the 5k in \"\"other debt\"\" is credit card debt it is virtually certain to be the highest interest rate debt. Pay it off immediately. Don't wait for the next statement. Once you are paying on credit cards there is no grace period and the sooner you pay it the less interest you will accrue. Second, keep 10k for emergencies but pretend you don't have it. Keep your spending as close as possible to what it is now. Check the interest rate on the auto loan v student loans. If the auto loan is materially higher pay it off, then pay the remaining 20k toward the student loans. Added this comment about credit with a view towards the OP's future: Something to consider for the longer term is getting your credit situation set up so that should you want to buy a new car or a home a few years down the road you will be paying the lowest possible interest. You can jump start your credit by taking out one or two secured credit cards from one of the banks that will, in a few years, unsecure your account, return your deposit, and leave no trace you ever opened a secured account. That's the route I took with Citi and Wells Fargo. While over spending on credit cards can be tempting, they are, with a solid payment history, the single most important positive attribute on a credit report and impact FICO scores more than other type of credit or debt. So make an absolute practice of only using them for things you would buy anyway and always, always, pay each monthly bill in full. This one thing will make it far easier to find a good rental, buy a car on the best terms, or get a mortgage at good rates. And remember: Credit is not equal to debt. Maximize the former and minimize the latter.\"",
"title": ""
},
{
"docid": "04f0c4fdfc875de875e3ad4e0ee47072",
"text": "\"My grandma left a 50K inheritance You don't make clear where in the inheritance process you are. I actually know of one case where the executor (a family member, not a professional) distributed the inheritance before paying the estate taxes. Long story short, the heirs had to pay back part of the inheritance. So the first thing that I would do is verify that the estate is closed and all the taxes paid. If the executor is a professional, just call and ask. If a family member, you may want to approach it more obliquely. Or not. The important thing is not to start spending that money until you're sure that you have it. One good thing is that my husband is in grad school and will be done in 2019 and will then make about 75K/yr with his degree profession. Be a bit careful about relying on this. Outside the student loans, you should build other expenses around the assumption that he won't find a job immediately after grad school. For example, we could be in a recession in 2019. We'll be about due by then. Paying off the $5k \"\"other debt\"\" is probably a no brainer. Chances are that you're paying double-digit interest. Just kill it. Unless the car loan is zero-interest, you probably want to get rid of that loan too. I would tend to agree that the car seems expensive for your income, but I'm not sure that the amount that you could recover by selling it justifies the loss of value. Hopefully it's in good shape and will last for years without significant maintenance. Consider putting $2k (your monthly income) in your checking account. Instead of paying for things paycheck-to-paycheck, this should allow you to buy things on schedule, without having to wait for the money to appear in your account. Put the remainder into an emergency account. Set aside $12k (50% of your annual income/expenses) for real emergencies like a medical emergency or job loss. The other $16k you can use the same way you use the $5k other debt borrowing now, for small emergencies. E.g. a car repair. Make a budget and stick to it. The elimination of the car loan should free up enough monthly income to support a reasonable budget. If it seems like it isn't, then you are spending too much money for your income. Don't forget to explicitly budget for entertainment and vacations. It's easy to overspend there. If you don't make a budget, you'll just find yourself back to your paycheck-to-paycheck existence. That sounds like it is frustrating for you. Budget so that you know how much money you really need to live.\"",
"title": ""
},
{
"docid": "6f5dd68de3ec919add46bf5c947d97fd",
"text": "First, don't borrow any more money. You're probably bankrupt right now at that income level. 2k/month is poverty level income, especially in some of the higher cost of living areas of California. At $2k per month of income, and $1300 of rent and utilities, you've only got 700 a month for food. The student loans are probably in deferment while your husband is in school. If so, keep them that way and deal with them when he lands a career track goal after grad school. The car loan is more than you can afford. Seriously consider selling the car to get rid of the note. Then use the cash flow that was going to the car loan to pay off the 'other' debt. A car is usually a luxury, but if it is necessary, be sure it is one that doesn't include a loan. Budget all of your income (consider using YNAB or something like it). Include a budget item to build an emergency fund. Live within your means and look for ways to supplement your income. With three of your own, you'd probably make an excellent baby sitter. As for the inheritance, find a low risk, liquid investment, such as 12 month CDs or savings bonds. Something that you can liquidate without penalty if an emergency arises. Save the money for if you get into a situation where there is no other way out. Hopefully you can have your emergency fund built up so that you don't need to draw on the inheritance. Set a date, grad school + landing + 90 days. If you reach that date and haven't had to use the inheritance, and you have a good emergency fund, put the inheritance in a retirement fund and forget about it. Why retirement fund and not a college fund for the kids? The best gift you can give them is to remain financially independent throughout your life. If you get to the point where you are fully funding your tax advantaged retirement savings, and you are ready to start wealth-building, that is the time to take part of that cash flow and set it aside for college funds.",
"title": ""
},
{
"docid": "4a5ec55d554a5c7b3fdc2253bcfbd86b",
"text": "**I would encourage you to clear all your debts and remain debt free, then you can consult a financial manager-for investing purposes that fits your needs and goals. There are so many investment vehicles out, but the best of all is in real estate which requires lots of money. For your case I would prefer money market funds. If don't have time for a specialist you just walk into any stock broker and invest in those shares from well established companies with strong fundamentals. Buy them when undervalued but with long term goals. Ask the stock broker about bonds and other ways that the government purposes for domestic borrowings. Etc.",
"title": ""
}
] |
[
{
"docid": "7ec4040c3ac8334ab36c650435360cd4",
"text": "\"As Dilip said, if you want actual concrete, based in tax law, answers, please add the country (and if applicable, state) where you pay income tax. Also, knowing what tax bracket you're in would help as well, although I certainly understand if you're not comfortable sharing that. So, assuming the US... If you're in the 10% or 15% tax bracket, then you're already not paying any federal tax on the $3k long term gain, so purposely taking losses is pointless, and given that there's probably a cost to taking the loss (commission, SEC fee), you'd be losing money by doing so. Also, you won't be able to buy back the loser for 31 days without having the loss postponed due to the wash sale that would result. State tax is another matter, but (going by the table in this article), even using the highest low end tax rate (Tennessee at 6%), the $50 loss would only save you $3, which is probably less than the commission to sell the loser, so again you'd be losing money. And if you're in a state with no state income tax, then the loss wouldn't save you anything on taxes at the state level, but of course you'll still be paying to be able to take the loss. On the high end, you'd be saving 20% federal tax and 13.3% state tax (using the highest high end tax state, California, and ignoring (because I don't know :-) ) whether they tax long-term capital gains at the same rate as regular income or not), you'd be saving $50 * (20% + 13.3%) = $50 * 33.3% = $16.65. So for taxes, you're looking at saving between nothing and $16.65. And then you have to subtract from that the cost to achieve the loss, so even on the high end (which means (assuming a single filer)) you're making >$1 million), you're only saving about $10, and you're probably actually losing money. So I personally don't think taking a $50 loss to try to decrease taxes makes sense. However, if you really meant $500 or $5000, then it might (although if you're in the 10-15% brackets in a no income tax state, even then it wouldn't). So the answer to your final question is, \"\"It depends.\"\" The only way to say for sure is, based on the country and state you're in, calculate what it will save you (if anything). As a general rule, you want to avoid letting the tax tail wag the dog. That is, your financial goal should be to end up with the most money, not to pay the least taxes. So while looking at the tax consequences of a transaction is a good idea, don't look at just the tax consequences, look at the consequences for your overall net worth.\"",
"title": ""
},
{
"docid": "6da4f2f93e76033d15a828d5afbe534e",
"text": "\"First off, leaving money in a 529 account is not that bad, since you may always change the beneficiary to most any blood relative. So if you have leftovers, you don't HAVE to pay the 10% penalty if you have a grandchild, for instance, that can use it. But if you would rather have the money out, then you need a strategy to get it out that is tax efficient. My prescription for managing a situation like this is not to pay directly out of the 529 account, but instead calculate your cost of education up-front and withdraw that money at the beginning of the school year. You can keep it in a separate account, but that's not necessary. The amount you withdraw should be equal to what the education costs, which may be estimated by taking the budget that the school publishes minus grants and scholarships. You should have all of those numbers before the first day of school. This is amount $X. During the year, write all the checks out of your regular account. At the end of the school year, you should expect to have no money left in the account. I presume that the budget is exactly what you will spend. If not, you might need to make a few adjustments, but this answer will presume you spend exactly $X during the fall and the spring of the next year. In order to get more out of the 529 without paying penalties, you are allowed to remove money without penalty, but having the gains taxed ($y + $z). You have the choice of having the 529 funds directed to the educational institution, the student, or yourself. If you direct the funds to the student, the gains portion would be taxed at the student's rate. Everyone's tax situation is different, and of course there is a linkage between the parent's taxes and student's taxes, but it may be efficient to have the 529 funds directed to the student. For instance, if the student doesn't have much income, they might not even be required to file income tax. If that's the case, they may be able to remove an amount, $y, from the 529 account and still not need to file. For instance, let's say the student has no unearned income, and the gains in the 529 account were 50%. The student could get a check for $2,000, $1,000 would be gains, but that low amount may mean the student was not required to file. Or if it's more important to get more money out of the account, the student could remove the total amount of the grants plus scholarships ($y + $z). No penalty would be due, just the taxes on the gains. And at the student's tax rate (generally, but check your own situation). Finally, if you really want the money out of the account, you could remove a check ($y + $z + $p). You'd pay tax on the gains of the sum, but penalty of 10% only on the $p portion. This answer does not include the math that goes along with securing some tax credits, so if those credits still are around as you're working through this, consider this article (which requires site sign-up). In part, this article says: How much to withdraw - ... For most parents, it will be 100% of the beneficiary’s qualified higher education expenses paid this year—tuition, fees, books, supplies, equipment, and room and board—less $4,000. The $4,000 is redirected to the American Opportunity Tax Credit (AOTC),... When to withdraw it - Take withdrawals in the same calendar year that the qualified expenses were paid. .... Designating the distributee - Since it is usually best that the Form 1099-Q be issued to the beneficiary, and show the beneficiary’s social security number, I prefer to use either option (2) or (3) [ (2) a check made out to the account beneficiary, or (3) a check made out to the educational institution] What about scholarships? - The 10 percent penalty on a non-qualified distribution from a 529 plan is waived when the excess distribution can be attributed to tax-free scholarships. While there is no direct guidance from the IRS, many tax experts believe the distribution and the scholarship do not have to match up in the same calendar year when applying the penalty waiver. If you're curious about timing (taking non-penalty grants and scholarship money out), there is this link, which says you \"\"probably\"\" are allowed to accumulate grants and scholarship totals, for tax purposes, over multiple years.\"",
"title": ""
},
{
"docid": "9b3bd63f5d55ca2eb550414c3182b710",
"text": "Setting aside for the moment the very relevant issue of whether you need the full amount quickly, I'll just tackle comparing which option gives you to maximum amount of money (in terms of real dollars). The trick is, unless you think inflation will suddenly reverse itself or stop entirely (not likely), $50K today is worth a LOT more than $50K in 20 years. If you don't believe me, consider that just 30 years ago the average price for a mid-level new car was around $3k. When you grandfather says he got a burger for a nickel, he isn't talking about 2010 dollars. So, how do you account for this? Well, the way financial people and project managers do it to estimate how much to pay today for $1 at some point in the future is through a net present value (NPV) calculation. You can find a calculator here. In your question, you gave some numbers for the payout, but not the lump sum prize amount. Going solely on what you have provided, I calculate that you should take the lump sum if it is greater than $766,189.96 which is the net present value of 20 years of $50K Payments assuming 3% annual inflation, which is fairly a fairly reasonable number given history. However, if you think the out-of-control Gov't spending is going to send inflation through the roof (possible, but not a given), then you almost certainly would want the lump sum. I suppose in that scenario you might want the lump sum anyway because if the Govt starts filching on their obligations, doing it to a small number of lottery winners might be politically more popular than cutting other programs that affect a large number of voters.",
"title": ""
},
{
"docid": "5e88382b08a124934ea96a6c792286bb",
"text": "\"How will 45K-60K \"\"end up in your pocket\"\"? Are you selling your home? Where are you going to live? You talk about moving to Arizona, what is so magical about that place? Congratulations on making a wise purchase. Some people with new found money use it to correct past mistakes. However, if they do not change their behavior they end up in the same situation just less them money they once had. While 50K income is respectable at your age, it is below the national average for households. One factor in having a college education is those with them tend to experience shorter and fewer periods of unemployment especially for males. Nothing will ever replace hustle, however. I'd ask you to have a plan to raise your income. Can you double it in 5 years? You need to get rid of the revolving debt. Do that out of current income. No need to touch the house proceeds for something so small. Shoot for 9 months. Then you need to get rid of the speeding fines and the vehicle loan. That is a lot of vehicle for your income. Again, I would do that out of current income or by selling the vehicle and moving to something more inline with your income. As far as to moving or flipping foreclosures that is more of a question that has to do with your hopes and dreams. Do you want to move your children every 3 years? What if you move to Arizona and it turns out to be quite horrible? You and your wife need to sit down and discuss what is best for your family.\"",
"title": ""
},
{
"docid": "d549935b0d5e2906febccf145bed1559",
"text": "You can play with the numbers all you like (and that's good), however, here is a different way to look at it. The debt you have is risk. It limits your choices and eats your cash flow. Without the debt, you can invest at a much greater rate. It frees up you cash flow for all the things you might want to do, or decide in the future you might want to do. Right now is the easiest time for you to focus on debt repayment. It sounds like you are not married and have no children. It is much easier now to cut back your lifestyle and concentrate on paying off this $50k of student debt. This will get harder as your responsibility increases. Build up a small amount of cash for emergencies and put the rest at the debt. You can keep contributing to your 401k to the match if you want. This will give you 2 benefits: Patience. When you actually DO start investing, you will have a new appreciation for the money you are using. If you sacrifice to pay off $50k now, you wont look at money the same for the rest of your life. Drive. If you see the debt as a barrier to achieving your goals, you will work harder to get out of debt. These are all things I would tell my 23 year-old self if i could go back in time. Good luck!",
"title": ""
},
{
"docid": "c66cbcb3da2ed4677285c282e5396dea",
"text": "John - sure, your points are well taken. $500K in cash is preferable to $500K invested in a way I wouldn't choose at the moment. A friendly warning - inheritances often come in the form of an IRA account. This comes with its own issues, and an IRA shouldn't be confused with the assets it contains. Selling the assets inside is fine, you can reinvest in what you wish, but selling and pulling the money out can result in an horrific tax bill. I was recently interviewed on the radio (and available as a Podcast) discussing Inherited IRA Tax Tips, and it's worth educating yourself as the topic is quite convoluted. (And thanks, John, for a question that permitted me to sneak this in. I owe you a beverage)",
"title": ""
},
{
"docid": "ee9dd9059baeca33306de0ce321cb4f0",
"text": "When you say: I am 48 and my husband is 54. We have approx. 60,000.00 left in our retirement accounts. We want to move our money into something so our money will grow. We've been looking at annunities. We've talked to 4 different advisors about what is best for us. Bad mistake, I am so overwhelmed with the differences they all have til I can't even think straight anymore. @Havoc P is correct: ...It's very likely that 60k is not nearly enough, and that making the right investment choices will make only a small difference. You could invest poorly and maybe end up with 50K when you retire, or invest well and maybe end up with 80-90k. But your goal is probably more like a million dollars, or more, and most of that will come from future savings. This is what a planner can help you figure out in detail. TL; DR Here is my advice:",
"title": ""
},
{
"docid": "86757f81a25dec22096b7c31c97526da",
"text": "My take is that he can avoid a big tax hit by leaving it as and giving the untouched fund to the heirs. 100% correct. By withdrawing now he'll be subjected to the income tax on the gains. Since his gains are almost the whole value of the account, he'll actually find himself in the highest bracket, not the lowest as Joe suggests. Not only that, but his SS income will become taxable as well. Capital gains are included in the AGI. By leaving as is, the heirs will get stepped up basis, and the whole 700K will not be taxed (its below the estate tax threshold, and the basis for the heirs will be the value at death).",
"title": ""
},
{
"docid": "b9838f030c43ae7ef9cb5567a6f0bf48",
"text": "My understanding is that when you die, the stocks are sold and then the money is given to the beneficiary or the stock is repurchased in the beneficiaries name. This is wrong, and the conclusion you draw from michael's otherwise correct answer follows your false assumption. You seem to understand the Estate Tax federal threshold. Jersey would have its own, and I have no idea how it works there. If the decedent happened to trade in the tax year prior to passing, normal tax rules apply. Now, if the executor chooses to sell off and liquidate the estate to cash, there's no further taxable gain, a $5M portfolio can have millions in long term gain, but the step up basis pretty much negates all of it. If that's the case, the beneficiaries aren't likely to repurchase those shares, in fact, they might not even know what the list of stocks was, unless they sifted through the asset list. But, that sale was unnecessary, assets can be divvied up and distributed in-kind, each beneficiary getting their fraction of the number of shares of each stock. And then your share of the $5M has a stepped up basis, meaning if you sell that day, your gains are near zero. You might owe a few dollars for whatever the share move in the time passing between the step up date and date you sell. I hope that clarifies your misunderstanding. By the way, the IRS is just an intermediary. It's congress that writes the laws, including the tangled web of tax code. The IRS is the moral equivalent of a great customer service team working for a company we don't care for.",
"title": ""
},
{
"docid": "8202cafb805923b1d2787eb0a9e241da",
"text": "If you have no need for the money. Donate it. Spend the next few years determining what charities make sense and then when the wills are settled, then make those donations. You should get advice how how to best do that, there can be some limitations and complications. Sometimes the source of the money/property makes it more complicated. The form of the inheritance can also make a difference. You could even setup a charitable trust to spread the donations out over year or decade. You could even make it so that you can live off the interest until you die, and then the rest goes to the charity. Note: just because they have no other children, there is no guarantee that you will receive the money/property. They, at any time, could write a will and cut you out of some, most , or all of the wealth.",
"title": ""
},
{
"docid": "41b6f7f8119d1318ecf780bd75d8542a",
"text": "In today's market being paid 1% for risk and free access money is pretty darn good. If 50k is what you feel comfortable with an emergency fund, then you are doing a fine enough job. To me that is a lot to keep in an emergency fund, however several factors play into this: We both drive older cars, so I also keep enough money around to replace one of them. Considering all that I keep a specific amount in savings that for me earns .89%. Some of that is kept in our checking accounts which earns nothing. You have to go through some analysis of your own situation and keep that amount where it is. If that amount is less than 50K, you have some money to play with. Here are some options:",
"title": ""
},
{
"docid": "63e9e9e1fadfbdea4bec60ddf4548284",
"text": "It's in your interest to pay down these loans (just like any debt) at an accelerated rate, so long as you prioritize it appropriately and don't jeopardize your financial situation. What are your plans for the $50k? Is it a downpayment on a house? Are you already saving for retirement? At what rate are you saving each year? These are all important questions. There is nothing wrong with using some of the $50k to make a dent in your loans, but overpaying a debt at 6% should not be your first priority. Save for retirement, pay off credit cards, make sure you have an emergency fund of between 6-12 months living expenses (depending on your comfort level as well as how stable you think your job is, and how much you could downsize if need be). Then, tackle extra loan payments. Unfortunately 6% is about what you would expect to get in the market these days, so you can't necessarily make more money investing your remaining cash on hand as compared to putting it towards your loans. And you could always make less. Personally, I would divide the $50k as follows. Insert your own numbers/circumstances :) Of the ~$30k that remains...",
"title": ""
},
{
"docid": "2947f7492ade177b57d15dc7816b08c5",
"text": "If you are looking to transfer money to another person in the US, you can do do with no tax consequence. The current annual gift limit is $14k per year per person, so for example, my wife and I can gift $56k to another couple with no tax and no forms. For larger amounts, there is a lifetime exclusion that taps into your $5M+ estate tax. It requires submitting a form 709, but just paperwork, no tax would be due. This is the simplest way to gift a large sum and not have any convoluted tracking or structured loan with annual forgiveness. One form and done. (If the sum is well over $5M you should consider a professional to guide you, not a Q&A board)",
"title": ""
},
{
"docid": "b70b032abf7f9de01988fde5b4ddca1b",
"text": "Rule of thumb: To retire with a yearly income of $X, you need to save $(20*X) -- in other words, the safe assumption is that you'll average 4% returns on your stabilized savings/investments. In the case of retiring with a $50k passive pretax income, that means you need savings of $1M by the time you retire. If you want the $50,000 to be real post-tax spendable dollars, and your savings aren't in something like a Roth 401k or Roth IRA, increase that proportionately to account for taxes. How you get there depends on what you start with, how much you put into it every year, how you invest it and how many years you have before your retirement date. Passive investment alone will not do it unless you start with a lot of money; passive ongoing investment may depending on how much you can make yourself save when. To find out whether any specific plan will do what you need, you have to work with real numbers.",
"title": ""
},
{
"docid": "b8d347f46e81ba0f67ad4363338c0677",
"text": "Here are my conditions for an emergency account: A compromise would be to have 1,000-2,000 in a very liquid account and the rest in something a little less liquid that maybe has a minimum balance (but no transaction requirements). The behavioral risk is when you do have an emergency and you don't want to cash out or go through any hassle to get it out, so you just charge the emergency instead of paying cash.",
"title": ""
}
] |
fiqa
|
cf08468c52e808d90cfbddd0ba7c3ae0
|
What is the principle of forming an arbitrage strategy?
|
[
{
"docid": "aeaed7656b849572a06fdfc76899b390",
"text": "\"Arbitrage is basically taking advantage of a difference in price. Generally extending to \"\"in different places for the same thing\"\". A monetary version would be interlisted stocks, that is stocks in companies that are on both the NYSE/Nasdaq and Toronto stock exchanges. If somebody comes along and buys a large number of shares in Toronto, that will tend to make the price go up - standard supply and demand. But if someone else can buy shares instead in NY, and then sell them in Toronto where the first person is buying up shares, where the price is higher, they the the arbitrageur (second person) can make pretty easy money. By its very nature, this tends to bring the prices back in line, as NY will then go up and Toronto will then go down (ignoring FX rates and the like for ease of explanation). The same can work for physical goods, although it does tend to get more complex with taxes, duties, and the like.\"",
"title": ""
},
{
"docid": "c67e32269a972e5a4e46ebb9ed6a7e07",
"text": "Well, arbitrage is a simple mean reversion strategy which states that any two similar commodity with some price difference (usually not much) will converge. So either you can bet on difference in prices in different exchanges or also you can bet on difference in futures value. For example if current price of stock is 14$ and if futures price is 10$. Then you can buy one futures contract and short one stock at the market price. This would lock in a profit of 4$ per share.",
"title": ""
}
] |
[
{
"docid": "b1e6e328ddefd77d0000e46e8212a7af",
"text": "To answer your original question: There is proof out there. Here is a paper from the Federal Reserve Bank of St. Louis that might be worth a read. It has a lot of references to other publications that might help answer your question(s) about TA. You can probably read the whole article then research some of the other ones listed there to come up with a conclusion. Below are some excerpts: Abstract: This article introduces the subject of technical analysis in the foreign exchange market, with emphasis on its importance for questions of market efficiency. “Technicians” view their craft, the study of price patterns, as exploiting traders’ psychological regularities. The literature on technical analysis has established that simple technical trading rules on dollar exchange rates provided 15 years of positive, risk-adjusted returns during the 1970s and 80s before those returns were extinguished. More recently, more complex and less studied rules have produced more modest returns for a similar length of time. Conventional explanations that rely on risk adjustment and/or central bank intervention do not plausibly justify the observed excess returns from following simple technical trading rules. Psychological biases, however, could contribute to the profitability of these rules. We view the observed pattern of excess returns to technical trading rules as being consistent with an adaptive markets view of the world. and The widespread use of technical analysis in foreign exchange (and other) markets is puzzling because it implies that either traders are irrationally making decisions on useless information or that past prices contain useful information for trading. The latter possibility would contradict the “efficient markets hypothesis,” which holds that no trading strategy should be able to generate unusual profits on publicly available information—such as past prices—except by bearing unusual risk. And the observed level of risk-adjusted profitability measures market (in)efficiency. Therefore much research effort has been directed toward determining whether technical analysis is indeed profitable or not. One of the earliest studies, by Fama and Blume (1966), found no evidence that a particular class of TTRs could earn abnormal profits in the stock market. However, more recent research by Brock, Lakonishok and LeBaron (1992) and Sullivan, Timmermann an d White (1999) has provided contrary evidence. And many studies of the foreign exchange market have found evidence that TTRs can generate persistent profits (Poole 6 (1967), Dooley and Shafer (1984), Sweeney (1986), Levich and Thomas (1993), Neely, Weller and Dittmar (1997), Gençay (1999), Lee, Gleason and Mathur (2001) and Martin (2001)).",
"title": ""
},
{
"docid": "3c367ad374da420b8a8c5cb6d2191b80",
"text": "Your strategy of longing company(a) and shorting company(b) is flawed as the prices of company(a) and company(b) can both increase and though you are right , you will lose money due to the shorting strategy. You should not engage in pair trading , which is normally used for arbitrage purposes You should just buy company(a) since you believed its a better company compared to company(b) , its as simple as that",
"title": ""
},
{
"docid": "4b9b7a9442c2fc7ba68d446c2c09c18b",
"text": "\"You're talking about modern portfolio theory. The wiki article goes into the math. Here's the gist: Modern portfolio theory (MPT) is a theory of finance that attempts to maximize portfolio expected return for a given amount of portfolio risk, or equivalently minimize risk for a given level of expected return, by carefully choosing the proportions of various assets. At the most basic level, you either a) pick a level of risk (standard deviation of your whole portfolio) that you're ok with and find the maximum return you can achieve while not exceeding your risk level, or b) pick a level of expected return that you want and minimize risk (again, the standard deviation of your portfolio). You don't maximize both moments at once. The techniques behind actually solving them in all but the most trivial cases (portfolios of two or three assets are trivial cases) are basically quadratic programming because to be realistic, you might have a portfolio that a) doesn't allow short sales for all instruments, and/or b) has some securities that can't be held in fractional amounts (like ETF's or bonds). Then there isn't a closed form solution and you need computational techniques like mixed integer quadratic programming Plenty of firms and people use these techniques, even in their most basic form. Also your terms are a bit strange: It has correlation table p11, p12, ... pij, pnn for i and j running from 1 to n This is usually called the covariance matrix. I want to maximize 2 variables. Namely the expected return and the additive inverse of the standard deviation of the mixed investments. Like I said above you don't maximize two moments (return and inverse of risk). I realize that you're trying to minimize risk by maximizing \"\"negative risk\"\" so to speak but since risk and return are inherently a tradeoff you can't achieve the best of both worlds. Maybe I should point out that although the above sounds nice, and, theoretically, it's sound, as one of the comments points out, it's harder to apply in practice. For example it's easy to calculate a covariance matrix between the returns of two or more assets, but in the simplest case of modern portfolio theory, the assumption is that those covariances don't change over your time horizon. Also coming up with a realistic measure of your level of risk can be tricky. For example you may be ok with a standard deviation of 20% in the positive direction but only be ok with a standard deviation of 5% in the negative direction. Basically in your head, the distribution of returns you want probably has negative skewness: because on the whole you want more positive returns than negative returns. Like I said this can get complicated because then you start minimizing other forms of risk like value at risk, for example, and then modern portfolio theory doesn't necessarily give you closed form solutions anymore. Any actively managed fund that applies this in practice (since obviously a completely passive fund will just replicate the index and not try to minimize risk or anything like that) will probably be using something like the above, or at least something that's more complicated than the basic undergrad portfolio optimization that I talked about above. We'll quickly get beyond what I know at this rate, so maybe I should stop there.\"",
"title": ""
},
{
"docid": "44fa918fa226a914a48c0e624bff32a8",
"text": "The commenters who referred you to the prisoner's dilemma are exactly correct, but I wanted to give a more detailed explanation because I find game theory quite interesting. The prisoner's dilemma is a classic scenario in game theory where even though it's in the best interests of two or more players to cooperate, they fail to do so. Wikipedia has a simple example using prisoners, but I'll use a simple example using Fidel and Charles, who are fund managers at Fidelity and Charles Schwab, respectively. To make the table shorter, I abbreviated a bit: INC = increase fees, KEEP=keep fees the same, DEC=decrease fees. Here is the dilemma itself, in the table that shows the resulting market shares if each fund manager follows the course of action in question. While this example isn't mathematically rigorous because I completely fabricated the numbers, it makes a good example. The most profitable course of action would be both fund managers agreeing to increase their fees, which would keep their market shares the same but increase their profits as they earn more fees. However, this won't happen for several reasons. Because economies of scale exist in the market for investment funds, it's reasonable to assume in a simple example that as funds grow larger, their costs decrease, so even though a fund manager decreases his fees (betraying the other players), this decrease won't be enough to reduce their profits. In fact, the increased market share resulting from such a decrease may well dominate the decreased fees and lead to higher profits. The prisoner's dilemma is highly applicable to markets such as these because they exist as oligopolies, i.e. markets where a relatively small number of established sellers possess considerable market power. If you actually wanted to model the market for donor-advised funds using game theory, you need to take a few more things into account. Obviously there are more than two firms. It's probably a valid assumption that the market is an oligopoly with significant economies of scale, but I haven't researched this extensively. There is more than one time period, so some form of the iterated prisoner's dilemma is needed. The market for donor-advised funds is also complicated by the fact that these are philanthropic funds. This may introduce tax implications or the problem of goodwill and institutional opinion of these funds. Although both funds increasing their fees may increase their profits in theory, institutional investors may look on this as a pure profit-seeking and take their funds elsewhere. For example, they may choose to invest in smaller funds with higher fees but better reputations. While reputation is important for any company, it might make more of a difference when the fund/investment vehicle is philanthropic in nature. I am by no means an expert on game theory, so I'm sure there are other nuances to the situation that I'm unaware of.",
"title": ""
},
{
"docid": "d7c498aeb47a6ff89bd62f0388e5f896",
"text": "Academic research into ADRs seems to suggest that pairs-trading ADRs and their underlying shares reveals that there certainly are arbitrage opportunities, but that in most (but not all cases) such opportunities are quickly taken care of by the market. (See this article for the mexican case, the introduction has a list of other articles you could read on the subject). In some cases parity doesn't seem to be reached, which may have to do with transaction costs, the risk of transacting in a foreign market, as well as administrative & legal concerns that can affect the direct holder of a foreign share but don't impact the ADR holder (since those risks and costs are borne by the institution, which presumably has a better idea of how to manage such risks and costs). It's also worth pointing out that there are almost always arbitrage opportunities that get snapped up quickly: the law of one price doesn't apply for very short time-frames, just that if you're not an expert in that particular domain of the market, it might as well be a law since you won't see the arbitrage opportunities fast enough. That is to say, there are always opportunities for arbitrage with ADRs but chances are YOU won't be able to take advantage of it (In the Mexican case, the price divergence seems to have an average half-life of ~3 days). Some price divergence might be expected: ADR holders shouldn't be expected to know as much about the foreign market as the typical foreign share holder, and that uncertainty may also cause some divergence. There does seem to be some opportunity for arbitrage doing what you suggest in markets where it is not legally possible to short shares, but that likely is the value added from being able to short a share that belongs to a market where you can't do that.",
"title": ""
},
{
"docid": "cfd59d5453f7bac8980471a1619cf26d",
"text": "Basic arbitrage is the (near-)simultaneous purchasing and selling of things that are convertible. The classic example is the international trading of equities. If someone in London wants to purchase a hundred shares of Shell for 40 GBP ea. and someone in New York wants to sell you a hundred shares of Shell for 61 USD ea., you can buy the shares from the guy in New York, sell them to the guy in London and convert your GBP back in to USD for a profit of $41.60 minus fees. Now, if after you buy the shares in New York, the price in London goes down, you'll be left holding 100 shares of Shell that you don't want. So instead you should borrow 100 shares in London and sell them at the exact same time that you buy the shares in New York, thus keeping your net position at 0. In fact, you should also borrow 4000GBP and convert them to USD at the same time, so that exchange rate changes don't get you.",
"title": ""
},
{
"docid": "c5deea8142a0d002a0eb0baa2cd6e99e",
"text": "\"Can someone please clarify if Norbert's gambit is the optimal procedure to exchange CAD to USD? I'm not sure I'd call an arbitrage trade the \"\"optimal procedure,\"\" because as you point out you're introducing yet another point of risk in to the transaction. I think buying the foreign currency for an agreed upon price is the \"\"optimal procedure.\"\" If you must use this arbitrage trade, try with a government bond fund; they're typically very stable.\"",
"title": ""
},
{
"docid": "139f80c3e8aa881661ceed255f3d6c8c",
"text": "\"I'm loving this thread, by the way. The answer to your question is yes: the PDE method and the martingale method lead to the same result. I think this is intuitive, since they address the same things (drift, probability, etc). Heath & Schweizer (2000) have a nice paper in the Journal of Applied Probability that shows the (fairly general) circumstances under which the two methods will always have the same result. It's titled \"\"Martingales versus PDEs in Finance: An Equivalence Result with Examples\"\". My argument is that Black-Scholes is really an equilibrium model, not an arbitrage-free model. Despite that, I'm claiming that it is possible to use BS (and any other equilibrium model) in a no-arbitrage manner by incorporating information from other securities, but that this doesn't make the underlying model and its assumptions a no-arbitrage model. I think, basically, what I'm trying to say is that I don't think market completeness is really the issue, but rather that the issue is the difference between the model and reality. Equilibrium models make a statement about what reality *should* be, given some parameters that you're supposed to know with certainty (all bets are off if you have to estimate them). Arbitrage-free models explicitly use external, observed prices, *but do not explain why we observe those prices*. In this context (and using these definitions), I'd say Black-Scholes is clearly an equilibrium model, albeit one built from some arguments that involve arbitrage.\"",
"title": ""
},
{
"docid": "e215380be65e1d229d6662ffc05ffa45",
"text": "A bullish (or 'long') call spread is actually two separate option trades. The A/B notation is, respectively, the strike price of each trade. The first 'leg' of the strategy, corresponding to B, is the sale of a call option at a strike price of B (in this case $165). The proceeds from this sale, after transaction costs, are generally used to offset the cost of the second 'leg'. The second 'leg' of the strategy, corresponding to A, is the purchase of a call option at a strike price of A (in this case $145). Now, the important part: the payoff. You can visualize it as so. This is where it gets a teeny bit math-y. Below, P is the profit of the strategy, K1 is the strike price of the long call, K2 is the strike price of the short call, T1 is the premium paid for the long call option at the time of purchase, T2 is the premium received for the short call at the time of sale, and S is the current price of the stock. For simplicity's sake, we will assume that your position quantity is a single option contract and transaction costs are zero (which they are not). P = (T2 - max(0, S - K2)) + (max(0, S - K1) - T1) Concretely, let's plug in the strikes of the strategy Nathan proposes, and current prices (which I pulled from the screen). You have: P = (1.85 - max(0, 142.50 - 165)) - (max(0, 142.50 - 145)) = -$7.80 If the stock goes to $150, the payoff is -$2.80, which isn't quite break even -- but it may have been at the time he was speaking on TV. If the stock goes to $165, the payoff is $12.20. Please do not neglect the cost of the trades! Trading options can be pretty expensive depending on the broker. Had I done this trade (quantity 1) at many popular brokers, I still would've been net negative PnL even if NFLX went to >= $165.",
"title": ""
},
{
"docid": "b0d570729d6309ccf9878653379d3654",
"text": "The literal answer to your question 'what determines the price of an ETF' is 'the market'; it is whatever price a buyer is willing to pay and a seller is willing to accept. But if the market price of an ETF share deviates significantly from its NAV, the per-share market value of the securities in its portfolio, then an Authorized Participant can make an arbitrage profit by a transaction (creation or redemption) that pushes the market price toward NAV. Thus as long as the markets are operating and the APs don't vanish in a puff of smoke we can expect price will track NAV. That reduces your question to: why does NAV = market value of the holdings underlying a bond ETF share decrease when the market interest rate rises? Let's consider an example. I'll use US Treasuries because they have very active markets, are treated as risk-free (although that can be debated), and excluding special cases like TIPS and strips are almost perfectly fungible. And I use round numbers for convenience. Let's assume the current market interest rate is 2% and 'Spindoctor 10-year Treasury Fund' opens for business with $100m invested (via APs) in 10-year T-notes with 2% coupon at par and 1m shares issued that are worth $100 each. Now assume the interest rate goes up to 3% (this is an example NOT A PREDICTION); no one wants to pay par for a 2% bond when they can get 3% elsewhere, so its value goes down to about 0.9 of par (not exactly due to the way the arithmetic works but close enough) and Spindoctor shares similarly slide to $90. At this price an investor gets slightly over 2% (coupon*face/basis) plus approximately 1% amortized capital gain (slightly less due to time value) per year so it's competitive with a 3% coupon at par. As you say new bonds are available that pay 3%. But our fund doesn't hold them; we hold old bonds with a face value of $100m but a market value of only $90m. If we sell those bonds now and buy 3% bonds to (try to) replace them, we only get $90m par value of 3% bonds, so now our fund is paying a competitive 3% but NAV is still only $90. At the other extreme, say we hold the 2% bonds to maturity, paying out only 2% interest but letting our NAV increase as the remaining term (duration) and thus discount of the bonds decreases -- assuming the market interest rate doesn't change again, which for 10 years is probably unrealistic (ignoring 2009-2016!). At the end of 10 years the 2% bonds are redeemed at par and our NAV is back to $100 -- but from the investor's point of view they've forgone $10 in interest they could have received from an alternative investment over those 10 years, which is effectively an additional investment, so the original share price of $90 was correct.",
"title": ""
},
{
"docid": "bc6441895c3baa22d5e47efabf9c69e4",
"text": "\"As you say, the currency carry trade shouldn't work. The deluge of new cash into a high-interest currency should result in falling exchange rates. A November 2009 paper by Òscar Jordà and Alan Taylor of the University of California, Davis, may be offer one approach which is more stable. According to The Economist: They find that a refined carry-trade strategy—one that incorporates a measure of long-term value—produces more consistent profits and is less prone to huge losses than one that targets the highest yield. However, exchange rates, central bank interest rates, as well as money supply are all political as well as economic constructs. An economic driver for arbitrage may be offset by political will (such as US quantative easing) or even social malaise (Japanese continual low inward investment). I wouldn't go so far as calling the carry trade \"\"free money\"\" - currencies have proven far too unstable for that - but state interference in markets tends to be clearly telegraphed and a trader with nerves of steel may take advantage of it.\"",
"title": ""
},
{
"docid": "8efad011153e1a252633e7cf601a316f",
"text": "\"The process of borrowing shares and selling them is called shorting a stock, or \"\"going short.\"\" When you use money to buy shares, it is called \"\"going long.\"\" In general, your strategy of going long and short in the same stock in the same amounts does not gain you anything. Let's look at your two scenarios to see why. When you start, LOOT is trading at $20 per share. You purchased 100 shares for $2000, and you borrowed and sold 100 shares for $2000. You are both long and short in the stock for $2000. At this point, you have invested $2000, and you got your $2000 back from the short proceeds. You own and owe 100 shares. Under scenario A, the price goes up to $30 per share. Your long shares have gone up in value by $1000. However, you have lost $1000 on your short shares. Your short is called, and you return your 100 shares, and have to pay interest. Under this scenario, after it is all done, you have lost whatever the interest charges are. Under scenario B, the prices goes down to $10 per share. Your long shares have lost $1000 in value. However, your short has gained $1000 in value, because you can buy the 100 shares for only $1000 and return them, and you are left with the $1000 out of the $2000 you got when you first sold the shorted shares. However, because your long shares have lost $1000, you still haven't gained anything. Here again, you have lost whatever the interest charges are. As explained in the Traders Exclusive article that @RonJohn posted in the comments, there are investors that go long and short on the same stock at the same time. However, this might be done if the investor believes that the stock will go down in a short-term time frame, but up in the long-term time frame. The investor might buy and hold for the long term, but go short for a brief time while holding the long position. However, that is not what you are suggesting. Your proposal makes no prediction on what the stock might do in different periods of time. You are only attempting to hedge your bets. And it doesn't work. A long position and a short position are opposites to each other, and no matter which way the stock moves, you'll lose the same amount with one position that you have gained in the other position. And you'll be out the interest charges from the borrowed shares every time. With your comment, you have stated that your scenario is that you believe that the stock will go up long term, but you also believe that the stock is at a short-term peak and will drop in the near future. This, however, doesn't really change things much. Let's look again at your possible scenarios. You believe that the stock is a long-term buy, but for some reason you are guessing that the stock will drop in the short-term. Under scenario A, you were incorrect about your short-term guess. And, although you might have been correct about the long-term prospects, you have missed this gain. You are out the interest charges, and if you still think the stock is headed up over the long term, you'll need to buy back in at a higher price. Under scenario B, it turns out that you were correct about the short-term drop. You pocket some cash, but there is no guarantee that the stock will rise anytime soon. Your investment has lost value, and the gain that you made with your short is still tied up in stocks that are currently down. Your strategy does prevent the possibility of the unlimited loss inherent in the short. However, it also prevents the possibility of the unlimited gain inherent in the long position. And this is a shame, since you fundamentally believe that the stock is undervalued and is headed up. You are sabotaging your long-term gains for a chance at a small short-term gain.\"",
"title": ""
},
{
"docid": "224aff422d16df2e577db7132e434f85",
"text": "\"You're mostly correct, although I think you're missing something essential about no-arbitrage versus an arbitrage argument. Black-Scholes makes an arbitrage argument, which is that the value of an option should be the same as any portfolio that has identical cash flows, and this is generally a sound argument. Notice, however, that BS is ultimately an equilibrium model: it tells you the \"\"correct\"\" price of an option if the assumptions of BS hold, and doesn't necessarily match observed market prices. A no-arbitrage condition or model deliberately incorporates observed prices (or yields, or whatever) into the model, so that there cannot be an arbitrage opportunity implied by the model. This comes up a lot in term structure of interest rate problems, where equilibrium models like Vasicek or Cox-Ingersoll-Ross won't perfectly reproduce the current, observed term structure, and so imply an arbitrage opportunity. No-arbitrage models like Hull-White specifically match the model's term structure to observed yields/prices, so that there is no arbitrage opportunity between the observed term structure and your model of it. It's important to note that this will still allow for arbitrage involving bonds that are *not* part of the observed term structure. As for equivalent martingale measures, you might think about it more generally. The process involves changing the probability distribution from the actual (which is hard to use for pricing) to a different one that's easier to use but will result in the same prices; this is nearly always a risk-neutral probability. You can think of equivalent martingale pricing as asking, \"\"how would this security behave, and be priced, in a world that is completely risk neutral\"\", and then making an argument that the prices are in fact equivalent. EDIT: grammar\"",
"title": ""
},
{
"docid": "afd55a620b8f7f4be8eb0f72d72178f2",
"text": "\"Being \"\"long\"\" - expecting the price to go up to make a profit - is a two step process: 1) buy 2) sell Being \"\"short\"\" - expecting the price to go down to make a profit - is a 5 step process: 1) borrow someone else's asset 2) sell their asset on the open market to somebody else a third party 3) pocket the proceeds of the sell for your own account 4) buy an identical asset for a cheaper price 5) return this identical asset to the person that let you borrow their asset if this is successful you keep the difference between 3) and 4)\"",
"title": ""
},
{
"docid": "305cc437d237af842843b32283de3763",
"text": "\"What disconnect? And I'm not even kidding here - where is it? Do you really think that arbitrage that is a pittance compared to long term trading somehow distorts the process that some people claim is actually socially beneficial? Given that there's really no evidence of it causing misallocation or mispricing, what is the problem? That some dumbass day trader (who is, by the way, trying to make money in exactly the same way as the HFT people - he's just worse at it) got screwed over by some not-quite-as-dumbass people working at Goldman Sachs? And why would you think that HFT (or any other advancement) is somehow related to such a thing; we've had \"\"speculation\"\" and foul play of various types for hundreds of years. What is it that is fundamentally different this time that wasn't there in, for example, the 80s?\"",
"title": ""
}
] |
fiqa
|
f7d5efba4a4c527e923576fe604ff2b1
|
Can warrants to buy stock contain conditions or stipulations other than price?
|
[
{
"docid": "3fd948cde00191d690fa4f9864f8eb30",
"text": "All sorts of conditions, yes. Most commonly is a limitation on the exercise date. The two more common would be American which is exercisable any time, and European which are only exercisable on their expiry date. Sometimes they may be linked to the original asset, and might only be convertible to stock if that original asset is given/sold back to the company. (Effectively perhaps making the bond convertible to stock). Lots more details on the Pedia, but in short, basically you need to read the warrant contract individually, as each will differ.",
"title": ""
}
] |
[
{
"docid": "ecb156f821da90cf6b20e5f77a89ecea",
"text": "Let's work from the inside out. Options are not stock. Options are a contract that give you the right to own the stock. For options to have value they have to be exercised. Straight line means that each quarter 1/16th of the option grant becomes yours and the company cannot take it away. Four quarters in a year times four years is 16 quarters. 'Grant' means they are giving you the options at no cost to you. 'Nonqualified' means that there is nothing you have to do, or be, in order to get the options. (Some options are only for management.)",
"title": ""
},
{
"docid": "8fd22fb4b04a3bab76b172ea9a18a837",
"text": "Something to consider is that in the case of the company you chose, on the OTC market, that stock is thinly traded and with such low volume, it can be easy for it to fluctuate greatly to have trades occur. This is why volume can matter for some people when it comes to buying shares. Some OTC stocks may have really low volume and thus may have bigger swings than other stocks that have higher volume.",
"title": ""
},
{
"docid": "4046514c9c1f46c97d5cbb109400ba6e",
"text": "It depends completely on the current order book for that security. There is literally no telling how that buy order would move the price of a stock in general.",
"title": ""
},
{
"docid": "d789e42d59c3ecd9aa81709d72c53a26",
"text": "Buy and sell orders always include the price at which you buy/sell. That's how the market prices for stocks are determines. So if you want to place a buy order at 106, you can do that. When that order was fulfilled and you have the stock, you can place a sell order at 107. It will be processed as soon as someone places a buy order at 107. Theoretically you can even place sell orders for stocks you haven't even bought yet. That's called short selling. You do that when you expect a stock to go down in the future. But this is a very risky operation, because when you mispredict the market you might end up owing more money than you invested. No responsible banker will even discuss this with you when you can not prove you know what you are doing.",
"title": ""
},
{
"docid": "2ca73cc0c28838ed1dafb94c0b3cf5db",
"text": "\"Shares sold to private investors are sold using private contracts and do not adhere to the same level of strict regulations as publicly traded shares. You may have different classes of shares in the company with different strings attached to them, depending on the deals made with the investors at the time. Since public cannot negotiate, the IPO prospectus is in fact the investment contract between the company and the public, and the requirements to what the company can put there are much stricter than private sales. Bob may not be able to sell his \"\"special\"\" stocks on the public exchange, as the IPO specifies which class of stock is being listed for trading, and Bob's is not the same class. He can sell it on the OTC market, which is less regulated, and then the buyer has to do his due diligence. Yes, OTC-sold stocks may have strings attached to them (for example a buy back option at a preset time and price).\"",
"title": ""
},
{
"docid": "b8da10c8337c08554e4582761a771d98",
"text": "underwriters aren't subject to lock-up. They actually don't hold anything. They oversell at IPO, with their short position covered by the green shoe (an option from the company). If the deal does well, the underwriters exercise the green shoe to cover their short. If the deal runs into some pressure, they step in to support the price by buying back shares... thereby covering their short. So they are doing price support in the early days of a deal, but it is almost always paid for by the company granting them an option. But the underwriters aren't taking stock. Correct that typically all insiders and existing investors are expected to sign-up a lock-up.",
"title": ""
},
{
"docid": "69c90279a1829fd8ce58e09cb7fd2a79",
"text": "No. If you didn't specify LIFO on account or sell by specifying the shares you wish sold, then the brokers method applies. From Publication 551 Identifying stock or bonds sold. If you can adequately identify the shares of stock or the bonds you sold, their basis is the cost or other basis of the particular shares of stock or bonds. If you buy and sell securities at various times in varying quantities and you cannot adequately identify the shares you sell, the basis of the securities you sell is the basis of the securities you acquired first. For more information about identifying securities you sell, see Stocks and Bonds under Basis of Investment Property in chapter 4 of Pub. 550. The trick is to identify the stock lot prior to sale.",
"title": ""
},
{
"docid": "6715398b77d54f3615158a59b309c063",
"text": "\"Interactive Brokers offers global securities trading. Notice that the security types are: cash, stock (STK), futures (FUT), options (OPT), futures options (FOP), warrants (WAR), bonds, contracts for differences (CFD), or Dutch warrants (IOPT) There is a distinction between options (OPT), warrants (WAR), options on futures (FOP) and finally, Dutch Warrants (IOPT). IOPT is intuitively similar to an \"\"index option\"\". (For index option valuation equations, iopt=1 for a call, and iopt= -1 for a put. I don't know if Interactive Brokers uses that convention). What is the difference between a \"\"Dutch Warrant\"\" and an option or warrant? Dutch warrants aren't analogous to Dutch auctions e.g. in the U.S.Treasury bond market. For North America, Interactive Brokers only lists commissions for traditional warrants and options, that is, warrants and options that have a single stock as the underlying security. For Asia and Europe, Interactive Brokers lists both the \"\"regular\"\" options (and warrants) as well as \"\"equity index options\"\", see commission schedule. Dutch warrants are actually more like options than warrants, and that may be why Interactive Brokers refers to them as IOPTS (index options). Here's some background from a research article about Dutch warrants (which was NOT easy to find): In the Netherlands, ING Bank introduced call and put warrants on the FT-SE 100, the CAC 40 and the German DAX indexes. These are some differences between [Dutch] index warrants and exchange traded index options: That last point is the most important, as it makes the pricing and valuation less subject to arbitrage. Last part of the question: Where do you find Structured Products on Interactive Brokers website? Look on the Products page (rather than the Commissions page, which does't mention Structured Products at all). There is a Structured Products tab with details.\"",
"title": ""
},
{
"docid": "ef30a432d7454e3ff4e13d625cde1ce5",
"text": "\"As @ApplePie pointed out in their answer, at any given time there is a finite amount of stock available in a company. One subtlety you may be missing is that there is always a price associated with an offer to buy shares. That is, you don't put in an order simply to buy 1 share of ABC, you put in an order to buy 1 share of ABC for $10. If no one is willing to sell a share of ABC for $10, then your order will go unfilled. This happens millions of times a day as traders try to figure the cheapest price they can get for a stock. Practically speaking, there is always a price at which people are willing to sell their shares. You can put in a market order for 1 share of ABC, which says essentially \"\"I want one share of ABC, and I will pay whatever the market deems to be the price\"\". Your broker will find you 1 share, but you may be very unhappy about the price you have to pay! While it's very rare for a market to have nobody willing to sell at any price, it occasionally happens that no one is willing to buy at any price. This causes a market crash, as in the 2007-2008 financial crisis, when suddenly everyone became very suspicious of how much debt the major banks actually held, and for a few days, very few traders were willing to buy bank stocks at any price.\"",
"title": ""
},
{
"docid": "0e09e504da831f2a596ce992d0226259",
"text": "\"For every buyer there is a seller. That rule refers to actual (historical) trades. It doesn't apply to \"\"wannabees.\"\" Suppose there are buyers for 2,000 shares and sellers for only 1,000 at a given price, P. Some of those buyers will raise their \"\"bid\"\" (the indication of the price they are willing to pay) above P so that the sellers of the 1000 shares will fill their orders first (\"\"sold to the highest bidder\"\"). The ones that don't do this will (probably) not get their orders filled. Suppose there are more sellers than buyers. Then some sellers will lower their \"\"offer\"\" price to attract buyers (and some sellers probably won't). At a low enough price, there will likely be a \"\"match\"\" between the total number of shares on sale, and shares on purchase orders.\"",
"title": ""
},
{
"docid": "0bc45136caca7745acf7af3a33fe7e41",
"text": "I don't think you understand options. If it expires, you can't write a new call for the same expiration date as it expired that day. Also what if the stock price decreases further to $40 or even more? If you think the stock will move in either way greatly, and you wish to be profit from it, look into straddles.",
"title": ""
},
{
"docid": "8b9343c6b6243a75529b6cc30d3c93f1",
"text": "\"That's the way the markets work in THEORY. In actual fact, markets are subject to \"\"real world\"\" pressures. That is, there are so many things going on in the market that the end of the \"\"Lined In\"\" lock up is just one of many. To produce the result you describe, traders would have to hold cash in reserve for this so-called \"\"contingency\"\" to buy at the end of the lock-up. In most cases, they wouldn't want to because of everything else that is going on. To use a real world analogy, would you want to wait until the last possible moment before going to the bathroom? Or would you go now while you had the chance? That's what the decision about \"\"holding cash in reserve for a contingency\"\" is like.\"",
"title": ""
},
{
"docid": "971fa0f2e0225a6fc471fc34d6c4f1e7",
"text": "I can't speak for all brokerages but the one I use requires cash accounts to have cash available to purchase the stock in this situation. With the cash available you would be able to purchase the stock if the option was exercised. Hope this helps",
"title": ""
},
{
"docid": "2f9c383ddc0240549e56b8035e2188fb",
"text": "Can a company not bargain with a dying company for example and buy a falling stock at lower than market value? Of course. If the shareholders agree to it. But why would they, if the market value is higher, agree to sell to someone who offers less? If there's a compelling reason - it can happen. It might happen during a hostile takeover, for example. In the case of buying the company for more than market value, are the stocks bought for significantly more, or slightly more than the current market value? Again, depends on how valuable the shareholders think the company is. If the shareholders think that the company has a potential which has not yet affected the stock price, they'll want a higher premium (and they'd think that, otherwise why would they hold the stock?). How much higher? Depends on the bargaining abilities of the sides.",
"title": ""
},
{
"docid": "8ad5c2927fa3913dc196b47f4cff7d1a",
"text": "No, you trade the warrant and the warrant price of $11.50 for one stock. The warrant is a little like an option, but with a longer term. If you buy a IPOA.WS warrant then that warrant gives you the option to buy one share of class A stock at $11.50 at a future date. If in the future, the stock is worth $20, then you make $20 - $11.50 - per share. If you buy one IPOA.U, then you get 1/3 of a warrant and 1 share of stock, the warrants will be useless unless you buy in groups of 3 for the IPOA.U. I didn't see the timeframe of the warrant, they're usually good for 10+ years, and they're currently trading in the $1.5-1.8 range. To confirm, here's a decent article about how warrants work: http://www.investopedia.com/articles/04/021704.asp",
"title": ""
}
] |
fiqa
|
89c943c3998ba714b85d0b2b61d52306
|
Is stock trading based more on luck than poker playing?
|
[
{
"docid": "fa09b5650b3e3017d5ce58eea7eb1d52",
"text": "I'd say that it cannot be meaningfully calculated or measured because the two are just too different in every way. Poker Stock trading I guess the last point (that someone relying on luck is exploitable in poker but not in stock trading) could be interpreted as stock trading being based more on luck, while the second and third points indicated that poker has more true randomness and is thus based more on luck. Something both have in common is that people who have been losing money are often tempted to take stupid risks which lose them everything.",
"title": ""
},
{
"docid": "e729fd9708142d3b72345705f9ccda9c",
"text": "\"This depends strongly on what you mean by \"\"stock trading\"\". It isn't a single game, but a huge number of games grouped under a single name. You can invest in individual stocks. If you're willing to make the (large) effort needed to research the companies and their current position and potentialities, this can yield large returns at high risk, or moderate returns at moderate risk. You need to diversify across multiple stocks, and multiple kinds of stocks (and probably bonds and other investment vehicles as well) to manage that risk. Or you can invest in managed mutual funds, where someone picks and balances the stocks for you. They charge a fee for that service, which has to be subtracted from their stated returns. You need to decide how much you trust them. You will usually need to diversify across multiple funds to get the balance of risk you're looking for, with a few exceptions like Target Date funds. Or you can invest in index funds, which automate the stock-picking process to take a wide view of the market and count on the fact that, over time, the market as a whole moves upward. These may not produce the same returns on paper, but their fees are MUCH lower -- enough so that the actual returns to the investor can be as good as, or better than, managed funds. The same point about diversification remains true, with the same exceptions. Or you can invest in a mixture of these, plus bonds and other investment vehicles, to suit your own level of confidence in your abilities, confidence in the market as a whole, risk tolerance, and so on. Having said all that, there's also a huge difference between \"\"trading\"\" and \"\"investing\"\", at least as I use the terms. Stock trading on a short-term basis is much closer to pure gambling -- unless you do the work to deeply research the stocks in question so you know their value better than other people do, and you're playing against pros. You know the rule about poker: If you look around the table and don't see the sucker, he's sitting in your seat... well, that's true to some degree in short-term trading too. This isn't quite a zero-sum game, but it takes more work to play well than I consider worth the effort. Investing for the long term -- defining a balanced mixture of investments and maintaining that mixture for years, with purchases and sales chosen to keep things balanced -- is a positive sum game, since the market does drift upward over time at a long-term average of about 8%/year. If you're sufficiently diversified (which is one reason I like index funds), you're basically riding that rise. This puts you in the position of betting with the pros rather than against them, which is a lower-risk position. Of course the potential returns are reduced too, but I've found that \"\"market rate of return\"\" has been entirely adequate, though not exciting. Of course there's risk here too, if the market dips for some reason, such as the \"\"great recession\"\" we just went through -- but if you're planning for the long term you can usually ride out such dips, and perhaps even see them as opportunities to buy at a discount. Others can tell you more about the details of each of these, and may disagree with my characterizations ... but that's the approach I've taken, based on advice I trust. I could probably increase my returns if I was willing to invest more time and effort in doing so, but I don't especially like playing games for money, and I'm getting quite enough for my purposes and spending near-zero effort on it, which is exactly what I want.\"",
"title": ""
},
{
"docid": "1c39c551f496cf4eb9805d8702548952",
"text": "I assert not so. Even if we assume a zero sum game (which is highly in doubt); the general stock market curves indicate the average player is so bad that you don't have to be very good to have better that 50/50 averages. One example: UP stock nosedived right after some political mess in Russia two years ago. Buy! Profit: half my money in a month. I knew that nosedive was senseless as UP doesn't have to care much about what goes on in Russia. Rising oil price was a reasonable prediction; however this is good for railroads, and most short-term market trends behave as if it is bad.",
"title": ""
}
] |
[
{
"docid": "ee8da48f29cae322b5d609d552edca4e",
"text": "We're probably thinking of different jobs. I have read countless stories of how if you want to be an investment banker or a quant, you need to go to an ivy league school and be at the top of your class. But I have also heard that many traders are more akin to blue-collar workers, and only need the gusto.",
"title": ""
},
{
"docid": "6a1262891c194a2cbc898f9e9242f2df",
"text": "being prepared to take advantage of opportunities is also determined by luck. Did you get to choose who your parents were or how they brought you up, eventually defining your personality and therefore propensity to be prepared for opportunities? No. Did you get to choose what random events occurred around an opportunity, which modified your ability or propensity to act up on it? No. The idea of 'success' depends on the idea of free will and the ability to overcome disadvantages, but you don't even need to rule out free will to see that ability itself is determined by luck. Luck is all. Read The Sirens of Titan by Vonnegut, it really solidified my thinking in this vein.",
"title": ""
},
{
"docid": "bf07ec9e09b72c3b44f4c116f1caed05",
"text": "Someone entering a casino with $15 could employ a very simple strategy and have a better-than-90% chance of walking out with $16. Unfortunately, the person would have a non-trivial chance (about one in 14) of walking out with $0. If after losing $15 the person withdrew $240 from the bank and tried to win $16, the person would have a better-than-90% chance of succeeding and ending up ahead (holding the original $15, plus the additional $240, plus $1) but would have at that point about a one in 14 chance from that point of losing the $240 along with the original $15. Measured from the starting point, you'd have about a 199 out of 200 chance of gaining $1, and a one out of 200 chance of losing $240. Market-timing bets are like that. You can arrange things so you have a significant chance of making a small profit, but at the risk of a large downside. If you haven't firmly decided exactly how much downside you are willing to accept, it's very easy to simultaneously believe you don't have much money at risk, but that you'll be able to win back anything you lose. The only way you can hope to win back anything you lose is by bringing a lot more money to the table, which will of course greatly increase your downside risk. The probability of making money for the person willing to accept $15 of downside risk to earn $1 is about 93%. The probability of making money for the person willing to accept $255 worth of risk is about 99.5%. It's easy to see that there are ways of playing which have a 99.5% chance of winning, and that there are ways of playing that only have a 15:1 downside risk. Unfortunately, the ways of playing that have the smaller risk don't have anything near a 99.9% chance of winning, and those that have a better chance of winning have a much larger downside risk.",
"title": ""
},
{
"docid": "db36784b4dcf7d7f90ba6e9e02a58c7e",
"text": "\"Clearly you aren't in trading. While that is the case for IBanking, I personally work with numerous very successful traders who \"\"underperformed their peers\"\" and I'm not doing so bad myself either. Having a good GPA has almost no correlation with being a good trader. Honestly, from the interviews I've given I've found that the kids with the extremely high GPA's 4.0, were less suited for the profession.\"",
"title": ""
},
{
"docid": "31cc1b414ce9879753cb345ab95d2af5",
"text": "\"Even the Wall Street jobs require skill, knowing how the stock market work, knowing how people work, etc. Even saying \"\"that luck is the main factor in the majority of cases of great wealth\"\" is still wrong. Really the only time luck is the real reason is non skill based gambling games (lottery, slots, etc), inheritance, and finding a wallet on the side of the road/street\"",
"title": ""
},
{
"docid": "ffcaa2f4da364083844146b2ab7a2396",
"text": "Mark Zuckerburg is a mixture of hard work, intelligence, and soullessness. He spent more time working, reading, or studying, when others were out drinking. That's the story of most successful people. They spend their time taking risk, so they make their own luck. Sure, it boils down to luck, but you can't be lucky if you don't play. What people like to hear worse is that they can make their own success. Though success on the Facebook level seems to have some aspects of luck, most successful people are successful because they spend their time taking risk. If you are working for someone else, you are not taking a risk. If you are goofing off, you are not really taking a risk. Unless you are specifically building project for profit, or performing some service, this luck will never shine down on you.",
"title": ""
},
{
"docid": "0ea62e95e3263f1a36380f04e52a0b54",
"text": "It is not luck just as much it was destined to happen. If you want to get real technical, it's the every action he has taken(both mental and physical), from BIRTH, that put him, or anyone else for that matter, in the financial and medical health we're in at this very very second.",
"title": ""
},
{
"docid": "9dddc1a47be34d8ba56d8071a8d8f94b",
"text": "\"If they could really do this, do you really think they would be wasting their time offering this course? You are being lied to. (Or more accurately: It's certainly possible to gamble and get lucky, but those gambles are more likely to result in your rapidly losing your money than in your rapidly gaining value.) It is possible to make money in the market. But \"\"market rate of return\"\" has historically averaged around 8%. That won't make you rich by itself, but it's better return than you can get from banks... at higher risk, please note. There are places in the market where, by accepting more risk of losing your money, you can improve on that 8%. For me the risk and effort are too much for the potential additional gains, but de gustibus.\"",
"title": ""
},
{
"docid": "3acf275d77964f6b617beee49dcc0d64",
"text": "There are those who would suggest that due to the Efficient Market Hypothesis, stocks are always fairly valued. Consider, if non-professional posters on SE (here) had a method that worked beyond random chance, everyone seeking such a method would soon know it. If everyone used that method, it would lose its advantage. In theory, this is how stocks' values remain rational. That said, Williams %R is one such indicator. It can be seen in action on Yahoo finance - In the end, I find such indicators far less useful than the news itself. BP oil spill - Did anyone believe that such a huge oil company wouldn't recover from that disaster? It recovered by nearly doubling from its bottom after that news. A chart of NFLX (Netflix) offers a similar news disaster, and recovery. Both of these examples are not quantifiable, in my opinion, just gut reactions. A quick look at the company and answer to one question - Do I feel this company will recover? To be candid - in the 08/09 crash, I felt that way about Ford and GM. Ford returned 10X from the bottom, GM went through bankruptcy. That observation suggests another question, i.e. where is the line drawn between 'investing' and 'gambling'? My answer is that buying one stock hoping for its recovery is gambling. Being able to do this for 5-10 stocks, or one every few months, is investing.",
"title": ""
},
{
"docid": "318bf7c07d2181281ba642478fc8debb",
"text": "I agree with the other answers, but I want to give a slightly different perspective. I believe that a lot of people are smart enough to beat the market, but that it takes a lot more dedication, patience, and self-control than they think. Before Warren Buffett buys a stock, he has read the quarterly reports for years, has personally met with management, has visited facilities, etc. If you aren't willing to do that kind of analysis for every stock you buy, then I think that you are doing little more than gambling. If you are just using the information that everyone else has, then you'll get the returns that everyone else gets (if you're lucky).",
"title": ""
},
{
"docid": "c0a22865d3c92a8476bba9a888093840",
"text": "No, the stock market and investing in general is not a zero sum game. Some types of trades are zero sum because of the nature of the trade. But someone isn't necessarily losing when you gain in the sale of a stock or other security. I'm not going to type out a technical thesis for your question. But the main failure of the idea that investing is zero sum is the fact the a company does not participate in the transacting of its stock in the secondary market nor does it set the price. This is materially different from the trading of options contracts. Options contracts are the trading of risk, one side of the contract wins and one side of the contract loses. If you want to run down the economic theory that if Jenny bought her shares from Bob someone else is missing out on Jenny's money you're free to do that. But that would mean that literally every transaction in the entire economy is part of a zero sum game (and really misses the definition of zero sum game). Poker is a zero sum game. All players bet in to the game in equal amounts, one player takes all the money. And hell, I've played poker and lost but still sometimes feel that received value in the form of entertainment.",
"title": ""
},
{
"docid": "6ede2221b9cba836cc16caa75a486192",
"text": "Being lucky is definitely a part of it, but being smart on how to navigate each choice is NOT based on luck. Think of a blackjack game. A game based on luck, but you can make logical moves that can help you win. Do you double-down on an 11 with 3 face cards on the table?, probably not. Do you split the tens with lots of low cards on the table?, yes. So to think it's only luck that determines one success is naive.",
"title": ""
},
{
"docid": "13fe2693df54cb1419cc60e61a2343b4",
"text": "\"You have already indicted in another question, titled Which risk did I take winning this much?, that you did not understand (1) Why a previous trade made you as much money as it did; nor (2) How much you could have lost if things went a different way. You were, in that other question, talking about taking short position, without understanding (apparently) that a short position can create losses exceeding the value of your initial investment. Can one make money doing day trading? Yes, an educated investor may be able to prudently invest in short term positions making knowledgeable judgments about risk, and still make money. Can you make money doing day trading? Well, maybe. You have in the past, in what you described in a previous post as \"\"winning\"\". So even in your own eyes, you were effectively gambling, and got lucky. Perhaps the more relevant questions you can ask yourself are: Can you lose money doing day trading? And, most importantly, Are you more likely to lose money day trading, or consistently make money by taking on reasonable and educated risks?\"",
"title": ""
},
{
"docid": "ef24b8ea7bbc07185c1410de1dbae6dc",
"text": "> No, because I assert that it's not only about these lucky events. It still takes some degree of intelligence, or insight, and hard work That is just as, if not more, superstitious as believing in luck as a measurable force. Without prescience, it's impossible to predict which way hard work will pay off. 'luck' (or coincidence, if you prefer) can cut you out of the successful herd in a single morning of stock market flunctuations. You're talking about good choices, when the case in point we just read showed that lewis make blind, dumb choices twice that paid off - and shouldn't have. > with the ability and drive to maximize the opportunity Again, what you are talking about involves predicting how a presented advantage will pan out. Choosing nearly-identical employer A instead of B will only be obviously a good choice in hindsight. Getting it right is 'luck'.",
"title": ""
},
{
"docid": "ba92dda80ec4ee9b2a01658aad4269a3",
"text": "\"The policy you quoted suggests you deposit 6% minimum. That $6,000 will cost you $4,500 due to the tax effect, yet after the match, you'll have $9,000 in the account. Taxable on withdrawal, but a great boost to the account. The question of where is less clear. There must be more than the 2 choices you mention. Most plans have 'too many' choices. This segues into my focus on expenses. A few years back, PBS Frontline aired a program titled The Retirement Gamble, in which fund expenses were discussed, with a focus on how an extra 1% in expenses will wipe out an extra 1/3 of your wealth in a 40 year period. Very simple to illustrate this - go to a calculator and enter .99 raised to the power of 40. .669 is the result. My 401(k) has an expense of .02% (that's 1/50 of 1%) .9998 raised to the same 40 gives .992, in other words, a cost of .8% over the full 40 years. My wife and I are just retired, and will have less in expenses for the rest of our lives than the average account cost for just 1 year. In your situation, the knee-jerk reaction is to tell you to maximize the 401(k) deposit at the current (2016) $18,000. That might be appropriate, but I'd suggest you look at the expense of the S&P index (sometime called Large Cap Fund, but see the prospectus) and if it's costing much more than .75%/yr, I'd go with an IRA (Roth, if you can't deduct the traditional IRA). Much of the value of the 401(k) beyond the match is the tax differential, i.e. depositing while in the 25% bracket, but withdrawing the funds at retirement, hopefully at 15%. It doesn't take long for the extra expense and the \"\"holy cow, my 401(k) just turned decades of dividends and long term cap gains into ordinary income\"\" effect to take over. Understand this now, not 30 years hence. Last - to answer your question, 'how much'? I often recommend what may seem a cliche \"\"continue to live like a student.\"\" Half the country lives on $54K or less. There's certainly a wide gray area, but in general, a person starting out will choose one of 2 paths, living just at, or even above his means, or living way below, and saving, say, 30-40% off the top. Even 30% doesn't hit the extreme saver level. If you do this, you'll find that if/when you get married, buy a house, have kids, etc. you'll still be able to save a reasonable percent of your income toward retirement. In response to your comment, what counts as retirement savings? There's a concept used as part of the budgeting process known as the envelope system. For those who have an income where there's little discretionary money left over each month, the method of putting money aside into small buckets is a great idea. In your case, say you take me up on the 30-40% challenge. 15% of it goes to a hard and fast retirement account. The rest, to savings, according to the general order of emergency fund, 6-12 months expenses, to cover a job loss, another fund for random expenses, such as new transmission (I've never needed one, but I hear they are expensive), and then the bucket towards house down payment. Keep in mind, I have no idea where you live or what a reasonable house would cost. Regardless, a 20-25% downpayment on even a $250K house is $60K. That will take some time to save up. If the housing in your area is more, bump it accordingly. If the savings starts to grow beyond any short term needs, it gets invested towards the long term, and is treated as \"\"retirement\"\" money. There is no such thing as Saving too much. When I turned 50 and was let go from a 30 year job, I wasn't unhappy that I saved too much and could call it quits that day. Had I been saving just right, I'd have been 10 years shy of my target.\"",
"title": ""
}
] |
fiqa
|
9e4f1eb30e8557890dce94e9bb6878f6
|
What is the opposite of a sunk cost? A “sunk gain”?
|
[
{
"docid": "691507a8b59982fbc66bf4fc3f3fa831",
"text": "\"It is called \"\"Opportunity Cost.\"\" Opportunity cost is the value you lose because of a decision you made. This is the book definition from Investopedia. The difference in return between a chosen investment and one that is necessarily passed up. Say you invest in a stock and it returns a paltry 2% over the year. In placing your money in the stock, you gave up the opportunity of another investment - say, a risk-free government bond yielding 6%. In this situation, your opportunity costs are 4% (6% - 2%).\"",
"title": ""
},
{
"docid": "4797874368b255c8cb8485f0779f8e32",
"text": "\"The opposite of a cost is an investment. Buying a car is an expense, usually a sunk cost, whereas purchasing real-estate, e.g. productive farmland, is an investment. (Some investments are wasting assets, as the value decreases over time, but they are still investments with market value, not costs.) \"\"Sunk cost\"\" isn't a fallacy. It just means an expenditure that one cannot expect to recoup. The action item is, \"\"Don't throw good money after bad.\"\" The opposite of a sunk cost is an investment.\"",
"title": ""
},
{
"docid": "9b1878d675da2b5a540ade3487ed40d6",
"text": "In the second example you are giving up future free cash flows in exchange for a capital gain on the original investment. With that respect the money you will not gain will be the difference of the future cash flows ( net of related costs) minus the net gain on the panel you have sold. The financial result can be considered as the opposite of a sunk cost, that is a cost you have already incurred ( and cannot be recovered) vs net future gains you are giving up. In more sophisticated financial terms we are talking about the benefit-cost ratio: ( from Investopedia)",
"title": ""
},
{
"docid": "c7626296dd8470e5e61b10acdd3c2c3f",
"text": "\"The complete opposite of \"\"sunk cost\"\" is the term \"\"unrealized gain\"\"; until you sell it, then it is a \"\"realized gain\"\". There is also a term \"\"paper profit\"\" to point out the ephemeral nature of some of these unrealized gains.\"",
"title": ""
},
{
"docid": "11ba7b772e85b5807815d611fa89a4a5",
"text": "\"A \"\"sunk cost\"\" is a cost that you have already incurred, and won't get back. The \"\"sunk cost fallacy,\"\" as you described, is when you make a bad decision based on your sunk cost. When you identify a sunk cost, you realize that the money has been spent, and the decision is irreversible. Future decisions should not take this cost into account. When you commit the \"\"sunk cost fallacy,\"\" you are keeping something that is bad simply because you spent a lot of money on it. You are failing to identify the correct current value of something based on its high cost to you in the past. The other fallacy you describe, the opposite of the sunk cost fallacy, is when you get rid of something that is good simply because you spent little on it. As before, you are also failing to correctly identify the correct current value of something, but in this case, you are assigning too little a value based on the low cost in the past. You could call this a type of \"\"opportunity cost,\"\" a loss of future benefits due to a mistake made today. It seems reasonable to describe this type of fallacy as an \"\"opportunity cost fallacy.\"\"\"",
"title": ""
},
{
"docid": "441ba8b775cfb8bd849a22467dda1290",
"text": "\"liquid asset A sunk cost may turn out to be a loss or it may make you a profit, but what makes it \"\"sunk\"\" is: you can't get it back. The opposite is a cost that you can later redeem, which makes it \"\"liquid\"\".\"",
"title": ""
}
] |
[
{
"docid": "8178fd1146418a40530944cc77778bcf",
"text": "These are not real gains. Wherever you're looking this up, the prices are not adjusted for corporate actions. In a reverse stock split the price of a single share multiplies by five, but as a shareholder you hold only one share after for every five that you did before.",
"title": ""
},
{
"docid": "1b21e111173e3ecdcd7780e47437aa2b",
"text": "\"There are two things going on here, neither of which favors this approach. First, as @JohnFx noted, you should be wary of the sunk-cost fallacy, or throwing good money after bad. You already lost the money you lost, and there's no point in trying to \"\"win it back\"\" as opposed to just investing the money you still have as wisely as possible, forgetting your former fortune. Furthermore, the specific strategy you suggest is not a good one. The problem is that you're assuming that, whenever the stock hits $2, it will eventually rebound to $3. While that may often happen, it's far from guaranteed. More specifically, assuming the efficient market hypothesis applies (which it almost certainly does), there are theorems that say you can't increase your expected earning with a strategy like the one you propose: the apparent stability of the steady stream of income is offset by the chance that you lose out if the stock does something you didn't anticipate.\"",
"title": ""
},
{
"docid": "ae229b502d3703935223089402b569de",
"text": "\"By definition, a downturn in the business cycle will push some companies into bankruptcy. What's worse, a downturn in the business cycle will trigger \"\"bankruptcy fears\"\" for a LOT of companies, far more than will suffer this fate. So the prices of MANY candidates go down to levels that reflect this fear. This aggregate impact produces the \"\"overreaction\"\" you're talking about. It's called \"\"fallacy of composition\"\"; some of these companies will go under, but not all. Then the prices of the survivors will bounce back strongly during the early stages of an upturn when it becomes clear which companies WON'T go bankrupt.\"",
"title": ""
},
{
"docid": "1d32ef3f5a5bdd379a2ec4dff98318a8",
"text": "\"There is no opposite of a hedge, except not having a hedge at all. A \"\"hedge\"\" isn't directional. If you are short, you hedge by having something that minimizes your losses if you are wrong. If you are long, you hedge by having something that minimizes your losses if it decreases in value. If you own a house, you hedge by having insurance. There are \"\"hedged bets\"\" and \"\"unhedged bets\"\"\"",
"title": ""
},
{
"docid": "70591461ef9fce7e7b32b7b259bf14f6",
"text": "The quant aspect '''''. This is the kind of math I was wondering if it existed, but now it sounds like it is much more complex in reality then optimizing by evaluating different cost of capital. Thank you for sharing",
"title": ""
},
{
"docid": "41738846c29b227d7c9af116f730c97e",
"text": "Ok so Arbitrage? I was looking specifically at the people who took this deal to the extreme taking the $5k and using the $10 giftcards to buy prepaid credit cards. Would the better term would be positive-feedback loop, since the only constraint would be time and energy to the people exploit this deal. Is there a financial term that fits this better?",
"title": ""
},
{
"docid": "9deab02a93f8610d92c4ad9185f964b0",
"text": "You are confusing manufacturing cost and listed price. They are being sold for less than listed price. There is no way they are being sold for 1/3rd of manufacturing cost. They could be sold for less than manufacturing cost but future support will be factored into that sale so they would still be a loss leader.",
"title": ""
},
{
"docid": "7acc0cc7b924cbf49ca9a80edd4ec788",
"text": "The satisfaction from gains packs less of an emotional impact than the fear of loss. It's very difficult for many people to overcome this fear, so when prices begin to fall, many investors sell to minimize their potential loss. This causes a further drop, which can lead to more selling as other investors reach their emotional threshold for loss. This emotion-based selling keeps the market inefficient in the short term. If there aren't enough value investors waiting to scoop up the stock at the new discount, it can stay undervalued for a long time.",
"title": ""
},
{
"docid": "13d5c8d1757f4113f3d00149c7023f95",
"text": "Companies do both quite often. They have opposite effects on the share price, but not on the total value to the shareholders. Doing both causes value to shareholders to rise (ie, any un-bought back shares now own a larger percentage of the company and are worth more) and drops the per-share price (so it is easier to buy a share of the stock). To some that's irrelevant, but some might want a share of an otherwise-expensive stock without paying $700 for it. As a specific example of this, Apple (APPL) split its stock in 2014 and also continued a significant buyback program: Apple announces $17B repurchase program, Oct 2014 Apple stock splits 7-to-1 in June 2014. This led to their stock in total being worth more, but costing substantially less per share.",
"title": ""
},
{
"docid": "e2ce692daf1875916c41f817ea8fb73f",
"text": "\"The fundamental flaw here is conflating net worth with utility, at least failing to recognize that there's a nonlinear relationship between the two. In the extreme example imagine taking a bet that will either make you twice as rich or completely broke. Your expected return is zero, but it would be pretty dumb to take it since being flat broke could ruin your life while being twice as rich may only improve it marginally. In more realistic cases most of your income is tied up in fixed costs, which magnifies relatively small perturbations to your net worth. Losing something essential (like your house or car), even if it's only 20% of your net worth, renders you effectively broke until you scrape together enough cash to get another one. That situation robs you of much more utility than you'd gain from a 20% increase in net worth. In either case, avoiding the risk is completely rational as long as you believe in nonlinear utility as a function of net worth, it's not just an issue of humans being \"\"risk averse\"\".\"",
"title": ""
},
{
"docid": "c82725f2c339667dd6c65fc2bae50c3e",
"text": "I'm trying to think it out, but I feel like it would be hard to justify using potential profit sources as material for dividends. Especially your example of wine. Wouldn't it be counterintuitive to take a hit to sales, while still having the cost of production?",
"title": ""
},
{
"docid": "5356f3858e3f23badd6f69f9bb16c3d4",
"text": "I'll give the credit to @Quid in the comments section of the question. You put out $10k, you got back $20k, that's a cash gain of $10k, how the asset was valued between your purchase and sale isn't relevant. From an accounting perspective, the company is the only party that is realizing the loss (as they have sold the asset for 40K less than par). You the buyer, only get to see the initial buy and sale of such capital asset. Example: A company purchases a car for $20,000 and after depreciation it is worth (book valued at) $2,000. It is then sold to a customer for $3,000. Does the customer realize a loss of $1,000? No. Does the company realize a gain of $1,000? Yes. Your bank analogy is flawed in two ways:",
"title": ""
},
{
"docid": "410f540b4ab654bf8bda42f5bd8443f1",
"text": "If you make money in currency speculation (as in your example), that is a capital gain. A more complicated example is if you were to buy and then sell stocks on the mexican stock exchange. Your capital gain (or loss) would be the difference in value in US dollars of your stocks accounting for varying exchange rates. It's possible for the stocks to go down and for you to still have a capital gain, and vice versa.",
"title": ""
},
{
"docid": "ee6234f4817c3d2cabf9b1d528b2e618",
"text": "Start ups are a con if you're the employee that does all the work and finds that the company has no ground to stand on. In that case, you're closer to an idiot for taking the job in the first place than anything else. This isn't a stab at start ups being a horrible investment: This is a stab at the people that take up a job that ends up making them the backbone of all of it and they just keep on trucking to make it happen without consideration to their value.",
"title": ""
},
{
"docid": "b6c4988c510794c55b679ed4c439b519",
"text": "ACH as offered in US is a very broad and versatile network used for a range of business case. There is no other network as versatile. In Europe UK has BACS as equivalent about 50-70% of what US-ACH offers. Most European countries also have ACH [Collectively Called ACH, have 90% of the layouts that are identical, called by different names domestically, different business capabilities and rules]. Most countries in Asia also have similar networks. For example in India there is ECS now replaced by NACH. In Singapore/Indonesia/Thailand/Malaysia they have Giro's. China has CNAPS and BEPS. So essentially every country has addressed the business need differently and bis.org has a decent over-view country wise on the clearing systems available.",
"title": ""
}
] |
fiqa
|
1814ca38e91497a3a1c26e9c85c35a1b
|
Why don't companies underestimate their earnings to make quarterly reports look better?
|
[
{
"docid": "6091f4e3b80296ecb1cba1c0e9370f93",
"text": "Stating poor estimates in advance will lower your share price to compensate for thge extras boost it gets later ... And may run afoul of stock manipulation laws. More pain than gain likely.",
"title": ""
},
{
"docid": "c1badb1b14dffa130f4d2ae7d360fed7",
"text": "You need to distinguish a company's guidance from analysts' estimates. A company will give a revenue/earnings guidance which is generally based on internal budgets. The guidance may be aggressive or conservative - some managements are known to be conservative and the market will take that into account to form actual estimates. When you see a headline saying that a company missed, it is generally by reference to the analysts' estimates. Analysts use a company's guidance as one data point among many others to form a forecast of revenue/earnings. The idea behind those headlines is that the average sales/earnings estimates of analysts is a good approximation of what the market expects (which is debatable).",
"title": ""
}
] |
[
{
"docid": "4e4095d42a193b554e513a451e5dc91b",
"text": "The company's value (which should be reflected in the share price) is not how much money it has in the bank, but something along the lines of 'how much money will it make between now and the end of times' (adjusted for time value of money and risk). So when you purchase a share of a company that has, say, little money in the bank, but expects to make 1M$ profit this year, 2M$ for the following 3 years, and say, nothing after, you are going to pay your fraction of 7M$ (minus some discount because of the risk involved). If now they announce that their profits were only 750k$, then people may think that the 2M$ are more likely to be 1.5M$, so the company's value would go to ~ 5M$. And with that, the market may perceive the company as more risky, because its profits deviated from what was expected, which in turn may reduce the company's value even further.",
"title": ""
},
{
"docid": "205ee66f682f0c4c21792a31c0241a1e",
"text": "Varying the amount to reflect income during the quarter is entirely legitimate -- consider someone like a salesman whose income is partly driven by commissions, and who therefore can't predict the total. The payments are quarterly precisely so you can base them on actual results. Having said that, I suspect that as long as you show Good Intent they won't quibble if your estimate is off by a few percent. And they'll never complain if you overpay. So it may not be worth the effort to change the payment amount for that last quarter unless the income is very different.",
"title": ""
},
{
"docid": "e6e2c4144b03eee8275d2caeee234a0b",
"text": "\"Company values (and thus stock prices) rely on a much larger time frame than \"\"a weekend\"\". First, markets are not efficient enough to know what a companies sales were over the past 2-3 days (many companies do not even know that for several weeks). They look at performance over quarters and years to determine the \"\"value\"\" of a company. They also look forward, not backwards to determine value. Prior performance only gives a hint of what future performance may be. If a company shut its doors over a weekend and did no sales, it still would have value based on its future ability to earn profits.\"",
"title": ""
},
{
"docid": "e5048e4d9632df7eaba7dfc268e86f37",
"text": "\"Hi, accounting major here! A lot of people mentioned both tax advantages and \"\"cheap\"\" money (money you can borrow at a low interest rate). Another reason businesses do this is to reward investors. Generally people with stock in a company want to see some of its operations financed with debt, instead of all of it financed from investors' money or profit. This way the company can grow more and still pay better dividends to its investors. However, you don't want too much debt either. It's a balance, and a way to see how much debt vs equity a company has is called a leverage ratio (leverage=debt). Hope this helps!\"",
"title": ""
},
{
"docid": "5b9d617f557de461922e4bbc5006d96e",
"text": "Their net income hangs around zero because they raise expenses as reinvestment in the company (line items like $16.09B in Research & Development expense last year). Retained earnings is a balance sheet item reflective of assets they're holding for projects in a later fiscal period; they aren't waiting for the next period to reinvest.",
"title": ""
},
{
"docid": "a39047c6cf9a2daf3a06383fdb3e3041",
"text": "Changes in implied volatility are caused by many things, of course, and it is tough to isolate the effect you are describing, but let's try to generalize for a moment. Implied volatility is generally a measure of how much expect uncertainty there is about the future price of the stock. Uncertainty generally is higher in periods including earnings announcements because it is significant new information about the company's fortunes can make for significant changes in the price. However, you could easily have the case where the earnings are good and for some reason the market is very certain that the earnings will be good and near a certain level. In that case the price would rise, but the implied volatility could well be lower because the market believes that there will be no significant new information in the earnings announcement.",
"title": ""
},
{
"docid": "6f104bc19f1de755792938127a3a23a6",
"text": "But that's the point. Financial analysts may have to make adjustments to get closer to some idea of true value. Auditors should assure comparability by testing adherence to sometimes arbitrary rules that at least are common (if the world outside the US doesn't exist, or the world doesn't include the US).",
"title": ""
},
{
"docid": "a4c2709bf60be26983024ff6508150dd",
"text": "Most companies want to grow. In order to grow, you need to do better than just breaking even. If you want to keep hiring, or building new facilities, you'd probably want to retain some of your earnings year over year. That's just one reason. Shareholders also want to see a higher return on their investment; dividends are paid out of retained earnings, rather than expensed in the calculation of profits. Decreasing profits decreases retained earnings, which pisses off shareholders. I'm sure someone else can expand on this or fill in any other holes. Edit: Someone please correct me if I'm off base here. My comment is a bit confusing at times. For instance, tax expense is included in the calculation of book income, but not taxable income, and this comment deals with both.",
"title": ""
},
{
"docid": "d722e7576e39a0409b6c1eba39447e38",
"text": "In general over the longer term this is true, as a company whom continuously increases earnings year after year will generally continue to increase its share price year after year. However, many times when a company announces increased earning and profits, the share price can actually go down in the short term. This can be due to the market, for example, expecting a 20% increase but the company only announcing a 10% increase. So the price can initially go down. The market could already have priced in a higher increase in the lead up to the announcement, and when the announcement is made it actually disapoints the market, so the share price can go down instead of up.",
"title": ""
},
{
"docid": "902bf3e14e3b1566ce884a71532a57d1",
"text": "Not sure why you are getting downvotes. Managing to the next quarters numbers at the expense of the future is rampant in big companies these days. I work at a big bank and it’s really becoming a large problem. Individual contributors can only do so much to hide the fact that management is sacrificing the future for their quarterly bonus. In any one quarter it’s no big deal but when it’s done for years as is likely the case with GE it does cause huge problems.",
"title": ""
},
{
"docid": "08c3f5e83dd7e845ab352290781bcd70",
"text": "Dividends are not paid immediately upon reception from the companies owned by an ETF. In the case of SPY, they have been paid inconsistently but now presumably quarterly.",
"title": ""
},
{
"docid": "aa74b4578872b3d54c02ec58e7f4d678",
"text": "If you look at the value as a composite, as Graham seems to, then look at its constituent parts (which you can get off any financials sheet they file with the SEC): For example, if you have a fictitious company with: Compared to the US GDP (~$15T) you have approximately: Now, scale those numbers to a region with a GDP of, say, $500B (like Belgium), the resultant numbers would be:",
"title": ""
},
{
"docid": "9c23a0157305f44f8188c6b44ff7c5ac",
"text": "If the company reported a loss at the previous quarter when the stock what at say $20/share, and now just before the company's next quarterly report, the stock trades around $10/share. There is a misunderstanding here, the company doesn't sell stock, they sell products (or services). Stock/share traded at equity market. Here is the illustration/chronology to give you better insight: Now addressing the question What if the stock's price change? Let say, Its drop from $10 to $1 Is it affect XYZ revenue ? No why? because XYZ selling ads not their stocks the formula for revenue revenue = products (in this case: ads) * quantity the equation doesn't involve capital (stock's purchasing)",
"title": ""
},
{
"docid": "9f6afef6b64a4f1725e6c9221de1d9be",
"text": "Yep, I often think that baby boomers don't understand that there's inflation and that the salary they had years ago might not be good enough.. Sure, median income has decreased in the last decade, but it's no excuse for paying engineers 45K because they'll jump ship as soon as they put their resume on Monster and get offer of 60-80k.",
"title": ""
},
{
"docid": "8560f07934dc5abea6412aee757ff03f",
"text": "I'm no financial advisor, but I do have student loans and I do choose to pay them off as slowly as I can. I will explain my reasoning for doing so. (FWIW, these are all things that pertain to government student loans in the US, not necessarily private student loans, and not necessarily student loans from other countries) So that's my reasoning. $55 per month for the rest of my life adds up to a large amount of money over the course of my life, but the impact month-to-month is essentially nonexistent. That combined with the low interest and the super-low-pressure-sales-tactics means I just literally don't have any incentive to ever pay it all off. Like I said before, I'm just a guy who has student loans, and not even one who is particularly good with money, but as someone who does choose not to pay off my student loans any faster than I have to, this is why.",
"title": ""
}
] |
fiqa
|
c413798fb7c23cc5bca8719a4a73d14b
|
How much is my position worth after 5-1 stock split?
|
[
{
"docid": "ad583b8150b66387306f405e29f9831a",
"text": "The average price would be $125 which would be used to compute your basis. You paid $12,500 for the stock that is now worth $4,500 which is a loss of $8,000 overall if you sell at this point.",
"title": ""
}
] |
[
{
"docid": "191f50bf6f69a2c7ccf6f29bd4a781f7",
"text": "Since the 2 existing answers addressed the question as asked. Let me offer a warning. You have 10,000 options at $1. You've worked four years and the options are vested. The stock is worth $101 when you get a job offer (at another company) which you accept. So you put up $10k and buy the shares. At this moment, you put up $10K for stock worth $1.01M, a $1M profit and ordinary income. You got out of the company just in time. For whatever reason, the stock drops to $21 and at tax time you realize the $1M gain was ordinary income, but now the $800k loss is a capital loss, limited to $3000/yr above capital gains. In other words you have $210k worth of stock but a tax bill on $1M. This is not a contrived story, but a common one from the dotcon bubble. It's a warning that 'buy and hold' has the potential to blow up in your face, even if the shares you buy retain some value.",
"title": ""
},
{
"docid": "7ccebb6bcea7089d89b1fd72e66e3b81",
"text": "Thank you for replying. I'm not sure I totally follow though, aren't you totally at mercy of the liquidity in the stock? I guess I'm havinga hard time visualizing the value a human can add as opposed to say vwapping it or something. I can accept that you're right, just having a difficult time picturing it",
"title": ""
},
{
"docid": "b4230bc9749d09b9fad10599e79b40ef",
"text": "\"I don't have anything definitive, but in general positions in a company are not affected materially by what is called a corporate action. \"\"Corp Actions\"\" can really be anything that affects the details of a stock. Common examples are a ticker change, or exchange change, IPO (ie a new ticker), doing a split, or merging with another ticker. All of these events do not change the total value of people's positions. If a stock splits, you might have more shares, but they are worth less per share. A merger is quite similar to a split. The old company's stock is converted two the new companies stock at some ratio (ie 10 shares become 1 share) and then converted 1-to-1 to the new symbol. Shorting a stock that splits is no different. You shorted 10 shares, but after the split those are now 100 shares, when you exit the position you have to deliver back 100 \"\"new\"\" shares, though dollar-for-dollar they are the same total value. I don't see why a merger would affect your short position. The only difference is you are now shorting a different company, so when you exit the position you'll have to deliver shares of the new company back to the brokerage where you \"\"borrowed\"\" the shares you shorted.\"",
"title": ""
},
{
"docid": "2c600e5d7c6579a79832cc6565ae570f",
"text": "\"Edited: Pub 550 says 30 days before or after so the example is ok - but still a gain by average share basis. On sale your basis is likely defaulted to \"\"average price\"\" (in the example 9.67 so there was a gain selling at 10), but can be named shares at your election to your brokerage, and supported by record keeping. A Pub 550 wash might be buy 2000 @ 10 with basis 20000, sell 1000 @9 (nominally a loss of 1000 for now and remaining basis 10000), buy 1000 @ 8 within 30 days. Because of the wash sale rule the basis is 10000+8000 paid + 1000 disallowed loss from wash sale with a final position of 2000 shares at 19000 basis. I think I have the link at the example: http://www.irs.gov/publications/p550/ch04.html#en_US_2014_publink100010601\"",
"title": ""
},
{
"docid": "c3a2a93a5829cdfd83d150b6d2c9ee9a",
"text": "Stock splits are typically done to increase the liquidity of stock merely by converting every stock of the company into multiple stocks of lower face value. For example, if the initial face value of the stock was $10 and the stock got split 10:1, the new face value of the stock would be $1 each. This has a proportional effect on the market value of the stock also. If the stock was trading at $50, after the split the stock should ideally adjust to $5. This is to ensure that despite the stock split, the market capitalization of the company should remain the same. Number of Shares * Stock Price = Market Capitalization = CONSTANT",
"title": ""
},
{
"docid": "1c3238b1e61f3a388948be934ced572c",
"text": "\"The share price on its own has little relevance without looking at variations. In your case, if the stock went from 2.80 to 0.33, you should care only about the 88% drop in value, not what it means in pre-split dollar values. You are correct that you can \"\"un-split\"\" to give you an idea of what would have been the dollar value but that should not give you any more information than the variation of 88% would. As for your title question, you should read the chart as if no split occurred as for most intents and purposes it should not affect stock price other than the obvious split.\"",
"title": ""
},
{
"docid": "a94a1e65b2db8127bd4c8dec7cc095b6",
"text": "The reason to do a stock split is to get the price of the stock down to an affordable range. If your stock costs $100,000 per share, you are seriously cutting in to the number of people who can afford to buy it. I can think of two reasons NOT to do a stock split. The biggest is, Why bother? If your stock is trading at a reasonable price, why change anything? It takes time and effort, which equals money, to do a stock split. If this serves no purpose, you're just wasting that effort. The other reason is that you don't want to drive your stock price down too low. Low prices are normally associated with highly speculative start-up companies, and so can give a wrong impression of your company. Also, low prices make it difficult for the price to reflect small changes. If your stock is trading at $10.00, a 1/2 of 1% change is 5 cents. But if it's trading at $1.50, a 1/2 of 1% change is a fraction of a penny. Does it go up by that penny or not? You've turned a smooth scale into a series of hurdles.",
"title": ""
},
{
"docid": "dba12f6dd3394f6c0e5f0db98356b7fe",
"text": "How can they reduce the number of shares I hold? They may have purchased them. You don't say what stock it is, so we can only speculate. Let's say that the stock is called PENNY. So they may have taken your 1600 PENNY shares and renamed them to 1600 PENNYOLD shares. Then they created a new $5 PENNY share and gave you .2357 shares of that in exchange for your 1600 PENNYOLD shares. This suggests that your old shares were worth $1.1785 or less than a tenth of a cent each. As an example, MYLAN did this in 2015 as part of their tax inversion (moved official headquarters from the US to Europe). They did not change the number of shares at that time, but MYLAN is not a penny stock. This is the kind of thing that might happen in a bankruptcy. A reverse split (where they give you one share in exchange for more than one share) is also possible, although you received an odd amount for a reverse split. Usually those produce rounder numbers. A number like .2357 sounds more like a market price, as those can be bizarre.",
"title": ""
},
{
"docid": "6812554ac6a6fe2c714ab6e6f19a657c",
"text": "\"Note that these used to be a single \"\"common\"\" share that has \"\"split\"\" (actually a \"\"special dividend\"\" but effectively a split). If you owned one share of Google before the split, you had one share giving you X worth of equity in the company and 1 vote. After the split you have two shares giving you the same X worth of equity and 1 vote. In other words, zero change. Buy or sell either depending on how much you value the vote and how much you think others will pay (or not) for that vote in the future. As Google issues new shares, it'll likely issue more of the new non-voting shares meaning dilution of equity but not dilution of voting power. For most of us, our few votes count for nothing so evaluate this as you will. Google's founders believe they can do a better job running the company long-term when there are fewer pressures from outside holders who may have only short-term interests in mind. If you disagree, or if you are only interested in the short-term, you probably shouldn't be an owner of Google. As always, evaluate the facts for yourself, your situation, and your beliefs.\"",
"title": ""
},
{
"docid": "06238bcde4f209948bd74386f6b222c0",
"text": "\"I've bought ISO stock over they years -- in NYSE traded companies. Every time I've done so, they've done what's called \"\"sell-to-cover\"\". And the gubmint treats the difference between FMV and purchase price as if it's part of your salary. And for me, they've sold some stock extra to pay estimated taxes. So, if I got this right... 20,000 shares at $3 costs you 60,000 to buy them. In my sell-to-cover at 5 scenario: did I get that right? Keeping only 4,000 shares out of 20,000 doesn't feel right. Maybe because I've always sold at a much ratio between strike price and FMV. Note I made some assumptions: first is that the company will sell some of the stock to pay the taxes for you. Second is your marginal tax rate. Before you do anything check these. Is there some reason to exercise immediately? I'd wait, personally.\"",
"title": ""
},
{
"docid": "32c703e65992e29f3f89adca99fc1d6d",
"text": "While my margin is not nearly as good as yours, I sell out early. I generally think it's a bad idea to hold any single stock, as they can vary wildly in value. However, as you mention, it's advantageous to hold for one year. Read more about Capital Gains Taxes here and here.",
"title": ""
},
{
"docid": "2062d8a92e3151241257c925fd0c2a15",
"text": "One way that is common is to show the value over time of an initial investment, say $10,000. The advantage of this is that it doesn't show stock price at all, so handles splits well. It can also take into account dividend reinvestment. Fidelity uses this for their mutual funds, as can be seen here. Another option would be to compute the stock price as if the split didn't happen. So if a stock does a 2:1 split, you show double the actual price starting at that point.",
"title": ""
},
{
"docid": "e0a23b436069fb1ebdb4e83095041424",
"text": "\"You should contact the company and the broker about the ownership. Do you remember ever selling your position? When you look back at your tax returns/1099-B forms - can you identify the sale? It should have been reported to you, and you should have reported it to the IRS. If not - then you're probably still the owner. As to K-1 - the income reported doesn't have to be distributed to you. Partnership is a pass-through entity, and cannot \"\"accumulate\"\" earnings for tax purposes, everything is deemed distributed. If, however, it is not actually distributed - you're still taxed on the income, but it is added to your basis in the partnership and you get the tax \"\"back\"\" when you sell your position. However, you pay income tax on the income based on the kind of the income, and on the sale - at capital gains rates. So the amounts added to your position will reduce your capital gains tax, but may be taxed at ordinary rates. Get a professional advice on the issue and what to do next, talk to a EA/CPA licensed in New York.\"",
"title": ""
},
{
"docid": "7c9402e6b60744e382aaead94dae4f43",
"text": "make assume should be make assumptions*. I feel like there are other reasons that the 5% in year 2 could have cost less than the 5% in year 1 besides a falling stock price (this is what I'm trying to figure out). In your opinion, how do you think the investment is performing.",
"title": ""
},
{
"docid": "a3d8fefc639c7cb5e3c2ba260f5dd1fd",
"text": "\"I'm going to ignore your numbers to avoid spending the time to understand them. I'm just going to go over the basic moving parts of trading an upside down car against another financed car because I think you're conflating price and value. I'm also going to ignore taxes, and fees, and depreciation. The car has an acquisition cost (price) then it has a value. You pay the price to obtain this thing, then in the future it is worth what someone else will pay you. When you finance a car you agree to your $10,000 price, then you call up Mr. Bank and agree to pay 10% per year for 5 years on that $10,000. Mr. Banker wires over $10,000 and you drive home in your car. Say in a year you want a different car. This new car has a price of $20,000, and wouldn't you know it they'll even buy your current car from you. They'll give you $7,000 to trade in your current car. Your current car has a value of $7,000. You've made 12 payments of $188.71. Of those payments about $460 was interest, you now owe about $8,195 to Mr. Banker. The new dealership needs to send payment to Mr. Banker to get the title for your current car. They'll send the $7,000 they agreed to pay for your car. Then they'll loan you the additional $1,195 ($8,195 owed on the car minus $7,000 trade in value). Your loan on the new car will be for $21,195, $20,000 for the new car and $1,195 for the amount you still owed on the old car after the dealership paid you $7,000 for your old car. It doesn't matter what your down-payment was on the old car, it doesn't matter what your payment was before, it doesn't matter what you bought your old car for. All that matters is how much you owe on it today and how much the buyer (the dealership) is willing to pay you for it. How much of this is \"\"loss\"\" is an extremely vague number to derive primarily because your utility of the car has a value. But it could be argued that the $1,195 added on to your new car loan to pay for the old car is lost.\"",
"title": ""
}
] |
fiqa
|
6aea124963acdc8764444303e4b4ef53
|
Extra cash - go towards mortgage, or stock?
|
[
{
"docid": "949dd4d88ee2a2c51f9f36b8f6a9ed2e",
"text": "It's six of one a half dozen of another. Investing the cash is a little more risky. You know exactly what you'll get by paying down your mortgage. If you have a solid emergency fund it's probably most advisable to pay down your mortgage. If your mortgage is 3% and your investment makes 3.5% you're talking about a taxable gain of 0.5% on the additional cash. Is that worth it to you? Sure, the S&P has been on a tear but remember, past results are not a guarantee of future performance.",
"title": ""
},
{
"docid": "8565cf0b7da77351974b7bf617d705d7",
"text": "the math makes sense to invest instead of paying down, but... how much would you borrow at 3.5%, to invest the money into the stock market? It's the same question, just turned around.",
"title": ""
}
] |
[
{
"docid": "3188ba3af58c8955a687b494fcb5883d",
"text": "\"I strongly doubt your numbers, but lets switch the question around anyway. Would you borrow 10k on your house to buy stocks on leverage? That's putting your house at risk to have the chance of a gain in the stock market (and nothing in the market is sure, especially in the short term), and I would really advise against it. The decision you're considering making resolves down to this one. Note: It is always better to make any additional checks out as \"\"for principal only\"\", unless you will be missing a future payment.\"",
"title": ""
},
{
"docid": "74b3f1e58bda2b062d3ad816837fd262",
"text": "Certainly, paying off the mortgage is better than doing nothing with the money. But it gets interesting when you consider keeping the mortgage and investing the money. If the mortgage rate is 5% and you expect >5% returns from stocks or some other investment, then it might make sense to seek those higher returns. If you expect the same 5% return from stocks, keeping the mortgage and investing the money can still be more tax-efficient. Assuming a marginal tax rate of 30%, the real cost of mortgage interest (in terms of post-tax money) is 3.5%*. If your investment results in long-term capital gains taxed at 15%, the real rate of growth of your post-tax money would be 4.25%. So in post-tax terms, your rate of gain is greater than your rate of loss. On the other hand, paying off the mortgage is safer than investing borrowed money, so doing so might be more appropriate for the risk-averse. * I'm oversimplifying a bit by assuming the deduction doesn't change your marginal tax rate.",
"title": ""
},
{
"docid": "35448fbdfe15a6955e97a5641b0bc772",
"text": "\"You are effectively 'making' 3.8% right now. By maintaining a loan at 0% vs the 3.8% you'd otherwise pay, you are ahead by that percent. Now, if you borrowed at 3.8%, and made 7.6% on your investments, taxes aside, you'd break even. you are exactly ahead by the same 3.8%. It seems to me that with a break-even of 7.6%, you'd be taking a risk based on the market return over the next few years. In a sense, that's true for any of us, but in your case, you are not deciding where to put idle cash, you already have the 3.8% option of \"\"leave well enough alone.\"\" This is where I'd quote Harry Callahan - 'you've gotta ask yourself one question: \"\"Do I feel lucky?\"\" Well, do ya, punk?'\"",
"title": ""
},
{
"docid": "a58fc7dbe14f82ac3d2856a08f1a856f",
"text": "\"Forget, for the moment, which will pay off most over the long term. Consider risk exposure. You've said that you (hypothetically) have \"\"little or no money\"\": that's the deal-breaker. From a risk-management perspective, your investment portfolio would be better off diversified than with 90% of your assets in a house. Consider also the nature of the risk which owning a house exposes you to: Housing prices are generally tied to the state of the economy. If the local economy crashes, not only could you lose your job, but you could lose a good part of the value of your house... and still owe a lot on your loan. (You also might not be able to move as easily if you found a new job somewhere else.) You should almost certainly rent until you're more financially stable and could afford to pay the new mortgage for a year (or more) if you suddenly lost your job. Then you can worry more about maximizing your investments' rate of return.\"",
"title": ""
},
{
"docid": "a31a9db361a97b55d29f3aaf7dc22cfc",
"text": "Other answers are already very good, but I'd like to add one step before taking the advice of the other answers... If you still can, switch to a 15 year mortgage, and figure out what percentage of your take-home pay the new payment is. This is the position taken by Dave Ramsey*, and I believe this will give you a better base from which to launch your other goals for two reasons: Since you are then paying it off faster at a base payment, you may then want to take MrChrister's advice but put all extra income toward investments, feeling secure that your house will be paid off much sooner anyway (and at a lower interest rate). * Dave's advice isn't for everyone, because he takes a very long-term view. However, in the long-term, it is great advice. See here for more. JoeTaxpayer is right, you will not see anything near guaranteed yearly rates in mutual funds, so make sure they are part of a long-term investing plan. You are not investing your time in learning the short-term stock game, so stay away from it. As long as you are continuing to learn in your own career, you should see very good short-term gains there anyway.",
"title": ""
},
{
"docid": "3195c837f59cdeb66273957d4c640161",
"text": "If you take the statement you quote as stated, it is indeed absurd. Unless you have a really creative tax accountant or live in a country with very unusual tax laws, any tax deduction you get for mortgage interest is going to be less than the interest. You don't come out ahead by getting a $25 deduction if you had a $100 expense to get that deduction. Where there can be some sense behind such a statement is if you consider the alternative to paying cash for a house or making extra payments against a mortgage. If you had $100,000 in cash in a box under your bed, and the choice is between, (a) use that $100,000 to buy a house in cash, or (b) borrow $100,000 at 6% interest and leave that cash in the box under the bed, than clearly (a) is the better choice because it saves you the interest expense. But if the choice is between, (a) buy a house for $100,000 in cash and borrow $100,000 at 6% to buy a car; or (b) borrow $100,000 at 6% interest to buy a house and use the $100,000 cash to buy the car, (b) is the better choice. The home mortgage loan is tax deductible; the car loan is not. As others have pointed out, if instead of using some extra cash to pay down the principle on your mortgage you used that money to invest in the stock market, it is likely that you would get better returns on the investment than what you would have saved in interest on the mortgage -- depending, of course, on how the market is doing and how well you pick stocks. But the key issue there isn't the tax deduction, it's the comparison of the profits from the investment versus the opportunity cost of the money that could have been saved on the mortgage interest. The tax deduction affects that comparison by effectively reducing the interest rate on the mortgage -- your real interest expense is the nominal interest minus the deduction -- but that's not the key point, just another number to plug in to the formula. By the way, given the complexity of U.S. tax law, I would not rule out the possibility that there could be some scenario where you really would save money by having mortgage interest. There are lots of deductions and credits that are phased out or eliminated as your income goes up. Perhaps you could find some set of tax laws that apply to you such that having an additional $1000 in interest expense lets you take a $300 deduction here and a $500 credit there, etc, and they add up to more than $1000. I don't know if that could actually happen, but the rules are complicated enough that, maybe. Any tax accountants here who can come up with such a scenario?",
"title": ""
},
{
"docid": "e4ad5de991424ab48e01a72ac5cbd3ac",
"text": "\"I'll assume you live in the US for the start of my answer - Do you maximize your retirement savings at work, at least getting your employer's match in full, if they do this. Do you have any other debt that's at a higher rate? Is your emergency account funded to your satisfaction? If you lost your job and tenant on the same day, how long before you were in trouble? The \"\"pay early\"\" question seems to hit an emotional nerve with most people. While I start with the above and then segue to \"\"would you be happy with a long term 5% return?\"\" there's one major point not to miss - money paid to either mortgage isn't liquid. The idea of owing out no money at all is great, but paying anything less than \"\"paid in full\"\" leaves you still owing that monthly payment. You can send $400K against your $500K mortgage, and still owe $3K per month until paid. And if you lose your job, you may not so easily refinance the remaining $100K to a lower payment so easily. If your goal is to continue with real estate, you don't prepay, you save cash for the next deal. Don't know if that was your intent at some point. Disclosure - my situation - Maxing out retirement accounts was my priority, then saving for college. Over the years, I had multiple refinances, each of which was a no-cost deal. The first refi saved with a lower rate. The second, was in early 2000s when back interest was so low I took a chunk of cash, paid principal down and went to a 20yr from the original 30. The kid starts college, and we target retirement in 6 years. I am paying the mortgage (now 2 years into a 10yr) to be done the month before the kid flies out. If I were younger, I'd be at the start of a new 30 yr at the recent 4.5% bottom. I think that a cost of near 3% after tax, and inflation soon to near/exceed 3% makes borrowing free, and I can invest conservatively in stocks that will have a dividend yield above this. Jane and I discussed the plan, and agree to retire mortgage free.\"",
"title": ""
},
{
"docid": "33e55100e7f8cf99fa4c9a79c4fe355c",
"text": "If it's either/or, I'd pay down the mortgage, no question. I know I'm in the minority, but I'm not a fan of tax-advantaged retirement accounts. There are too many things that can change between now and the next 30 years (the time frame that you'll be able to withdraw from your IRA account without penalty). The rules governing these accounts can change at any time, and I don't think they'll be changes for the better. Putting the money toward your mortgage will relieve you of that monthly payment faster. The benefits of IRAs come retirement age are too uncertain for my taste.",
"title": ""
},
{
"docid": "c68d769428eb86677848174ed88fdd4a",
"text": "\"I think the basic question you're asking is whether you'd be better off putting the $20K into an IRA or similar investment, or if your best bet is to pay down your mortgage. The answer is...that depends. What you didn't share is what your mortgage balance is so that we can understand how using that money to pay down the mortgage would affect you. The lower your remaining balance on the mortgage, the more impact paying it down will affect your long-term finances. For example, if your remaining principal balance is more than $200k, paying down $20k in principal will not have as significant an effect as if you only have $100k principal balance and were paying down $20k of that. To me, one option is to put the $20k toward mortgage principal, then perhaps do a refinance on your remaining mortgage with the goal of getting a better interest rate. This would double the benefit to you. First, your mortgage payment would be lower by virtue of a lower principal balance (assuming you keep the same term period in your refinanced mortgage as you have now. In other words, if you have a 15-year now, your new mortgage should be 15 years also to see the best effect on your payment). Further, if you can obtain a lower interest rate on the new loan, now you have the dual benefit of a lower principal balance to pay down plus the reduced interest cost on that principal balance. This would put money into your pocket immediately, which I think is part of your goal, although the question does hinge on what you'd pay in points and fees for a refinance. You can invest, but with that comes risk, and right now may not be the ideal time to enter the markets given all of the uncertainties with the \"\"Brexit\"\" issue. By paying down your mortgage principal, even if you do nothing else, you can save yourself considerable interest in the long term which might be more beneficial than the return you'd get from the markets or an IRA at this point. I hope this helps. Good luck!\"",
"title": ""
},
{
"docid": "669fa0e4a8df16b1139a5b3b44fdc799",
"text": "Personally, I would split the difference, putting about half into each. Simply because it balances out the problem and I don't have to fret about whether one or the other will provide a significant difference. As bstpierre points out, the one which will make you more in the end is the one which you can grow the fastest. The mortgage payment is locked at 5% growth, which, while modest, is also essentially guaranteed at this point. The CD in your IRA is likely less than that amount, even after tax consideration. A couple additional points to consider:",
"title": ""
},
{
"docid": "141db581e02b6001d62934d4a7fc0138",
"text": "At the moment the interest rate... implies a variable rate mortgage. I believe rates are only going to go up from here. So, if I were in your position, I would pay off the mortgage first. If you don't have 3-6 months in savings for an emergency, I would invest that much money in low risk investments. Anything remaining I would invest in a balanced portfolio of mutual funds. The biggest benefit to this is the flexibility it gives you. Not being burdened by a monthly mortgage frees you up to invest. This may be in your stock portfolio each month or it may be in your community or charitable causes. You have financial margin.",
"title": ""
},
{
"docid": "e4bf0dcb96ce68979ca1b604142bb2d7",
"text": "\"Forget the math's specifics for a moment: here's some principles. Additional housing for a renter gives you returns in the form of money. Additional housing for yourself pays its returns in the form of \"\"here is a nice house, live in it\"\". Which do you need more of? If you don't need the money, get a nicer house for yourself. If you need (or want) the money, get a modest house for yourself and either use the other house as a rental property, or invest the proceeds of its sale in the stock market. But under normal circumstances (++) don't expect that buying more house for yourself is a good way to increase how much money you have. It's not. (++ the exception being during situations where land/housing value rises quickly, and when that rise is not part of a housing bubble which later collapses. Generally long-term housing values tend to be relatively stable; the real returns are from the rent, or what economists call imputed rent when you're occupying it yourself.)\"",
"title": ""
},
{
"docid": "d7523341fb1046ff65e5a90e8538285c",
"text": "An extra payment on a loan is, broadly speaking, a known-return, risk-free investment. (That the return on the investment is in reduced costs going forward instead of increased revenue is basically immaterial, assuming you have sufficient cash flow to handle either situation.) We can't know what the interest rates will be like going forward, but we can know what they are today, because you gave us those numbers in your question. Quick now: Given the choice between a known return of 3.7% annually and a known return of 7% annually, with identical (and extremely low) risk, where would you invest your money? By putting the $15k toward the $14k loan, you free up $140 per month and have $1k left that you can put toward the $30k loan, which will reduce your payment term by $1k / $260/month or about 4 months. You will be debt free in 14 years 8 months. You pay $14,000 instead of $16,800 on the $14,000 loan, reducing the total cost of the loan by $2,800, and reduce the cost of the $30,000 loan by four months' worth of interest which is about $175 (so the $30,000 loan ends up costing you something like $46,600 instead of $46,800). By putting the $15k toward the $30k loan, you cut the principal of that one in half. Assuming that you keep paying the same amount each month, you will reduce the payment term by 7 ½ years, and will be debt free in 10 years (because the $14,000 10-year loan now has the longer term). Instead of paying $46,800 for the $30k loan, you end up paying $23,400 plus the $15,000 = $38,400, reducing the total cost of the $30,000 loan by $8,400 while doing nothing to reduce the cost of the $14,000 loan. To a first order estimate, using the $15,000 to pay off the $14,000 loan in full will improve your cash flow in the short term, but putting the money toward the $30,000 loan will give you a three-fold better return on investment over the term of both loans and nearly halve the total loan term, assuming unchanged monthly payments and unchanged interest rates. That's how powerful compounding interest is.",
"title": ""
},
{
"docid": "699785d1cb3f24db24145681487e024e",
"text": "\"From what I've read, paying down your mortgage -- above and beyond what you'd normally pay -- is indeed an investment but a very poor form of investment. In other words, you could take that extra money you'd apply towards your mortgage and put it in something that has a much higher rate of return than a house. As an extreme example, consider: if I took $6k extra I would have paid toward my mortgage in a single year, and bought a nice performing stock, I could see returns of 2x or 3x. Now, that implies I know which stock to pick, etcetera.. I found a \"\"mortgage or investment\"\" calculator which could be of use as well: http://www.planningtips.com/cgi-bin/prepay_v_invest.pl (scroll to bottom to see the summary and whether or not prepay or invest wins for the numbers you plugged in)\"",
"title": ""
},
{
"docid": "ad0821b69667c2483efe026aa1337a7b",
"text": "This may be a good or a bad deal, depending on the fair market value (FMV) of the stock at the time of exercise. Let's assume the FMV is $6, which is the break even point. In general this would probably be treated as two transactions. So overall you would be cash neutral, but your regular tax income would be increased by $30,000 and your AMT income by $60,000.",
"title": ""
}
] |
fiqa
|
d8ff674c01395d091a702702aca0739c
|
Is it prudent to sell a stock on a 40% rise in 2 months
|
[
{
"docid": "974ddb2aa065fb9d2f460b6cea10bad0",
"text": "Depends entirely on the stock and your perception of it. Would you buy it at the current price? If so, keep it. Would you buy something else? If so, sell it and buy that.",
"title": ""
},
{
"docid": "c69c580db04dd347982451a6f92ad87d",
"text": "Sell half. If it's as volatile as you say, sell it all and buy on another dip. No one can really offer targeted advice based on the amount of information you have provided.",
"title": ""
},
{
"docid": "2f1f69b594bec1557e30b09e8b493b73",
"text": "Did you buy near the bottom? Suppose you did then the price is still 16% below. 50% fall and then 40% increase leaves a 16% gap. So there could still be upside. However, it appears that you are talking about a small-cap that is volatile. I wouldn't hold it. I would take the money and invest elsewhere. If you have a lot of shares and brokerage is less then sell 60% now and the remaining 40% on either 10-15% jump in price or if it falls by 5% from now. Too risky to hold longer-term.",
"title": ""
}
] |
[
{
"docid": "54206e2e41ee5a5610742a147b527fef",
"text": "Ignore sunk costs and look to future returns. Although it feels like a loss to exit an investment from a loss position, from a financial standpoint you should ignore the purchase price. If your money could be better invested somewhere else, then move it there. You shouldn't look at it as though you'll be more financially secure because you waited longer for the stock to reach the purchase price. That's psychological, not financial. Some portion of your invested wealth is stuck in this particular stock. If it would take three months for the stock to get back to purchase price but only two months for an alternate investment to reach that same level, then obviously faster growth is better. Your goal is greater wealth, not arbitrarily returning certain investments to their purchase price. Investments are just instrumental. You want more wealth. If an investment is not performing, then ignore purchase price and sunken costs. Look at the reasonable expectations about an investment going forward.",
"title": ""
},
{
"docid": "d365b4480c725511653ad90c95226c7f",
"text": "1-2 years is very short-term. If you know you will need the money in that timeframe and cannot risk losing money because of a stock market correction, you should stay away from equities (stocks). A short-term bond fund (like VBISX) will pay around 1%, maybe a bit more, and only has a small amount of risk. Money Market funds are practically risk-free (technically speaking they can lose money, but it's extremely rare) but rates of return are dismal. It's hard to get bigger returns without taking on more risk.",
"title": ""
},
{
"docid": "4e469e94c4147cd6d8400187f1aef89c",
"text": "\"In a sense, yes. There's a view in Yahoo Finance that looks like this For this particular stock, a market order for 3000 shares (not even $4000, this is a reasonably small figure) will move the stock past $1.34, more than a 3% move. Say, on the Ask side there are 100,000 shares, all with $10 ask. It would take a lot of orders to purchase all these shares, so for a while, the price may stay right at $10, or a bit lower if there are those willing to sell lower. But, say that side showed $10 1000, $10.25 500, $10.50 1000. Now, the volume is so low that if I decided I wanted shares at any price, my order, a market order will actually drive the market price right up to $10.50 if I buy 2500 shares \"\"market\"\". You see, however, even though I'm a small trader, I drove the price up. But now that the price is $10.50 when I go to sell all 2500 at $10.50, there are no bids to pay that much, so the price the next trade will occur at isn't known yet. There may be bids at $10, with asking (me) at $10.50. No trades will happen until a seller takes the $10 bid or other buyers and sellers come in.\"",
"title": ""
},
{
"docid": "d4243204acd7aa7a6f881b59294cbe58",
"text": "2.5 years is a short period in the stock market. That means there is a significant chance it will be lower in 2.5 years, whereas it is very likely to be higher over a longer time period like 5-10 years. So if you want the funds to grow for sure then consider an online savings account, where you might earn 1-2%. If you want to do stocks anyway, but don't have any idea what fund to buy, the safest default choice is to buy an index fund that tracks the S&P 500. Vanguard's VFINX is one example.",
"title": ""
},
{
"docid": "918e6778d512aaca7c4e49d5715759e1",
"text": "Yes, you can do this buy placing a conditional order to buy at market if the price moves to 106 or above. Once the price hits 106 your market order will hit the market and you will purchase the stock at 106 or above. You can also place a tack profit order at 107 linked to your initial conditional buy order, so that once you buy order is executed and you buy at 106, a take profit order will be executed only if the price reaches 107 or above. If the price never reaches 106, neither your market buy order or take profit order will hit the market and you won't buy or sell anything.",
"title": ""
},
{
"docid": "aa237f48dd59fcf2a15c1039a5fe5043",
"text": "My thoughts are that if you've seen considerable growth and the profit amassed would be one that makes sense, you would have to seriously consider selling NOW because it could take yeoman's time to mimic that profit in the next 10 quarters or so. To analogize; If you bought a house for 100k and we're renting it for say 1,000/month and we're making $ 250/month profit and could sell it now for 125k, it would take you 100 months to recoup that $25k profit (or 8 years 4 months). Doesn't it make sense to sell now? You would have that profit NOW and could invest it somewhere else without losing that period of time, and TIME is the emphasis here.",
"title": ""
},
{
"docid": "101679bbac4e296e705bad5e77b74459",
"text": "I think the advice Bob is being given is good. Bob shouldn't sell his investments just because their price has gone down. Selling cheap is almost never a good idea. In fact, he should do the opposite: When his investments become cheaper, he should buy more of them, or at least hold on to them. Always remember this rule: Buy low, sell high. This might sound illogical at first, why would someone keep an investment that is losing value? Well, the truth is that Bob doesn't lose or gain any money until he sells. If he holds on to his investments, eventually their value will raise again and offset any temporary losses. But if he sells as soon as his investments go down, he makes the temporary losses permanent. If Bob expects his investments to keep going down in the future, naturally he feels tempted to sell them. But a true investor doesn't try to anticipate what the market will do. Trying to anticipate market fluctuations is speculating, not investing. Quoting Benjamin Graham: The most realistic distinction between the investor and the speculator is found in their attitude toward stock-market movements. The speculator's primary interest lies in anticipating and profiting from market fluctuations. The investor's primary interest lies in acquiring and holding suitable securities at suitable prices. Market movements are important to him in a practical sense, because they alternately create low price levels at which he would be wise to buy and high price levels at which he certainly should refrain from buying and probably would be wise to sell. Assuming that the fund in question is well-managed, I would refrain from selling it until it goes up again.",
"title": ""
},
{
"docid": "1b21e111173e3ecdcd7780e47437aa2b",
"text": "\"There are two things going on here, neither of which favors this approach. First, as @JohnFx noted, you should be wary of the sunk-cost fallacy, or throwing good money after bad. You already lost the money you lost, and there's no point in trying to \"\"win it back\"\" as opposed to just investing the money you still have as wisely as possible, forgetting your former fortune. Furthermore, the specific strategy you suggest is not a good one. The problem is that you're assuming that, whenever the stock hits $2, it will eventually rebound to $3. While that may often happen, it's far from guaranteed. More specifically, assuming the efficient market hypothesis applies (which it almost certainly does), there are theorems that say you can't increase your expected earning with a strategy like the one you propose: the apparent stability of the steady stream of income is offset by the chance that you lose out if the stock does something you didn't anticipate.\"",
"title": ""
},
{
"docid": "c3292817005d13deadb2e1a31d52a00c",
"text": "\"If they return to their earlier prices Assuming I don't make too many poor choices That's your problem right there: you have no guarantee that stocks, will in fact return to their earlier prices rather than go down some more after the time you buy them. Your strategy only looks good and easy in hindsight when you know the exact point in time when stocks stopped going down and started going up. But to implement it, you need to predict that time, and that's impossible. I would adopt a guideline of \"\"sell when you've made X%, even if it looks like it might go higher.\"\" Congratulations, you've come up with the concept of technical analysis. Now go and read the hundreds of books that have been written about it, then think about why the people who wrote them waste time doing so rather than getting rich by using that knowledge.\"",
"title": ""
},
{
"docid": "8b85c5d4437839baccbbc65186d8eb96",
"text": "If you do this, you own a stock worth $1, with a basis of $2. The loss doesn't get realized until the shares are sold. Of course, we hope you see the stock increase above that price, else, why do this?",
"title": ""
},
{
"docid": "a744e74b592f9e0373f74ba71847b693",
"text": "You are assuming the price increase will continue. The people selling are assuming that the price increase will not continue. Ultimately that's what a share transaction is: one person would rather have the cash at a particular price / time, and one person would rather have the share.",
"title": ""
},
{
"docid": "cca1f388f296720d6f055eea0c36174e",
"text": "If your criteria has changed but some of your existing holdings don't meet your new criteria you should eventually liquidate them, because they are not part of your new strategy. However, you don't want to just liquidate them right now if they are currently performing quite well (share price currently uptrending). One way you could handle this is to place a trailing stop loss on the stocks that don't meet your current criteria and let the market take you out when the stocks have stopped up trending.",
"title": ""
},
{
"docid": "f0f31bfcbaa30331486b78cda3e57cf2",
"text": "Unless you have insider information (ILLEGAL!!!) don't go high risk over this time frame. It makes about as much sense as betting on the horses. Stick it in a 3 or 6 month GIC at the pathetic rates the banks are giving.",
"title": ""
},
{
"docid": "71752390575b4a5bc86085914073912b",
"text": "\"I think the question can be answered by realizing that whoever is buying the stock is buying it from someone who can do the same mathematics. Ask your son to imagine that everyone planned to buy the stock exactly one week before Christmas. Would the price still be cheap? The problem is that if everyone knows the price will go up, the people who own it already won't want to sell. If you're buying something from someone who doesn't really want to sell it, you have to pay more to get it. So the price goes up a week before Christmas, rather than after Christmas. But of course everyone else can figure this out too. So they are going to buy 2 weeks before, but that means the price goes up 2 weeks before rather than 1 week. You play this game over and over, and eventually the expected increased Christmas sales are \"\"priced in\"\". But of course there is a chance people are setting the price based on a mistaken belief. So the winner isn't the person who buys just before the others, but rather the one who can more accurately predict what the sales will be (this is why insider trading is so tempting even if it's illegal). The price you see right now represents what people anticipate the price will be in the future, what dividends are expected in the future, how much risk people think there is, and how that compares with other available investments.\"",
"title": ""
},
{
"docid": "7c9353f6a0cae024f3d16f95ca48999b",
"text": "\"Check your math... \"\"two stocks, both with a P/E of 2 trading at $40 per share lets say, and one has an EPS of 5 whereas the other has an EPS of 10 is the latter a better purchase?\"\" If a stock has P/E of 2 and price of $40 it has an EPS of $20. Not $10. Not $5.\"",
"title": ""
}
] |
fiqa
|
444b73cbd8768ee9fe0ac65fa900d74f
|
How much does the volatility change for a 1$ move in the underlying
|
[
{
"docid": "22d688f1402e8f49f666d9a6935b39a0",
"text": "The volatility measures how fast the stock moves, not how much. So you need to know the period during which that change occurred. Then the volatility naturally is higher the faster is the change.",
"title": ""
}
] |
[
{
"docid": "912044904c25c867405c94192153e981",
"text": "What if there is only one trading day and the volume is smaller than the open interest on that one trading day. This is assuming there is no open interest before that day? I pulled this from a comment. This can't happen. We have zero open interest on day one. On day 2, I buy 10 contracts. Volume is 10 and now open interest is also 10. Tomorrow, if I don't sell, open interest starts at 10 and will rise by whatever new contracts are traded. This is an example. I removed the stock name. This happens to be the Jan'17 expiration. The 10 contract traded on the $3 strike happen to be mine. You can see how open interest is cumulative, representing all outstanding contracts. It's obvious to me the shares traded as high as $5 at some point which created the interest (i.e. the desire) to trade this strike. Most activity tends to occur near the current price.",
"title": ""
},
{
"docid": "f93ae4aa6cff425d08d6816d9cb7ee3f",
"text": "I understand that ITM have little time value, so they will have small time decay(theta), but why OTM has a lesser theta than ATM? The Time value represents uncertainty. That uncertainty decreases the farther away from ATM you get (in either direction). At-the-money, there is roughly a 50% chance that the option expires worthless. As you get deeper in-the-money, the change that is expires worthless decreases, so there is less uncertainty (there is more certainty that the option will pay off). As you go deeper OTM, the probability that the option expires worthless increases, so there is also less uncertainty. At the TTM decreases, the uncertainty (theta) decreases as well, since there is less time for the option to cross the strike from either direction. Similarly, as volatility decreases, theta decreases, since low-volatility stocks have a less change of crossing the strike.",
"title": ""
},
{
"docid": "cc2ce9aa4157bdbf143a442b23fb0430",
"text": "You are asking 'what if', do you have some anticipated answers? Having volume smaller than open interest is the norm. As far as I can tell, having only one trading day and no previous open interest only affects someone trying to sell a contract they are holding. Meaning that if you only have one day to sell your contract then you need to offer it 'at market' or at the bid price (or even lower than the bid price). If you cannot sell your contract then you have to let it expire worthless or you have to exercise it. Those are your three options: let it expire, sell it (perhaps at a loss), and exercise it. Edit: be careful about holding an in-the-money option. Many brokers will automatically exercise an in-the-money contract if you hold it till expiration date.",
"title": ""
},
{
"docid": "d1af3160c122e590eba248a8764aab34",
"text": "Are you geometrically linking the spot rates for each spot period over of the next year? I.e. are you looking at the spot strip, or just taking today's spot rate and annualizing it? If you are looking at the spot strip, then a YTM for a bond maturing in one year should equal the return from investing in rolling one month spot rates for the next year - more or less. If this variance is large, then there is scope for arbitrage.",
"title": ""
},
{
"docid": "285a03c9ad4b1e6cab12e0675e95ec57",
"text": "If we were to observe some call price (e.g., 15), and then derived implied volatilities from the BS formula depending on different strike prices but fixed maturity (i.e, maturity = 1, and strike goes from 80 to 140??), would we then see a smile? Yes. Market prices for various strikes and a given maturity often have higher implied volatilities from the Black-Scholes model away from at-the-money. It is not accounted for in the Black-Scholes model in the fact that volatility is not a function of strike, so volatility is assumed to be constant across strikes, but the market does not price options that way. I don't know that a quantitative theory has ever been proven; I've always just assumed that people are willing to pay slightly more for options deep in or out of the money based on their strategy, but I have no evidence to base that theory on.",
"title": ""
},
{
"docid": "c41e61f063420043ec5dd6378082c882",
"text": "\"As I understand it, Implied Volatility represents the expected gyrations of an options contract over it's lifetime. No, it represents that expected movement of the underlying stock, not the option itself. Yes, the value of the option will move roughly in the same direction the value of the stock, but that's not what IV is measuring. I even tried staring at the math behind the Options pricing model to see if that could make more sense for me but that didn't help. That formula is correct for the Black-Scholes model - and it is not possible (or at least no one has done it yet) to solve for s to create a closed-form equation for implied volatility. What most systems do to calculate implied volatility is plug in different values of s (standard deviation) until a value for the option is found that matches the quoted market value ($12.00 in this example). That's why it's called \"\"implied\"\" volatility - the value is implied from market prices, not calculated directly. The thing that sticks out to me is that the \"\"last\"\" quoted price of $12 is outside of the bid-ask spread of $9.20 to $10.40, which tells me that the underlying stock has dropped significantly since the last actual trade. If the Implied Vol is calculated based on the last executed trade, then whatever algorithm they used to solve for a volatility that match that price couldn't find a solution, which then choose to show as a 0% volatility. In reality, the volatility is somewhere between the two neighbors of 56% and 97%, but with such a short time until expiry, there should be very little chance of the stock dropping below $27.50, and the value of the option should be somewhere around its intrinsic value (strike - stock price) of $9.18.\"",
"title": ""
},
{
"docid": "f9372e6dd41524dc78d7511dbcc45a15",
"text": "It really varies based on the stock (volatility is the main determining factor), and whether you are talking about temporary or permanent price impact, how long you are trading, etc. The below paper fits a functional form to a set of Citigroup data and estimates for a 10% dtv trade in a large cap like IBM the price would move on the order of 30bps. Presumably smallcaps would be more expensive. Their estimate seems a bit low to me but I'm more familiar with futures, so maybe it's not unreasonable https://www.google.com/url?sa=t&source=web&rct=j&ei=JjDsU_L-CI33yQSh4oKQDA&url=http://www.math.nyu.edu/~almgren/papers/costestim.pdf&cd=3&ved=0CCQQFjAC&usg=AFQjCNGN6LmPb9sHR5dljcJJ2rV4bNE4Jg&sig2=WYhcCUFr8WcRfetA24wXLg",
"title": ""
},
{
"docid": "96e142303cb6650812333485d62f01ca",
"text": "Out of the money options often have the biggest changes in value, when the stock moves upward. This person could also gain, by the implied (underlying) volatility of the stock rising if it moves erratically to either side. Still seems to be a very risky game, given only 4 days to expiry.",
"title": ""
},
{
"docid": "dfe42869d03227277ae9575312efd0e8",
"text": "Volatility is a shitty metric and is sample dependent, What is more interesting is point recurrence, i.e. how many times has a certain point been touched in x time, you can make good day trading strategies off point recurrence (relative that is).",
"title": ""
},
{
"docid": "4046514c9c1f46c97d5cbb109400ba6e",
"text": "It depends completely on the current order book for that security. There is literally no telling how that buy order would move the price of a stock in general.",
"title": ""
},
{
"docid": "37b135e4dca1a8ccbea2e58b9507de8c",
"text": "No, it means what it says. Prices change, hence price of the derivative can go down even if the price of the underlying doesn't change (e.g. theta decay in options).",
"title": ""
},
{
"docid": "325b30fb598f679f0d3dc954b0dbdfdf",
"text": "I have an example of a trade I made some time ago. By entering the position as a covered call, I was out of pocket $5.10, and if the stock traded flat, i.e. closed at the same $7.10 16 months hence, I was up 39% or nearly 30%/yr. As compared to the stock holder, if the stock fell 28%, I'd still break even, vs his loss of 28%. Last, if the stock shot up, I'd get 7.50/5.10 or a 47% return, vs the shareholder who would need a price of $10.44 to reflect that return. Of course, a huge jump in the shares, say to $15, would benefit the option buyer, and I would have left money on the table. But this didn't happen. The stock was at $8 at expiration, and I got my 47% return. The option buyer got 50 cents for his $2 bet. Note, the $2 option price reflected a very high implied volatility.",
"title": ""
},
{
"docid": "6a2b7e92bc19b74a8b13ad788058ef94",
"text": "Robert is right saying that options' prices are affected by implied volatility but is wrong saying that you have to look at the VIX index. For two reasons: 1) the VIX index is for S&P500 options only. If you are trading other options, it is less useful. 2) if you are trading an option that is not at the money, your implied volatility may be very different (and follow a different dynamics) that the VIX index. So please look at the right implied volatility. In terms of strategy, I don't think that not doing anything is a good strategy. I accept any point of view but you should consider that option traders should be able to adjust positions depending on market view. So you are long 1 call, suppose strike 10. Suppose the underlying price at the time of entry was 10 (so the call was at the money). Now it's 9. 1) you still have a bullish view: buy 1 call strike 9 and sell 2 calls strike 10. This way you have a bull call spread with much higher probability of leading to profit. You are limiting your profit potential but you are also reducing the costs and managing the greeks in a proper way (and in line with your expectations). 2) you become bearish: you can sell 1 call strike 9. This way you end up with a bear call spread. Again, you are limiting your profit potential but you are also reducing the costs and managing the greeks in a proper way (and in line with your expectations). 3) you become neutral: buy 1 call strike 8 and sell 2 calls strike 9. This way you end up with a call butterfly. You are almost delta neutral and you can wait until your view becomes clear enough to become directional. At that point you can modify the butterfly to make it directional. These are just some opportunities you have. There is no reason for you to wait. Options are eroding contracts and you must be fast and adjust the position before time starts eroding your capital at risk. It's true that buying a call doesn't make you loose more than the premium you paid, but it's better to reduce this premium further with some adjustment. Isn't it? Hope that helps. :)",
"title": ""
},
{
"docid": "2fd055035118e9368579e888c579bdf7",
"text": "It depends to some extent on how you interpret the situation, so I think this is the general idea. Say you purchase one share at $50, and soon after, the price moves up, say, to $55. You now have an unrealized profit of $5. Now, you can either sell and realize that profit, or hold on to the position, expecting a further price appreciation. In either case, you will consider the price change from this traded price, which is $55, and not the price you actually bought at. Hence, if the price fell to $52 in the next trade, you have a loss of $3 on your previous profit of $5. This (even though your net P&L is calculated from the initial purchase price of $50), allows you to think in terms of your positions at the latest known prices. This is similar to a Markov process, in the sense that it doesn't matter which route the stock price (and your position's P&L) took to get to the current point; your decision should be based on the current/latest price level.",
"title": ""
},
{
"docid": "1527d960ca0ae909169234ac934632c1",
"text": "The credit scale is deceptive, it goes: AAA, AA, A, BBB, BBB-, BB+, BB, B, CCC, CC, C, D. In reality it should be A,B,C,D,E, F, G,H, I, etc. The current scale does not reflect with clarity the ranking of risks and ratings. AA is much worse than AAA, but the uncertainty involved can be scary. Check out these corporate and sovereign debt credit ratings.",
"title": ""
}
] |
fiqa
|
71243311f44a5552112a12b267700e12
|
ETF holding shares in itself
|
[
{
"docid": "76af050f8c775a0f6149e7fd5e51c176",
"text": "\"Lindsell Train Investment Trust could be different than the \"\"Lindsell Train Limited\"\", the company that runs the fund and thus you are mixing apples and oranges here since the bank isn't a listed stock.\"",
"title": ""
}
] |
[
{
"docid": "5143955b19fc35d10f4d972ba0c77714",
"text": "I've never heard of such a thing, but seems like if such a product existed it would be easily manipulated by the big trading firms - simply bet that trading volume will go up, then furiously buy and sell shares yourself to artificially drive up the volume. The fact that it would be so easily manipulated makes me think that no such product exists, but I could be wrong.",
"title": ""
},
{
"docid": "5f4a5b3c153b0ee7c0d8c166d89883c0",
"text": "\"Back in the olden days, if you wanted to buy the S&P, you had to have a lot of money so you can buy the shares. Then somebody had the bright idea of making a fund that just buys the S&P, and then sells small pieces of it to investor without huge mountains of capital. Enter the ETFs. The guy running the ETF, of course, doesn't do it for free. He skims a little bit of money off the top. This is the \"\"fee\"\". The major S&P ETFs all have tiny fees, in the percents of a percent. If you're buying the index, you're probably looking at gains (or losses) to the tune of 5, 10, 20% - unless you're doing something really silly, you wouldn't even notice the fee. As often happens, when one guy starts doing something and making money, there will immediately be copycats. So now we have competing ETFs all providing the same service. You are technically a competitor as well, since you could compete with all these funds by just buying a basket of shares yourself, thereby running your own private fund for yourself. The reason this stuff even started was that people said, \"\"well why bother with mutual funds when they charge such huge fees and still don't beat the index anyway\"\", so the index ETFs are supposed to be a low cost alternative to mutual funds. Thus one thing ETFs compete on is fees: You can see how VOO has lower fees than SPY and IVV, in keeping with Vanguard's philosophy of minimal management (and management fees). Incidentally, if you buy the shares directly, you wouldn't charge yourself fees, but you would have to pay commissions on each stock and it would destroy you - another benefit of the ETFs. Moreover, these ETFs claim they track the index, but of course there is no real way to peg an asset to another. So they ensure tracking by keeping a carefully curated portfolio. Of course nobody is perfect, and there's tracking error. You can in theory compare the ETFs in this respect and buy the one with the least tracking error. However they all basically track very closely, again the error is fractions of the percent, if it is a legitimate concern in your books then you're not doing index investing right. The actual prices of each fund may vary, but the price hardly matters - the key metric is does it go up 20% when the index goes up 20%? And they all do. So what do you compare them on? Well, typically companies offer people perks to attract them to their own product. If you are a Fidelity customer, and you buy IVV, they will waive your commission if you hold it for a month. I believe Vanguard will also sell VOO for free. But for instance Fidelity will take commission from VOO trades and vice versa. So, this would be your main factor. Though, then again, you can just make an account on Robinhood and they're all commission free. A second factor is reliability of the operator. Frankly, I doubt any of these operators are at all untrustworthy, and you'd be buying your own broker's ETF anyway, and presumably you already went with the most trustworthy broker. Besides that, like I said, there's trivial matters like fees and tracking error, but you might as well just flip a coin. It doesn't really matter.\"",
"title": ""
},
{
"docid": "f69471fbc64767b814c43447c1a02d6f",
"text": "There are not necessarily large shareholders, maybe every other Joe Schmoe owns 3 or 5 shares; and many shares might be inside investment funds. If you are looking for voting rights, typically, the banks/investment companies that host the accounts of the individual shareholders/fund owners have the collective voting rights, so the Fidelity's and Vanguard's of the world will be the main and deciding voters. That is very common.",
"title": ""
},
{
"docid": "46954434d854deff0918901928a5d57c",
"text": "How much should a rational investor have in individual stocks? Probably none. An additional dollar invested in a ETF or low cost index fund comprised of many stocks will be far less risky than a specific stock. And you'd need a lot more capital to make buying, voting, and selling in individual stocks as if you were running your own personal index fund worthwhile. I think in index funds use weightings to make it easier to track the index without constantly trading. So my advice here is to allocate based not on some financial principal but just loss aversion. Don't gamble with more than you can afford to lose. Figure out how much of that 320k you need. It doesn't sound like you can actually afford to lose it all. So I'd say 5 percent and make sure that's funded from other equity holdings or you'll end up overweight in stocks.",
"title": ""
},
{
"docid": "e44598dada0a8ebf91496f7b40fd3b2c",
"text": "Shares are partial ownership of the company. A company can issue (not create) more of the shares it owns at any time, to anyone, at any price -- subject to antitrust and similar regulations. If they wanted to, for example, flat-out give 10% of their retained interest to charity, they could do so. It shouldn't substantially affect the stock's trading for others unless there's a completely irrational demand for shares.",
"title": ""
},
{
"docid": "7f41528167b11270066075f83661d86c",
"text": "\"The amount, reliability and frequency of dividends paid by an ETF other than a stock, such as an index or mutual fund, is a function of the agreement under which the ETF was established by the managing or issuing company (or companies), and the \"\"basket\"\" of investments that a share in the fund represents. Let's say you invest in a DJIA-based index fund, for instance Dow Diamonds (DIA), which is traded on several exchanges including NASDAQ and AMEX. One share of this fund is currently worth $163.45 (Jan 22 2014 14:11 CDT) while the DJIA itself is $16,381.38 as of the same time, so one share of the ETF represents approximately 1% of the index it tracks. The ETF tracks the index by buying and selling shares of the blue chips proportional to total invested value of the fund, to maintain the same weighted percentages of the same stocks that make up the index. McDonald's, for instance, has an applied weight that makes the share price of MCD stock roughly 5% of the total DJIA value, and therefore roughly 5% of the price of 100 shares of DIA. Now, let's say MCD issued a dividend to shareholders of, say, $.20 per share. By buying 100 shares of DIA, you own, through the fund, approximately five MCD shares, and would theoretically be entitled to $1 in dividends. However, keep in mind that you do not own these shares directly, as you would if you spent $16k buying the correct percentage of all the shares directly off the exchange. You instead own shares in the DIA fund, basically giving you an interest in some investment bank that maintains a pool of blue-chips to back the fund shares. Whether the fund pays dividends or not depends on the rules under which that fund was set up. The investment bank may keep all the dividends itself, to cover the expenses inherent in managing the fund (paying fund management personnel and floor traders, covering losses versus the listed price based on bid-ask parity, etc), or it may pay some percentage of total dividends received from stock holdings. However, it will virtually never transparently cut you a check in the amount of your proportional holding of an indexed investment as if you held those stocks directly. In the case of the DIA, the fund pays dividends monthly, at a yield of 2.08%, virtually identical to the actual weighted DJIA yield (2.09%) but lower than the per-share mean yield of the \"\"DJI 30\"\" (2.78%). Differences between index yields and ETF yields can be reflected in the share price of the ETF versus the actual index; 100 shares of DIA would cost $16,345 versus the actual index price of 16,381.38, a delta of $(36.38) or -0.2% from the actual index price. That difference can be attributed to many things, but fundamentally it's because owning the DIA is not the exact same thing as owning the correct proportion of shares making up the DJIA. However, because of what index funds represent, this difference is very small because investors expect to get the price for the ETF that is inherent in the real-time index.\"",
"title": ""
},
{
"docid": "51ad976b1e5d211f36c818bfef24e2a1",
"text": "Is there any precedent for companies trading on their own insider information for the benefit of stockholders? Said another way, if a company were to enter a new market where they were very confident of their ability to steamroll a public competitor, could they use a wholly-owned special-purpose investment vehicle to short that competitor in order to juice the benefit of that move?",
"title": ""
},
{
"docid": "446c12b0d6ce872ec6a585017050af10",
"text": "\"Does the bolded sentence apply for ETFs and ETF companies? No, the value of an ETF is determined by an exchange and thus the value of the share is whatever the trading price is. Thus, the price of an ETF may go up or down just like other securities. Money market funds can be a bit different as the mutual fund company will typically step in to avoid \"\"Breaking the Buck\"\" that could happen as a failure for that kind of fund. To wit, must ETF companies invest a dollar in the ETF for every dollar that an investor deposited in this aforesaid ETF? No, because an ETF is traded as shares on the market, unless you are using the creation/redemption mechanism for the ETF, you are buying and selling shares like most retail investors I'd suspect. If you are using the creation/redemption system then there are baskets of other securities that are being swapped either for shares in the ETF or from shares in the ETF.\"",
"title": ""
},
{
"docid": "bbda2280304228ee54efc1f6aa7d9d0b",
"text": "No. Investors purchase ETFs' as they would any other stock, own it under the same circumstances as an equity investment, collecting distributions instead of dividends or interest. The ETF takes care of the internal operations (bond maturities and turnover, accrued interest, payment dates, etc.).",
"title": ""
},
{
"docid": "9381d589de0907189c958cae99ba34b6",
"text": "The ETF supply management policy is arcane. ETFs are not allowed to directly arbitrage their holdings against the market. Other firms must handle redemptions & deposits. This makes ETFs slightly costlier than the assets held. For ETFs with liquid holdings, its price will rarely vary relative to the holdings, slippage of the ETF's holdings management notwithstanding. This is because the firms responsible for depositing & redeeming will arbitrage their equivalent holdings of the ETF assets' prices with the ETF price. For ETFs with illiquid holdings, such as emerging markets, the ETF can vary between trades of the holdings. This will present sometimes large variations between the last price of the ETF vs the last prices of its holdings. If an ETF is shunned, its supply of holdings will simply drop and vice versa.",
"title": ""
},
{
"docid": "f3ea138a007df8c0daf625f11ca5d011",
"text": "OK, VERY glad you get that idea! The problem with the ETF is: it's the monkeys-throwing-darts method. If the average (dollar-weighted) member stock in the ETF goes up, you win, but if half of them go under, and half succeed, over some time periods you will lose (and win over others). I guess my POV is: if you can't do serious research into the expected success of an individual company, maybe it's too risky to even try betting on the whole group. YMMV. The problem with your investment plan is: you are depending on luck, and the assumption the group will increase in value over your investment period. I prefer research over hope.",
"title": ""
},
{
"docid": "d2bfbfbabfc07ef43711447587646f45",
"text": "A share is just a part ownership of a company. If you buy a share of a green stock in the open market, you now just own part of a green company. Just like if you buy a house, the money you paid moves to the former owner, but what you are getting is a clear asset in return that you now own. Via mutual funds/indexes this can get a little more complicated (voting rights etc tend to go to the mutual/indexing company rather than the holders of the fund), but is approximately the same thing: the fund buys assets on the open market, then holds them, buys more, or sells them on behalf of the fund investors.",
"title": ""
},
{
"docid": "0f674d1424f87c8217af2cb4e6041c10",
"text": "You likely received the shares as ordinary income for services of $10k, since they withheld taxes at granting. Separately, you likely had a short term capital loss on sale of $2k, since your holding period seems to have been under one year.",
"title": ""
},
{
"docid": "6515286ee6ba2472db2ccfacf71192a3",
"text": "They're exchange traded debt, basically, not funds. E.g. from the NYSE: An exchange-traded note (ETN) is a senior unsecured debt obligation designed to track the total return of an underlying market index or other benchmark, minus investor fees. Whereas an ETF, in some way or another, is an equity product - which doesn't mean that they can only expose you to equity, but that they themselves are a company that you buy shares in. FCOR for example is a bond ETF, basically a company whose sole purpose is to own a basket of bonds. Contrast that to DTYS, a bear Treasury ETN, which is described as The ETNs are unsecured debt obligations of the issuer, Barclays Bank PLC, and are not, either directly or indirectly, an obligation of or guaranteed by any third party. Also from Barclays site: Because the iPath ETNs are debt securities, they do not have any voting rights. FCOR on the other hand is some sort of company owned/managed by a Fidelity trust, though my EDGAR skills are rusty. AGREEMENT made this 18th day of September, 2014, by and between Fidelity Merrimack Street Trust, a Massachusetts business trust which may issue one or more series of shares of beneficial interest (hereinafter called the Trust), on behalf of Fidelity Corporate Bond ETF (hereinafter called the Fund), and Fidelity Investments Money Management, Inc., a New Hampshire corporation (hereinafter called the Adviser) as set forth in its entirety below.",
"title": ""
},
{
"docid": "145a5decacc13be14030121db03b4578",
"text": "The (assets - liabilities)/#shares of a company is its book value, and that number is included in their reports. It's easy for a fund to release the net asset value on a daily basis because all of its assets (stocks, bonds, and cash) are given values every day by the market. It's also necessary to have a real time value for a fund as it will be bought and sold every day. A company can't really do the same thing as it will have much more diverse assets - real estate, cars, inventory, goodwill, etc. The real time value of those assets doesn't have the same meaning as a fund; those assets are used to earn cash, while a fund's business is only to maximize its net asset value.",
"title": ""
}
] |
fiqa
|
3bbb4b832347124fa4420633d9b73610
|
Any Experience with the Gone Fishin' Portfolio?
|
[
{
"docid": "740de5afea45123d65bdc09bc1208f1b",
"text": "\"Yes, the \"\"based on\"\" claim appears to be true – but the Nobel laureate did not personally design that specific investment portfolio ;-) It looks like the Gone Fishin' Portfolio is made up of a selection of low-fee stock and bond index funds, diversified by geography and market-capitalization, and regularly rebalanced. Excerpt from another article, dated 2003: The Gone Fishin’ Portfolio [circa 2003] Vanguard Total Stock Market Index (VTSMX) – 15% Vanguard Small-Cap Index (NAESX) – 15% Vanguard European Stock Index (VEURX) – 10% Vanguard Pacific Stock Index (VPACX) – 10% Vanguard Emerging Markets Index (VEIEX) – 10% Vanguard Short-term Bond Index (VFSTX) – 10% Vanguard High-Yield Corporates Fund (VWEHX) – 10% Vanguard Inflation-Protected Securities Fund (VIPSX) – 10% Vanguard REIT Index (VGSIX) – 5% Vanguard Precious Metals Fund (VGPMX) – 5% That does appear to me to be an example of a portfolio based on Modern Portfolio Theory (MPT), \"\"which tries to maximize portfolio expected return for a given amount of portfolio risk\"\" (per Wikipedia). MPT was introduced by Harry Markowitz, who did go on to share the 1990 Nobel Memorial Prize in Economic Sciences. (Note: That is the economics equivalent of the original Nobel Prize.) You'll find more information at NobelPrize.org - The Prize in Economics 1990 - Press Release. Finally, for what it's worth, it isn't rocket science to build a similar portfolio. While I don't want to knock the Gone Fishin' Portfolio (I like most of its parts), there are many similar portfolios out there based on the same concepts. For instance, I'm reminded of a similar (though simpler) portfolio called the Couch Potato Portfolio, made popular by MoneySense magazine up here in Canada. p.s. This other question about asset allocation is related and informative.\"",
"title": ""
}
] |
[
{
"docid": "2591ce2451f7d5ac4b526b0f345156c6",
"text": "I use Yahoo Finance to plot my portfolio value over time. Yahoo Finance uses SigFig to link accounts (I've linked to Fidelity), which then allows you to see you exact portfolio and see a plot of its historical value. I'm not sure what other websites SigFig will allow you to sync with, but it is worth a try. Here is what the plot I have looks like, although this is slightly out of date, but still gives you an idea of what to expect.",
"title": ""
},
{
"docid": "9d9cfa352ce07f9aa89d06d2a710373e",
"text": "I don't see it in any of the exchange feeds I've gone through, including the SIPs. Not sure if there's something wrong with Nasdaq Last Sale (I don't have that feed) but it should be putting out the exact same data as ITCH.",
"title": ""
},
{
"docid": "e784c91a357f8a6f43b6cecad1872133",
"text": "My uncle successfully manages a portfolio for an investment firm in New York. I believe he works with somewhere around 2.5 billion dollars, mostly endowments from schools and other funds like that. I know that he had to work very hard to get where he is today but he's been rewarded with excellent compensation and a lot of freedom to do his job how he sees fit.",
"title": ""
},
{
"docid": "4f7cf55f589509f0a62586f3533edbfc",
"text": "The shopping cart is probably the worst bit, although the cutting was obviously sloppy. I find that Vice produces good content sometimes, but their website is horrendous. There's frequently writing overlaying images with colors that blend or clash. At first, I thought that my extensions were breaking the design, but after whitelisting it every way possible I have come to the conclusion that whoever designed it for them was not a professional. It's simply bad.",
"title": ""
},
{
"docid": "0da566a2cdaad2c8b83676062a6e257f",
"text": "\"Can you give me a rundown of what I'm seeing? Is this basically a super zoomed in tracker of a current stock or something? Where a stock fluctuates a few cents up/down on the day, and you just trade before it goes down, then trade as it goes up or what? EDIT: Is this really live? Can you say, \"\"Yes this is live narwalls\"\"\"",
"title": ""
},
{
"docid": "9ebbd10569a6fb6de85d3561e71c4fbc",
"text": "Yes it does, I have just had the worst luck with my job search so far. I do need to brush up on my investing knowledge for interviews because I have been out of school for a few months now Edit: do you work in ny? Any tips on getting me résumé noticed?",
"title": ""
},
{
"docid": "67f92908515289320624d7c88b6ad245",
"text": "I'v actually heard of this before, the idea is that you gamble across the spread. Most of these have a place in a risky asset class in portfolios. Think of it as the little bit of crack you do on the side of your vanilla life.",
"title": ""
},
{
"docid": "c39435defed0b2f6294236be0fdaf569",
"text": "Good catch. So Bloomberg came out with a good new article today. Read it on desktop, tried to find it on mobile to submit it (I figure my firm wouldn't be too thrilled with my username etc.) ended up with this. They had basically the same headlines. I'll delete and resubmit.",
"title": ""
},
{
"docid": "b814e2e4f943f77864610939f302e619",
"text": "\"I find it interesting that you didn't include something like [Total Bond Market](http://stockcharts.com/freecharts/perf.html?VBMFX), or [Intermediate-Term Treasuries](http://stockcharts.com/freecharts/perf.html?VBIIX), in your graphic. If someone were to have just invested in the DJI or SP500, then they would have ignored the tenants of the Modern Portfolio Theory and not diversified adequately. I wouldn't have been able to stomach a portfolio of 100% stocks, commodities, or metals. My vote goes for: 1.) picking an asset allocation that reflects your tolerance for risk (a good starting point is \"\"age in bonds,\"\" i.e. if you're 30, then hold 30% in bonds); 2.) save as if you're not expecting annualized returns of %10 (for example) and save more; 3.) don't try to pick the next winner, instead broadly invest in the market and hold it. Maybe gold and silver are bubbles soon to burst -- I for one don't know. I don't give the \"\"notion in the investment community\"\" much weight -- as it always is, someday someone will be right, I just don't know who that someone is.\"",
"title": ""
},
{
"docid": "153e6fe57be6b11edea32c06959cfbb1",
"text": "\"You got out in time, great, but how did you know when to get back in? The internet is littered with threads by people who got out (in advance, or during), then didn't get back in in time, because the recoveries didn't 'feel real'. Some people are still sitting out, just hoping against hope the market crashes - but it probably won't to those 2009 levels. I recommend looking at [Trinity Study](https://www.bogleheads.org/wiki/Safe_withdrawal_rates) results as a place to start getting a sense of portfolio longevity when totally out of the market. The reality is that all cash (which is basically a zero-duration bond) is a dangerous position, as is all stocks. A balanced portfolio gives you diversification, the only \"\"free lunch\"\" in investing. Better to not try and time your way in and out of the market, but rather glide within a range (Benjamin Graham recommends no more/less than 75/25, 25/75). If you want to skip the research headaches, stick with a 'total bond' or 'intermediate-term bond' fund (or Google around for 'lazy portfolios'). The real key is not to let emotions drive your decisions - it always 'feels different this time' until it isn't. Much better to set a target portfolio of stocks/bonds (rule of thumb: imagine you might lose half the stock portion in a downturn) then ride it out. That way you don't have to worry about being at one extreme or the other.\"",
"title": ""
},
{
"docid": "363c2829224280e5295cefae7404911e",
"text": "In the US, illegal. Giving free investment advice (opinions) is really hard to get arrested for. Might lose you a friend, but nothing that would get cross-wise with the Securities and Exchange Commission. That said, I would never put those opinions in writing.",
"title": ""
},
{
"docid": "0790763ce1214e0a9fa81798f3e2e128",
"text": "I've used BigCharts (now owned by MarketWatch.com) for a while and really like them. Their tools to annotate charts are great.",
"title": ""
},
{
"docid": "4fcf665ffa10c9f80ce5d25907cfd42c",
"text": "The following have been recommended to me for the UK: When I was doing my investigations, all had good reputations but Interactive Investor looked to have the nicer service and their fees seemed a bit more reasonable. TD Waterhouse has the advantage of a number of sites serving local markets (TD Ameritrade for the US, for instance).",
"title": ""
},
{
"docid": "8d5673b4ee323ee1a122f4b009a36dac",
"text": "If you have enough assets at T Rowe Price, you get what I think is a scaled back version of the portfolio tracker for free.",
"title": ""
},
{
"docid": "a7de2abcd6c7bdaf5142448fec9b06c1",
"text": "Considering that it's common for the monthly mortgage payment to be 25% of one's income, it's an obvious advantage for that monthly burden to be eliminated. The issue, as I see it, is that this is the last thing one should do in the list of priorities: The idea of 'no mortgage' is great. But. You might pay early and have just a few years of payments left on the mortgage and if you are unemployed, those payments are still due. It's why I'd suggest loading up retirement accounts and other savings before paying the mortgage sooner. Your point, that rates are low, and your expected return is higher, is well presented. I feel no compulsion to prepay my 3.5% mortgage. As the OP is in Canada, land of no mortgage interest deduction, I ignore that, till now. The deduction simply reduces the effective rate, based on the country tax code permitting it. It's not the 'reason' to have a loan. But it's ignorant to ignore the math.",
"title": ""
}
] |
fiqa
|
ef7236fe8120e8db96e6b1285f4fa55e
|
Why does the biotechnology industry have such a high PE ratio?
|
[
{
"docid": "3d2d90e1bda83babf879836b40840068",
"text": "\"If you look at the biotech breakdown, you'll find a lot of NAs when it comes to P/E since there are many young biotech companies that have yet to make a profit. Thus, there may be something to be said for how is the entire industry stat computed. Biotechnology can include pharmaceutical companies that can have big profits due to patents on drugs. As an example, look at Shire PLC which has a P/E of 1243 which is pretty high with a Market Capitalization of over a billion dollars, so this isn't a small company. I wonder what dot-com companies would have looked like in 1998/1999 that could well be similar as some industries will have bubbles you do realize, right? The reason for pointing out the Market Capitalization is that this a way to measure the size of a company, as this is merely the sum of all the stock of the company. There could be small companies that have low market capitalizations that could have high P/Es as they are relatively young and could be believed to have enough hype that there is a great deal of confidence in the stock. For example, Amazon.com was public for years before turning a profit. In being without profits, there is no P/E and thus it is worth understanding the limitations of a P/E as the computation just takes the previous year's earnings for a company divided by the current stock price. If the expected growth rate is high enough this can be a way to justify a high P/E for a stock. The question you asked about an industry having this is the derivation from a set of stocks. If most of the stocks are high enough, then whatever mean or median one wants to use as the \"\"industry average\"\" will come from that.\"",
"title": ""
},
{
"docid": "737c84266aeb5494df7a0a0cdba9b4a7",
"text": "\"I want to elaborate on some of the general points made in the other answers, since there is a lot that is special or unique to the biotech industry. By definition, a high P/E ratio for an industry can stem from 1) high prices/demand for companies in the industry, and/or 2) low earnings in the industry. On average, the biotech industry exhibits both high demand (and therefore high prices) and low earnings, hence its average P/E ratio. My answer is somewhat US-specific (mainly the parts about the FDA) but the rest of the information is relevant elsewhere. The biotech industry is a high-priced industry because for several reasons, some investors consider it an industry with significant growth potential. Also, bringing a drug to market requires a great deal of investment over several years, at minimum. A new drug may turn out to be highly profitable in the future, but the earliest the company could begin earning this profit is after the drug nears completion of Phase III clinical trials and passes the FDA approval process. Young, small-cap biotech companies may therefore have low or negative earnings for extended periods because they face high R&D costs throughout the lengthy process of bringing their first drug (or later drugs) to market. This process can be on the order of decades. These depressed earnings, along with high demand for the companies, either through early investors, mergers and acquisitions, etc. can lead to high P/E ratios. I addressed in detail several of the reasons why biotech companies are in demand now in another answer, but I want to add some information about the role of venture capital in the biotech industry that doesn't necessarily fit into the other answer. Venture capital is most prevalent in tech industries because of their high upfront capital requirements, and it's even more important for young biotech companies because they require sophisticated computing and laboratory equipment and highly-trained staff before they can even begin their research. These capital requirement are only expected to rise as subfields like genetic engineering become more widespread in the industry; when half the staff of a young company have PhD's in bioinformatics and they need high-end computing power to evaluate their models, you can see why the initial costs can be quite high. To put this in perspective, in 2010, \"\"venture capitalists invested approximately $22 billion into nearly 2,749 companies.\"\" That comes out to roughly $7.8M per company. The same year (I've lost the article that mentioned this, unfortunately), the average venture capital investment in the biotech industry was almost double that, at $15M. Since many years can elapse between initial investment in a biotech company and the earliest potential for earnings, these companies may require large amounts of early investment to get them through this period. It's also important to understand why the biotech industry, as a whole, may exhibit low earnings for a long period after the initial investment. Much of this has to do with the drug development process and the phases of clinical trials. The biotech industry isn't 100% dedicated to pharmaceutical development, but the overlap is so significant that the following information is more than applicable. Drug development usually goes through three phases: Drug discovery - This is the first research stage, where companies look for new chemical compounds that might have pharmaceutical applications. Compounds that pass this stage are those that are found to be effective against some biological target, although their effects on humans may not be known. Pre-clinical testing - In this stage, the company tests the drug for toxicity to major organs and potential side effects on other parts of the body. Through laboratory and animal testing, the company determines that the drug, in certain doses, is likely safe for use in humans. Once a drug passes the tests in this stage, the company submits an Investigational New Drug (IND) application to the FDA. This application contains results from the animal/laboratory tests, details of the manufacturing process, and detailed proposals for human clinical trials should the FDA approve the company's IND application. Clinical trials - If the FDA approves the IND application, the company moves forward with clinical trials in human, which are themselves divided into several stages. \"\"Post-clinical phase\"\" / ongoing trials - This stage is sometimes considered Phase IV of the clinical trials stage. Once the drug has been approved by the FDA or other regulatory agency, the company can ramp up its marketing efforts to physicians and consumers. The company will likely continue conducting clinical trials, as well as monitoring data on the widespread use of the drug, to both watch for unforeseen side effects or opportunities for off-label use. I included such detailed information on the drug development process because it's vitally important to realize that each and every step in this process has a cost, both in time and money. Most biopharm companies won't begin to realize profits from a successful drug until near the end of Phase III clinical trials. The vast R&D costs, in both time and money, required to bring an effective drug through all of these steps and into the marketplace can easily depress earnings for many years. Also, keep in mind that most of the compounds identified in the drug discovery stage won't become profitable pharmaceutical products. A company may identify 5,000 compounds that show promise in the drug discovery stage. On average, less than ten of these compounds will qualify for human tests. These ten drugs may start human trials, but only around 20% of them will actually pass Phase III clinical trials and be submitted for FDA approval. The pre-clinical testing stage alone takes an average of 10 years to complete for a single drug. All this time, the company isn't earning profit on that drug. The linked article also goes into detail about recruitment delays in human trials, scheduling problems, and attrition rates for each phase of the drug development process. All of these items add both temporal and financial costs to the process and have the potential to further depress earnings. And finally, a drug could be withdrawn from the market even after it passes the drug development process. When this occurs, however, it's usually the fault of the company for poor trial design or suppression of data (as in the case of Vioxx). I want to make one final point to keep in mind when looking at financial statistics like the P/E ratio, as well as performance and risk metrics. Different biotech funds don't necessarily represent the industry in the same way, since not all of these funds invest in the same firms. For example, the manager of Fidelity's Select Biotechnology Portfolio (FBIOX) has stated that he prefers to weight his fund towards medium to large cap companies that already have established cash flows. Like all biopharm companies, these firms face the R&D costs associated with the drug development process, but the cost to their bottom line isn't as steep because they already have existing cash flows to sustain their business and accumulated human capital that should (ideally) make the development process more efficient for newer drugs. You can also see differences in composition between funds with similar strategies. The ishares Nasdaq Biotech Index Fund (IBB) also contains medium to large cap companies, but the composition of its top 10 holdings is slightly different from that of FBIOX. These differences can affect any metric (although some might not be present for FBIOX, since it's a mutual fund) as well as performance. For example, FBIOX includes Ironwood Pharmaceuticals (IRWD) in its top 10 holdings, while IBB doesn't. Although IBB does include IRWD because it's a major NASDAQ biotech stock, the difference in holdings is important for an industry where investors' perception of a stock can hinge on a single drug approval. This is a factor even for established companies. In general, I want to emphasize that a) funds that invest more heavily in small-cap biotech stocks may exhibit higher P/E ratios for the reasons stated above, and b) even funds with similar mixes of stocks may have somewhat different performance because of the nature of risk in the biotech industry. There are also funds like Vanguard's Healthcare ETF (VHT) that have significant exposure to the biotech industry, including small-cap firms, but also to major players in the pharmaceutical market like Pfizer, Johnson and Johnson, etc. Since buyouts of small-cap companies by large players are a major factor in the biotech industry, these funds may exhibit different financial statistics because they reflect both the high prices/low earnings of young companies and the more standard prices/established earnings of larger companies. Don't interpret anything I stated above as investment advice; I don't want anything I say to be construed as any form of investment recommendation, since I'm not making one.\"",
"title": ""
},
{
"docid": "34f5426e7f5b8b66614ee66648c0ca3e",
"text": "Residential Construction at 362x, by the way. I'm going to hazard a guess here - Say XYZ corp trades at $100, and it's showing a normal earnings of $10 the last few years. Its industry falls on hard times, and while it makes enough to keep its doors open, profits fall to $1. The company itself is still sound, but the small earnings result in a high P/E. By the way, its book value is $110, and they have huge cash on the books along with real estate. I offer these details to show why the price doesn't drop like a rock. Now, biotech may be in a period of low reported earnings but with future results expected to justify the price. On one hand it may be an anomaly, with earnings due to rise, or it may be a bit of a bubble. An analyst for this sector should be able to comment if I'm on the right track.",
"title": ""
},
{
"docid": "efca071232849de11062be9e06e6db9b",
"text": "Most biotech companies do not have a product they are selling. They have a set of possible drugs that they are developing. If any of these drugs get proven to be better than the current drugs they can be sold at a great profit. Therefore as soon as a biotech company proves a drug candidate is likely to pass large scale trials the company is often taken over by a large pharmaceutical company and is therefore no longer listed on the stock market. So mostly profit comes after the company stops being listed, therefore the profit will be negative for most biotech companies that are publicly traded.",
"title": ""
}
] |
[
{
"docid": "24939e8fad0abdfe7b5f23d7a473ff45",
"text": "\"What folks here don't get is it's generally in the industries interest to not mislead. As you may have noticed, folks don't like being mislead. Yes, it happens, but the large majority of companies consider it in their interests to label clearly. Are you aware that General Foods is strongly lobbying to mandate GMO labeling? Or that the pork industry is making a strong (hopefully successful) effort to change the rules about \"\"natural\"\" nitrites so that they're labeled like any other nitrite? I'm guessing you're not, and instead are just making unfounded assumptions.\"",
"title": ""
},
{
"docid": "6235eabca42157ded89249ded9a3f859",
"text": "complete fucking bullshit line of thinking. There are far more expensive industrial development (silicon fabrication, each fab cost $3-15Billion). You don't see Samsung running around begging for patent extension do you? The pharma industry is bunch of con artist and scum. It has always been like that. (You do know Merck originally sold opium right?)",
"title": ""
},
{
"docid": "09b1053fc87f66569fd3329bb3a182d5",
"text": "High ROI and high barriers to entry are rare to find existing together at the same time in the same market. More commonly, you have high margins/ROI in early markets, but high barriers to entry are more common in mature markets. The most common places to find high ROI and barriers to entry is when there is something *proprietary* involved. This is why the STEM (science, technology, engineering, and math) fields are so valuable. Industries related to these fields have an edge because they are the most likely fields to create something proprietary. When something proprietary is also in high demand, you have a barrier to entry and also a potential to create high margins (which in turn will be high ROI). Some people have mentioned medical devices, which are an excellent example. There are only a handful of companies that have went to the lengths of development to create the Swan Ganz catheter, for example (an essential tool used in cardiac surgeries). With little competition and high demand, companies that manufacture Swan Ganz catheters can put healthy margins on the product without worry. TL;DR: The best way to find something high ROI that also has barriers to entry is to specialize towards something proprietary that cannot be imitated or replaced, but is also in high demand.",
"title": ""
},
{
"docid": "05e5e0d13d28689315c9c2673b79e2da",
"text": "Well a huge difference in drugs compared to all those other industries is health regulation. Standards for new medicines are typically extremely higher compared to other industries. For example, when proposing a new drug, only 10% of them actually make it to market.",
"title": ""
},
{
"docid": "4b89f01b1e1888d70c2a668c581ea6d6",
"text": "I don't understand why this article keeps speaking in absolute dollar terms. GE is a massive company, so of course all the numbers look big. The 67% funded status is the key point. That number isn't great, but it isn't terrible. I bet most multi-industrial companies are in that ballpark.",
"title": ""
},
{
"docid": "d6825718869cc56c8475b159575c21e5",
"text": "The reason is that China has identified a problem, has found a solution, and has realized the solution is worth billions in the new energy markets. It can solve a problem while becoming a leader in the largest industry in the world. Meanwhile the US has politicized science and is debating if there is a problem at all.",
"title": ""
},
{
"docid": "3eca7d9af683c9fc97f8fd180a29d566",
"text": "The article briefly mentioned Martin Shkreli and Daraprim, which is an excellent extreme example of the underlying flaws in the American medical market. Hide the true costs of various necessary medications behind multiple walls of insurance pools and government subsidy and pretty soon the sky's the limit for these companies: https://rebelnews.com/willparke/the-drama-of-daraprim-and-the-for-profit-medicine-industry/",
"title": ""
},
{
"docid": "cc49612e943dd8c3f558af5d92088149",
"text": "I agree with the article, but one thing I wonder about: how much is driving suppressed because of the relative high price of gasoline and the relative lack of fuel efficiency in cars? In other words, are we going to put more cars on the road and drive on average more km per yr per if we have a sort of quantum leap in fuel efficiency? Not necessarily a bad thing, but perhaps something that makes achieving foreign oil independence a bit harder than we might think.",
"title": ""
},
{
"docid": "0adb3fdabed361261d5cea1a20e2cffd",
"text": "One problem is that P/E ratio only looks at the last announced earnings. Let's take your manufacturing plant with a P/E of 12.5. Then they announce a major problem that will hurt future earnings and the price drops in half. Now the P/E is 6.25. It looks great, but since there aren't any new earnings that reflect the problem, it's very misleading.",
"title": ""
},
{
"docid": "57473b20e156f849264f404f94ac0064",
"text": "\"In general, when companies are regarded as \"\"hot\"\" growth stocks, they are expected to keep up an accelerated level of growth for a good long time. That accelerated growth justifies a high PE relative to a slow-growth stock. When companies that are supposed to grow miss expectations or (worse) lose money, the markets punish the stock severely... Particularly if the company doesn't make analysts aware of problems early on. Netflix is a great example of a company bungling a few different business problems, creating a much bigger one in the process. A poorly conceived rate hike killed the reliable cash flow of the company, and that crazy Quixter thing just confused everyone. Now nobody trusts the management. BlackBerry is another example of a high performing company that just screwed up, damaging shareholders in the process. We're living in a very challenging era today, but growth stocks are always risky by nature -- growing a company rapidly is very difficult.\"",
"title": ""
},
{
"docid": "0a24cda6eea9a2bb992e11172f5b0980",
"text": "The operating margin deals with the ability for a company to make a profit above the costs of running the company and generating sales. While ROE is how much money the company makes relative to the shareholders equity. I'd be willing to bet that if a company has a small ROE then it also has a quite large P/E (price to earnings) ratio. This would be caused by the company's stock being bid up in relation to its earnings and may not necessarily be a bad thing. People expect the high operating margin to help drive increased revenues in the future, and are willing to pay a higher price now for when that day comes.",
"title": ""
},
{
"docid": "774c77aa1f67de425eee606416932749",
"text": "\"Can you elaborate? What other countries are you talking about? It's definitely not uncommon for publicly funded \"\"healthcare\"\" (unsure why you put this in quotations) to go to corporate revenues / profits. Canada and Switzerland are two examples off the top of my head who use similar systems. Many other countries use a private sector component. \"\"The margins are huge\"\" largely because of government involvement. The bloated Resource-Based Relative Value Scale (RBRVS) standardized payment scheme determines payments for services based on the resource costs estimated by a committee that meets in private (the Relative Value Update Committee). This impractical archaic value system has been adopted by 80% of private insurers, impairing their ability to drive down and offer more competitive prices.\"",
"title": ""
},
{
"docid": "8977fd0cc64c9f5e17e280db974656dc",
"text": "\"This is just trade warfare. China is rejecting loads based on the presence of the \"\"Vipterra\"\" corn trait which is just another BT variant from Syngenta. China has only rejected loads from America based on the presence of Vipterra despite every single load coming from Brazil and Argentina having this trait present. Vipterra is grown a ton in South America due to the very high insect pressure.\"",
"title": ""
},
{
"docid": "66bf45f6087c29960afe97f1a27cf57a",
"text": "Most of the money gained through PE is done through financial engineering/deal structuring. There are funds that are operationally focused which do make changes on the portfolio company level. From what I have seen, most people who are operationally focused do not achieve that much in the way of results. Picture it as consulting, except that the results of your initiatives are actually important. As for turn-arounds, there are funds that specialize in that. Golden Gate Capital comes to mind. These are far more exciting investments, but can be very frustrating. If you want to look at it in terms of the public markets, turnarounds in PE are essentially levered value investments. It is likely that you aren't going to change the business much, but are actually just buying an out-of-favor business and waiting on the industry to bounce back. The argument that PE funds just gut companies and sell with the new higher operating profitability is somewhat flawed. There is really only so much cost cutting you can do, once you have fired staff or corrected a mistake you won't likely have more chances to gain from that original problem. What people should be criticizing is that funds often cut capex and reinvestment to increase results at the expense of the future profitability of the company.",
"title": ""
},
{
"docid": "0f5b2d1f782e4cd0c68c483116f7f71f",
"text": "Is this a joke? Equity research and investment banking jobs have historically been handed out to top Ivy grads who know nothing about finance and learn it on the job. It's changing now because of the competiveness but that statement is just ridiculous.",
"title": ""
}
] |
fiqa
|
cd155bb82adb06046ee9cb5fc2d37dbf
|
Should I sell when my stocks are growing?
|
[
{
"docid": "fab5eb5d350aa52c14d77e8e9a02afac",
"text": "If you feel comfortable taking an 8% gain on your stocks, then yes, you should sell. It is generally a good idea to know when you want to sell (either a price or %) before you ever actually buy the stocks. That helps from getting emotional and making poor decisions.",
"title": ""
},
{
"docid": "bc0e632377b47b8cabb451a7c4bd1fc8",
"text": "\"I reread your question. You are not asking about the validity of selling a particular stock after a bit of an increase but a group of stocks. We don't know how many. This is the S&P for the past 12 months. Trading at 1025-1200 or so means that 80-100 points is an 8% move. I count 4 such moves during this time. The philosophy of \"\"you can't go wrong taking a gain\"\" is tough for me to grasp as it offers no advice on when to get (back) in. Studies by firms such as Dalbar (you can google for some of their public material) show data that supports the fact that average investors lag the market by a huge amount. 20 years ending 12/31/08 the S&P returned 8.35%, investor equity returns showed 1.87%. I can only conclude that this is a result of buying high and selling low, not staying the course. The data also leads me to believe the best advice one can give to people we meet in these circumstances is to invest in index funds, keeping your expenses low as you can. I've said this since read Jack Bogle decades ago, and this advice would have yielded about 8.25% over the 20 years, beating the average investor by far, by guaranteeing lagging the average by 10 basis points or so. A summary of the more extensive report citing the numbers I referenced is available for down load - QAIB 2015 - Quantitative Analysis of Investor Behavior. It's quite an eye-opener and a worthy read. (The original report was dated 2009, but the link broke, so I've updated to the latest report, 2015)\"",
"title": ""
},
{
"docid": "0e05cdeaf1814b1715922e2a633dc6e7",
"text": "It depends on what your investment goals are. Are you investing for the short-term or the long-term? What was your reason for investing in these stocks in the first place? Timing short-term fluctuations in the market is very difficult, so if that's your goal, I wouldn't count on being able to sell and buy back in at exactly the right time. Rather, I think you should think about what your investment rationale was in the first place, and whether or not that rationale still holds. If it does, then hold on to the stocks. If it doesn't, then sell.",
"title": ""
},
{
"docid": "38b141265488c5145a995691b0c8772f",
"text": "You should constantly look at your investment portfolio and sell based on future outlook. Don't get emotional. Selling a portfolio of stocks at once without a real reason is foolish. If you have a stock that's up, and circumstances make you think it's going to go up further, hold it. If prospects are not so good, sell it. Also, you don't have to buy or sell everything at once. If you've made money on a stock and want to realize those gains, sell blocks as it goes up. Stay diversified, monitor your portfolio every week and keep a reserve of cash to use when opportunity strikes. If you have more stocks or funds than you can keep current on every week, you should consolidate your positions over time.",
"title": ""
},
{
"docid": "8087b7aad543cf60eb8dd55cccbdd07b",
"text": "There is an approach which suggests that each weekend you should review your positions as if they were stocks to be considered for purchase on Monday. I can't offer advice on picking stocks, but it's fair to say that you need to determine if the criteria you used to buy it the first time is still valid. I own a stock trading at over $300, purchased for $5. Its P/E is still reasonable as the darn E just keeps rising. Unless your criteria is to simply grab small gains, which in my opinion is a losing strategy, an 8% move up would never be a reason to sell, in and of itself. Doing so strikes me as day trading, which I advise againgst.",
"title": ""
},
{
"docid": "dbb1f21ba8b9fe7f9f4698a4bee6758c",
"text": "Try to find out (online) what 'the experts' think about your stock. Normally, there are some that advise you to sell, some to hold and some to buy. Hold on to your stock when most advise you to buy, otherwise, just sell it and get it over with. A stock's estimated value depends on a lot of things, the worst of these are human emotions... People buy with the crowd and sell on panic. Not something you should want to do. The 'real' value of a stock depends on assets, cash-flow, backlog, benefits, dividends, etc. Also, their competitors, the market position they have, etc. So, once you have an estimate of how much the stock is 'worth', then you can buy or sell according to the market value. Beware of putting all your eggs in one basket. Look at what happened to Arthur Andersen, Lehman Brothers, Parmalat, Worldcom, Enron, etc.",
"title": ""
},
{
"docid": "a9d0b3abbe31300d637cb9313dc9bdd5",
"text": "\"In my view, it's better to sell when there's a reason to sell, rather than to cap your gains at 8%. I'm assuming you have no such criteria on the other side - i.e. hold your losses down to 8%. That's because what matters is how much you make overall in your portfolio, not how much you make per trade. Example: if you own three stocks, equal amounts - and two go up 20% but one falls 20%. If you sell your gains at 8%, and hold the loser, you have net LOST money. So when do you actually sell? You might say a \"\"fall of 10%\"\" from the last high is good enough to sell. This is called a \"\"trailing\"\" stop, which means if a stock goes from 100 to 120, I'll still hold and sell if it retraces to 108. Needless to say if it had gone from 100 to 90, I would still be out. The idea is to ride the trend for as long as you can, because trends are strong. And keep your trailing stops wide enough for it to absorb natural jiggles, because you may get stopped out of a stock that falls 4% but eventually goes up 200%. Or sell under other conditions: if the earnings show a distinct drop, or the sector falls out of favor. Whenever you decide to sell, also consider what it would take for you to buy the stock back - increased earnings, strong prices, a product release, whatever. Because getting out might seem like a good thing, but it's just as important to not think of it as saying a stock is crappy - it might just be that you had enough of one ride. That doesn't mean you can't come back for another one.\"",
"title": ""
},
{
"docid": "aa237f48dd59fcf2a15c1039a5fe5043",
"text": "My thoughts are that if you've seen considerable growth and the profit amassed would be one that makes sense, you would have to seriously consider selling NOW because it could take yeoman's time to mimic that profit in the next 10 quarters or so. To analogize; If you bought a house for 100k and we're renting it for say 1,000/month and we're making $ 250/month profit and could sell it now for 125k, it would take you 100 months to recoup that $25k profit (or 8 years 4 months). Doesn't it make sense to sell now? You would have that profit NOW and could invest it somewhere else without losing that period of time, and TIME is the emphasis here.",
"title": ""
}
] |
[
{
"docid": "9d8e6b6d8d672f90472fe90bbc81c66e",
"text": "An instant 15% profit sounds good to me, so you can't go wrong selling as soon as you are able. Here are a couple other considerations: Tax implications: When you sell the stock, you have to pay taxes on the profit (including that 15% discount). The tax rate you pay is based on how long you wait to sell it. If you wait a certain amount of time (usually 2 years, but it will depend on your specific tax codes) before you sell, you could be subject to lower tax rates on that profit. See here for a more detailed description. This might only apply if you're in the US. Since you work for the company, you may be privy to a bit more information about how the company is run and how likely it is to grow. As such, if you feel like the company is headed in the right direction, you may want to hold on the the stock for a while. I am generally wary of being significantly invested in the company you work for. If the company goes south, then the stock price will obviously drop, but you'll also be at risk to be laid off. As such you're exposed much more risk than investing in other companies. This is a good argument to sell the stock and take the 15% profit.* * - I realize your question wasn't really about whether to sell the stock, but more for when, but I felt this was relevant nonetheless.",
"title": ""
},
{
"docid": "566c46d1e90f3c2b4f6b483efe05b910",
"text": "If the stock starts to go down DO NOT SELL!! My reasoning for this is because, when you talk about the stock market, you haven't actually lost any money until you sell the stock. So if you sell it lower than you bought it, you loose money. BUT if you wait for the stock to go back up again, you will have made money.",
"title": ""
},
{
"docid": "b7be95f329bacb0dd5a51bd39320063b",
"text": "why sell? Because the stock no longer fits your strategy. Or you've lost faith in the company. In our case, it's because we're taking our principal out and buying something else. Our strategy is, basically, to sell (or offer to sell) after the we can sell and get our principal out, after taxes. That includes dividends -- we reduce the sell price a little with every dividend collected.",
"title": ""
},
{
"docid": "787dff3b420a2556d3121dccca8468f6",
"text": "\"In a perfect world of random stock returns (with a drift) there is no reason to \"\"take profit\"\" by exiting a position because there is no reason to think price appreciation will be followed by decline. In our imperfect world, there are many rules of thumb that occasionally work but if any one of them works consistently over a long period of time, everyone starts to practice that rule and then it stops working. Therefore, there are no such rules of thumb that work reliably and consistently over long periods of time and are expected to continue doing so. Finding such a rule is and always has been a moving target. The rational, consistently sensible reasons to sell a stock are: These rules are very different from my interpretation of the \"\"walk with your chips\"\" behavior mentioned in your question.\"",
"title": ""
},
{
"docid": "b6e009ec30f69b32a49996716bf36410",
"text": "\"The psychology of investing is fascinating. I buy a stock that's out of favor at $10, and sell half at a 400% profit, $50/share. Then another half at $100, figuring you don't ever lose taking a profit. Now my Apple shares are over $500, but I only have 100. The $10 purchase was risky as Apple pre-iPod wasn't a company that was guaranteed to survive. The only intelligent advice I can offer is to look at your holdings frequently, and ask, \"\"would I buy this stock today given its fundamentals and price?\"\" If you wouldn't buy it, you shouldn't hold it. (This is in contrast to the company ratings you see of buy, hold, sell. If I should hold it, but you shouldn't buy it to hold, that makes no sense to me.) Disclaimer - I am old and have decided stock picking is tough. Most of our retirement accounts are indexed to the S&P. Maybe 10% is in individual stocks. The amount my stocks lag the index is less than my friends spend going to Vegas, so I'm happy with the results. Most people would be far better off indexing than picking stocks.\"",
"title": ""
},
{
"docid": "f540b8aa33ad5cdafe3ccc68ff7cdcc3",
"text": "You talk about an individual not being advised to sell (or purchase) in response to trends in the market in such a buy and hold strategy. But think of this for a moment: You buy stock ABC for $10 when both the market as a whole and stock ABC are near the bottom of a bear market as say part of a value buying strategy. You've now held stock ABC for a number of years and it is performing well hitting $50. There is all good news about stock ABC, profit increases year after year in double digits. Would you consider selling this stock just because it has increased 400%. It could start falling in a general market crash or it could keep going up to $100 or more. Maybe a better strategy to sell ABC would be to place a trailing stop of say 20% on the highest price reached by the stock. So if ABC falls, say in a general market correction, by less than 20% off its high and then rebounds and goes higher - you keep it. If ABC however falls by more than 20% off its high you automatically sell it with your stop loss order. You may give 20% back to the market if the market or the stock crashes, but if the stock continues going up you benefit from more upside in the price. Take AAPL as an example, if you bought AAPL in March 2009, after the GFC, for about $100, would you have sold it in December 2011 when it hit $400. If you did you would have left money on the table. If instead you placed a trailing stop loss on AAPL of 20% you would have been still in it when it hit its high of $702 in September 2012. You would have finally been stopped out in November 2012 for around the $560 mark, and made an extra $160 per share. And if your thinking, how about if I decided to sell AAPL at $700, well I don't think many would have picked $700 as the high in hindsight. The main benefit of using stop losses is that it takes your emotions out of your trading, especially your exits.",
"title": ""
},
{
"docid": "8bc7bbe92b183a48b4f7a4f92bece0b1",
"text": "\"Once again I offer some sage advice - \"\"Don't let the tax tail wag the investing dog.\"\" Michael offers an excellent method to decide what to do. Note, he doesn't base the decision on the tax implication. If you are truly indifferent to holding the stock, taxwise, you might consider selling just the profitable shares if that's enough cash. Then sell shares at a loss each year if you have no other gains. That will let you pay the long term gain rate on the shares sold this year, but offset regular income in years to come. But. I'm hard pressed to believe you are indifferent, and I'd use Michel's approach to decide. Updated - The New Law is simply a rule requiring brokers to track basis. Your situation doesn't change at all. When you sell the shares, you need to identify which shares you want to sell. For older shares, the tracking is your responsibility, that's all.\"",
"title": ""
},
{
"docid": "af172ae2d3b33181efe360010bd142d9",
"text": "No one can advise you on whether to hold this stock or sell it. Your carried losses can offset short or long term gains, but the long term losses have to be applied to offset long term gains before any remaining losses can offset short term gains. Your question doesn't indicate how long you have to hold before the short term gains become long term gains. Obviously the longer the holding period, the greater the risk. You also must avoid a wash sale (selling to lock in the gains/reset your basis then repurchasing within a month). All of those decisions hold risks that you have to weigh. If you see further upside in holding it longer, keep the investment. Don't sell just to try to maximize tax benefits.",
"title": ""
},
{
"docid": "a2bdd2296da8aaa634b7848286231084",
"text": "\"Obviously a stock that's hit a high is profit waiting to be taken, be safe, take the money, Sell Sell Sell!! Ah.. but wait, they say \"\"run your winners, cut your losers\"\", so here this stock is a winner... keep on to it, Hold Hold Hold!!!!! Of course, if you're holding, then you think it's going to return even higher.... Buy Buy Buy!!!! So, hope that's clears things up for you - Sell, Hold, or maybe Buy :-) A more serious answer is not ever to worry about past performance, if its gone past a reasonable valuation then consider selling, but never care about selling out just because its reached some arbitrary share price. If you are worried about losses, you might like to set a trailing stop and sell if it drops, but if you're a LTBH type person, just keep it until you feel it is overvalued compared to its fundamentals.\"",
"title": ""
},
{
"docid": "a842c96adc2d4dcddba174421c0069dd",
"text": "The only time I've bothered with stop orders is when I think the position is in a particularly volatile state and there is an earnings report pending. In this situation it's an easily debatable thing to do. If I'm so concerned that the earnings report will be enough to cause a wild downswing that I'd place a stop order, maybe I should just drop the position now. I subscribe to the school of thought that you don't sell your MVPs. I've bought a few things on a whim that really performed well over the few years to follow. To me it doesn't make sense to pick a return at which I would turn off the spigot. So generally it doesn't make sense to hold orders that would force a sale, either after some upside or downside occurs. Additionally, if I've chosen something as a long term hold. I never spend all my cash opening up a position. I've frequently opened positions that subsequently experienced a decline, when that happens I buy more. Meaningless side thought: With the election coming I've been seriously considering pulling some of my gains off the table. My big apprehension with doing that is that I have no near-term alternative use for the money. So what's the point of selling a position I'm otherwise comfortable with just to pay taxes on the gain then probably buy back in?",
"title": ""
},
{
"docid": "f46e0a3669d0732b765f5b13b110c0a3",
"text": "Your gain is $1408. The difference between 32% of your gain and 15% of your gain is $236.36 or $1.60 per share. If you sell now, you have $3957.44 after taxes. Forget about the ESPP for a moment. Are you be willing to wager $4000 on the proposition that your company's stock price won't go down more than $1.60 or so over the next 18 months? I've never felt it was worth it. Also, I never thought it made much sense to own any of my employer's stock. If their business does poorly, I'd prefer not to have both my job and my money at risk. If you sell now: Now assuming you hold for 18 months, pay 15% capital gains tax, and the stock price drops by $1.60 to $23.40:",
"title": ""
},
{
"docid": "2a7804bb59b40d13a2aad5382f5c06dd",
"text": "Never. Isn't that the whole idea of the limit order. You want a bargain, not the price the seller wants. And when the market opens it is volatile at the most, just an observation mayn't be correct. Let it stabilize a bit. The other thing is you might miss the opportunity. But as an investor you should stick to your guns and say I wouldn't buy any higher than this or sell any lower than this. As you are going long, buying at the right price is essential. You aren't going to run away tomorrow, so be smart. Probably this is what Warren Buffet said, it is important to buy a good stock at the right price rather than buying a good stock at the wrong price. There is no fixed answer to your question. It can be anything. You can check what analysts, someone with reputation of predicting correctly(not always), say would be the increase/decrease in the price of a stock in the projected future. They do quite a lot of data crunching to reach a price. Don't take their values as sacrosanct but collate from a number of sources and take an average or some sorts of it. You can then take an educated guess of how much you would be willing to pay depending the gain or loss predicted. Else if you don't believe the analysts(almost all don't have a stellar reputation) you can do all the data crunching yourself if you have the time and right tools.",
"title": ""
},
{
"docid": "73ef8e8eee6d0af27702fa012c74a352",
"text": "Katherine from Betterment here. I wanted to address your inquiry and another comment regarding our services. I agree with JAGAnalyst - it's detrimental to your returns and potential for growth if you try to time the market. That's why Betterment offers customized asset allocation for each portfolio based on the nature of your goal, time horizon, and how much you are able to put towards your investments. We do this so regardless of what's happening in the markets, you can feel comfortable that your asset allocation plus other determining factors will get you where you need to go, without having to time your investing. We also put out quite a bit of content regarding market timing and why we think it's an unwise practice. We believe continuously depositing to your goal, especially through auto-deposits, compounding returns, tax-efficient auto-rebalancing, and reinvesting dividends are the best ways to grow your assets. Let me know if you would like additional information regarding Betterment accounts and our best practices. I am available at [email protected] and am always happy to speak about Betterment's services. Katherine Buck, Betterment Community Manager",
"title": ""
},
{
"docid": "313795aa3cd7009475a761556439cee3",
"text": "My theory, if you must be in debit, own it at the least expense possible. The interest you will pay by the end, combined with the future value of money. Example: The Future value of $3000 at an effective interest rate of 5% after 3 years =$3472.88 Present value of $3000 at 5% over 3 years =$2591.51 you will need more money in the future to pay for the same item",
"title": ""
},
{
"docid": "111f26264d4ed2392a2d01ad93724d66",
"text": "A typical manufacturer buys raw materials, produces a product using labor and energy at a specific cost with some waste, and then sells the product to produce income. A bank buys raw materials (deposits) by paying interest, then uses labor and energy to turn a portion of the raw materials into their product (loans), they then receive income (interest) on those loans. If the income exceeds the cost to buy and produce the loans taking into account losses due to delinquencies (waste) the bank company has made a profit. The growing profits can lead to an increase in stock prices or the paying of dividends. The search for more raw materials can lead to paying more for the raw materials, or by buying other factories (branches) or even other bank companies.",
"title": ""
}
] |
fiqa
|
059187191e5da247f62ba8ba286f2033
|
What does it really mean to buy a share?
|
[
{
"docid": "32778590fecaad9af44b55729a0b9ea3",
"text": "I have been careful here to cover both shares in companies and in ETFs (Exchange Traded Funds). Some information such as around corporate actions and AGMs is only applicable for company shares and not ETFs. The shares that you own are registered to you through the broker that you bought them via but are verified by independent fund administrators and brokerage reconciliation processes. This means that there is independent verification that the broker has those shares and that they are ring fenced as being yours. The important point in this is that the broker cannot sell them for their own profit or otherwise use them for their own benefit, such as for collateral against margin etc.. 1) Since the broker is keeping the shares for you they are still acting as an intermediary. In order to prove that you own the shares and have the right to sell them you need to transfer the registration to another broker in order to sell them through that broker. This typically, but not always, involves some kind of fee and the broker that you transfer to will need to be able to hold and deal in those shares. Not all brokers have access to all markets. 2) You can sell your shares through a different broker to the one you bought them through but you will need to transfer your ownership to the other broker and that broker will need to have access to that market. 3) You will normally, depending on your broker, get an email or other message on settlement which can be around two days after your purchase. You should also be able to see them in your online account UI before settlement. You usually don't get any messages from the issuing entity for the instrument until AGM time when you may get invited to the AGM if you hold enough stock. All other corporate actions should be handled for you by your broker. It is rare that settlement does not go through on well regulated markets, such as European, Hong Kong, Japanese, and US markets but this is more common on other markets. In particular I have seen quite a lot of trades reversed on the Istanbul market (XIST) recently. That is not to say that XIST is unsafe its just that I happen to have seen a few trades reversed recently.",
"title": ""
},
{
"docid": "4ff798af431d6755b22dcf6694af8ed0",
"text": "\"Ditto to MD-Tech, but from a more \"\"philosophical\"\" point of view: When you buy stock, you own it, just like you own a cell phone or a toaster or a pair of socks that you bought. The difference is that a share of stock means that you own a piece of a corporation. You can't physically take possession of it and put it in your garage, because if all the stock-holders did that, then all the company's assets would be scattered around all the stock-holder's garages and the company couldn't function. Like if you bought a 1/11 share in a football team, you couldn't take one of the football players home and keep him in your closet, because then the team wouldn't be able to function. (I might want to take one of the cheerleaders home, but that's another subject ...) In pre-electronic times, you could get a piece of paper that said, \"\"XYZ Corporation - 1 share\"\". You could take physical possession of this piece of paper and put it in your filing cabinet. I'm not sure if you can even get such certificates any more; I haven't seen one in decades. These days it's just recorded electronically. That doesn't mean that you don't own it. It just means that someone else is keeping the records for you. It's like leaving your car in a parking lot. It's still your car. The people who run the parking lot doesn't own it. They are keeping it for you, but just because they have physical possession doesn't make it theirs.\"",
"title": ""
}
] |
[
{
"docid": "61a6f11ae6c1166c8c224750b01862e4",
"text": "I think the correct statement is that Expedia wants to buy Orbitz for $12/share. The market price is $11, which means there is somebody willing to sell for that price. But you can't say that a stock price of $11 means that everybody is willing to sell for that price. And Expedia is unlikely to bid $12/share for just 40% of Orbitz shares; they'll want at least a controlling majority.",
"title": ""
},
{
"docid": "2a2880cc32f51a709d7cc91acef8eb9e",
"text": "\"Let's handle this as a \"\"proof of concept\"\" (POC); OP wants to buy 1 share of anything just to prove that they can do it before doing the months of painstaking analysis that is required before buying shares as an investment. I will also assume that the risks and costs of ownership and taxes would be included in OP's future analyses. To trade a stock you need a financed broker account and a way to place orders. Open a dealing account, NOT an options or CFD etc. account, with a broker. I chose a broker who I was confident that I could trust, others will tell you to look for brokers based on cost or other metrics. In the end you need to be happy that you can get what you want out of your broker, that is likely to include some modicum of trust since you will be keeping money with them. When you create this account they will ask for your bank account details (plus a few other details to prevent fraud, insider trading, money laundering etc.) and may also ask for a minimum deposit. Either deposit enough to cover the price of your share plus taxes and the broker's commission, plus a little extra to be on the safe side as prices move for every trade, including yours, or the minimum if it is higher. Once you have an account the broker will provide an interface through which to buy the share. This will usually either be a web interface, a phone number, or a fax number. They will also provide you with details of how their orders are structured. The simplest type of order is a \"\"market order\"\". This tells the broker that you want to buy your shares at the market price rather than specifying only to buy at a given price. After you have sent that order the broker will buy the share from the market, deduct the price plus tax and her commission from your account and credit your account with your share.\"",
"title": ""
},
{
"docid": "bf6ae9f8692786d01c25dbdbbf863086",
"text": "\"When people talk about \"\"the price\"\" of a stock, they usually mean one of the following: Last price: The price at which a trade most recently took place. If someone sold (and someone else bought) shares of XYZ for $20 each, then until another trade occurs, the last price of the stock will be quoted at $20. Bid price: The highest price at which someone is currently offering to buy the stock. Ask price: The lowest price at which someone is currently offering to sell the stock. As you can see, all of these are completely determined by the people buying and selling the stock.\"",
"title": ""
},
{
"docid": "6f0cb1b299c8902d05de659c56af9285",
"text": "\"In finance, form is function, and while a reason for a trade could be anything, but since the result of a trade is a change in value, it could be presumed that one seeks to receive a change in value. Stock company There may have been more esoteric examples, but currently, possession of a company (total ownership of its' assets actually) is delineated by percentage or a glorified \"\"banknote\"\" frequently called a \"\"share\"\". Percentage companies are usually sole proprietorship and partnerships, but partnerships can now trade in \"\"units\"\". Share companies are usually corporations. With shares, a company can be divided into almost totally indistinguishable units. This allows for more flexible ownership, so individuals can trade them without having to change the company contract. Considering the ease of trade, it could be assumed that common stock contract provisions were formulated to provide for such an ease. Motivation to trade This could be anything, but it seems those with the largest ownership of common stock have lots of wealth, so it could be assumed that people at least want to own stocks to own wealth. Shorting might be a little harder to reason, but I personally assume that the motivation to trade is still to increase wealth. Social benefit of the stock market Assuming that ownership in a company is socially valuable and that the total value of ownership is proportional to the social value provided, the social benefit of a stock market is that it provided the means to scale ownership through convenience, speed, and reliability.\"",
"title": ""
},
{
"docid": "e185bd487ce466eea430fe6c6c67a618",
"text": "If a deal is struck, you're part of that deal because you own shares. If someone offers $10/share for the entire company, you'll get that. If the stock price is $1.50 and someone offers $2/share, you'll get that.",
"title": ""
},
{
"docid": "b4b12e9aa94ea9a3c6df4c597cad3fa6",
"text": "I know what your saying. But I think there is a bit of hopes and feels in stocks also. If people feel like it's going to go down they sale. Causing it to go down right? Bad news article comes out about a stock or bitcoin. They go down. Good news article comes out they both go up. Even if the company changed nothing. Bit of hopes and feels involved. Edit: pose that as a question. Am I completely off the mark here?",
"title": ""
},
{
"docid": "5454e160157a86cd1775242c0efdbbb4",
"text": "Your understanding of the stock market is absolutely correct theoretically. However there is a lot more to it. A stock on a given day is effected by a lot of factors. These factors could really be anything. For example, if you are buying a stock in an agricultural company and there was no rainfall this year, there is a big chance that your stock will lose value. There is also a chance that a war breaks out tomorrow and due to all the government spending on the war, the economy collapses and effects the prices of stocks. Why does this happen? This happens because bad rainfall or war can get people to lose confidence in a stock market. On the other hand GDP growth and low unemployment rates can make people think positive and increase the demand in a stock driving the prices up. The main factor in the stock market is sentiment(How people perceive certain news). This causes a stock to rise or fall even before the event actually happens. (For example:- Weather pundits predicted good rainfall for next year. That news is already known to people, so if the weather pundit was correct, it might not drive the prices up. However, if the rainfall was way better than people expected it to be it would drive the price up and vice versa. These are just examples at a basic level. There are a lot of other factors which determine the price of the stock. The best way to look at it(In my personal opinion) is the way Warren Buffet puts it, i.e. look at the stock as a business and see the potential growth over a long period of time. There will be unexpected events, but in the long run, the business must be profitable. There are various ways to value a company such as Price to earnings ratios, PEG ratios, discounted cash flows and you can also create your own. See what works best for you and record your success/failure ratio before you actually put money in. Good Luck,",
"title": ""
},
{
"docid": "92174efaea066aa7b16d666a6d03c5b8",
"text": "\"I think I understand what you're trying to achieve. You just want to see how it \"\"feels\"\" to own a share, right? To go through the process of buying and holding, and eventually selling, be it at a loss or at a gain. Frankly, my primary advice is: Just do it on paper! Just decide, for whatever reason, which stocks to buy, in what amount, subtract 1% for commissions (I'm intentionally staying on the higher side here), and keep track of the price changes daily. Instead of doing it on mere paper, some brokers offer you a demo account where you can practice your paper trading in the same way you would use a live account. As far as I know, Interactive Brokers and Saxo Bank offer such demo accounts, go look around on their web pages. The problem about doing it for real is that many of the better brokers, such as the two I mentioned, have relatively high minimum funding limits. You need to send a few thousand pounds to your brokerage account before you can even use it. Of course, you don't need to invest it all, but still, the cash has to be there. Especially for some younger and inexperienced investors, this can seduce them to gambling most of their money away. Which is why I would not advise you to actually invest in this way. It will be expensive but if it's just for trying it on one share, use your local principal bank for the trade. Hope this gets you started!\"",
"title": ""
},
{
"docid": "3372ab2c637d4541156521cfb61737d7",
"text": "\"Learn something new every day... I found this interesting and thought I'd throw my 2c in. Good description (I hope) from Short Selling: What is Short Selling First, let's describe what short selling means when you purchase shares of stock. In purchasing stocks, you buy a piece of ownership in the company. You buy/sell stock to gain/sell ownership of a company. When an investor goes long on an investment, it means that he or she has bought a stock believing its price will rise in the future. Conversely, when an investor goes short, he or she is anticipating a decrease in share price. Short selling is the selling of a stock that the seller doesn't own. More specifically, a short sale is the sale of a security that isn't owned by the seller, but that is promised to be delivered. Still with us? Here's the skinny: when you short sell a stock, your broker will lend it to you. The stock will come from the brokerage's own inventory, from another one of the firm's customers, or from another brokerage firm. The shares are sold and the proceeds are credited to your account. Sooner or later, you must \"\"close\"\" the short by buying back the same number of shares (called covering) and returning them to your broker. If the price drops, you can buy back the stock at the lower price and make a profit on the difference. If the price of the stock rises, you have to buy it back at the higher price, and you lose money. So what happened? The Plan The Reality Lesson I never understood what \"\"Shorting a stock\"\" meant until today. Seems a bit risky for my blood, but I would assume this is an extreme example of what can go wrong. This guy literally chose the wrong time to short a stock that was, in all visible aspects, on the decline. How often does a Large Company or Individual buy stock on the decline... and send that stock soaring? How often does a stock go up 100% in 24 hours? 600%? Another example is recently when Oprah bought 10% of Weight Watchers and caused the stock to soar %105 in 24 hours. You would have rued the day you shorted that stock - on that particular day - if you believed enough to \"\"gamble\"\" on it going down in price.\"",
"title": ""
},
{
"docid": "b731769f380d1dbc187594d1070e9701",
"text": "I was thinking that the value of the stock is the value of the stock...the actual number of shares really doesn't matter, but I'm not sure. You're correct. Share price is meaningless. Google is $700 per share, Apple is $100 per share, that doesn't say anything about either company and/or whether or not one is a better investment over the other. You should not evaluate an investment decision on price of a share. Look at the books decide if the company is worth owning, then decide if it's worth owning at it's current price.",
"title": ""
},
{
"docid": "b32701eca361387d32f57d1bcda9f2b7",
"text": "I believe, I could be wrong, it has been a long day. By exercising this right you have the right to purchase the equivalent of their current share. Eg. Someone owns 50 of 100 shares. and the company does a rights offering and is expanding the shares to 200. That person has first right to purchase 50 more shares to keep his share from being diluted.",
"title": ""
},
{
"docid": "4675bd9a58984de643e21efc51fa8034",
"text": "For all practical purposes the words mean the same thing. Shares are just stock in a particular company whereas stock can refer to shares over many companies. Investopedia has a good explaination. If you are a financial journalist you might want to make sure you are using the right term at the right time, but otherwise they are synonyms.",
"title": ""
},
{
"docid": "084b6a7c6c93bb138202603fa9676eff",
"text": "You are misunderstanding what makes the price of a stock go up and down. Every time you sell a share of a stock, there is someone else that buys the stock. So it is not accurate to say that stock prices go down when large amounts of the stock are sold, and up when large amounts of the stock are bought. Every day, the amount of shares of a stock that are bought and sold are equal to each other, because in order to sell a share of stock, someone has to buy it. Let me try to explain what actually happens to the price of a stock when you want to sell it. Let's say that a particular stock is listed on the ticker at $100 a share currently. All this means is that the last transaction that took place was for $100; someone sold their share to a buyer for $100. Now let's say that you have a share of the stock you'd like to sell. You are hoping to get $100 for your share. There are 2 other people that also have a share that they want to sell. However, there is only 1 person that wants to buy a share of stock, and he only wants to pay $99 for a share. If none of you wants to sell lower than $100, then no shares get sold. But if one of you agrees to sell at $99, then the sale takes place. The ticker value of the stock is now $99 instead of $100. Now let's say that there are 3 new people that have decided they want to buy a share of the stock. They'd like to buy at $99, but you and the other person left with a share want to sell at $100. Either one of the sellers will come down to $99 or one of the buyers will go up to $100. This process will continue until everyone that wants to sell a share has sold, and everyone who wants to buy a share has bought. In general, though, when there are more people that want to sell than buy, the price goes down, and when there are more people that want to buy than sell, the price goes up. To answer your question, if your selling of the stock had caused the price to go down, it means that you would have gotten less money for your stock than if it had not gone down. Likewise, if your buying the stock had caused it to go up, it just means that it would have cost you more to buy the stock. It is just as likely that you would lose money doing this, rather than gain money.",
"title": ""
},
{
"docid": "bffdd2b0003ce358a8fc2bc569131763",
"text": "\"Price is decided by what shares are offered at what prices and who blinks first. The buyer and seller are both trying to find the best offer, for their definition of best, within the constraints then have set on their bid or ask. The seller will sell to the highest bid they can get that they consider acceptable. The buyer will buy from the lowest offer they can get that they consider acceptable. The price -- and whether a sale/purchase happens at all -- depends on what other trades are still available and how long you're willing to wait for one you're happy with, and may be different on one share than another \"\"at the same time\"\" if the purchase couldn't be completed with the single best offer and had to buy from multiple offers. This may have been easier to understand in the days of open outcry pit trading, when you could see just how chaotic the process is... but it all boils down to a high-speed version of seeking the best deal in an old-fashioned marketplace where no prices are fixed and every sale requires (or at least offers the opportunity for) negotiation. \"\"Fred sells it five cents cheaper!\"\" \"\"Then why aren't you buying from him?\"\" \"\"He's out of stock.\"\" \"\"Well, when I don't have any, my price is ten cents cheaper.\"\" \"\"Maybe I won't buy today, or I'll buy elsewhere. \"\"Maybe I won't sell today. Or maybe someone else will pay my price. Sam looks interested...\"\" \"\"Ok, ok. I can offer two cents more.\"\" \"\"Three. Sam looks really interested.\"\" \"\"Two and a half, and throw in an apple for Susie.\"\" \"\"Done.\"\" And the next buyer or seller starts the whole process over again. Open outcry really is just a way of trying to shop around very, very, very fast, and electronic reconciliation speeds it up even more, but it's conceptually the same process -- either seller gets what they're asking, or they adjust and/or the buyer adjusts until they meet, or everyone agrees that there's no agreement and goes home.\"",
"title": ""
},
{
"docid": "bcd6f38df9a8a466e7cc2fa5acde92d6",
"text": "\"In general, I think you're conflating a lot of ideas. The stock market is not like a supermarket. With the exception of a direct issue, you're not buying your shares from the company or from the New York Stock Exchange you're buying from an owner of stock, Joe, Sally, a pension fund, a hedge fund, etc; it's not sitting on a shelf at the stock market. When you buy an Apple stock you don't own $10 of Apple, you own 1/5,480,000,000th of Apple because Apple has 5,480,000,000 shares outstanding. When a the board gets together to vote on and approve a dividend the approved dividend is then divided by 5.48 billion to determine how much each owner receives. The company doesn't pay dividends out to owners from a pot of money it received from new owners; it sold iPhones at a profit and is sending a portion of that profit to the owners of the company. \"\"When you buy stock, it is claimed that you own a small portion of the company. This statement has no backing, as you cannot exchange your stock for the company's assets.\"\" The statement does have backing. It's backed by the US Judicial system. But there's a difference between owning a company and owning the assets of the company. You own 1/5,480,000,000 of the company and the company owns the company's assets. Nevermind how disruptive it would be if any shareholder could unilaterally decide to sell a company's buildings or other assets. This is not a ponzi scheme because when you buy or sell your Apple stock, it has no impact on Apple, you're simply transacting with another random shareholder (barring a share-repurchase or direct issue). Apple doesn't receive the proceeds of your private transaction, you do. As far as value goes, yes the stock market provides tons of value and is a staple of capitalism. The stock market provides an avenue of financing for companies. Rather than taking a loan, a company's board can choose to relinquish some control and take on additional owners who will share in the spoils of the enterprise. Additionally, the exchanges deliver value via an unbelievable level of liquidity. You don't have to go seek out Joe or Sally when you want to sell your Apple stock. You don't need to put your shares on Craigslist in the hope of finding a buyer. You don't have to negotiate a price with someone who knows you want to sell. You just place an order at an exchange and you're aligned with a buyer. Also understand that anything can move up or down in value without any money actually changing hands. Say you get your hands on a pair of shoes (or whatever), they're hot on the market, very rare and sought after. You think you can sell them for $1,000. On tonight's news it turns out that the leather is actually from humans and the CEO of the company is being indicted, the company is falling apart, etc. Your shoes just went from $1,000 to $0 with no money changing hands (or from $1,000 to $100,000 depending on how cynical you are).\"",
"title": ""
}
] |
fiqa
|
f50b70bb9e97344bc5e7049ef8590ad9
|
Should I set a stop loss for long term investments?
|
[
{
"docid": "1107626b9d56e20a0d0a6074e897b4d8",
"text": "If they are truly long term investments I would not put a stop loss on them. The recent market dive related to the Brexit vote is a prime example of why not to have one. That was a brief dive that may have stopped you out of any or all of your positions and it was quite short lived. You would likely have bought your positions back (or new positions entirely) and run the risk of experiencing a loss over what turned out to be a non event. That said, I would recommend evaluating your positions periodically to see if they still make sense and are performing the way you want.",
"title": ""
},
{
"docid": "a1e8a47f391e470ba0989ee1d6f99efa",
"text": "Stop loss orders are the exact opposite of what you should be doing if you are implementing a long term buy-and-hold strategy. The motivation of a buy-and-hold strategy is that in the long term, the market rises even despite the occasional crash or recession. Setting a stop loss simply increases the probability that you will sell for a low price in a temporary market downturn. Unless you are likely to need near-term liquidity (in which case you're not a long term investor), that makes no sense.",
"title": ""
},
{
"docid": "97e65970f20cad08d3fe6ee5ebb651e8",
"text": "Do not use a stop loss order as a long-term investor. The arguments in favor of stop losses being presented by a few users here rely on a faulty premise, namely, that there is some kind of formula that will let you set your stop such that it won't trigger on day-to-day fluctuations but will trigger in time to protect you from a significant loss in a serious market downturn. No such formula exists. No matter where you set your stop, it is as likely to dump you from your investment just before it begins climbing again as it is to shield you from continued losses. Each time that happens, you will have sold low and bought high, incurring trading fees into the bargain. It is very unlikely that the losses you avoid in a bear market (remember, you still incur the loss up until your stop is hit; it's only the losses after that that you avoid) will make up the costs of false alarms. On top of that, once you have stopped out of your first investment choice, then what? Will you reinvest in some other stock or fund? If those investments didn't look good to you when you first set up your asset allocation, then why should they look any better now, just because your primary investment has dropped by some arbitrary[*] amount? Will you park the money in cash while you wait for prices to bottom out? The market bottom is only apparent in retrospect. There is no formula for calling it in real time. Perhaps stop loss orders have their uses in active trading strategies, or maybe they're just chrome that trading platforms use to attract customers. Either way, using them on long-term investments will just cost you money in the long run. Forget the fancy order types, and manage your risk through your asset allocation. The overwhelming likelihood is that you will get better performance, and you will spend less time worrying about your investments to boot. [*] Why are the stop levels recommended by the formulae invariably multiples of 5%? Do the market gods have a thing for round numbers?",
"title": ""
},
{
"docid": "8767fd8487c7fbf1fe4d78d52a38411b",
"text": "\"My broker offers the following types of sell orders: I have a strategy to sell-half of my position once the accrued value has doubled. I take into account market price, dividends, and taxes (Both LTgain and taxes on dividends). Once the market price exceeds the magic trigger price by 10%, I enter a \"\"trailing stop %\"\" order at 10%. Ideally what happens is that the stock keeps going up, and the trailing stop % keeps following it, and that goes on long enough that accrued dividends end up paying for the stock. What happens in reality is that the stock goes up some, goes down some, then the order gets cancelled because the company announces dividends or something dumb like that. THEN I get into trouble trying to figure out how to re-enter the order, maintaining the unrealized gain in the history of the trailing stop order. I screwed up and entered the wrong type of order once and sold stock I didn't want to. Lets look at an example. a number of years ago, I bought some JNJ -- a hundred shares at 62.18. - Accumulated dividends are 2127.75 - My spreadsheet tells me the \"\"double price\"\" is 104.54, and double + 10% is 116.16. - So a while ago, JNJ exceeded 118.23, and I entered a Trailing Stop 10% order to sell 50 shares of JNJ. The activation price was 106.41. - since then, the price has gone up and down... it reached a high of 126.07, setting the activation price at 113.45. - Then, JNJ announced a dividend, and my broker cancelled the trailing stop order. I've re-entered a \"\"Stop market\"\" order at 113.45. I've also entered an alert for $126.07 -- if the alert gets triggered, I'll cancel the Market Stop and enter a new trailing stop.\"",
"title": ""
},
{
"docid": "a842c96adc2d4dcddba174421c0069dd",
"text": "The only time I've bothered with stop orders is when I think the position is in a particularly volatile state and there is an earnings report pending. In this situation it's an easily debatable thing to do. If I'm so concerned that the earnings report will be enough to cause a wild downswing that I'd place a stop order, maybe I should just drop the position now. I subscribe to the school of thought that you don't sell your MVPs. I've bought a few things on a whim that really performed well over the few years to follow. To me it doesn't make sense to pick a return at which I would turn off the spigot. So generally it doesn't make sense to hold orders that would force a sale, either after some upside or downside occurs. Additionally, if I've chosen something as a long term hold. I never spend all my cash opening up a position. I've frequently opened positions that subsequently experienced a decline, when that happens I buy more. Meaningless side thought: With the election coming I've been seriously considering pulling some of my gains off the table. My big apprehension with doing that is that I have no near-term alternative use for the money. So what's the point of selling a position I'm otherwise comfortable with just to pay taxes on the gain then probably buy back in?",
"title": ""
},
{
"docid": "df23c140202eec107b9a1e27a3e56147",
"text": "This is the exactly wrong thing to do especially in the age of algorithmic trading. Consider this event from 2010: Chart Source Another similar event occurred in 2015 and there was also a currency flash crash in that year. As you can see the S&P 500 (and basically the entire market) dropped nearly 7% in a matter of minutes. It regained most of that value within 15 minutes. If you are tempted to think that 7% isn't that big of a deal, you need to understand that specific securities will have a much bigger drop during such events. For example the PowerShares S&P 500 Low Volatility ETF (SPLV) was down 45% at one point on Aug 24, 2015 but closed less than 6% down. Consider what effect a stop loss order would have on your portfolio in that circumstance. You would not be able to react fast enough to buy at the bottom. The advantage of long-term investing is that you are immune to such aberrations. Additionally, as asked by others, what do you do once you've pulled out your money. Do you wait for a big jump in the market and hop back in? The risk here is that you are on the sidelines for the gains. By missing out on just a small number of big days, you can really hurt your long-term returns.",
"title": ""
},
{
"docid": "8fd24a7a18ae6dee7c86ef01815fefa1",
"text": "\"The emphasis of \"\"stop loss\"\" is \"\"stop\"\", not \"\"loss\"\". Stop and long term are contradictory. After you stop, what are you going to do with your cash? Since it's long term, you still have 5+ years to before you use the money, do you simply park everything in 0.5% savings account? On the other hand, if your investment holds N stocks and one has dropped a lot, you are free to switch to another one. This is just an investment strategy and you are still in the market.\"",
"title": ""
},
{
"docid": "764dee227ea830455f3ebacea7bd0685",
"text": "Patience is the key to success. If you hold strong without falling to temptations like seeing a small surge in the price. If it goes down it comes up after a period of time. Just invest on the share when it reaches low bottom and you could see you money multiplying year after year",
"title": ""
},
{
"docid": "116c584e7e9849b25089edfb7efa448f",
"text": "You should definately have a stop loss in place to manage your risk. For a time frame of 5 to 10 years I would be looking at a trailing stop loss of 20% to 25% off the recent high. Another type of stop you could use is a volatility stop. Here the more volatile the stock the larger the stop whilst the less volatile the stock the smaller the stop. You could use 3 or 4 x Weekly ATR (Average True Range) to achieve this. The reason you should always use a stop loss is because of what can happen and what did happen in 2008. Some stock markets have yet to fully recover from their peaks at the end of 2007, almost 9 years later. What would you do if you were planning to hold your positions for 5 years and then withdrawal your funds at the end of June 2021 for a particular purpose, and suddenly in February 2021 the market starts to fall. By the time June comes the market has fallen by over 50%, and you don't have enough funds available for the purpose you planned for. Instead if you were using a trailing stop loss you would manage to keep at least 75% of the peak of your portfolio. You could even spend 10 minutes each week to monitor your portfolio for warning signs that a downtrend may be around the corner and adjust your trailing stop to maybe 10% in these situations, protecting 90% of the peak of your portfolio. If the downtrend does not eventuate you can adjust your trailing back to a higher percentage. If you do get stopped out and shortly after the market recovers, then you can always buy back in or look for other stocks and ETFs to replace them. Sure you might lose a bit of profits if this happens, but it should always be part of your investment plan and risk management how you will handle these situation. If you are not using stop losses, risk management and money management you are essentially gambling. If you say I am going to buy these stocks and ETFs hold them for 10 years and then sell them, then you are just hoping to make gains - which is essentially gambling.",
"title": ""
}
] |
[
{
"docid": "d6bc346d33311b92b56c2ac137a508a7",
"text": "I like C. Ross and MrChrister's advice to not be heavily weighted in one stock over the long run, especially the stock of your employer. I'll add this: One thing you really ought to find out – and this is where your tax advisor is likely able to help – is whether your company's stock options plan use qualified incentive stock options (ISO) or non-qualified stock options (NQO or NSO). See Wikipedia - Incentive stock option for details. From my understanding, only if your plan is a qualified (or statutory) ISO and you hold the shares for at least 1 year of the date of exercise and 2 years from the date of the option grant could your gain be considered a long-term capital gain. As opposed to: if your options are non-qualified, then your gain may be considered ordinary income no matter how long you wait – in which case there's no tax benefit to waiting to cash out. In terms of hedging the risk if you do choose to hold long, here are some ideas: Sell just enough stock at exercise (i.e. taking some tax hit up front) to at least recover your principal, so your original money is no longer at risk, or If your company has publicly listed options – which is unlikely, if they are very small – then you could purchase put options to insure against losses in your stock. Try a symbol lookup at the CBOE. Note: Hedging with put options is an advanced strategy and I suggest you learn more and seek advice from a pro if you want to consider this route. You'll also need to find out if there are restrictions on trading your employer's public stock or options – many companies have restrictions or black-out periods on employee trading, especially for people who have inside knowledge.",
"title": ""
},
{
"docid": "4925a42610d9d45797fcb67ad5c8a122",
"text": "I agree, one should not let the tax tail wag the investing dog. The only question should be whether he'd buy the stock at today's price. If he wishes to own it long term, he keeps it. To take the loss this year, he'd have to sell soon, and can't buy it back for 30 days. If, for whatever reason, the stock comes back a bit, he's going to buy in higher. To be clear, the story changes for ETFs or mutual funds. You can buy a fund to replace one you're selling, capture the loss, and easily not run afoul of wash sale rules.",
"title": ""
},
{
"docid": "2eece10018e187b5456011337e0d74c9",
"text": "It was not 100% clear if you have held all of these stocks for over a year. Therefore, depending on your income tax bracket, it might make sense to hold on to the stock until you have held the individual stock for a year to only be taxed at long-term capital gains rates. Also, you need to take into account the Net Investment Income Tax(NIIT), if your current modified adjusted income is above the current threshold. Beyond these, I would think that you would want to apply the same methodology that caused you to buy these in the first place, as it seems to be working well for you. 2 & 3. No. You trigger a taxable event and therefore have to pay capital gains tax on any gains. If you have a loss in the stock and repurchase the stock within 30 days, you don't get to recognize the loss and have to add the loss to your basis in the stock (Wash Sales Rules).",
"title": ""
},
{
"docid": "182b561785b6dbb85ff8bf140ba84456",
"text": "\"If you only have to pay 23k federal taxes on 100k, that means you are in the long term capital gains tax rate, which is the lower of the tax rates available. First you get your federal income tax marginal tax rate, and then find the matching long term capital gains tax rate. For example, if your marginal federal income tax rate is 28%, your capital gains tax rate would be 15%. Or rather, if the amount of the gain would put you in the 28% rate, then your long term capital gains tax rate is 15%. You can reduce that by having more losses. If you have anything else invested anywhere that is taking a loss, then you can sell that this year and it will offset the other gains you have realized. The only note is that your losses have to be long term capital losses too. Tax loss harvesting takes this to an extreme where you sell something at a loss to lock in the tax loss, but you didn't really want to get rid of that investment, so then you buy a nearly identical investment. ie. if you owned shares of \"\"Direxion Tech Sector ETF\"\" and it was at a loss, you would sell that and then immediately buy \"\"ProShares Tech Sector ETF\"\", the competing product that does the exact same thing. Then there is charity. This still requires spending money and you not having it any longer. If you feel that a cause can use the money more directly than the US government, you can donate an appreciated asset to the charity - not report a gain and also take a charitable deduction.\"",
"title": ""
},
{
"docid": "e43a11f2f07debb1aab6bda4d0b3e316",
"text": "Firstly, going short on a stock and worrying if the price suddenly gaps up a lot due to good news is the same as being long on a stock and worrying that the price will suddenly collapse due to bad news. Secondly, an out of the money call option would be cheaper than an in the money call option, in fact the further out of the money the cheaper the premium will be, all other things being equal. So a good risk management strategy would be to set your stop orders as per your trading plan and if you wish to have added protection in case of a large gap is to buy a far out of the money call option. The premium should not be too expensive. Something you should also consider is the time until expiry for the option, if your time frame for trading is days to weeks you make consider a cheaper option that expires in about a month, but if you are planning on holding the position for more than a month you might need a longer expiry period on the option, which will increase the premium. Another option to consider, if your broker offers it, is to use a guaranteed stop loss order. You will pay a little premium for this type of order and not all brokers offer it, but if it is offered you will be protected against any price gaps past your guaranteed stop loss price.",
"title": ""
},
{
"docid": "00ead6e1e4accaf77de20977700dc957",
"text": "\"There some specific circumstances when you would have a long-term gain. Option 1: If you meet all of these conditions: Then you've got a long-term gain on the stock. The premium on the option gets rolled into the capital gain on the stock and is not taxed separately. From the IRS: If a call you write is exercised and you sell the underlying stock, increase your amount realized on the sale of the stock by the amount you received for the call when figuring your gain or loss. The gain or loss is long term or short term depending on your holding period of the stock. https://www.irs.gov/publications/p550/ch04.html#en_US_2015_publink100010630 Option 2: If you didn't hold the underlying and the exercise of the call that you wrote resulted in a short position, you might also be able to get to a long-term gain by buying the underlying while keeping your short position open and then \"\"crossing\"\" them to close both positions after one year. (In other words, don't \"\"buy to cover\"\" just \"\"buy\"\" so that your account shows both a long and a short position in the same security. Your broker probably allows this, but if not you, could buy in a different account than the one with the short position.) That would get you to this rule: As a general rule, you determine whether you have short-term or long-term capital gain or loss on a short sale by the amount of time you actually hold the property eventually delivered to the lender to close the short sale. https://www.irs.gov/publications/p550/ch04.html#en_US_2015_publink100010586 Option 1 is probably reasonably common. Option 2, I would guess, is uncommon and likely not worthwhile. I do not think that the wash sale rules can help string along options from expiration to expiration though. Option 1 has some elements of what you wrote in italics (I find that paragraph a bit confusing), but the wash sale does not help you out.\"",
"title": ""
},
{
"docid": "6ed80b2fab2d34f3fb79084973735525",
"text": "Capping the upside while playing with unlimited downside is a less disciplined investment strategy vis-a-vis a stop-loss driven strategy. Whether it is less risky or high risky also depends on the fluctuations of the stock and not just long-term movements. For example, your stop losses might get triggered because of a momentary sharp decline in stock price due to a large volume transaction (esp more so in small-cap stocks). Although, the stock price might recover from the sudden price drop pretty soon causing a seemingly preventable loss. That being said, playing with stop losses is always considered a safer strategy. It may not increase your profits but can certainly cap your losses.",
"title": ""
},
{
"docid": "1592c7926967d762c261dca26cb01931",
"text": "I need to see the policy you are referring to give a more accurate answer. However what could be happening, it’s again the way these instruments are structured; For example if the insurance premium is say 11,000 of which 1000 is toward expenses and Term insurance amount. The Balance 10,000 is invested in growth. The promise is that this will grow max of 9.5% and never below zero. IE say if we are talking only about a year, you can get anything between 10,000 to 10,950. The S & P long-term average return is in the range of 12 -15% [i don't remember correctly] So the company by capping it at 9.5% is on average basis making a profit of 2.5% to 5.5%. IE in a good year say the S & P return is around 18%, the company has pocketed close to 9% more money; On a bad year say the Index gave a -ve return of say 5% ... The Insurance company would take this loss out of the good years. If say when your policy at the S & P for that year has given poor returns, you would automatically get less returns. Typically one enters into Life Insurance on a long term horizon and hence the long term averages should be used as a better reference, and going by that, one would make more money just by investing this in an Index directly. As you whether you want to invest in such a scheme, should be your judgment, in my opinion I prefer to stay away from things that are not transparent.",
"title": ""
},
{
"docid": "54de8f950e5eb26faf4845ac8f2c2bc7",
"text": "From your question, I am guessing that you are intending to have stoploss buy order. is the stoploss order is also a buy order ? As you also said, you seems to limit your losses, I am again guessing that you have short position of the stock, to which you are intending to place a buy limit order and buy stoploss order (stoploss helps when when the price tanks). And also I sense that you intend to place buy limit order at the price below the market price. is that the situation? If you place two independent orders (one limit buy and one stoploss buy). Please remember that there will be situation where two orders also get executed due to market movements. Add more details to the questions. it helps to understand the situation and others can provide a strategic solution.",
"title": ""
},
{
"docid": "6ae1356d942a1f11b3d2191aadab1c0b",
"text": "Placing bets on targeted sectors of the market totally makes sense in my opinion. Especially if you've done research, with a non-biased eye, that convinces you those sectors will continue to outperform. However, the funds you've boxed in red all appear to be actively managed funds (I only double-checked on the first.) There is a bit of research showing that very few active managers consistently beat an index over the long term. By buying these funds, especially since you hope to hold for decades, you are placing bets that these managers maintain their edge over an equivalent index. This seems unlikely to be a winning bet the longer you hold the position. Perhaps there are no sector index funds for the sectors or focuses you have? But if there were, and it was my money that I planned to park for the long term, I'd pick the index fund over the active managed fund. Index funds also have an advantage in costs or fees. They can charge substantially less than an actively managed fund does. And fees can be a big drag on total return.",
"title": ""
},
{
"docid": "d7818ae9d9068f5953344459e340be74",
"text": "\"In a way yes but I doubt you'd want that. A \"\"Stop-Limit\"\" order has both stop and limit components to it but I doubt this gives you what you want. In your example, if the stock falls to $1/share then the limit order of $3/share would be triggered but this isn't quite what I'd think you'd want to see. I'd suggest considering having 2 orders: A stop order to limit losses and a limit order to sell that are separate rather than fusing them together that likely isn't going to work.\"",
"title": ""
},
{
"docid": "4ee5b35b0455e555d9c22058508cc985",
"text": "\"From Intuit: \"\"Yes, but there are limits. Losses on your investments are first used to offset capital gains of the same type. So short-term losses are first deducted against short-term gains, and long-term losses are deducted against long-term gains. Net losses of either type can then be deducted against the other kind of gain.\"\" \"\"If you have an overall net capital loss for the year, you can deduct up to $3,000 of that loss against other kinds of income, including your salary, for example, and interest income. Any excess net capital loss can be carried over to subsequent years to be deducted against capital gains and against up to $3,000 of other kinds of income.\"\" So in your case, take the loss now if you have short term gains. Also take it if you want to take a deduction on your salary (but this maxes at 3k, but you can keep using an additional 3k each year into the future until its all used up). There isn't really an advantage to a long term loss right now (since long term rates are LOWER than short term rates).\"",
"title": ""
},
{
"docid": "bdf902963e79c6b5e308997b48edab0a",
"text": "I can think of a few simple and quick techniques for timing the market over the long term, and they can be used individually or in combination with each other. There are also some additional techniques to give early warning of possible turns in the market. The first is using a Moving Average (MA) as an indication of when to sell. Simply if the price closes below the MA it is time to sell. Obviously if the period you are looking at is long term you would probably use a weekly or even monthly chart and use a relatively large period MA such as a 50 week or 100 week moving average. The longer the period the more the MA will lag behind the price but the less false signals and whipsawing there will be. As we are looking long term (5 years +) I would use a weekly chart with a 100 week Exponential MA. The second technique is using a Rate Of Change (ROC) Indicator, which is a momentum indicator. The idea for timing the markets in the long term is to buy when the indicator crosses above the zero line and sell when it crosses below the zero line. For long term investing I would use a 13 week EMA of the 52 week ROC (the EMA smooths out the ROC indicator to reduce the chance of false signals). The beauty of these two indicators is they can be used effectively together. Below are examples of using these two indicators in combination on the S&P500 and the Australian S&P ASX200 over the past 20 years. S&P500 1995 to 2015 ASX200 1995 to 2015 If I was investing in an ETF tracking one of these indexes I would use these two indicators together by using the MA as an early warning system and maybe tighten any stop losses I have so that if the market takes a sudden turn downward the majority of my profits would be protected. I would then use the ROC Indicator to sell out completely out of the ETF when it crosses below zero or to buy back in when the ROC moves back above zero. As you can see in both charts the two indicators would have kept you out of the market during the worst of the downfalls in 2000 and 2008 for the S&P500 and 2008 for the ASX200. If there is a false signal that gets you out of the market you can quite easily get back in if the indicator goes back above zero. Using these indicators you would have gotten into the market 3 times and out of it twice for the S&P500 over a 20 year period. For the ASX200 you would have gone in 6 times and out 5 times, also over a 20 year period. For individual shares I would use the ROC indicator over the main index the shares belong to, to give an indication of when to be buying individual stocks and when to tighten stop losses and stay on the sidelines. My philosophy is to buy rising stocks in a rising market and sell falling stocks in a falling market. So if the ROC indicator is above zero I would be looking to buy fundamentally healthy stocks that are up-trending and place a 20% trailing stop loss on them. If I get stopped out of one stock then I would look to replace it with another as long as the ROC is still above zero. If the ROC indicator crosses below zero I would tighten my trailing stop losses to 5% and not buy any new stocks once I get stopped out. Some additional indicators I would use for individual stock would be trend lines and using the MACD as a momentum indicator. These two indicators can give you further early warning that the stock may be about to reverse from its current trend, so you can tighten your stop loss even if the ROC is still above zero. Here is an example chart to explain: GEM.AX 3 Year Weekly Chart Basically if the price closes below the trend line it may be time to close out the position or at the very least tighten up your trailing stop loss to 5%. If the price breaks below an established uptrend line it may well be the end of the uptrend. The definition of an uptrend is higher highs and higher lows. As GEM has broken below the uptrend line and has maid a lower low, all that is needed to confirm the uptrend is over is a lower high. But months before the price broke below the uptrend line, the MACD momentum indicator was showing bearish divergence between it and the price. In early September 2014 the price made a higher high but the MACD made a lower high. This is called a bearish divergence and is an early warning signal that the momentum in the uptrend is weakening and the trend could be reversing soon. Notice I said could and not would. In this situation I would reduce my trailing stop to 10% and keep a watchful eye on this stock over the coming months. There are many other indicators that could be used as signals or as early warnings, but I thought I would talk about some of my favourites and ones I use on a daily and weekly basis. If you were to employ any of these techniques into your investing or trading it may take a little while to learn about them properly and to implement them into your trading plan, but once you have done that you would only need to spend 1 to 2 hours per week managing your portfolio if trading long-term or about 1 hour per nigh (after market close) if trading more medium term.",
"title": ""
},
{
"docid": "e21331efcf4b1348c1afe3ad08025a41",
"text": "\"When you're calculating the cash flows used to compute an IRR, with regard to the expenses used to calculate those cash flows: Do you assume that expenses are going to be higher than they would be today, by using an assumed inflation rate? Or is everything (all cash flows) assumed to be in today's dollars, and you account for inflation's effect on your actual returns at \"\"the end\"\" by subtracting off the inflation rate from the IRR?\"",
"title": ""
},
{
"docid": "52f5dbdf11819f5558574b5eddcfd402",
"text": "I like your example. My only issue with it is that it's very anthropocentric. Even at a very basic level, we should be teaching that economy is a subset of ecology, not just about human interactions. I think the great economic problem of our age is not how to spur growth, but how to appropriately factor in costs of natural resources and affects to the world ecology.",
"title": ""
}
] |
fiqa
|
fe07ab7461cb1fc777975fab94757b49
|
Variable Annuity inside a Roth IRA? What is this and how can I switch it to something else?
|
[
{
"docid": "0a3e1f76db959025e5bcc8a31cf63f2e",
"text": "\"This answer is provided mostly to answer your question \"\"what is it?\"\" A variable annuity is a contract between you and an insurance company. The insurance company takes a bunch of money up front as a lump sum, and will pay you some money yearly - like earning interest. (In this case, they will probably be paying you the money into the account itself). How much they return is, as the name suggests, variable. It can be anything, depending on what the contract says. Mostly, there will be some formula based on the stock market - frequently, the performance of the Standard & Poors 500 Index. There will typically be some minimum returns and maximum returns - if the stock market tanks, your annuity will not lose a ton of value, but if the stock market goes up a lot in one year (as it frequently does), you will not gain a lot of value either. If you are going to be in the market for a long amount of time (decades, e.g. \"\"a few years out of college\"\" and then a little), it makes a lot more sense to invest in the stock market directly. This is essentially what the insurance company is going to do, except you can cut out the middleman. You can get a lot more money that way. You are essentially paying the insurance company to take on some stock market risk for you - you are buying some safety. Buying safety like this is expensive. Variable annuities are the right investment for a few people in a few circumstances - mostly, if you're near retirement, it's one way to have an option for a \"\"safe\"\" investment, for a portion (but not all) of your portfolio. Maybe. Depending on the specifics, a lot. If you are under, like, 50 or so? Almost certainly a terrible investment which will gradually waste your money (by not growing it as fast as it deserves to be grown). Since you want to transfer it to Vanguard, you can probably call Vanguard, ask to open a Roth IRA, and request assistance rolling it over from the place it is held now. There should be no legal restrictions or tax consequences from transferring the money from one Roth IRA account to another.\"",
"title": ""
},
{
"docid": "703d3f19d981eeae3ea9f433c253c381",
"text": "Your financial advisor got a pretty good commission for selling you the annuity is what happened. As for transferring it over to Vanguard (or any other company) and investing it in something else, go to Vanguard's site, tell them that you want to open a new Roth IRA account by doing a trustee-to-trustee transfer from your other Roth IRA account, and tell them to go get the funds for you from your current Roth IRA trustee. You will need to sign some papers authorizing Vanguard to go fetch, make sure all the account numbers and the name of the current trustee (usually a company with a name that includes Trust or Fiduciary as shown on your latest statement) are correct, and sit back and wait while your life improves.",
"title": ""
}
] |
[
{
"docid": "aafb9d455bfccbb5195b3e1d960f4efe",
"text": "TL; DR version: What you propose to do might not save you taxes, and may well be illegal. Since you mention your wife, I assume that the Inherited IRA has been inherited from someone other than your spouse; your mother, maybe, who passed away in Fall 2015 as mentioned in your other question (cf. the comment by Ben Miller above)? If so, you must take (at least) the Required Minimum Distribution (RMD) from the Inherited IRA each year and pay taxes on the distribution. What the RMD is depends on how old the Owner of the IRA was when the Owner passed away, but in most cases, it works out to be the RMD for you, the Beneficiary, considered to be a Single Person (see Publication 590b, available on the IRS web site for details). So, Have you taken the (at least) the RMD amount for 2016 from this Inherited IRA? If not, you will owe a 50% penalty of the difference between the amount withdrawn and the RMD amount. No, it is not a typo; the penalty (it is called an excise tax) is indeed 50%. Assuming that the total amount that you have taken as a Distribution from the Inherited IRA during 2016 is the RMD for 2016 plus possibly some extra amount $X, then that amount is included in your taxable income for that year. You cannot rollover any part of the total amount distributed into your own IRA and thereby avoid taxation on the money. Note that it does not matter whether you will be rolling over the money into an existing IRA in your name or will be establishing a new rollover IRA account in your name with the money: the prohibition applies to both ways of handling the matter. If you wish, you can roll over up to $X (the amount over and above the RMD) into a new Inherited IRA account titled exactly the same as the existing Inherited IRA account with a different custodian. If you choose to do so, then the amount that you roll over into the new Inherited IRA account will not included in your taxable income for 2016. To my mind, there is no point to doing such a rollover unless you are unhappy with the current custodian of your Inherited IRA, but the option is included for completeness. Note that the RMD amount cannot be rolled over in this fashion; only the excess over the RMD. If you don't really need to spend the money distributed from your Inherited IRA for your household expenses (your opening statement that your income for 2016 is low might make this unlikely), and (i) you and/or your spouse received compensation (earned income such as wages, salary, self-employment income, commissions for sales, nontaxable combat pay for US Military Personnel, etc) in 2016, and (ii) you were not 70.5 years of age by December 2016, then you and your wife can make contributions to existing IRAs in your names or establish new IRAs in your names. The amount that can be contributed for each IRA is limited to the smaller of $5500 ($6500 for people over 50) and that person's compensation for 2016, but if a joint tax return is filed for 2016, then both can make contributions to their IRAs as long as the sum of the amounts contributed to the IRAs does not exceed the total compensation reported on the joint return. The deadline for making such IRA contributions is the due date for your 2016 Federal income tax return. Since your income for 2016 is less than $98K, you can deduct the entire IRA contribution even if you or your wife are covered by an employer plan such as a 401(k) plan. Thus, your taxable income will be reduced by the IRA contributions (up to a maximum of $11K (or $12 K or $13K depending on ages)) and this can offset the increase in taxable income due to the distribution from the Inherited IRA. Since money is fungible, isn't this last bullet point achieving the same result as rolling over the entire $9.6K (including the RMD) into an IRA in your name, the very thing that the first bullet point above says cannot be done? The answer is that it really isn't the same result and differs from what you wanted to do in several different ways. First, the $9.6K is being put into IRAs for two different people (you and your wife) and not just you alone. Should there, God forbid, be an end to the marriage, that part of your inheritance is gone. Second, you might not even be entitled to make contributions to IRAs (no compensation, or over 70.5 years old in 2016) which would make the whole thing moot. Third, the amount that can be contributed to an IRA is limited to $5500/$6500 for each person. While this does not affect the present case, if the distribution had been $15K instead of $9.6K, not all of that money could be contributed to IRAs for you and your wife. Finally, the contribution to a Traditional IRA might be non-deductible for income tax purposes because the Adjusted Gross Income is too high; once again, not an issue for you for 2016 but something to keep in mind for future years. In contrast, rollovers from one IRA into another IRA (both titled the same) can be in any amount, and they can be done at any time regardless of whether there is compensation for that year or not or what the Adjusted Gross Income is or whether there is coverage by a 401(k) plan. There are no tax consequences to rollovers unless the rollover is from a Traditional IRA to a Roth IRA in which case, the distribution is included in taxable income for that year. What is prohibited is taking the entire amount of the $9.6K distribution from an Inherited IRA and rolling it over into your existing IRA (or establishing a Rollover IRA in your name with that $9.6K); ditto for some money going into your IRA and some into your wife's IRA. I expect that any IRA custodian will likely refuse to allow you to carry out such a rollover transaction but will be glad to accept 2016 contributions (in amounts of up to $5500/$6500) from you into existing IRAs or open a new IRA for you. The custodian will not ask whether you have compensation for 2016 or not (but will check your age!); it is your responsibility to ensure that you do not contribute more than the compensation etc. Incidentally, subject to the $5500/6500 maximum limit, you can (if you choose to do so) contribute the entire amount of your compensation to an IRA, not just the take-home pay amount (which will be smaller than your compensation because of withholding for Social Security and Medicare tax, State and Federal income tax, etc).",
"title": ""
},
{
"docid": "09848b9331b52609b3aa51f93f586f3a",
"text": "There is always some fine print, read it. I doubt there is any product out there that can guarantee an 8% return. As a counter example - a 70 yr old can get 6% in a fixed immediate annuity. On death, the original premium is retained by the insurance company. Whenever I read the prospectus of a VA, I find the actual math betrays a salesman who misrepresented the product. I'd be really curious to read the details for this one.",
"title": ""
},
{
"docid": "2435f2aa1cdc92f131cfec9963b02f7e",
"text": "What you should do is re-characterize contributions from being a Traditional IRA contributions to Roth IRA contributions. Call your broker that holds the account and ask how to do that. Note: re-characterize means you don't move the money to Roth account, you retroactively say that it was a Roth account to begin with. By re-characterization you're saying that your contribution, and all the earnings on it, are Roth from the start. This is different from moving (rolling over), and moving is not advised if you have significant Rollover IRA sums. If your MAGI is over the limit for Roth IRA as well (see table 2-1 in pub 590) then you keep it as non-deductible IRA contribution and report it on form 8606. In this case your wife's Roth IRA contribution should be recharacterized as traditional and reported as non-deductible on form 8606 as well.",
"title": ""
},
{
"docid": "52456dcf90b012d6a5124b3306c93288",
"text": "I wrote an article about this a while ago with detailed instructions, so I'll link to it here. Here's a snippet about how to use the Roth IRA loophole and report it properly: You don’t have any Traditional/Rollover IRA at all. You deposit up to the yearly maximum (currently $5500) into a traditional IRA. In your case, you re-characterized, which means you essentially deposited. The fact that it lost money may help you later if you have extra amounts in Traditional IRA. You convert your traditional IRA to become Roth IRA ($5500 change designation from Traditional IRA to Roth IRA). You fill IRS form 8606 and attach it to your yearly tax return, no tax due. You have a fully funded Roth IRA account. If you have amounts in the Traditional IRA in excess to what you contributed last year - it becomes a bit more complicated and you need to prorate. See my article for a detailed example. On the form 8606 you fill the numbers as they are. You deposited to IRA 5500, you converted 5100, your $400 loss is lost (unless you have more money in IRA from elsewhere). If you completely distribute your IRA, you can deduct the $400 on your Schedule A, if you itemize.",
"title": ""
},
{
"docid": "d1170a7a6127cb2bff5f0784dc298245",
"text": "\"This is the infographic from the Fidelity. It exemplifies what's wrong with the financial industry, and the sad state of innumeracy that we are in. To be clear, Fidelity treats the 401(k) correctly, although the assumption that the withdrawals are all at a marginal 28% is a poor one. The Roth side, they assume the $5000 goes in at a zero tax rate. This is nonsense, as Elaine can't deposit $5000, she has to pay tax first, no? She'd deposit $3600, and would have the identical $27,404 at withdrawal time. And this is pure nonsense - \"\"Let’s look at the numbers another way. Tom takes the $1,400 he saved in taxes from his $5,000 pretax contributions, and invests that money in a taxable brokerage account. That could boost his total at age 75 to $35,445.\"\" The $1400 saved is in his 401(k) already, there's no extra $1400. $5000 went in pretax. Let me go one more step, and explain what I think Joe meant in his comment below - tax table first - At retirement, say a couple has exactly $168,850 of income. With the $20K in standard deduction and exemptions, they are right at the top of the 25% bracket. And have a federal tax bill of $28,925. Overall, an effective rate of 17%. Of course this is a blend from 0%-25%, and I maintain that if some money could have gone in post tax while in the 10%/15% brackets, that would be great, but in the end, if it all skims off at 25%, and comes out at an effective 17%, that's not too bad. The article is incorrect. Misleading. And offends any of us that have any respect for numbers. And the fact that the article claim that \"\"87% found this helpful\"\" just makes me... sad. I've said it elsewhere, and will repeat, there are not just two points in time. The ability to convert Traditional 401(k) to Roth 401(k), and if in IRAs, not just convert, but also recharacterize, opens up other possibilities. It's worth a bit of attention and ongoing paperwork to minimize your lifetime tax bill. Time makes no difference. There is no \"\"crossover point\"\" as with other financial decisions. For this illustration, the results are identical regardless of time. By the way, in today's dollars, it would take $4M pretax to produce an annual withdrawal of $160K. This number is about top 2-3%. The 90%ers need not worry about saving their way to a higher tax bracket.\"",
"title": ""
},
{
"docid": "64179b9abe526e78ade3da280069e512",
"text": "You are likely thinking of a individual variable insurance contract (IVIC) , better known as a segregated fund, or a principal-protected note (PPN). For a segregated fund, to get a full guarantee on invested capital, you need a 100/100 where the maturity value and death benefit are each 100% guaranteed. The PPN works similar to a long-term GIC (or CD) with a variable investment component. The thing is, neither of these things are cheap and the cost structure that is built in behind them makes it difficult to make any real above market rates of return. In both cases, if you try to break the contracts early then the guarantees are null and void and you get out what you get out.",
"title": ""
},
{
"docid": "2211b7e46afdf6f00f2ec40df1332e6c",
"text": "\"I wrote a brilliant guest post at Don't Mess With Taxes, titled Roth IRAs and Your Retirement Income. (Note - this article now reflects 2012 rates. Just updated) Simply put, it's an ongoing question of whether your taxes will be higher now than at any point in the future. If you are in the 25% bracket now, it would take quite of bit of money for your withdrawals to put you in that bracket at retirement. In the case of the IRA, you have the opportunity to convert in any year between now and retirement if your rate that year drops for whatever reason. The simplest case is if you are now in the 25% bracket. I say go pre-tax, and track, year by year what your withdrawal would be if you retired today. At 15%, but with a good chance for promotion to the 25% bracket, start with Roth flavor and then as you hit 25%, use a combination. This approach would smooth your marginal rate to stay at 15%. To give you a start to this puzzle, in 2012, a couple has a $11,900 standard deduction along with 2 exemptions of $3800 each. This means the first $19,500 in an IRA comes out tax free at retirement. If you believe in a 4% withdrawal rate, you need a retirement account containing $500K pretax to generate this much money. This tick up with inflation, 2 years ago, it was $18,700 and $467K respectively. This is why those who scream \"\"taxes will go up\"\" may be correct, but do you really believe the standard deduction and exemptions will go away? Edit - and as time passes, and I learn more, new info comes to my attention. The above thoughts not withstanding, there's an issue of taxation of Social Security benefits. This creates a The Phantom Tax Rate Zone which I recently wrote about. A single person with not really too high an income gets thrust into the 46% bracket. Not a typo, 46.25% to be exact.\"",
"title": ""
},
{
"docid": "82e4a219be65afcddb94527e7ceb52fb",
"text": "\"What is a 403b? A 403(b) plan is a tax-advantaged retirement savings plan available for public education organizations, some non-profit employers (only US Tax Code 501(c)(3) organizations), cooperative hospital service organizations and self-employed ministers in the United States. Kind of a rare thing. A bit more here: http://www.sec.gov/investor/pubs/teacheroptions.htm under investment options Equity Indexed Annuities are a special type of contract between you and an insurance company. During the accumulation period — when you make either a lump sum payment or a series of payments — the insurance company credits you with a return that is based on changes in an equity index, such as the S&P 500 Composite Stock Price Index. The insurance company typically guarantees a minimum return. Guaranteed minimum return rates vary. After the accumulation period, the insurance company will make periodic payments to you under the terms of your contract, unless you choose to receive your contract value in a lump sum. For more information, please see our \"\"Fast Answer\"\" on Equity Indexed Annuities, and read FINRA's investor alert entitled Equity-Indexed Annuitiies — A Complex Choice. So perhaps \"\"equity indexed annuities\"\" is the more correct thing to search for and not \"\"insurance funds\"\"?\"",
"title": ""
},
{
"docid": "c6afc08aa2ccb47a510e4af39c642a8d",
"text": "Fidelity recently had an article on their website about deferred annuities (variable and fixed) that don't have the contribution limitations of an IRA, are a tax-deferred investment, and can be turned into a future income stream. I just started investigating this for myself. DISCLAIMER: I'm not a financial professional, and would suggest that you consult with a fee-only planner and tax advisor before making any decision.",
"title": ""
},
{
"docid": "fa606018412c90bd9630de00ff8409e0",
"text": "You can get no load annuities through some no-load financial companies like Vanguard so to start with I'd see how what she is being offered compares with something that comes free of a sales load. I'd also question that fixed rate, seems pretty impossible to me, which makes me think there is some catch or 'gotcha' that we are not seeing that either brings down that rate, or makes it delusional (they are kidding themselves) or deceptive in some way. In any case it's setting off my 'too good to be true' alarm at full volume, along with the 'shark attack' alarm as well. (I would strongly suspect the 'advisor' is advising the product that makes the most money for him, NOT what is in your mother's best interest) A fixed annuity is an insurance product, not a security, because the insurance company must credit the annuity holder’s account with the specified interest rate for the contractually-stipulated time period, regardless of market fluctuations in actual interest rates. It is the insurance company that bears the investment risk, which it does by investing the annuity holder’s purchase proceeds in fixed-income instruments that the company hopes will provide sufficient return to fulfill its contractual representations to the holder. THIS is why there is no prospectus (it's not a 'security' they are not required to provide one by SEC) because the risk is entirely with the company. Obviously as pointed out in the comments, the company could easily go out of business (especially of they sell a lot of these and can't find a way to get that kind of return on the invested money). Now, ask yourself, if I was the insurance company, would I be comfortable guaranteeing that level of return over that much time if I intend to make a profit from it, pay sales comissions, and stay in business? In terms of 'will they stay in business' I'd have a hard look at their ratings, and go compare where that is on the total range for AM Best (they are lowest 'secure' rating, next thing down is in the 'vulnerable' category) and Standard and Poors (4 places down from their best rating, next thing down is 'marginal' followed by 'poor') You might also want to see if you can get any idea of historical ratings, is this company's ratings falling, or rising? Personally, for the amount of money involved, I'd want a company with MUCH higher ratings than these guys.. THEN maybe someone could say 'no risk', but with those ratings? an no, I don't think so! BTW I'd check over what this bozo (um sorry, that's not fair to clowns) is recommending she do with her own funds as well. For example is he recommending she take something that is already tax sheltered such as an IRA and investing the stuff inside that in an annuity (kind of pointless to 'double shelter' the money, or lock it up for a period of time when she may be required to make withdrawals) make sure you don't see something there that is actually against what is in her best interest and is only done to make him a comission.",
"title": ""
},
{
"docid": "b7fecba0e505b64150038abf84fbea44",
"text": "\"Like JoeTaxpayer said, I don't know of any difference between the backdoor and a regular Roth IRA contribution besides the issue with existing pre-tax IRA money. So if it is your practice to contribute at the beginning of the year (good for you, most people wait until the last minute), then doing a backdoor seems like the safe choice. Some people have speculated that, hypothetically, the IRS could use the \"\"step transaction doctrine\"\" to treat it as a single direct contribution to a Roth IRA (which then would be disallowed and cause you a penalty until you take it out), but I have never heard of this happening to anyone. As for the paperwork, you just need to fill out one extra form at tax time, Form 8606 (you need to complete two parts of it, one for the non-deductible contribution, and one for the conversion). It is pretty straightforward. (Although I've found that it is a pain to do it in tax software.) Another option would be for you to contribute to a Roth IRA now, but when you discover that you're over the limit at the end of the year, re-characterize it as a Traditional contribution and then convert it back to Roth. But this way is not good because then there is a long time between the Traditional contribution and the Roth conversion, and earnings during this time will be taxed at conversion.\"",
"title": ""
},
{
"docid": "62d87d57d8983cfcd5b6402e797eeef7",
"text": "She is very wrong. If the IRA is a traditional, i.e. A pretax IRA (not a Roth), all withdrawals are subject to tax at one's marginal rate. Read that to mean that a large sum can easily push her into higher brackets than normal. If it stayed with her, she'd take smaller withdrawals and be able to throttle her tax impact. Once she takes it all out, and gifts it to you, no gift tax is due, but there's form 709, where it's declared, and counts against her $5.5M lifetime estate exemption. There are a few things in the world of finance that offend me as much as lawyer malpractice, going into an area they are ignorant of.",
"title": ""
},
{
"docid": "1494bec7d05f08e8eb2b1f30184a73f8",
"text": "I am not a lawyer but I do not see a legal problem here. However, if the puts in the Roth IRA are not purchased at fair market value that could be a problem. For example, if your traditional IRA sold puts to the Roth IRA below fair market value that would not be allowed. However, from your post, it appears that you will be buying the puts from a third party so that will not be an issue. There is something else that just cross my mind. Imagine that you own 100 shares of the XYZ stock in your traditional IRA and 100 shares of the XYZ stock outside of an IRA. Now, you buy a put on the XYZ stock inside your Roth IRA. Are the dividends on the XYZ stock still qualified? I do not know but my guess is the answer is no.",
"title": ""
},
{
"docid": "24968d889f8165acac29fd0adf07240e",
"text": "\"The extent that you would have problems would depend on if the annuity is considered Qualified or Non-Qualified. If the annuity is qualified that means that the money that was put into it has never been taxed and a rollover to an IRA is simple. The possible issues here are tax issues and a CPA is likely the best person to answer this question. Two other things to consider in such an event is the loss of any 'living benefit' or 'death benefit'. Variable annuities have been through quite the evolution in the last 15 years. Death benefits have been around longer than living benefits but both are usually based on some derrivitive of a 'high water' mark of the variable sub accounts. You might want to ask Hartford the question \"\"...how will my living or death benefits be affected if I roll this over\"\".\"",
"title": ""
},
{
"docid": "e134c8e2dc970331adafc60acda2ed44",
"text": "\"Welcome to the 'what should otherwise be a simple choice turns into a huge analysis' debate. If the choice were actually simple, we've have one 'golden answer' here and close others as duplicate. But, new questions continue to bring up different scenarios that impact the choice. 4 years ago, I wrote an article in which I discussed The Density of Your IRA. In that article, I acknowledge that, with no other tax favored savings, you can pack more value into the Roth. In hindsight, I failed to add some key points. First, let's go back to what I'd describe as my main thesis: A retired couple hits the top of the 15% bracket with an income of $96,700. (I include just the standard deduction and exemptions.) The tax on this gross sum is $10,452.50 for an 'average' rate of 10.8%. The tax, paid or avoided, upon deposit, is one's marginal rate. But, at retirement, the withdrawals first go through the zero bracket (i.e. the STD deduction and exemptions), then 10%, then 15%. The above is the simplest snapshot. I am retired, and our return this year included Sch A, itemized deductions. Property tax, mort interest, insurance, donations added up fast, and from a gross income (IRA withdrawal) well into the 25% bracket, the effective/average rate was reported as 7.3%. If we had saved in Roth accounts, it would have been subject to 25%. I'd suggest that it's this phenomenon, the \"\"save at marginal 25%, but withdraw at average sub-11%\"\" effect that account for much of the resulting tax savings that the IRA provides. The way you are asking this, you've been focusing on one aspect, I believe. The 'density' issue. That assumes the investor has no 401(k) option. If I were building a spreadsheet to address this, I'd be sure to consider the fact that in a taxable account, long term gains are taxed at 15% for higher earners (I take the liberty to ignore that wealthier taxpayers will pay a maximum 20% tax on long-term capital gains. This higher rate applies when your adjusted gross income falls into the top 39.6% tax bracket.) And those in the 10 or 15% bracket pay 0%. With median household income at $56K in 2016, and the 15% bracket top at $76K, this suggests that most people (gov data shows $75K is 80th percentile) have an effective unlimited Roth. So long as they invest in a way that avoids short term gains, they can rebalance often enough to realize LT gains and pay zero tax. It's likely the $80K+ earner does have access to a 401(k) or other higher deposit account. If they don't, I'd still favor pretax IRAs, with $11K for the couple still 10% or so of their earnings. It would be a shame to lose that zero bracket of that first $20K withdrawal at retirement. Again working backwards, the $78K withdrawal would take nearly $2M in pretax savings to generate. All in today's dollars.\"",
"title": ""
}
] |
fiqa
|
152142caf1d0c3944b11cd6d4cb9f038
|
Low Fee Income Generating Investments for a Trust
|
[
{
"docid": "09b48a9451787d6330c32cdb45fff1de",
"text": "If your primary goal is no / minimized fees, there are 3 general options, as I see it: Based on the fact that you want some risk, interest-only investments would not be great. Consider - 2% interest equals only $1,500 annually, and since the trust can only distribute income, that may be limited. Based on the fact that you seem to have some hesitation on risk, and also limited personal time able to govern the trust (which is understandable), I would say keep your investment mix simple. By this I mean, creating a specific portfolio may seem desirable, but could also become a headache and, in my opinion, not desirable for a trust executor. You didn't get into the personal situation, but I assume you have a family / close connection to a young person, and are executor of a trust set up on someone's death. That not be the case for you, but given that you are asking for advice rather than speaking with those involved, I assume it is similar enough for this to be applicable: you don't want to set yourself up to feel emotionally responsible for taking on too much risk, impacting the trustee(s)'s life negatively. Therefore, investing in a few limited index funds seems to match what you're looking for in terms of risk, reward, and time required. One final consideration - if you want to maximize annual distributions to the trustee(s)'s, consider that you may be best served by seeking high-dividend paying stock (although again, probably don't do this on a stock-by-stock basis unless you can commit the time to fully manage it). Returns in the form of stock increases are good, but they will not immediately provide income that the trust can distribute. If you also wish to grow the corpus of the trust, then stock growth is okay, but if you want to maximize immediate distributions, you need to focus on returns through income (dividends & interest), rather than returns through value increase.",
"title": ""
}
] |
[
{
"docid": "7a31634080d21cd160fd160fc41d54b5",
"text": "\"That's an example of the Act applying to an adviser to a fund, not a fund being exempt from the Act. An adviser to a 3(c)7 fund in this case is taking advantage of a safe harbor pertaining to performance-based compensation set forth in the Act. The reasoning is that a 3(c)7 fund will by definition most likely be comprised of \"\"qualified clients.\"\" The prohibition does apply to other private funds - such as 3(c)1 funds. To the extent that their investors are not \"\"qualified clients,\"\" they are unable to charge a performance-based fee.\"",
"title": ""
},
{
"docid": "5757acae7e1624d29020368571f4543e",
"text": "I would suggest, both as an investor and as someone who has some experience with a family-run trust (not my own), that this is probably not something you should get involved with, unless the money is money you're not worried about - money that otherwise would turn into trips to the movies or something like that. If you're willing to treat it as such, then I'd say go for it. First off, this is not a short or medium term investment. This sort of thing will not be profitable right away, and it will take quite a few years to become profitable to the point that you could take money out of it - if ever. Your money will be effectively, if not actually, locked up for years, and be nearly entirely illiquid. Second, it's not necessarily a good investment even considering that. Real estate is something people tend to feel like it should be an amazing investment that just makes you money, and is better than risky things like the stock market; except it's really not. It's quite risky, vulnerable to things like the 2008 crash, but also to things like a local market being a bit down, or having several months with no renter. The amount your fund will have in it (at most $100x15/month) won't be enough to buy even one property for years ($1500/month means you're looking at what, 100-150 months before you have enough?), and as such won't have enough to buy multiple properties for even longer, which is where you reach some stability. Having a washing machine break down or a roof leak is a big deal when you only have one property to manage; having five or six properties spreads out the risk significantly. You won't get tax breaks from this, of course, and that's where the real issue is for you. You would be far better off putting your money in a Roth IRA (or a regular IRA, but based on your career choice and current income, I'd strongly consider a Roth). You'll get tax free growth, less risky than this fund AND probably faster growing - but regardless of both of those, tax free. That 15-25% that Uncle Sam is giving you back is a huge, huge deal, greater than any return a fund is going to give you (and if they promise that high, run far and fast). Finally, as someone who's watched a family trust work at managing itself - it's a huge, huge headache, and not something I'd recommend at least (unless it comes with money, in which case it's of course a different story). You won't agree on investments, inevitably, and you'll end up spending huge amounts of time trying to convince each other to go with your idea - and it will likely end up being fairly stagnant and conservative, because that's what everyone will be able to at least not object to. It might be something you all enjoy doing, in which case good luck - but definitely not my cup of tea.",
"title": ""
},
{
"docid": "2e5bbd3b47b5228814b16a2d6ac32674",
"text": "The answer is mathematics. Let's say you have $100 capital to invest with.. With a mortgage: With a unit trust (assuming you don't put in borrowed money): 5% growth on the property is $25, but a $25 profit on a unit trust requires 25% growth. Well, that's assuming zero interest and zero fees. Let's say interest is 3% but so are trust fees. A property now requires 8% growth for $25 profit in a year, where a unit trust now requires 29% growth for $25 profit. Which one is more likely? The above calculations don't take in to consideration all associated costs and is obviously exaggerated but it shows the answer is not black and white but is instead just mathematics on a bunch of variables. Debt isn't a bad thing so don't be afraid of using debt. With debt you can borrow more to invest. Having a fully paid off house is not a good investment if some of that equity could be earning you more else where (if the math makes sense).",
"title": ""
},
{
"docid": "007e22a9f926be047351fa6ff6a02a9c",
"text": "Although this scheme is likely to get shut down rather quickly by either your broker or credit card company some points you seem to have missed out on. Properly timed you should be able to get ~55 days of grace period (30 day billing cycle + 25 day grace period) assuming you pay everything off every month and charge immediately following the statement date. You will need to avoid certain card issuers that code all transactions with financial institutions as cash advances (Citibank in paticular). If it is possible it would be in your best interest to lower cash advance limits to 0 to avoid any chance of cash advance fees. If your credit card attempts to process it as a cash advance the transaction will just be declined and you won't be out anything. Otherwise one cash advance fee will eat several months worth of profits. As far as investments with guaranteed principal goes the only thing you can realistically do is money market accounts and maybe treasury notes. Anything else and the short term price fluctuation may leave you high and dry. If this scheme were to work you would be much better off attempting to get rewards for the purchases than anything you could invest in. If you used a 2% card and churned it every month you would be looking at a 24% return on credit card rewards. Even 1% rewards gives you a 12% annual return which is going to beat anything you could invest the money in.",
"title": ""
},
{
"docid": "e6cc30e76ef9235e52b2a547dac32a3a",
"text": "Considering the combined accounts you're contributing $100 per month and they want $100 per year to administer them... that's 8.3% of your contributions gone to fees each year. To me, that's a definite no. Without getting in to bad mouthing the adviser for even making the suggestion, the scale of your account doesn't warrant a fee that high. Fees are very meaningful to the little fish investors. There are LOADS of IRA account providers. With that level of competition, there are several that have very reasonable account minimums, no annual maintenance fees, and a suite of no fee, no load, no commission, low expense ratio funds to choose from. Schwab, Fidelity and Vanguard come to mind. I know Schwab is running a big ad campaign right now as it's reduced some of it's already low expense ratios. If I were you, yes I would move the account because you can even get rid of the $10/year/account fee. But, no, I would not move it to a higher fee situation. In my opinion on a $3,600 account + $1,200 per year in contributions, you don't need advise. You need a good broad market low fee index fund, and enough discipline to understand that retirement is 25 years away so you keep contributing even when news is bad and the market is going down. In 10 years maybe talk to an adviser. Using the S&P500 index daily close historical data from calendar year 2016, considering first of the month monthly deposits and a starting balance of $3,600, you would come out at the end of the year with about $5,294. That's $494 in gain on your total contributions of $4,800. They'd take $100, that's about 20% of your gain. Compared to a no fee account with a reasonable expense ratio of 0.1% the fee would be just $5.30. Bearing in mind also that your $100 per year account will probably be invested in funds that also have an expense ratio fee structure further zapping gains. Further, you lose the compounding effect of the $100 fee over time which adds up to a significant of retirement funds considering a 25 year period. If all you did was put that $100 fee in to a 1% savings account each year for 25 years you'd end up with $2,850. (Considering the average 7% return of the S&P you'd have $6,964 on just your $100 per year fees) This is why you should be so vigilant about fees.",
"title": ""
},
{
"docid": "0626a96a27ac1db6932091ee4ff8eac2",
"text": "Look at a mixture of low-fee index funds, low-fee bond funds, and CDs. The exact allocation has to be tailored to your appetite for risk. If you only want to park the money with essentially no risk of loss then you need FDIC insured products like CDs or a money market account (as opposed to a money market fund which is not FDIC insured). However as others have said, interest rates are awful now. Since you are in your early 30's, and expect to keep this investment for 10+ years, you can probably tolerate a bit of risk. Also considering speaking to a tax professional to determine the specific tax benefits/drawbacks of one investment strategy (funds and CDs) versus another (e.g. real estate).",
"title": ""
},
{
"docid": "62805ccdb9c6fbf48715ce3709ffaa39",
"text": "I think the main question is whether the 1.5% quarterly fee is so bad that it warrants losing $60,000 immediately. Suppose they pull it out now, so they have 220000 - 60000 = $160,000. They then invest this in a low-cost index fund, earning say 6% per year on average over 10 years. The result: Alternatively, they leave the $220,000 in but tell the manager to invest it in the same index fund now. They earn nothing because the manager's rapacious fees eat up all the gains (4*1.5% = 6%, not perfectly accurate due to compounding but close enough since 6% is only an estimate anyway). The result: the same $220,000 they started with. This back-of-the-envelope calculation suggests they will actually come out ahead by biting the bullet and taking the money out. However, I would definitely not advise them to take this major step just based on this simple calculation. Many other factors are relevant (e.g., taxes when selling the existing investment to buy the index fund, how much of their savings was this $300,000). Also, I don't know anything about how investment works in Hong Kong, so there could be some wrinkles that modify or invalidate this simple calculation. But it is a starting point. Based on what you say here, I'd say they should take the earliest opportunity to tell everyone they know never to work with this investment manager. I would go so far as to say they should look at his credentials (e.g., see what kind of financial advisor certification he has, if any), look up the ethical standards of their issuers, and consider filing a complaint. This is not because of the performance of the investments -- losing 25% of your money due to market swings is a risk you have to accept -- but because of the exorbitant fees. Unless Hong Kong has got some crazy kind of investment management market, charging 1.5% quarterly is highway robbery; charging a 25%+ for withdrawal is pillage. Personally, I would seriously consider withdrawing the money even if the manager's investments had outperformed the market.",
"title": ""
},
{
"docid": "0421ab8d7a42901d7685e545c3551bd1",
"text": "\"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.\"\"\"",
"title": ""
},
{
"docid": "fbc206185c63713543f1f540bc114421",
"text": "No, you will not have to pay taxes on the corpus (principal) of the trust distribution. If the trust tax forms were filed correctly, you might have as much as a $9000 loss that will flow to you on the trust's termination. Previously, the trust was supposed to file a return each year, and either claim the dividends or realized cap gains each year, and pay taxes at trust's rate, or distribute them to the beneficiaries via K-1 form. This is the best way to handle this as the trust has a steep tax table (relative high rates) vs the kiddie tax which would let you get nearly $1K/yr tax free each year as a minor. During that time, losses net again gains, but can't be 'distributed' to the beneficiary. They are carried forward year to year. In the year the trust is terminated, that loss is not lost, but it's then passed on to the beneficiary, still via K-1. See Schedule K-1 instructions and Schedule K-1 itself. On a lighter note, the trustee failed you. In the 16 years (Jan 2000-Dec 2015), the market (S&P) grew by 88%, with a compound 4.02%/yr return. Instead of any gain, you got a loss with a -2.75%/yr return. If this were a paid professional, you'd have a potential claim for a lawsuit. This is a reason why amateurs should not be assigned the role of trustee. To clearly answer the mix of questions you asked - Note - it's always a good idea to seek professional advice. But, the nature of this board is that if any of my answer isn't accurate, a high ranked member (top 20 or so on this list) will likely set me straight within 24 hours.",
"title": ""
},
{
"docid": "23b15c62d167248077f59ce49ce98344",
"text": "In summary, you are correct that the goal of investing is to maximize returns, while paying low management fees. Index investing has become very popular because of the low fees. There are many actively traded mutual funds out there with very high management fees of 2.5% and up that do not beat the market. This begs the question of why you are paying high management fees and not just investing in index funds. Consider maxing out your tax sheltered accounts (401(k) and ROTH IRA) to avoid even more fees on your returns. Also consider having a growth component of your portfolio which is generally filled with equity, along with a secure component for assets such as bonds. Bonds may not have the exciting returns of equity, but they help to smooth out the volatility of your portfolio, which may help to keep peace of mind when the market dips.",
"title": ""
},
{
"docid": "49f29b55b33e9105340e11bfb78539e9",
"text": "You also may want to consider how this interacts with the stepped up basis of estates. If you never sell the stock and it passes to your heirs with your estate, under current tax law the basis will increase from the purchase price to the market price at the time of transfer. In a comment, you proposed: Thinking more deeply though, I am a little skeptical that it's a free lunch: Say I buy stock A (a computer manufacturer) at $100 which I intend to hold long term. It ends up falling to $80 and the robo-advisor sells it for tax loss harvesting, buying stock B (a similar computer manufacturer) as a replacement. So I benefit from realizing those losses. HOWEVER, say both stocks then rise by 50% over 3 years. At this point, selling B gives me more capital gains tax than if I had held A through the losses, since A's rise from 80 back to 100 would have been free for me since I purchased at 100. And then later thought Although thinking even more (sorry, thinking out loud here), I guess I still come out ahead on taxes since I was able to deduct the $20 loss on A against ordinary income, and while I pay extra capital gains on B, that's a lower tax rate. So the free lunch is $20*[number of shares]*([my tax bracket] - [capital gains rates]) That's true. And in addition to that, if you never sell B, which continues to rise to $200 (was last at $120 after a 50% increase from $80), the basis steps up to $200 on transfer to your heirs. Of course, your estate may have to pay a 40% tax on the $200 before transferring the shares to your heirs. So this isn't exactly a free lunch either. But you have to pay that 40% tax regardless of the form in which the money is held. Cash, real estate, stocks, whatever. Whether you have a large or small capital gain on the stock is irrelevant to the estate tax. This type of planning may not matter to you personally, but it is another aspect of what wealth management can impact.",
"title": ""
},
{
"docid": "bbeb069f1de0e2d785f8e9e064473933",
"text": "Your initial investment in this case is $9 on the first morning. Every other morning you are using part of your profits to buy the new piece of jewelry, so you are actually not investing any new funds. So each day you are effectively keeping $1 of your profits and re_re-investing $9. But your initial investment of your own funds is only the first $9. In other words if you only had $9 in the bank at the start of the year you could make $365 profits during the year and finish up with $374 in the the bank at the end of the year.",
"title": ""
},
{
"docid": "65f7cecbb29b4cef157e86f531be6a7d",
"text": "\"In the UK, one quirky option in this area (OK, admittedly it's not a passive) is the \"\"Battle Against Cancer Investment Trust\"\" (BACIT). Launched in 2012, it's basically a fund-of-funds where the funds held charge zero management charges or performance fees to the trust, but the trust then donates 1% of NAV to charity each year (half to cancer research, investors decide the other half).\"",
"title": ""
},
{
"docid": "ae148a4b9aca1e2103a1c57a04f56f16",
"text": "This is great, thank you. Can you think of any cases where expected return is greater than interest payments (like in #2) but the best choice would still be raise money through equity issuing? My intuition tells me this may be possible for an expensive company.",
"title": ""
},
{
"docid": "dfbbd6a3615712f356ba0ae1b8ff2aa7",
"text": "I don't think you need to bother with trust accounts. The point of a trust account is holding funds that aren't yours yet. You take a retainer fee that you have yet to earn. As you work, you bill your hourly rate, your client signs off and you take possession of the funds. You're going to work a project, you'll take a partial payment as a deposit and partial payment upon completion. But this is a payment to you, not money transferred to you to hold until you earn it at a later date. Your contract can specify remedies for missing a deadline, or any other thing that could happen.",
"title": ""
}
] |
fiqa
|
178acca33fc791581d75f0e401ebc04a
|
How to use stocks certificate as a gift to a teenager?
|
[
{
"docid": "c6c91d59a4fc2f74edce1e2045913676",
"text": "Yes, depending on what you're trying to achieve. If its just a symbolic gift - you can use a service like this. There are several companies providing this service, look them up, but the prices are fairly the same. You'll end up getting a real stock certificate, but it will cost a lot of overhead (around $40 to get the certificate, and then another $40 to deposit it into a brokerage account if you want to sell it on a stock exchange). So although the certificate is real and the person whose name on it is a full-blown shareholder, it doesn't actually have much value (unless you buy a Google or Apple stock, where the price is much much higher than the fees). Take into account that it takes around 2 months for the certificate to be issued and mailed to you, so time accordingly. Otherwise, you can open a custodial brokerage account, and use it to buy stocks for the minor. Both ways are secure and legal, each for its own purpose and with its own fees.",
"title": ""
}
] |
[
{
"docid": "40965c0ba17523dcab20b0d0a7b79a96",
"text": "\"(Since you used the dollar sign without any qualification, I assume you're in the United States and talking about US dollars.) You have a few options here. I won't make a specific recommendation, but will present some options and hopefully useful information. Here's the short story: To buy individual stocks, you need to go through a broker. These brokers charge a fee for every transaction, usually in the neighborhood of $7. Since you probably won't want to just buy and hold a single stock for 15 years, the fees are probably unreasonable for you. If you want the educational experience of picking stocks and managing a portfolio, I suggest not using real money. Most mutual funds have minimum investments on the order of a few thousand dollars. If you shop around, there are mutual funds that may work for you. In general, look for a fund that: An example of a fund that meets these requirements is SWPPX from Charles Schwabb, which tracks the S&P 500. Buy the product directly from the mutual fund company: if you go through a broker or financial manager they'll try to rip you off. The main advantage of such a mutual fund is that it will probably make your daughter significantly more money over the next 15 years than the safer options. The tradeoff is that you have to be prepared to accept the volatility of the stock market and the possibility that your daughter might lose money. Your daughter can buy savings bonds through the US Treasury's TreasuryDirect website. There are two relevant varieties: You and your daughter seem to be the intended customers of these products: they are available in low denominations and they guarantee a rate for up to 30 years. The Series I bonds are the only product I know of that's guaranteed to keep pace with inflation until redeemed at an unknown time many years in the future. It is probably not a big concern for your daughter in these amounts, but the interest on these bonds is exempt from state taxes in all cases, and is exempt from Federal taxes if you use them for education expenses. The main weakness of these bonds is probably that they're too safe. You can get better returns by taking some risk, and some risk is probably acceptable in your situation. Savings accounts, including so-called \"\"money market accounts\"\" from banks are a possibility. They are very convenient, but you might have to shop around for one that: I don't have any particular insight into whether these are likely to outperform or be outperformed by treasury bonds. Remember, however, that the interest rates are not guaranteed over the long run, and that money lost to inflation is significant over 15 years. Certificates of deposit are what a bank wants you to do in your situation: you hand your money to the bank, and they guarantee a rate for some number of months or years. You pay a penalty if you want the money sooner. The longest terms I've typically seen are 5 years, but there may be longer terms available if you shop around. You can probably get better rates on CDs than you can through a savings account. The rates are not guaranteed in the long run, since the terms won't last 15 years and you'll have to get new CDs as your old ones mature. Again, I don't have any particular insight on whether these are likely to keep up with inflation or how performance will compare to treasury bonds. Watch out for the same things that affect savings accounts, in particular fees and reduced rates for balances of your size.\"",
"title": ""
},
{
"docid": "82c59505447ce6dfcaff69528f1fbe49",
"text": "\"The text of the Uniform Transfers to Minors Act states (Section 14, paragraph a): A custodian may deliver or pay to the minor or expend for the minor's benefit so much of the custodial property as the custodian considers advisable for the use and benefit of the minor, without court order and without regard to (i) the duty or ability of the custodian personally or of any other person to support the minor, or (ii) any other income or property of the minor which may be applicable or available for that purpose. Unfortunately, it is pretty hard to make the case that giving the money to her siblings is for the \"\"use and benefit\"\" of your daughter. However, when your daughter reaches the age of maturity, any money left in the UTMA account becomes hers. She, at that time, could give money to her siblings, if she chooses. Perhaps you and your father could talk to her about your father's wishes for this money, and that would show her that she should do so at that time. If you don't follow these rules, then your daughter or your father could sue you at any point in the future.\"",
"title": ""
},
{
"docid": "9ef4a64d9f6346598dcf117c93049ac2",
"text": "I have several as well, (acquired the same way as you) and I am happy with the idea. They are very stable and that is the reason they pay so little. I don't think you can get a low risk and medium (or high) return. The interest does reset every six months so you do get a bit of the market, should the fed set interest rates higher, you bonds will eventually reflect that. Bonds and Certificates of Deposit are just one element of your investment portfolio. Put the money you can't lose into bonds, the money you can into higher risk stocks. Bonds are great from our grandparent's perspective because they are NOT going to lose value. (My grandparents were depression era folks who wanted that stability) They are trivial to give as gifts. Most other investment forms require a heavy bit more of legal work I would think.",
"title": ""
},
{
"docid": "b8a45a3e2b81cc0f49f2d5dd2fa11139",
"text": "Not really practical... The real problem is getting the money into a form where you *can* invest it in something. It's not like E\\*Trade will let you FedEx them a briefcase of sequentially numbered hundreds and just credit your account, no questions asked. That **is** the hard part.",
"title": ""
},
{
"docid": "1c5bd2ce8b907fb18c884646da71f621",
"text": "sell drugs? (joking) In all seriousness though, your options to legally invest this money are limited, which leaves you to extra-legal options..... which many young people engage, different kind of candy I guess. Ok so you cannot invest into stocks, to day trade. Because you're not an adult. You can put the money in a bank, but the interest rate on that amount of money is in the realm of ~0.1%. You can use the money to seed another legal business venture, say another kind of better candy. My advice is to get a parental unit to put the cash into a mutual fund, in your name... then hand that over to you when you turn 18.",
"title": ""
},
{
"docid": "24e8c2efd41a0f4d14d7d3a333ae4246",
"text": "For point two.. The norm for buying stock is to just register online with a major broker: Fidelity, Schwab,TD Ameritrade...etc, send them money to fund your purchase, make the stock purchase in your account, and then have a little faith. You could probably get them to physically transfer the stock certificates from them to you, but it is not the norm at all. I would plan on a fee being involved also. The 10$ is for one trade... regardless of if you buy one share or many. So you wouldn't buy 1 share of a five dollar stock as your cost would be absurd. You might buy a hundred shares.",
"title": ""
},
{
"docid": "e84d4a034044672e384aff410380aaf5",
"text": "It's just money in an account somewhere with no tax shelter or string attached, to help maturing children (18-22ish) get a kick start in life whether they go to college or not. Basically, the money can be used for anything (for you or them). Or you can put it in a UGMA-type account where it's technically the child's funds and not yours (but check how college loans are calculated before dumping a bunch of money in those, I believe they are looked at differently, maybe as the first source of funds that gets tapped and could impact loan qualification).",
"title": ""
},
{
"docid": "4156c4a82da8f673123236c67faea15a",
"text": "\"I agree with the answer by @Michael that this number doesn't exist. It's hard to see what use it would have and it would be difficult to track. I'm writing a separate answer because I also disagree with the premise of your question: Individual shares of stock have never to my knowledge had such a number. Your comment about numbers on stock certificates identifies the certificate document, which will generally represent multiple shares of stock. That number no more identifies a single share of stock than the serial number on a $10 bill identifies any one of the ten dollars it represents. Even at the \"\"collective\"\" unit of $10, when the bill is eventually replaced with a new one, the new bill has a new number. No continuity.\"",
"title": ""
},
{
"docid": "d666c38057c10de0df25b0b819739a26",
"text": "It doesn't matter which exchange a share was purchased through (or if it was even purchased on an exchange at all--physical share certificates can be bought and sold outside of any exchange). A share is a share, and any share available for purchase in New York is available to be purchased in London. Buying all of a company's stock is not something that can generally be done through the stock market. The practical way to accomplish buying a company out is to purchase a controlling interest, or enough shares to have enough votes to bind the board to a specific course of action. Then vote to sell all outstanding shares to another company at a particular fixed price per share. Market capitalization is an inaccurate measure of the size of a company in the first place, but if you want to quantify it, you can take the number of outstanding shares (anywhere and everywhere) and multiply them by the price on any of the exchanges that sell it. That will give you the market capitalization in the currency that is used by whatever exchange you chose.",
"title": ""
},
{
"docid": "56596fac5107f6f0af730a04194202f2",
"text": "\"A little terminology: Grant: you get a \"\"gift\"\" with strings attached. \"\"Grant\"\" refers to the plan (legal contract) under which you get the stock options. Vesting: these are the strings attached to the grant. As long as you're employed by the company, your options will vest every quarter, proportionally. You'll become an owner of 4687 or 4688 options every quarter. Each such vest event means you'd be getting an opportunity to buy the corresponding amount of stocks at the strike price (and not the current market price which may be higher). Buying is called exercising. Exercising a nonqualified option is a taxable event, and you'll be taxed on the value of the \"\"gift\"\" you got. The value is determined by the difference between the strike price (the price at which you have the option to buy the stock) and the actual fair market value of the stock at the time of vest (based on valuations). Options that are vested are yours (depending on the grant contract, read it carefully, leaving the company may lead to forfeiture). Options that are not vested will disappear once you leave the company. Exercised options become stocks, and are yours. Qualified vs Nonqualifed - refers to the tax treatment. Nonqualified options don't have any special treatment, qualified do. 3.02M stocks issued refers to the value of the options. Consider the total valuation of the company being $302M. With $302M value and 3.02M stocks issued, each stock is worth ~$100. Now, in a year, a new investor comes in, and another 3.02M stocks are issued (if, for example, the new investor wants a 50% stake). In this case, there will be 6.04M stocks issued, for 302M value - each stock is worth $50 now. That is called dilution. Your grant is in nominal options, so in case of dilution, the value of your options will go down. Additional points: If the company is not yet public, selling the stocks may be difficult, and you may own pieces of paper that no-one else wants to buy. You will still pay taxes based on the valuations and you may end up paying for these pieces of paper out of your own pocket. In California, it is illegal to not pay salary to regular employees. Unless you're a senior executive of the company (which I doubt), you should be paid at least $9/hour per the CA minimum wages law.\"",
"title": ""
},
{
"docid": "fedc731ab6ca2dc898e6b0f3972279a9",
"text": "\"Put it in a Vanguard fund with 80% VTI and 20% VXUS. That's what you'll let set for 10-15 years. For somebody that is totally new to investing, use \"\"play money\"\" in the stock market. It's easy for young people to get dreams of glory and blow it all on some stock tip they've seen on Twitter.\"",
"title": ""
},
{
"docid": "0ca405224c5eb80b97e9c9a2ecccc177",
"text": "\"Yes, this is possible with some companies. When you buy shares of stock through a stock broker, the shares are kept in \"\"street name.\"\" That means that the shares are registered to the broker, not to you. That makes it easy to sell the stock later. The stock broker keeps track of who actually owns which shares. The system works well, and there are legal protections in place to protect the investors' assets. You can request that your broker change the stock to your name and request a certificate from the company. However, companies are no longer required to do this, and some won't. Your broker will charge you a fee for this service. Alternatively, if you really only want one share for decoration, there are companies that specialize in selling shares of stock with certificates. Two of them are giveashare.com and uniquestockgift.com, which offer one real share of stock with a stock certificate in certain popular companies. (Note: I have no experience with either one.) Some companies no longer issue new stock certificates; for those, these services sell you a replica stock certificate along with a real share of electronic stock. (This is now the case for Disney and Apple.) With your stock certificate, you are an actual official stockholder, entitled to dividends and a vote at the shareholder meeting. If this is strictly an investment for you, consider the advantages of street name shares: As to your question on buying stock directly from a company and bypassing a broker altogether, see Can I buy stocks directly from a public company?\"",
"title": ""
},
{
"docid": "a195bc1db3e3089f9216fa4126fd4007",
"text": "\"Yes, you can do that, but you have to have the stocks issued in your name (stocks that you're holding through your broker are issued in \"\"street name\"\" to your broker). If you have a physical stock certificate issued in your name - you just endorse it like you would endorse a check and transfer the ownership. If the stocks don't physically exist - you let the stock registrar know that the ownership has been transferred to someone else. As to the price - the company doesn't care much about the price of private sales, but the taxing agency will. In the US, for example, you report such a transaction as either a gift (IRS form 709), if the transaction was at a price significantly lower than the FMV (or significantly higher, on the other end), or a sale (IRS form 1040, schedule D) if the transaction was at FMV.\"",
"title": ""
},
{
"docid": "6bca2d910c31dc208916b2043ea172e7",
"text": "Parents are eminently capable of gifting to their children. If it's a gift call it a gift. If it's not a gift, it's either a loan or a landmine for some future interpersonal familial interaction (parent-child or sibling-sibling). I an concerned by some phrasing in the OP that it is partially down this path here. If it's a loan, it should have the full ceremony of a loan: written terms and a payment plan (which could fairly be a 0% interest, single balloon payment in 10 years or conditional on sale of a house or such; it's still not a gift).",
"title": ""
},
{
"docid": "f7058c5586ad44d8fd12dd70c1f65ccc",
"text": "Now a days, your stocks can be seen virtually through a brokerage account. Back in the days, a stock certificate was the only way to authenticate stock ownership. You can still request them though from the corporation you have shares in or your brokerage. It will have your name, corporation name and number of shares you have. You have to buy shares of a stock either through a brokerage or the corporation itself. Most stock brokerages are legit and are FDIC or SIPC insured. But your risks are your own loses. The $10 you are referring to is the trade commission fee the brokerage charges. When you place an order to buy or sell a stock the brokerage will charge you $10. So for example if you bought 1 share of a $20 stock. The total transaction cost will be $30. Depending on the state you live in, you can basically starting trading stocks at either 18 or 21. You can donate/gift your shares to virtually anyone. When you sell a stock and experience a profit, you will be charged a capital gains tax. If you buy a stock and sell it for a gain within 1 year, you will taxed up to 35% or your tax bracket but if you hold it for more than a year, you will taxed only 15% or your tax bracket.",
"title": ""
}
] |
fiqa
|
bf6662b4b9e7519ba32cdd94b6722306
|
Investing in stocks with gross income (not yet taxed) cash from contract work?
|
[
{
"docid": "29af954b3b5d2f33d38175d849fcf8ac",
"text": "You should get a 1099-MISC for the $5000 you got. And your broker should send you a 1099-B for the $5500 sale of Google stock. These are two totally separate things as far as the US IRS is concerned. 1) You made $5000 in wages. You will pay income tax on this as well as FICA and other state and local taxes. 2) You will report that you paid $5000 for stock, and sold it for $5500 without holding it for one year. Since this was short term, you will pay tax on the $500 in income you made. These numbers will go on different parts of your tax form. Essentially in your case, you'll have to pay regular income tax rates on the whole $5500, but that's only because short term capital gains are treated as income. There's always the possibility that could change (unlikely). It also helps to think of them separately because if you held the stock for a year, you would pay different tax on that $500. Regardless, you report them in different ways on your taxes.",
"title": ""
},
{
"docid": "18f2abc9ec0717c61baece578a5d83d4",
"text": "In most jurisdictions, you want to split the transactions. Why? Because you want to report capital gains on your investment income, and this will almost always be taxed at a lower rate than employment income. See Wikipedia's article for more information about capital gains. In Canada, you pay tax on 50% of your realized capital gains. There are also ways to shelter your gains from tax; in Canada, TFSA, in the US, I believe these are 'roth' accounts. I actually think you have to split the transactions, at least in Canada and the U.S., though I'm not absolutely sure. Regardless, you want to do so if you plan on making money with your investments. If you plan on making a loss, please contact me as I'm happy to accept the money you are planning on throwing away.",
"title": ""
},
{
"docid": "a673fcb56b419b6a87c7643e71729396",
"text": "You need to report the income from any work as income, regardless of if you invest it, spend it, or put it in your mattress (ignoring tax advantaged accounts like 401ks). You then also need to report any realized gains or losses from non-tax advantaged accounts, as well as any dividends received. Gains and losses are realized when you actually sell, and is the difference between the price you bought for, and the price you sold for. Gains are taxed at the capital gains rate, either short-term or long-term depending on how long you owned the stock. The tax system is complex, and these are just the general rules. There are lots of complications and special situations, some things are different depending on how much you make, etc. The IRS has all of the forms and rules online. You might also consider having a professional do you taxes the first time, just to ensure that they are done correctly. You can then use that as an example in future years.",
"title": ""
}
] |
[
{
"docid": "0a0abff4a29bb7980683feabb76108a1",
"text": "\"While @JB's \"\"yes\"\" is correct, a few more points to consider: There is no tax penalty for withdrawing any time from a taxable investment, that is, one not using specific tax protections like 401k/IRA or ESA or HSA. But you do pay tax on any income or gain distributions you receive from a taxable investment in a fund (except interest on tax-exempt aka \"\"municipal\"\" bonds), and any net capital gains you realize when selling (or technically redeeming for non-ETF funds). Just like you do for dividends and interest and gains on non-fund taxable investments. Many funds have a sales charge or \"\"load\"\" which means you will very likely lose money if you sell quickly typically within at least several months and usually a year or more, and even some no-load funds, to discourage rapid trading that makes their management more difficult (and costly), have a \"\"contingent sales charge\"\" if you sell after less than a stated period like 3 months or 6 months. For funds that largely or entirely invest in equities or longer term bonds, the share value/price is practically certain to fluctuate up and down, and if you sell during a \"\"down\"\" period you will lose money; if \"\"liquid\"\" means you want to take out money anytime without waiting for the market to move, you might want funds focussing on short-term bonds, especially government bonds, and \"\"money market\"\" funds which hold only very short bonds (usually duration under 90 days), which have much more stable prices (but lower returns over the longer term).\"",
"title": ""
},
{
"docid": "c5578afe7b8b8fea73e4f1a44aea7c7e",
"text": "To try to answer the three explicit questions: Every share of stock is treated proportionately: each share is assigned the same dollar amount of investment (1/176th part of the contribution in the example), and has the same discount amount (15% of $20 or $25, depending on when you sell, usually). So if you immediately sell 120 shares at $25, you have taxable income on the gain for those shares (120*($25-$17)). Either selling immediately or holding for the long term period (12-18 mo) can be advantageous, just in different ways. Selling immediately avoids a risk of a decline in the price of the stock, and allows you to invest elsewhere and earn income on the proceeds for the next 12-18 months that you would not otherwise have had. The downside is that all of your gain ($25-$17 per share) is taxed as ordinary income. Holding for the full period is advantageous in that only the discount (15% of $20 or $25) will be taxed as ordinary income and the rest of the gain (sell price minus $20 or $25) will be taxed at long-term capital gain tax rates, which generally are lower than ordinary rates (all taxes are due in the year you do sell). The catch is you will sell at different price, higher or lower, and thus have a risk of loss (or gain). You will never be (Federally) double taxed in any scenario. The $3000 you put in will not be taxed after all is sold, as it is a return of your capital investment. All money you receive in excess of the $3000 will be taxed, in all scenarios, just potentially at different rates, ordinary or capital gain. (All this ignores AMT considerations, which you likely are not subject to.)",
"title": ""
},
{
"docid": "cdc14fda39e15aa5537599cf56abf0e0",
"text": "i cannot directly tell from the provided information if it is already included in Net A/R but if there is a balance sheet you can check yourself if the Total Cash Flow matches the difference between cash position year 0&1 and see if it is net or still to be included.",
"title": ""
},
{
"docid": "a23ee0ace4c63933e52bb1c41be6751f",
"text": "For the employee, this is an identical tax situation to an at-the-money option purchase. They're buying an asset with a specific cost basis. For the company, you are just issuing shares from treasury as authorized... debit cash, credit additional paid-in-capital and equity. There is no tax consequence for this money received.",
"title": ""
},
{
"docid": "1754c182047fa24bb9978d4df8af2c42",
"text": "Cash flow is needed for expansion, either to increase manufacturing capacity or to expand the workforce. Other times companies use it to purchase other companies. Microsoft and Google have both used their cash or stocks to purchase companies. Examples by Google include YouTube, Keyhole (Google Earth), and now part of Motorola to expand into Phones. If you are investing for the future, you don't want a lot of dividends. They do bring tax issues. That is not a big problem if you are investing in an IRA or 401K. It is an issue if the non-tax-defered mutual fund distributes those dividends via the 1099, forcing you to address it on your taxes each year. Some investors do like dividends, but they are looking for their investments to generate cash. Who would require it? Would it be an SEC requirement? Even more government paperwork for companies.",
"title": ""
},
{
"docid": "e2c43bf2a8cae781baa20f76e00826ef",
"text": "\"Presumably it means they're paying with normal money rather than paying with stock. Shareholders will receive money rather than any shares of AMZN when the deal goes through. \"\"Cash\"\" doesn't necessarily mean \"\"currency\"\" a la bills and coins. When you have money in your brokerage that isn't tied up in a security, for example, you're holding \"\"cash\"\" even though you don't physically have \"\"currency\"\".\"",
"title": ""
},
{
"docid": "d6bc346d33311b92b56c2ac137a508a7",
"text": "I like C. Ross and MrChrister's advice to not be heavily weighted in one stock over the long run, especially the stock of your employer. I'll add this: One thing you really ought to find out – and this is where your tax advisor is likely able to help – is whether your company's stock options plan use qualified incentive stock options (ISO) or non-qualified stock options (NQO or NSO). See Wikipedia - Incentive stock option for details. From my understanding, only if your plan is a qualified (or statutory) ISO and you hold the shares for at least 1 year of the date of exercise and 2 years from the date of the option grant could your gain be considered a long-term capital gain. As opposed to: if your options are non-qualified, then your gain may be considered ordinary income no matter how long you wait – in which case there's no tax benefit to waiting to cash out. In terms of hedging the risk if you do choose to hold long, here are some ideas: Sell just enough stock at exercise (i.e. taking some tax hit up front) to at least recover your principal, so your original money is no longer at risk, or If your company has publicly listed options – which is unlikely, if they are very small – then you could purchase put options to insure against losses in your stock. Try a symbol lookup at the CBOE. Note: Hedging with put options is an advanced strategy and I suggest you learn more and seek advice from a pro if you want to consider this route. You'll also need to find out if there are restrictions on trading your employer's public stock or options – many companies have restrictions or black-out periods on employee trading, especially for people who have inside knowledge.",
"title": ""
},
{
"docid": "8fefe41a09a3c3baf58db957de491f60",
"text": "\"I am not a lawyer, but I can't think of a reason this is illegal (something that would be illegal would be to \"\"trade with yourself\"\" across the accounts to try to manipulate stock or option prices). I don't think you're \"\"funneling,\"\" you're doing \"\"asset location\"\" which is a standard tax planning strategy. http://news.morningstar.com/articlenet/article.aspx?id=154126&t1=1303874170 discusses asset location. I'd be more concerned about whether it makes sense.\"",
"title": ""
},
{
"docid": "4cde17aa6b9aefc3d4e12718987fbf44",
"text": "\"This kind of investment is called \"\"sweat equity\"\". It is sometimes taken into account by lenders and other investors. Such investors look at the alleged value of the input labor with a very skeptical eye, but they often appreciate that the entrepreneur has \"\"skin in the game\"\". The sort of analysis described by the original poster is useful for estimating \"\"economic profit\"\" -- how much better off was the entrepreneur than if he had done something else with his time. But this sort of analysis is not applicable for tax purposes for most small businesses in the United States. It is usually not in the entrepreneur's interest to use this method of accounting for tax purposes, for three reasons: It requires setting up the business in such a way that it can pay him wages or salaries for his time. The business might not have enough cash resources to do so. Furthermore, setting up the business in this way requires legal and accounting expertise, which is expensive. If the entrepreneur does set up the business like this, the wages and salaries will be subject to tax. Wage and salary tax rates are often much higher than capital gains tax rates, especially when one considers taxes like Social Security taxes, Medicare taxes, and Business & Occupation taxes. If the entrepreneur does set up the business like this, the taxes on the wages and salaries would be due long before the hoped-for sale of the company. The sale of the company might never happen. This results in a time-value-of-money penalty, an optionality penalty, and a risk penalty.\"",
"title": ""
},
{
"docid": "3bdd2e14dc990aa712c3092fbe817087",
"text": "I received a $2,000 bonus... Gross Income is income from whatever source derived, including (but not limited to) “compensation for services, including fees, commissions, fringe benefits, and similar items.” Adjusted Gross Income is defined as gross income minus adjustments to income. My question is, must I still report this money on my tax return and if so, how? Yes, and it would be on line 21 of your 1040 with supporting documentation. Are these legal fees deductible as an expense, and where would I list them? Yes, you would aggregate your deductible expenses and place these on your Schedule A. Instructions here. Good Luck. Edit: As Ben Miller pointed out in the comments, the deduction would be placed in either line 23 or 28 depending on the nature of the attorney (investment related or not).",
"title": ""
},
{
"docid": "69544397471ef5cae6bd7a87612b501f",
"text": "The company match is not earnings. My company deposits 5% of my income into my 401(k) and it appears nowhere except on the paperwork for the 401(k). To be clear, it doesn't appear on any paystub or W2.",
"title": ""
},
{
"docid": "8dd55b46d9c07218fb9f8baf97aa6c57",
"text": "There is Free employer money on both sides of the tax fence for some employees. On the pretax side, your employer may provide you a match. If so, invest the maximum to get 100% of the match. On the after tax side, many companies offers a 15% discount on ESPP plans and a one year hold. My wife has such an employer. The one year hold is fine because it allows us to be taxed at Long Term Capital gains if the stock goes up which is lower than our current income bracket. After creating a seasoned pool of stocks that we could sell after the one year hold, we are then able to sell the same number of stocks purchased each month. This provides a 17.6% guaranteed gain on a monthly basis. How much would you purchase if you had a guaranteed 17.6% return. Our answer is 15% (our maximum allowed). The other trick is that while the employer is collecting the money, you will purchase the stock at the lowest day of the period. You will usually sell for even more than the purchase price unless the day purchased was the lowest day of month. The trick is to reinvest the money in tax free investments to balance out the pretax investing. Never leave the money in the plan. That is too much risk.",
"title": ""
},
{
"docid": "c494d981cd42f26b230f546bd8aa58c1",
"text": "If you buy puts, there are no guaranteed proceeds though. If you short against the box, you've got immediate proceeds with a nice capital loss if it doesn't work out. Conversely, you could write a covered call, take the contract proceeds, and write off the long position losses. Nobody ever factors tax consequences into the equation here.",
"title": ""
},
{
"docid": "c40d07c619f044e9a931db4e06d967d2",
"text": "You can actually hold cash in your account as long as the manager has reason to believe it is awaiting investment. As for your question, some near cash equivalents are: It's difficult to go into more detail about which investments are eligible due to the variety of risk characteristics, but you can certainly find investment opportunities in the assets mentioned above. A good money manager can advise you better since he'll have an idea of their risk characteristics as well as tax status.",
"title": ""
},
{
"docid": "31048bb1b2a03ac9ca64d3e9576afa17",
"text": "Not that easy!. There’s millions of lines of code and so much logic added over the years. Programmers would add a comment line and insert the code. No one had time to cleanup or rewrite of remodularize functionality. They just piled on it !. Y2K happened and it corrected and renamed whole bunch of date fields and code to work for rollover year.",
"title": ""
}
] |
fiqa
|
1bcd6012c87cf94b149cc3a133719282
|
Is Cash Value Life Insurance (“whole life” insurance) a good idea for my future?
|
[
{
"docid": "4f83b055c8965bd202ba0b44f6511546",
"text": "I am of the strong opinion that life insurance should be purchased as a term product and nothing more. The internal expense is usually high, the returns, poor and the product disclosure is often incomprehensible. The only purpose Cash Value Life Insurance serves, in my opinion, is to fund the retirement and college educations of those selling it.",
"title": ""
},
{
"docid": "1176912da74cf1b97a8f7dcf90586010",
"text": "\"I have an answer and a few comments. Back to the basics: Insurance is purchased to provide protection in case of a loss. It sounds as though you are doing well, from a financial perspective. If you have $0 of financial obligations (loans, mortgages, credit cards, etc.) and you are comfortable with the amount that would be passed on to your heirs, then you DO NOT NEED LIFE INSURANCE. Life insurance is PROTECTION for your heirs so that they can pay off debts and pay for necessities, if you are the \"\"bread-winner\"\" and your assets won't be enough. That's all. Life insurance should never be viewed as an investment vehicle. Some policies allow you to invest in funds of your choosing, but the fees charged by the insurance company are usually high. Higher than you might find elsewhere. To answer your other question: I think NY Life is a great life insurance company. They are a mutual company, which is better in my opinion than a stock company because they are okay with holding extra capital. This means they are more likely to have the money to pay all of their claims in a specific period, which shows in their ratings: http://www.newyorklife.com/about/what-rating-agencies-say Whereas public companies will yield a lower return to their stock holders if they are just sitting on additional capital and not paying it back to their stock holders.\"",
"title": ""
},
{
"docid": "f91f75407ba06ce5f5366584b1a13ad6",
"text": "\"Almost everyone needs an insurance, you should also probably buy it. If you are good at planning [which it seems from your question], you should stick to Pure \"\"Term\"\" insurance and avoid any other types / variants of CVLI. CVLI is only advisable if one cannot commit to investing or is not good at saving money, or one feels that one loses money in Term Insurance. Otherwise term insurance is best.\"",
"title": ""
}
] |
[
{
"docid": "fa80e2066fab165e86db3de8af6d86ac",
"text": "Does such insurance make any sense or is it just wasting money for passengers? As with most insurance, it depends. If you just look at the probability of a payout, the cost of the insurance, and the payout amount, then statistically it will always be better to avoid buying insurance. This is because there is a certain amount of overhead in an insurance company, like the commissions and salaries you mentioned. The goal when buying insurance should be to avoid a cost that you cannot afford or is inconvenient to be able to afford. For example, if your family would be devastated financially by your death then it would make sense for you to buy some sort of life insurance. Whether or not this particular insurance makes sense for you depends on your financial situation and risk tolerance.",
"title": ""
},
{
"docid": "4e31e16f624ba1de4b917d4e9455387a",
"text": "Whole life insurance accumulates a cash value on a pre-tax basis. With a paid-up policy, you make payments until a particular age (usually 65 or 70), at which point you are insured for the rest of your life or a very old age like 120. You can also access this pool of money via loans while you are still alive, but you reduce your benefit until you repay the loans. This may be advantageous if you have a high net worth. Also, if you own a business or farm, a permanent policy may be desirable if the transfer of your property to heirs is likely to generate alot of transactional costs like taxes. Nowadays there are probably better ways to do that too. Whole life/universal life is a waste of money 95%+ of the time. An example, my wife and I were recently offered open-enrollment (no medical exam) insurance policies our employers in New York. We're in our early 30's. I bought a term policy paying about $400k which costs $19/mo. My wife was offered a permanent policy that pays $100k which costs $83/mo, and would have a cash value of $35k at age 65. If you invested the $60/mo difference between those policies and earned 5%/year with 30% taxes on the gains, you'd have over $40k with 4x more coverage.",
"title": ""
},
{
"docid": "6834979a82210697166fe19809123d2b",
"text": "\"anything whole life has a value (sometimes known as \"\"cash value\"\"), which is the value you get if you surrender the policy to the insurance company (ie. cancel the policy). I'm not sure i'd sell another person/company a life insurance policy on myself though. Kinda creates a bad incentive problem.\"",
"title": ""
},
{
"docid": "2808976f5888136ecafa9c654f02a222",
"text": "\"Often in life we have to choose the lesser of evils. Whole Life as an investment vs. Term Life and invest the difference is one of these times. I assume the following statement is true. \"\"The commissions on whole life are sick. The selling agent gets upward of 90% of your first year's premium.\"\" But how does that compare to investing in mutual funds (as one alternative)? Well according to Vanguard the average mutual fund keeps 60% of the total returns over the average investors lifetime. And of course income taxes (on withdrawal) consume another 30% (or more) of the dollars you withdraw (from a tax deferred retirement plan like a 401k.) http://www.fool.com/School/MutualFunds/Performance/Record.htm So you have to pick your poison and make the choice that fits your view of the future. Personally I don't believe my cost of living in retirement will be radically lower than my cost of living while working. Additionally I believe income tax rates will be higher in the future than the in the present and so deferring taxes (like a 401k) doesn't make sense to me. (In 1980 a 401k made sense when the average 401k participant was paying over 50% in federal income tax and also got a pension.) So paying 90% of my first year's premium rather than 60% of my gains over my lifetime seems acceptable. And borrowing tax free against my life insurance once retired (with no intention of paying it back) will, I believe, provide greater income than a 401k could.\"",
"title": ""
},
{
"docid": "e6e1b70d0e290fd57092064690caa97f",
"text": "Actually, most insurance policies DON'T have a cash value if you don't make a claim. The reason that some life insurance policies do this is that they are really tax sheltered investments posing as insurance. With that in mind, the root of your question is really whether insurance premiums are wasted if you never make a claim. It really makes no difference if you are talking about EI, Auto, or Homeowner's insurance. My answer to that is no. What you are paying for when you buy insurance is financial risk avoidance. Look at it this way, you don't buy EI as an investment where you hope to get a return on your investment. You are buying the right to be protected against catastrophic financial difficulty associated with losing your job. Whether you claim it or not you did receive that protection. This is what drives me so crazy when I hear people talk about how an insurance company is ripping you off because you paid more in premiums than they paid out in benefits. Of course you did! If most people didn't pay in more than the company paid out there would be no financial interest for someone to form an insurance company.",
"title": ""
},
{
"docid": "d6919c986116458e4bbfc0dab46fc07c",
"text": "\"Disclaimer: I work in life insurance, but I am not an agent. First things first, there is not enough information here to give you an answer. When discussing life insurance, the very first things we need to fully consider are the illustration of policy values, and the contract itself. Without these, there is no way to tell if this is a good idea or not. So what are the things to look for? A. Risk appetite. People love to discuss projections of the market, like for example, \"\"7-8% a year compounded annually\"\". Go look at the historical returns of the stock market. It is never close to that projection. Life insurance, however, can give you a GUARANTEED return (this would be show in the 'Guaranteed' section of the life insurance illustration). As long as you pay your premiums, this money is guaranteed to accrue. Now most life insurance companies also show 'Non-Guaranteed' elements in their illustrations - these are non-guaranteed projections based on a scale at this point in time. These columns will show how your cash value may grow when dividends are credited to your policy (and used to buy paid-up additional insurance, which generates more dividends - this can be compared to the compounding nature of interest). B. Tax treatment. I am definitely not an expert in this area, but life insurance does have preferential tax treatment, particularly to your beneficiaries. C. Beneficiaries. Any death benefit (again, listed as guaranteed and maybe non-guaranteed values) is generally completely tax free for the beneficiary. D. Strategy. Tying all of this together, what exactly is the point of this? To transfer wealth, to accrue wealth, or some combination thereof? This is important and unstated in your question. So again, without knowing more, there is no way to answer your question. But I am surprised that in this forum, so many people are quick to jump in and say in general that whole life insurance is a scam. And even more surprising is the fact the accepted answer has already been accepted. My personal take is that if you are just trying to accrue wealth, you should probably stick to the market and maybe buy term if you want a death benefit component. This is mostly due to your age (higher risk of death = higher premiums = lower buildup) and how long of a time period you have to build up money in the policy. But if a 25 year old asked this same question, depending on his purposes, I may suggest that a WL policy is in fact a good idea.\"",
"title": ""
},
{
"docid": "ca440ee1e73227aa5ca1ba0c59bff1fa",
"text": "For cash, SIPC insurance is similar to FDIC insurance. Your losses are not covered, but you're covered in case of fraud. Since your cash is supposed to be in a trust account and not commingled with brokerage's funds, in case of bankruptcy you would still have your cash unless there was fraud.",
"title": ""
},
{
"docid": "0cd42caa6d0f0896071c4796663ba013",
"text": "There are also low-risk money markets to invest into. With that kind of long-term savings plan I'd look into those first for the investment factor. I used one like this so that I had the flexibility to either use it for a down payment on a house or school. And make sure to name a new administrator in your will if you want to make sure the intent is upheld.",
"title": ""
},
{
"docid": "e7c606e17d41f33ef5ca789b461f6c8b",
"text": "(Disclosure - I am a real estate agent, involved with houses to buy/sell, but much activity in rentals) I got a call from a man and his wife looking for an apartment. He introduced itself, described what they were looking for, and then suggested I google his name. He said I'd find that a few weeks back, his house burned to the ground and he had no insurance. He didn't have enough savings to rebuild, and besides needing an apartment, had a building lot to sell. Insurance against theft may not be at the top of your list. Don't keep any cash, and keep your possessions to a minimum. But a house needs insurance for a bank to give you a mortgage. Once paid off, you have no legal obligation, but are playing a dangerous game. You are right, it's an odds game. If the cost of insurance is .5% the house value and the chance of it burning down is 1 in 300 (I made this up) you are simply betting it won't be yours that burns down. Given that for most people, a paid off house is their largest asset, more value that all other savings combined, it's a risk most would prefer not to take. Life insurance is a different matter. A person with no dependents has no need for insurance. For those who are married (or have a loved one), or for parents, insurance is intended to help survivors bridge the gap for that lost income. The 10-20 times income value for insurance is just a recommendation, whose need fades away as one approaches independence. I don't believe in insurance as an investment vehicle, so this answer is talking strictly term.",
"title": ""
},
{
"docid": "5a9072322c5a8124f83d076a4b3be4d3",
"text": "\"Technically there could be a true cash fund, but the issue is it would need to have some sort of cost associated with it, which would mean it would have negative yield or would charge a fee. In some cases, this might be preferable to having it invested in \"\"cash equivalents,\"\" which as you note are not cash. It is important to note that there is nothing, even cash or physical precious metals, that is considered zero risk. They all just have different risks associated with them, that may be an issue under certain circumstances. In severe deflation, cash is king, and all non-cash asset classes and debt could go down in value. Under severe inflation, cash can become worthless. One respondent mentioned an alternative of stopping contributing to a 401k and depositing money in a bank, but that is not the same as cash either. In recent decades, people have been led to believe that depositing your money in the bank means you hold that in cash at the bank. That is untrue. They hold your deposit on their books and proceed to invest/loan that money, but those investments can turn sour in an economic and financial downturn. The same financial professionals would then remind you that, while this is true, there is the Federal Deposit Insurance Corporation (FDIC) that will make you whole should the bank go under. Unfortunately, if enough banks went under due to lack of reserves, the FDIC may be unable to make depositors whole for lack of reserves. In fact, they were nearing this during the last financial crisis. The sad thing is that the financial industry is bias against offering what you said, because they make money by using your money. Fractional reserve banking. You are essentially holding IOUs from your bank when you have money on deposit with them. Getting back to the original question; you could do some searching and see if there is an institution that would act as a cash depository for physical cash in your IRA. There are IRA-approved ways of holding physical precious metals, which isn't all too different of a concept from holding physical cash. 401k plans are chosen by your company and often have very limited options available, meaning it'd be unlikely you could ever hold physical cash or physical precious metals in your 401k.\"",
"title": ""
},
{
"docid": "b13d1de016d4989c3332d1652aad7563",
"text": "the cash is not penalty free. if you take up loans from the policy to pay for retirement growth essentially stops and the interest will eat away policy value over time. so instead of gaining 7-8 % per year and taking withdrawals, you would be taking loans and losing whatever the interest rate is. Dividends are just the profits made from the company which is why its tax free. its considered a return of premium. you are just overpaying for the policy by its dividend rate. whole life is a great vehicle for some situations, but it always comes after a 401k or other retirement savings. whole life doesnt even begin to make sense imo until you are making a few hundred thousand a year and need it for a business buy sell agreement or legacy money to leave children/grandchildren. it doesnt scale well to lower incomes.",
"title": ""
},
{
"docid": "438545110087a3379434531a7350b942",
"text": "\"To be honest, I think a lot of people on this site are doing you a disservice by taking your idea as seriously as they are. Not only is this a horrible idea, but I think you have some alarming misunderstandings about what it means to save for retirement. First off, precious metals are not an \"\"investment\"\"; they are store of value. The old saying that a gold coin would buy a suit 300 years ago and will still buy a suit today is pretty accurate. Buying precious metals and expecting them to \"\"appreciate\"\" in the future because they are \"\"undervalued\"\" is just flat-out speculation and really doesn't belong in a well-planned retirement account, unless it's a very small part for the purposes of diversification. So the upshot to all of this is the most likely outcome is you get zero return after inflation (maybe you'll get lucky or maybe you'll be very unlucky). Next you would say that sure, you're giving up some expected return for a reduction in risk. But, you've done away with diversification which is the most effective way to minimize risk... And I'm not sure what scenario you're imagining that the stock market or any other reasonable investment doesn't make any returns. If you invest in a market wide index fund, then the expected return is going to be roughly in proportion with productivity gains. To say that there will be no appreciation of the stock market over the next 40 years is to say that technological progress will stop and/or we will have large-scale economic disruptions that will wipe out 40 years of progress. If that happens, I would say it's highly questionable whether silver will actually be worth anything at all. I'd rather have food, property, and firearms. So, to answer your question, practically any other retirement savings plan would be better than the one that you currently outlined, but the best plan is just to put your money in a very low-cost index fund at Vanguard and let it sit until you retire. The expense ratios are so stupidly small, that it's not going to meaningfully affect your return.\"",
"title": ""
},
{
"docid": "64179b9abe526e78ade3da280069e512",
"text": "You are likely thinking of a individual variable insurance contract (IVIC) , better known as a segregated fund, or a principal-protected note (PPN). For a segregated fund, to get a full guarantee on invested capital, you need a 100/100 where the maturity value and death benefit are each 100% guaranteed. The PPN works similar to a long-term GIC (or CD) with a variable investment component. The thing is, neither of these things are cheap and the cost structure that is built in behind them makes it difficult to make any real above market rates of return. In both cases, if you try to break the contracts early then the guarantees are null and void and you get out what you get out.",
"title": ""
},
{
"docid": "fa459e98c8cdb890395baf5afa2ea0de",
"text": "The way the question is worded, it is slightly opinion based. Just to point out; Tax benefits - Upto 50000 INR is tax free when invested here. This is actually 200,000 INR under 80C. So if you invest max of 150,000 in other instruments in 80C; you can still invest 50,000 into NPS. Hopefully it will provide some lumpsum money that I could probably use to buy a house / kid's education / kid's marriage. There are very few withdrawal options. Generally in the current scenario; By the time you retire; you would already have house, kid would have got married. Answers given the current data is it a worthwhile investment? It is a good investment option available. It is up to individual to select this or invest else where. If yes, would be better to fix choice at 50% in E and 25% in C and E or go for the auto choice? As you are young it is better to have max 50% in Equity and actively monitor this and change the percentage as you near the retirement age. If you don't have time, or are not financial savy, or one is plain simple lazy; going with Auto choice makes sense. bad investment because if you put the same money into equity oriented mutual funds then you will get better returns ... This depends. If you are currently investing everything into Equity; then yes at absolute level, the returns are high. However if you are investing into Equity and debt to achieve a balance, then NPS is doing it automatically for you. As the NPS has very low costs, there is substantial advantage. In some years [2013-2014?] the NPS equity return has been excellent and exceeded leading mutual funds. Other Aspect Edits: The Annuities need to invest in guaranteed risk free instruments; generally bonds. As the rates are locked for life, they need to factor things like average life expectancy, demographics, etc. This is largely statistical. Similar to how the Insurance premiums are decided. This is adjusted periodically. Say they offer 6.5% for 100 people. The investments into bonds is yielding only 6%. Then for next 100 people, they would offer 5.5%. However if the mortality increases, i.e. 50 people die at age of 70, they just need to adjust it to 5.75% for next 100 ... so there are quite a few parameters that go in and statical models output what the rate should be offered. At times the corpus manager may take a hedge to minimize downside. This is a specialized subject and there no dummies that show how rates are determined. It is also a trade secret.",
"title": ""
},
{
"docid": "5a54f525500d0422a8f341de6bf756ac",
"text": "I feel like that any full answer has multiple facets: **Free for 7 years:** I'm currently in KC, and most of the people in my area are opting in for the free service. So if I were able to get fibre (my neighborhood didn't get enough votes), it would cut my $40/mo bill from Time Warner and my service would increase if anything. That's a huge cut, and it pays for itself ($300 set up fee) in the first year. Then over the next 7 years it saves me over $3000 in bills. For some company like Time Warner to offer this, they'd lose a large amount of service. Free mediocre internet is a huge threat to companies whose top sellers are expensive mediocre internet. **Lawsuits:** Like other people have stated, it's pretty impossible to become an actual competitor to these companies. The other ISPs (namely TWC and Comcast) fight anybody who pops up. There are minor providers in some of the outer suburbs, but they can't offer near the speed that a fibre solution provides. **City Approval:** Even Google ran into issues with this. Cities have to approve things like new fibre lines, and if they don't you're pretty much stuck. Overland Park, a wealthier suburb of Kansas City, were really dragging their feet on getting Google approved. Google just decided to take the deal off the table. Google is such a big name, however, that people in Overland Park freaked out at their city council and I don't know what they did, but Google has opened up signups for them now. If this was a no-name company, though, they would have been out of luck and just been barred from entry altogether. City council problems are actually pretty interesting. **Cost Effectiveness and Overhead:** Building a fibre network in KC is a pretty big cost. There are others around, but really only in the commercial areas. So whatever company wants to compete with Google has to go without making a profit for several, several years. In order to speed up that time (and save the company) they'd have to raise prices, and less people would be interested in their product. Google really pulled off something huge, here. I'm pretty excited for what their doing (even if my stupid neighbors didn't sign up and I don't get to reap the benefits). I'm interested to see what effects this has on a larger scale when they start moving to other cities.",
"title": ""
}
] |
fiqa
|
e6a31da5ae2197c82fd9fb0e253d89b5
|
As a young adult, what can I be doing with my excess income?
|
[
{
"docid": "dbb774ef44583ab0f8f3a0370706cc1c",
"text": "I also have approx. £6000 in debt Just a note: you're guaranteed to get a return on whatever debt you pay off quickly. Even if your debt is only 2%, you get a guaranteed return of 2% - which is higher than most of the savings here in the US (not sure about the UK). You mention saving for a house, which is also a good idea, but with debt, I'd recommend eliminating that if you're paying any interest at all. This won't be popular to write, but markets are high right now, so even though you may feel that you're missing out, the return on paying off debt is guaranteed; markets aren't.",
"title": ""
},
{
"docid": "109518e8738dc5d7fb5e0c72d32a2771",
"text": "If I were you I would just save the money until I had at least 5000 pounds to keep as an emergency fund. There are various kinds of unexpected events and it is smart to have some cash in case a problem comes up. Next time I would recommend buying a car you can afford. Borrowing money to buy nice things is the enemy of wealth accumulation. Also, when you buy a car for cash you will get a much better deal than when you let a dealer put his foot on your neck.",
"title": ""
},
{
"docid": "c4f23ce5910e953720f911b9b3e81a44",
"text": "This is all very basic and general advice, that works for most, but not all. You are unique with your own special needs and desires. Good luck! P.S.: not exactly related to your question, but when you get more familiar with investing and utilizing your money, find more ways to save more. For example, change phone plan, cut the cable, home made food in bulk, etc.",
"title": ""
},
{
"docid": "dadd997d194fe1f6e1022dffd87f315a",
"text": "You apparently assume that pouring money into a landlord's pocket is a bad thing. Not necessarily. Whether it makes sense to purchase your own home or to live in a rental property varies based on the market prices and rents of properties. In the long term, real estate prices closely follow inflation. However, in some areas it may be possible that real estate prices have increased by more than inflation in the past, say, 10 years. This may mean that some (stupid) people assume that real estate prices continue to appreciate at this rate in the future. The price of real estates when compared to rents may become unrealistically high so that the rental yield becomes low, and the only reasonable way of obtaining money from real estate investments is price appreciation continuing. No, it will not continue forever. Furthermore, an individual real estate is a very poorly diversified investment. And a very risky investment, too: a mold problem can destroy the entire value of your investment, if you invest in only one property. Real estates are commonly said to be less risky than stocks, but this applies only to large real estate portfolios when compared with large stock portfolios. It is easier to build a large stock portfolio with a small amount of money to invest when compared to building a large real estate portfolio. Thus, I would consider this: how much return are you going to get (by not needing to pay rent, but needing to pay some minor maintenance costs) when purchasing your own home? How much does the home cost? What is the annual return on the investment? Is it larger than smaller when compared to investing the same amount of money in the stock market? As I said, an individual house is a more risky investment than a well-diversified stock portfolio. Thus, if a well-diversified stock portfolio yields 8% annually, I would demand 10% return from an individual house before considering to move my money from stocks to a house.",
"title": ""
}
] |
[
{
"docid": "75611f7d7709881a3c08bad29d9ebe60",
"text": "The amount of money you have should be enough for you to live a safe but somewhat restricted life if you never worked again - but it could set you up for just about any sort of financial goal (short of island buying) if you do just about any amount of work. The basic math for some financial rules of thumb to keep in mind: If your money is invested in very low-risk ways, such as a money market fund, you might earn, say, 3% in interest every year. That's $36k. But, if you withdraw that $36k every year, then every year you have the same principal amount invested. And a dollar tomorrow can't buy as much as a dollar today, because of inflation. If we assume for simplicity that inflation is 1% every year, then you need to contribute an additional $12k to your principal balance every year, just so that it has the same buying power next year. This leaves you with a net $24k of interest income that you can freely spend every year, for the rest of your life, without ever touching your principal balance. If your money is invested more broadly, including equity investments [stocks], you might earn, say, 7% every year. Some years you might lose money on your investments, and would need to draw down your principal balance to pay your bills. Some years you might do quite well - but would need to remain conservative and not withdraw your 'excess' earnings every year, because you will need that 'excess' to make up for the bad years. This would leave you with about $74k of income every year before inflation, and about $62k after inflation. But, you would be taking on more risk by doing this. If you work enough to pay your daily bills, and leave your investments alone to earn 7% on average annually, then in just 10 years your money would have doubled to ~ $2.4 Million dollars. This assumes that you never save another penny, and spend everything you make. It's a level of financial security that means you could retire at a drop of the hat. And if don't start working for 20 years [which you might need to do if you spend in excess of your means and your money dries up], then the same will not be true - starting work at 45 with no savings would put you at a much greater disadvantage for financial security. Every year that you work enough to pay your bills before 'retirement' could increase your nest egg by 7% [though again, there is risk here], but only if you do it now, while you have a nest egg to invest. Now in terms of what you should do with that money, you need to ask yourself: what are your financial goals? You should think about this long and hard (and renew that discussion with yourself periodically, as your goals will change over time). You say university isn't an option - but what other ways might you want to 'invest in yourself'? Would you want to go on 'sabbatical'-type learning trips? Take a trade or learn a skill? Start a business? Do you want to live in the same place for 30 years [and thus maybe you should lock-down your housing costs by buying a house] or do you want to travel around the world, never staying in the same place twice [in which case you will need to figure out how to live cheaply and flexibly, without signing unnecessary leases]. If you want to live in the middle of nowhere eating ramen noodles and watching tv, you could do that without lifting a finger ever again. But every other financial goal you might have should be factored into your budget and work plan. And because you do have such a large degree of financial security, you have a lot of options that could be very appealing - every low paying but desirable/hard-to-get job is open to you. You can pursue your interests, even if they barely pay minimum wage, and doing so may help you ease into your new life easier than simply retiring at such a young age [when most of your peers will be heavy into their careers]. So, that is my strongest piece of advice - work now, while you're young and have motivation, so that you can dial back later. This will be much easier than the other way around. As for where you should invest your money in, look on this site for investing questions, and ultimately with that amount of money - I suggest you hire a paid advisor, who works based on an hourly consultation fee, rather than a % management fee. They can give you much more directed advice than the internet (though you should learn it yourself as well, because that will give you the best piece of mind that you aren't being taken advantage of).",
"title": ""
},
{
"docid": "2452848d304d45a8eec636f6ec03ba5f",
"text": "Does your employer provide a matching contribution to your 401k? If so, contribute enough to the 401k that you can fully take advantage of the 401k match (e.g. if you employer matches 3% of your income, contribute 3% of your income). It's free money, take advantage of it. Next up, max out your Roth IRA. The limit is $5000 currently a year. After maxing your Roth, revisit your 401k. You can contribute up to 16,500 per year. You savings account is a good place to keep a rainy day fund (do you have one?), but it lacks the tax advantages of a Roth IRA or 401k, so it is not really suitable for retirement savings (unless you have maxed out both your 401k and Roth IRA). Once you have take care of getting money into your 401k and Roth IRA accounts, the next step is investing it. The specific investment options available to you will vary depending on who provides your retirement account(s), so these are general guidelines. Generally, you want to invest in higher-risk, higher-return investments when you are young. This includes things like stocks and developing countries. As you get older (>30), you should look at moving some of your investments into things that less volatile. Bond funds are the usual choice. They tend to be safer than stocks (assuming you don't invest in Junk bonds), but your investment grows at a slower rate. Now this doesn't mean you immediately dump all of your stock and buy bonds. Rather, it is a gradual transition over time. As you get older and older, you gradually shift your investments to bond funds. A general rule of thumb I have seen: 100 - (YOUR AGE) = Percentage of your portfolio that should be in stocks Someone that is 30 would have 70% of their portfolio in stock, someone that is 40 would have 60% in stock, etc. As you get closer to retirement (50s-60s), you will want to start looking at investments that are more conservatie than bonds. Start to look at fixed-income and money market funds.",
"title": ""
},
{
"docid": "b36a0c5beca455949cf83821a90b2c93",
"text": "The best thing to do right now is track your spending. You know you're saving 1k a month, and you know you're spending 1k a month on rent. That's 24k so far. I presume you'll have some income tax taken out, let's assume it's another 6k to round us neatly up to 30k. Since you earn 80k and you've spent 30k so far, you have another 50k unaccounted for. If you're in the USA I'd recommend using mint.com or a similar service to automatically track your transactions, or even just a spreadsheet if you don't like handing out your bank details (and you shouldn't). After that, I agree with SoulsOpenSource's answer. Write a budget and try to figure out where the fat can be trimmed. When I started tracking I saw I was spending almost a hundred bucks every week on fast food, due to poor planning and laziness. I decided to cook more and plan better and now I'm spending less than half that - in the last year I've saved almost three thousand dollars! If you want to save up for your future (and good on you if you do!) then there'll be some choices to make ahead. If you're spending a few hundred bucks on going out drinking every weekend, or you grab two coffees every day, or you buy fifty blurays a month (do people still buy blurays?), you'll have to ask yourself: Will I be happier spending money here than saving for my future?",
"title": ""
},
{
"docid": "0bde434c915299ee959f96420043a2b2",
"text": "The first thing you need to do is to set yourself a budget. Total all your money coming in (from jobs, allowances, etc.) and all your money going out (including rent, utilities, loan repayments, food, other essential and the luxuries). If your money coming in is more than your money going out, then you are onto a positive start. If on the other hand your money going out is more than the money coming in, then you are at the beginning of big trouble. You will have to do at least one of 2 things, either increase your income or reduce your expenses or both. You will have to go through all your expenses (money going out) and cut back on the luxuries, try to get cheaper alternatives for some of your essential, and get a second job or increase your hours at your current job. The aim is to always have more money coming in than the money you spend. The second thing to do is to pay off any outstanding debts by paying more than the minimum amounts and then have some savings goals. You said you wanted to save for a car - that is one saving goal. Another saving goal could be to set up a 6 month emergency fund (enough money in a separate account to be able to survive at least 6 months in case something happened, such as you lost your job or you suddenly got sick). Next you could look at getting a higher education so you can go out and get higher paying jobs. When you do get a higher paying job, the secret is not to spend all your extra money coming in on luxuries, you should treat yourself but do not go overboard. Increase the amounts you save and learn how to invest so you can get your savings to work harder for you. Building a sound financial future for yourself takes a lot of hard work and discipline, but once you do get started and change the way you do things you will find that it doesn't take long for things to start getting easier. The one thing you do have going for you is time; you are starting early and have time on your side.",
"title": ""
},
{
"docid": "09da3c61b08a888272fb92f03df75544",
"text": "You're young. Build a side business in your spare time. Invest in yourself. Fail a few times when you have some time to recover financially. Use the money that you would have let sit in some account and develop your skills, start up an LLC, and build up the capacity to get some real returns on your money. Be a rainmaker, not a Roth taker.",
"title": ""
},
{
"docid": "a8fa04eaae270a59d75c5b36c12e036b",
"text": "\"Between \"\"fresh out of college\"\" and \"\"I have no debts, and a support system in place which because of which I can take higher risks.\"\" I would put every penny I could afford in the riskiest investment platform I was willing to. Holding onto money in a bank account is likely to cost you %1-%2 a year depending on what interest rates are and what inflation looks like. Money invested in a market could loose it all for you or you could become an overnight millionaire. Loosing it all would suck but you are young you will bounce back. Losing it slowly to inflation is just silly when you are young. If there is something you know you have to do in the next few years start to save for it but otherwise use the fact that you are young and have a safety net to try to make money.\"",
"title": ""
},
{
"docid": "dfc2f3c33075335b08c50365125d6639",
"text": "Congrats on saving aggressively when you're young. I'm not a huge fan of tax-advantaged accounts because the rules can change on them, and there's already a penalty for you to take out that money for most purposes until you've almost tripled your age. Free money (a match) overcomes this reservation for me, but I'm not contributing anything beyond that. I'm paying my taxes on the rest and am done with them. Watching your money grow tax-free for another 37 1/2 years only to see your (and everyone else's) marginal tax rate rise isn't much fun. I'm not saying that will happen, but it certainly could.",
"title": ""
},
{
"docid": "aa2e095caac3e8601d766e12fde31a6d",
"text": "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.",
"title": ""
},
{
"docid": "7c7dbf0512932aa995f8d4924466f134",
"text": "\"Here's what I suggest... A few years ago, I got a chunk of change. Not from an inheritance, but stock options in a company that was taken private. We'd already been investing by that point. But what I did: 1. I took my time. 2. I set aside a chunk of it (maybe a quarter) for taxes. you shouldn't have this problem. 3. I set aside a chunk for home renovations. 4. I set aside a chunk for kids college fund 5. I set aside a chunk for paying off the house 6. I set aside a chunk to spend later 7. I invested a chunk. A small chunk directly in single stocks, a small chunk in muni bonds, but most just in Mutual Funds. I'm still spending that \"\"spend later\"\" chunk. It's about 10 years later, and this summer it's home maintenance and a new car... all, I figure it, coming out of some of that money I'd set aside for \"\"future spending.\"\"\"",
"title": ""
},
{
"docid": "ddaec831da2ea04d33237c7a9d7a2a9b",
"text": "Are you sure the question even makes sense? In the present-day world economy, it's unlikely that someone young who just started working has the means to put away any significant amount of money as savings, and attempting to do so might actually preclude making the financial choices that actually lead to stability - things like purchasing [the right types and amounts of] insurance, buying outright rather than using credit to compensate for the fact that you committed to keep some portion of your income as savings, spending money in ways that enrich your experience and expand your professional opportunities, etc. There's also the ethical question of how viable/sustainable saving is. The mechanism by which saving ensures financial stability is by everyone hoarding enough resources to deal with some level of worst-case scenario that might happen in their future. This worked for past generations in the US because we had massive amounts (relative to the population) of (stolen) natural resources, infrastructure built on enslaved labor, etc. It doesn't scale with modern changes the world is undergoing and it inherently only works for some people when it's not working for others. From my perspective, much more valuable financial skills for the next generation are:",
"title": ""
},
{
"docid": "973f7eacf416c4b3e28ab38eeeb4fdda",
"text": "\"I recommend a Roth IRA. At your age you could turn 25K into a million and never pay taxes on these earnings. Of course there are yearly limits (5.5k) on the amount your can contribute to a Roth IRA account. If you haven't filed your taxes this year yet ... you can contribute 5.5K for last year and 5.5K for this year. Open two accounts at a discount brokerage firm. Trades should be about $10 or less per. Account one ... Roth IRA. Account two a brokerage account for the excess funds that can't be placed in the Roth IRA. Each year it will be easy transfer money into the Roth from this account. Be aware that you can't transfer stocks from brokerage acct to Roth IRA ... only cash. You can sell some stocks in brokerage and turn that into cash to transfer. This means settling up with the IRS on any gains/losses on that sale. Given your situation you'd likely have new cash to bring to table for the Roth IRA anyway. Invest in stocks and hold them for the long term. Do a google search for \"\"motley fool stock advisor\"\" and join. This is a premium service that picks two stocks to invest in each month. Invest small amounts (say $750) in each stock that they say you should buy. They will also tell you when to sell. They also give insights into why they selected the stock and why they are selling (aka learning experience). They pick quality companies. So if the economy is down you will still own a quality company that will make it through the storm. Avoid the temptation to load up on one stock. Follow the small amount rule mentioned above per stock. Good luck, and get in the market.\"",
"title": ""
},
{
"docid": "5a8e68ad5843b6d0ddcc14b8d75ff039",
"text": "\"For allocation, there's rules of thumb. 120-age is the percentage some folks recommend for stock market (high risk) allocation. With the balance in bonds, and a bit of international fund to add some more diversity. However, everyone needs to determine how much risk they're willing to take, and what their horizon is. Once you figure out your allocation, determine how much of your surplus goes into investing, and how much goes into short term savings for your short term financial goals such as purchasing a home. I would highly recommend reading about \"\"Financial Independence, Retire Early\"\" (FIRE). Most of the articles I've seen on it were folks in the US, with the odd Canadian and Brit, but the principles should be able to work in the Netherlands with adjustment. The idea behind FIRE is that you adjust your lifestyle to minimize expenses and save as much of your income as possible. When the growth of your savings is > the amount you spend on a yearly basis, you've reached financial independence and can retire any time you wish. CD ladder is a good idea for your emergency fund, but CDs (at least in the US) usually pay around the same rate as inflation, give or take. A ladder would help you preserve your emergency fund.\"",
"title": ""
},
{
"docid": "4cf9bc141f3041ebc6991cb6d84786f9",
"text": "I'd invest in yourself. Start up a side business. Take a certification class that gets your foot in the door for something else (auctioneering, real estate sales, whatever). Bid on a storage auction and try to re-sell it. Learn Spanish (or whatever second language is best for your area). And so forth. Most of the suggestions thus far are either debt reduction or passive investment. You have good control on your debt, and most passive investments pay jack (though Lending Club might be a bit better than most). Build up another basket to put your eggs in and build equity and cash flow instead of interest and dividends. You're young. This is the time to learn how to do it.",
"title": ""
},
{
"docid": "43e29fa4421236af230cf2f47a04c70e",
"text": "\"I would like to add my accolades in saving $3000, it is an accomplishment that the majority of US households are unable to achieve. source While it is something, in some ways it is hardly anything. Working part time at a entry level job will earn you almost three times this amount per year, and with the same job you can earn about as much in two weeks as this investment is likely to earn, in the market in one year. All this leads to one thing: At your age you should be looking to increase your income. No matter if it is college or a high paying trade, whatever you can do to increase your life time earning potential would be the best investment for this money. I would advocate a more patient approach. Stick the money in the bank until you complete your education enough for an \"\"adult job\"\". Use it, if needed, for training to get that adult job. Get a car, a place of your own, and a sufficient enough wardrobe. Save an emergency fund. Then invest with impunity. Imagine two versions of yourself. One with basic education, a average to below average salary, that uses this money to invest in the stock market. Eventually that money will be needed and it will probably be pulled out of the market at an in opportune time. It might worth less than the original 3K! Now imagine a second version of yourself that has an above average salary due to some good education or training. Perhaps that 3K was used to help provide that education. However, this second version will probably earn 25,000 to 75,000 per year then the first version. Which one do you want to be? Which one do you think will be wealthier? Better educated people not only earn more, they are out of work less. You may want to look at this chart.\"",
"title": ""
},
{
"docid": "e155a7538f8822b59bcea7d7e2f5090d",
"text": "In addition to what others have said, I think it is important to consider that government retirement assistance (whatever it is called in each instance) is basically a promise that can be revoked. I talked to a retired friend of mine just yesterday and we got onto that subject; she mentioned that when she was young, the promise was for 90% of one's pay, paid by the government after retiring. It is very different today. Yes, you can gamble that you won't need the saved money, and thus decide not to save anything. What then if you do end up needing the money you did not set aside, but rather spent? You are just now graduating college, and assuming of course that you get a decently-paying job, are likely going to have loads more money than you are used to. If you make an agreement with yourself to set aside even just 10-15% of the difference in income right from the start, that is going to grow into a pretty sizable nest egg by the time you approach retirement age. Then, you will have the option of continuing to work (maybe part-time) or quitting in a way you would not have had otherwise. Now I'm going to pull numbers out of thin air, but suppose that you currently have $1000/month net, before expenses, and can get a job that pays $1800/month net starting out. 10-15% of the difference means you'll be saving around $100/month for retirement. In 35 years, assuming no return on investment (pessimistic, but works if returns match inflation) and no pay rises, that will still be over $40K. That's somewhere on the order of $150/month added to your retirement income for 25 years. Multiply with whatever inflation rate you think is likely if you prefer nominal values. It becomes even more noticable if you save a significant fraction of the additional pay; if you save 1/3 of the additional money (note that you still effectively get a 50% raise compared to what you have been living on before), that gives you a net income of $1500/month instead of $1800 ($500/month more rather than $800/month more) which grows into about $110K in 35 years assuming no return on investment. Nearly $400 per month for 25 years. $100 per week is hardly chump change in retirement, and it is still quite realistic for most people to save 30% of the money they did not have before.",
"title": ""
}
] |
fiqa
|
ffb3fd8a286e556d20544123742ffed0
|
Price graphs: why not percent change?
|
[
{
"docid": "907bb34ea663caa5e47a84b236fa264e",
"text": "The actual price is represented on charts and not the change in price as a percentage, because it is the actual price which is used in all other parts of analysis (both technical and fundamental), and it is the actual figure the security is bought and sold at. A change in price has to be relative to a previous price at a previous time, and we can easily work out the change in price over any given time period. I think what you are concerned about is how to compare a certain actual price change in low priced securities to the same actual price change in a higher priced securities. For example: $1.00 rise in a $2.00 stock representing a 50% increase in price; $1.00 rise in a $10.00 stock representing a 10% increase in price. On a standard chart both of these look the same, as they both show a $1.00 increase in price. So what can we do to show the true representation of the percentage increase in price? It is actually quite simple. You view the chart using a log scale instead of a standard scale (most charting packages should have this option). What may look like a bubble on a standard scale chart, looks like a healthy uptrend on a log scale chart and represents a true picture of the percentage change in price. Example of Standard Price Scale VS LOG Price Scale on a Chart Standard Price Scale On the standard scale the price seems to have very little movement from Mar09 to Jan12 and then the price seems to zoom up after Jan12 to Mar13. This is because a 4% increase (for example) of $0.50 is only $0.02, whilst a 4% increase of $7.00 $0.28, so the increases seem much bigger at the end of the chart. LOG Price Scale On the LOG chart however, these price changes seem to be more evenly displayed no matter at what price level the price change has occurred at. This thus give a better representation of how fast or slow the price is rising or falling, or the size of the change in price.",
"title": ""
},
{
"docid": "e13f4a4d7d6907b7bab5ecbf0bcd8a2a",
"text": "Actually, total return is the most important which isn't necessarily just price change as this doesn't account for dividends that may be re-invested. Thus, the price change isn't necessarily that useful in terms of knowing what you end up with as an ending balance for an investment. Secondly, the price change itself may be deceptively large as if the stock initial price was low, e.g. a few dollars or less adjusting for stock splits as most big companies will split the stock once the price is high enough, then the percentages can be quite large years later. Something else to consider is the percentage change would be based on what as the initial base. The price at the start of the chart or something else? Carefully consider what you want the initial starting point to be in determining price shifts here as one could take either end and claim a rationale for using it. Most people want to look at the price to get an idea of what would X shares cost to purchase rather than look at the percentage change from day to day.",
"title": ""
},
{
"docid": "b642eb854449d0c4e04bb13fc651c04b",
"text": "I am in complete agreement with you. The place i have found with the sort of charts you are looking for is stockcharts.com. To compare the percentage increase of several stocks over a period of 2 market-open days or more, which is quite useful to follow the changes in various stocks… etc., an example: Here the tickers are AA to EEEEE (OTC) and $GOLD / $SILVER for the spot gold / silver price (that isn't really a ticker). It is set to show the last 6 market days (one week+)...the '6' in '6&O'. You can change it in the URL above or change it on the site for the stocks you want... up to 25 in one chart but it gets really hard to tell them apart! By moving the slider just left of the ‘6’ at the bottom right corner of the chart, you can look at 2 days or more. For a specific time period in days, highlight the ‘6’ and type any number of market-open days you want (21 days = about one month, etc.). By setting a time period in days, and moving the entire slider, you can see how your stocks did in the last bull/bear run, as an example. The site has a full how-to, for this and the other types of charts they offer. The only problem is that many OTC stocks are not charted. Save the comparison charts you use regularly in a folder in your browser bookmarks. Blessings. I see the entire needed link isn't in blue... but you need it all.",
"title": ""
}
] |
[
{
"docid": "926a03b83d07282e1827b45727ab9af7",
"text": "> So: what do i do to have the monthly %change? I was thinking (last day of the mont CP - 1st day of the month OP)/ 1st day of the mont opening price. No, use the same day (usually month end) of each month (i.e. December 31 vs. January 31). Use closing prices only. Keep in mind, it may make more mathematical sense to use LN (natural logs) to determine %-change and standard deviation. The simplest way to compare the riskiness of each is just to compare St. Dev. You can, of course, go into more detail. If you want to impress your professor, look up the efficient frontier and make one for each portfolio.",
"title": ""
},
{
"docid": "ff68b09fef2ab83c41d8cf7759d12c2c",
"text": "The point of that question is to test if the user can connect shares and stock price. However, that being said yeah, you're right. Probably gives off the impression that it's a bit elementary. I'll look into changing it asap.",
"title": ""
},
{
"docid": "41d16faa39889d7deb9d94d194aa8873",
"text": "It helps to put the numbers in terms of an asset. Say a bottle of wine costs 10 dollars, but the price rises to 20 dollars a year later. The price has risen 100%, and your dollars have lost value. Whereas your ten used to be worth 100% of the price of bottle of wine, they now are worth 50% of the risen price of a bottle of wine so they've lost around 50% of their value. Divide the old price by the new inflated price to measure proportionally how much the old price is of the new price. 10 divided by 20 is 1/2 or .50 or 50%. You can then subtract the old price from the new in proportional terms to find how much value you've lost. 1 minus 1/2 or 1.00 minus .50 or 100% minus 50%.",
"title": ""
},
{
"docid": "2a59f0ebeaf20f975b4ff4f49b59424e",
"text": "I have watched the ticker when I have made a transaction. About ¼ of the time my buy (or sell) actually moves the going price. But that price movement is wiped out by other transactions within two (or so) munites. Is your uncle correct? Yes. Will anyone notice? No.",
"title": ""
},
{
"docid": "bfc93d42724ce523038b6fabed0ec9fc",
"text": "Instead of a price chart can use a performance chart, which is usually expressed as a percentage increase from the original purchase price. To factor in the dividends, you can either add in all of your dividends to the final price, or subtract the accumulated dividends from your cost basis (the initial price).",
"title": ""
},
{
"docid": "79761ea709f02e044c94985e3211cab4",
"text": "\"The fallacy in your question is in this statement: \"\"The formulas must exist, because prices can be followed real time.\"\" What you see are snapshots of the current status of the stock, what was the last price a stock was traded at, what is the volume, is the price going up or down. People who buy and hold their stock look at the status every few days or even every few months. Day traders look at the status every second of the trading day. The math/formula comes in when people try to predict where the stock is going based on the squiggles in the line. These squiggles move based on how other people react to the squiggles. The big movements occur when big pieces of news make large movements in the price. Company X announces the release of the key product will be delayed by a year; the founder is stepping down; the government just doubled the order for a new weapon system; the insiders are selling all the shares they can. There are no formulas to determine the correct price, only formulas that try to predict where the price may go.\"",
"title": ""
},
{
"docid": "4f7d2e62c3c0ab475ef32f74db3e3c8b",
"text": "\"NYT republished a nifty infographic that shows how the S&P 500 performs over various time horizons. If you study it for a bit, you'll see that 10 percent is not likely over time that you'll earn 10 percent annually after inflation. Most people quoting the higher number are working with numbers before inflation. The above linked chart is misleading in the following sense: it groups into five categories, who's boundaries are demarcated by percentages of interest. But we'd rather see them clustered by those percentages. For example, 6.9 percent falls into the neutral category (better than investing in fixed interest securities, but still below market average), but 7.1 falls into the \"\"above average\"\" category. The effect is that we will treat the neutral color that dominates the long term trend as being somewhere in the middle of 3-7, when I suspect that's not the case. Some day I'll probably make my own version and see how that plays out. So that all said, if you look at the 30 year diagonal, you can see there's still quite a bit of variation in returns. Unfortunately I can't turn this into a single number for you, but grab a spreadsheet and some market data if you want one.\"",
"title": ""
},
{
"docid": "3048767f63dd94d3d400c5ef3cc67c92",
"text": "If you're trying to teach them the value of money and quantifying the dollar difference between prices, one very effective way to do this is by using bar charts. For instance, if a toy is $5, and movie they really want to see is $10, and a vacation they want to go on costs $2000, it can be a useful tool to help explain how the relative costs work.",
"title": ""
},
{
"docid": "dffd12f3e29d909414e22f5f8cb281bd",
"text": "I don't have a source for this, but intuitively more finance options could increase people's willingness to pay, which is akin to shifting the demand curve outwards, leading to an increase in price, all other things equal. Consider asking a variation of this question in /r/askeconomics for a better answer.",
"title": ""
},
{
"docid": "22d688f1402e8f49f666d9a6935b39a0",
"text": "The volatility measures how fast the stock moves, not how much. So you need to know the period during which that change occurred. Then the volatility naturally is higher the faster is the change.",
"title": ""
},
{
"docid": "b05473247a4a23f270cd87f3c9d5db88",
"text": "While there are lots of really plausible explanations for why the market moves a certain way on a certain day, no one really knows for sure. In order to do that, you would need to understand the 'minds' of all the market players. These days many of these players are secret proprietary algorithms. I'm not quibbling with the specifics of these explanations (I have no better) just pointing out that these are just really hypotheses and if the market starts following different patterns, they will be tossed into the dust bin of 'old thinking'. I think the best thing you can explain to your son is that the stock market is basically a gigantic highly complex poker game. The daily gyrations of the market are about individuals trying to predict where the herd is going to go next and then after that and then after that etc. If you want to help him understand the market, I suggest two things. The first is to find or create a simple market game and play it with him. The other would be to teach him about how bonds are priced and why prices move the way they do. I know this might sound weird and most people think bonds are esoteric but there are bonds have a much simpler pricing model based on fundamental financial logic. It's much easier then to get your head around the moves of the bond markets because the part of the price based on beliefs is much more limited (i.e. will the company be able pay & where are rates going.) Once you have that understanding, you can start thinking about the different ways stocks can be valued (there are many) and what the market movements mean about how people are valuing different companies. With regard to this specific situation, here's a different take on it from the 'priced in' explanation which isn't really different but might make more sense to your son: Pretend for a second that at some point these stocks did move seasonally. In the late fall and winter when sales went up, the stock price increased in kind. So some smart people see this happening every year and realize that if they bought these stocks in the summer, they would get them cheap and then sell them off when they go up. More and more people are doing this and making easy money. So many people are doing it that the stock starts to rise in the Summer now. People now see that if they want to get in before everyone else, they need to buy earlier in the Spring. Now the prices start rising in the Spring. People start buying in the beginning of the year... You can see where this is going, right? Essentially, a strategy to take advantage of well known seasonal patterns is unstable. You can't profit off of the seasonal changes unless everyone else in the market is too stupid to see that you are simply anticipating their moves and react accordingly.",
"title": ""
},
{
"docid": "35e2016eba48ad0e31f8615e7502856b",
"text": "Doesn't work as it would be inflationary. Businesses would raise prices knowing they could get more revenue. This cycles throughout the supply chains which in turn cause prices of other products to increase etc. And why on earth you wouldn't means test something like this beyond me.",
"title": ""
},
{
"docid": "73143af4a4f1f0f7a3f85b82cb901a9f",
"text": "\"Their algorithm may be different (and proprietary), but how I would to it is to assume that daily changes in the stock are distributed normally (meaning the probability distribution is a \"\"bell curve\"\" - the green area in your chart). I would then calculate the average and standard deviation (volatility) of historical returns to determine the center and width of the bell curve (calibrating it to expected returns and implied volaility based on option prices), then use standard formulas for lognormal distributions to calculate the probability of the price exceeding the strike price. So there are many assumptions involved, and in the end it's just a probability, so there's no way to know if it's right or wrong - either the stock will cross the strike or it won't.\"",
"title": ""
},
{
"docid": "9673cb5d7b07b8fa7af7568ef4082cda",
"text": "I mentioned in other posts that it's not unreasonable that prices might rise slightly. Demand would go up and some labor costs would as well. To your point, I can say that prices would not go up 1:1, that's an absurd hypothesis that doesn't stand up to even a sniff test.",
"title": ""
},
{
"docid": "2227038c0029b9fdd52d89545028260a",
"text": "The last column in the source data is volume (the number of stocks that was exchanged during the day), and it also has a value of zero for that day, meaning that nobody bought or sold the stocks on that day. And since the prices are prices of transactions (the first and the last one on a particular day, and the ones with the highest/lowest price), the prices cannot be established, and are irrelevant as there was not a single transaction on that day. Only the close price is assumed equal to its previous day counterpart because this is the most important value serving as a basis to determine the daily price change (and we assume no change in this case). Continuous-line charts also use this single value. Bar and candle charts usually display a blank space for a day where no trade occurred.",
"title": ""
}
] |
fiqa
|
ddd2471bbfcd3ab642d65b1850a5ea61
|
How to split stock earnings?
|
[
{
"docid": "e02816e3c43e0b85145063d6085e22b5",
"text": "If he asked you to invest his money with certain objectives which resulted in you buying specific stocks for him with his money, then sell all the stocks which you bought with his money and the capital and profits to him. You may want to calculate the trading fees that you incurred while buying these specific stocks and taxes from the sale of these stocks, withholding them to over the trading fees that you have already paid and the taxes that you might still need to pay. If you traded with his money no different than yours, then I would think of your investment account as a black box. Calculate the initial money that you both invested at the time you added his capital to the account, calculate how much it all is currently worth, then liquidate and return a percentage equal to that of his initial investment. You can account for trading fees and taxes, subtracting by the same percentage.",
"title": ""
},
{
"docid": "3a43fd02236810d0cff0fa9231398b1d",
"text": "Let's suppose your friend gave your $100 and you invested all of it (plus your own money, $500) into one stock. Therefore, the total investment becomes $100 + $500 = $600. After few months, when you want to sell the stock or give back the money to your friend, check the percentage of profit/loss. So, let's assume you get 10% return on total investment of $600. Now, you have two choices. Either you exit the stock entirely, OR you just sell his portion. If you want to exit, sell everything and go home with $600 + 10% of 600 = $660. Out of $660, give you friend his initial capital + 10% of initial capital. Therefore, your friend will get $100 + 10% of $100 = $110. If you choose the later, to sell his portion, then you'll need to work everything opposite. Take his initial capital and add 10% of initial capital to it; which is $100 + 10% of $100 = $110. Sell the stocks that would be worth equivalent to that money and that's it. Similarly, you can apply the same logic if you broke his $100 into parts. Do the maths.",
"title": ""
},
{
"docid": "f3e0e119ea87f37cb166e15c29e39fa5",
"text": "If you have been a good steward of your friend's money this suggestion will not be too difficult. Pay your friend what his money would have earned in the S&P 500 if you had just invested it in an index fund. Subtract 15% for long-term capital gains. You can use the ticker SPY to see what the price was on the day he gave you the money, versus the price today. If you had helped your friend open an account for himself, you would have given him more than the returns on his money, you would have helped educate him on how to invest for himself.",
"title": ""
}
] |
[
{
"docid": "1e676b3dbee6e3a660c76ac613f54b5e",
"text": "Yes, one such strategy is dividend arbitrage using stock and in the money options. You have to find out which option is the most mispriced before the ex-dividend date.",
"title": ""
},
{
"docid": "cbe2602216d25f7f2f97e3625c46ea0b",
"text": "\"(Value of shares+Dividends received)/(Initial investment) would be the typical formula though this is more of a percentage where 1 would indicate that you broke even, assuming no inflation to be factored. No, you don't have to estimate the share price based on revenues as I would question how well did anyone estimate what kind of revenues Facebook, Apple, or Google have had and will have. To estimate the value of shares, I'd likely consider what does my investment strategy use as metrics: Is it discounted cash flow, is it based on earnings, is it something else? There are many ways to determine what a stock \"\"should be worth\"\" that depending on what you want to believe there are more than a few ways one could go.\"",
"title": ""
},
{
"docid": "34be7279e123c90c28ce59a21c4fe607",
"text": "You haven't seen one because you haven't looked for one properly. You can set a google alert for stock split and get information about major issues splitting their stocks quite regularly, as well as a daily dose of recommendations from people without a say in the matter for big companies to split their stock. Stock splits are announced in advance by company management.",
"title": ""
},
{
"docid": "3b9d51d78fc361b76ac4c53ebdb00e57",
"text": "Scrip dividends are similar to stock splits. With a stock split, 100 shares can turn into 200 shares; with scrip dividends they might turn into 105 shares.",
"title": ""
},
{
"docid": "daba55a220a8abad14c89e14440f6e2a",
"text": "Sources such as Value Line, or S&P stock reports will show you dividend payout ratios (the American usage. These are the inverse of dividend cover ratios, with dividends being in the numerator, and earnings in the denominator. For instance, if the dividend cover ratio is 2, the dividend payout ratio is 1/2= 50%.",
"title": ""
},
{
"docid": "18f2abc9ec0717c61baece578a5d83d4",
"text": "In most jurisdictions, you want to split the transactions. Why? Because you want to report capital gains on your investment income, and this will almost always be taxed at a lower rate than employment income. See Wikipedia's article for more information about capital gains. In Canada, you pay tax on 50% of your realized capital gains. There are also ways to shelter your gains from tax; in Canada, TFSA, in the US, I believe these are 'roth' accounts. I actually think you have to split the transactions, at least in Canada and the U.S., though I'm not absolutely sure. Regardless, you want to do so if you plan on making money with your investments. If you plan on making a loss, please contact me as I'm happy to accept the money you are planning on throwing away.",
"title": ""
},
{
"docid": "8611f8cbadc0cf3ddc4051b954763ed2",
"text": "How are shareholders sure to receive a fair percentage of each company? At the time the split occurs, each investor owns the same proportion of each new company that they owned in the first. What the investor does with it after that (selling one, for example) is irrelevant from a fairness perspective. Suppose company A splits into companies B and C. You own enough stock to have 1% of A. It splits. Now you have a bunch of shares of B and C. How much? Well, you have 1% of B and 1% of C. What if all the profitable projects are in B? Then shares of B will be worth more than those of C. But it should be the case that the value of your shares of B plus the value of your shares of C are equal to the original value of your shares of A. Completely fair. In fact, if the split was economically justified, then B + C > A. And the gains are realized proportionally by all equityholders. Remember, when a stock splits, every share splits so that everyone owns both companies in the same proportion as everyone else. Executives don't determine what the prices of the resulting companies are...that is determined by the market. A fair market will value the child companies such that together they are worth what the original was.",
"title": ""
},
{
"docid": "fc995ec5e7c0691a5351985999c81cc2",
"text": "For stock splits, let's say stock XYZ closed at 100 on February 5. Then on February 6, it undergoes a 2-for-1 split and closes the day at 51. In Yahoo's historical prices for XYZ, you will see that it closed at 51 on Feb 6, but all of the closing prices for the previous days will be divided by 2. So for Feb 5, it will say the closing price was 50 instead of 100. For dividends, let's say stock ABC closed at 200 on December 18. Then on December 19, the stock increases in price by $2 but it pays out a $1 dividend. In Yahoo's historical prices for XYZ, you will see that it closed at 200 on Dec 18 and 201 on Dec 19. Yahoo adjusts the closing price for Dec 19 to factor in the dividend.",
"title": ""
},
{
"docid": "4d08b1f08fde38cbbb81874de0a9017d",
"text": "You should have a partnership agreement of some sort. The reason partnership agreements exist is so nobody can change the game because of the outcome. I'd say the most typical partnership agreement is that everyone gets an equal cut, meaning that everyone also makes an equal contribution. If you have start up expenses of $10,000, you'd each contribute $5,000. Separately, you can determine ownership share by contribution amounts, maybe one of you contributed $2,000 and the other $8,000; this would be an 80/20 split. The performance of the operation doesn't have anything to do with determining how to divide the pie, your partnership agreement determines that. How much have you each contributed and what agreement did you make before you decided to be partners? If you have a poor performing business segment, then the partnership should get together and consider adjusting or stopping that line of business. But you don't change how the pie is divided because of it; unless your partnership agreement says you do.",
"title": ""
},
{
"docid": "469dd93d4f1c4545dd7884fbca865007",
"text": "Simple math. Take the sale proceeds (after trade expenses) and divide by cost. Subtract 1, and this is your return. For example, buy at 80, sell at 100, 100/80 = 1.25, your return is 25%. To annualize this return, multiply by 365 over the days you were in that stock. If the above stock were held for 3 months, you would have an annualized return of 100%. There's an alternative way to annualize, in the same example above take the days invested and dive into 365, here you get 4. I suggested that 25% x 4 = 100%. Others will ask why I don't say 1.25^4 = 2.44 so the return is 144%/yr. (in other words, compound the return, 1.25x1.25x...) A single day trade, noon to noon the next day returning just 1%, would multiply to 365% over a year, ignoring the fact there are about 250 trading days. But 1.01^365 is 37.78 or a 3678% return. For long periods, the compounding makes sense of course, the 8%/yr I hope to see should double my money in 9 years, not 12, but taking the short term trades and compounding creates odd results of little value.",
"title": ""
},
{
"docid": "0ff87b4504eaa0cf33d2b696582f47ef",
"text": "\"I think the \"\"right\"\" way to approach this is for your personal books and your business's books to be completely separate. You would need to really think of them as separate things, such that rather than being disappointed that there's no \"\"cross transactions\"\" between files, you think of it as \"\"In my personal account I invested in a new business like any other investment\"\" with a transfer from your personal account to a Stock or other investment account in your company, and \"\"This business received some additional capital\"\" which one handles with a transfer (probably from Equity) to its checking account or the like. Yes, you don't get the built-in checks that you entered the same dollar amount in each, but (1) you need to reconcile your books against reality anyway occasionally, so errors should get caught, and (2) the transactions really are separate things from each entity's perspective. The main way to \"\"hack it\"\" would be to have separate top-level placeholder accounts for the business's Equity, Income, Expenses, and Assets/Liabilities. That is, your top-level accounts would be \"\"Personal Equity\"\", \"\"Business Equity\"\", \"\"Personal Income\"\", \"\"Business Income\"\", and so on. You can combine Assets and Liabilities within a single top-level account if you want, which may help you with that \"\"outlook of my business value\"\" you're looking for. (In fact, in my personal books, I have in the \"\"Current Assets\"\" account both normal things like my Checking account, but also my credit cards, because once I spend the money on my credit card I want to think of the money as being gone, since it is. Obviously this isn't \"\"standard accounting\"\" in any way, but it works well for what I use it for.) You could also just have within each \"\"normal\"\" top-level placeholder account, a placeholder account for both \"\"Personal\"\" and \"\"My Business\"\", to at least have a consistent structure. Depending on how your business is getting taxed in your jurisdiction, this may even be closer to how your taxing authorities treat things (if, for instance, the business income all goes on your personal tax return, but on a separate form). Regardless of how you set up the accounts, you can then create reports and filter them to include just that set of business accounts. I can see how just looking at the account list and transaction registers can be useful for many things, but the reporting does let you look at everything you need and handles much better when you want to look through a filter to just part of your financial picture. Once you set up the reporting (and you can report on lists of account balances, as well as transaction lists, and lots of other things), you can save them as Custom Reports, and then open them up whenever you want. You can even just leave a report tab (or several) open, and switch to it (refreshing it if needed) just like you might switch to the main Account List tab. I suspect once you got it set up and tried it for a while you'd find it quite satisfactory.\"",
"title": ""
},
{
"docid": "4f86a8a4bb3fa8d170e7d2cb5f67b104",
"text": "Thanks for your thorough reply. Basically, I found a case study in one of my old finance workbooks from school and am trying to complete it. So it's not entirely complicated in the sense of a full LBO or merger model. That being said, the information that they provide is Year 1 EBITDA for TargetCo and BuyerCo and a Pro-Forma EBITDA for the consolidated company @ Year 1 and Year 4 (expected IPO). I was able to get the Pre-Money and Post-Money values and the Liquidation values (year 4 IPO), as well as the number of shares. I can use EBITDA to get EPS (ebitda/share in this case) for both consolidated and stand-alone @ Year 1, but can only get EPS for consolidated for all other years. Given the information provided. One of the questions I have is do I do anything with my liquidation values for an accretion/dilution analysis or is it all EPS?",
"title": ""
},
{
"docid": "2094d7156fc883a75b08ffc70efb33db",
"text": "It's really boring and you should automate it. Most front office guys worth their salt have built something that will normally calculate what they should have in their portfolios. Basically we own X units of stock K, stock K pays dividend D on date M, you check on date M that we have received X*D for all K's. When trades are made you also need to verify that the dollar amounts are correct, for equity its usually automatic but for fixed income and OTC products you can build a tool to check it.",
"title": ""
},
{
"docid": "f23b2797867eb8b76bf95504624c9fbc",
"text": "\"A Bloomberg terminal connected to Excel provides the value correcting splits, dividends, etc. Problem is it cost around $25,000. Another one which is free and I think that takes care of corporate action is \"\"quandl.com\"\". See an example here.\"",
"title": ""
},
{
"docid": "e9fae5b065d3896ebd048946f1926bb9",
"text": "Your dividend should show up in one of a few methods: (1) Cash in your trading account (2) A check mailed to you (3) A deposit to a linked bank account (4) As additional new shares in the stock, as the result of a DRIP setup.",
"title": ""
}
] |
fiqa
|
c4dc51a5a0c24e9c2e547ecdd0d3dee6
|
Does a disciplined stock investor stick with their original sell strategy, or stay in and make more?
|
[
{
"docid": "0ebd6d33c87dc7f7dd4620a6ab19a647",
"text": "Ask yourself a better question: Under my current investment criteria would I buy the stock at this price? If the answer to that question is yes you need to work out at what price you would now sell out of the position. Think of these as totally separate decisions from your original decisions to buy and at what price to sell. If you would buy the stock now if you didn't already hold a position then you should keep that position as if you had sold out at the price that you had originally seen as your take profit level and bought a new position at the current price without incurring the costs. If you would not buy now by those criteria then you should sell out as planned. This is essentially netting off two investing decisions. Something to think about is that the world has changed and if you knew what you know now then you would probably have set your price limit higher. To be disciplined as an investor also means reviewing current positions frequently and without any sympathy for past decisions.",
"title": ""
},
{
"docid": "9adaed15da977c52bf809649a2538234",
"text": "One of things I've learned about trading on the stock market is not to let your emotions get to you. Greed and fear are among them. You may be overthinking. Why not keep it simple, if you think it can go up to $300 a share, put in a stop loss at $X amount where you would secure your invested money along with some gains. If it goes up, let it go up, if it doesn't well you got an exit. Then if it goes up change your stop loss amount higher if you are feeling more optimistic about the stock. And by the way, a disciplined investor would stick to their strategy but also have the smarts to rethink it on the fly such as in a situation like you are in. Just in my opinion anyway, but congrats on the gain! Some gains are better than none.",
"title": ""
}
] |
[
{
"docid": "5e4bd07839471e3acbee1f3eefb1c5f3",
"text": "I agree with this. I like to buy stocks that are priced low according to value investing principles but set limits to sell if the stock happens to get priced at a point that exceeds X% annualized return, for instance 15% or 30% depending on preference. If the price goes up, I cash out and find the next best value stock and repeat. If the price does not go up, then I hold it which is fine because I only buy what I'm comfortable with holding for the long term. I tend to prefer stocks that have a dividend yield in the 2-6% range so I can keep earning a return. Also I too like the look of MCD. GE looks good as well, from this perspective.",
"title": ""
},
{
"docid": "ab781496800a13ed176c6fd1c5a90fde",
"text": "\"I bought 1000 shares of Apple, when it was $5. And yet, while the purchase was smart, the sales were the dumbest of my life. \"\"You can't go wrong taking a profit\"\" \"\"When a stock doubles sell half and let it ride\"\", etc. It doubled, I sold half, a $5000 gain. Then it split, and kept going up. Long story short, I took gains of just under $50,000 as it rose, and had 100 shares left for the 7 to 1 split. The 700 shares are worth $79,000. But, if I simply let it ride, 1000 shares split to 14,000. $1.4M. I suppose turning $5,000 into $130K is cause for celebration, but it will stay with me as the lost $1.3M opportunity. Look at the chart and tell me the value of selling stocks at their 52 week high. Yet, if you chart stocks heading into the dotcom bubble, you'll see a history of $100 stocks crashing to single digits. But none of them sported a P/E of 12.\"",
"title": ""
},
{
"docid": "3539d10c4d9b8ee4cb6d011696498707",
"text": "If you have your long positions established and are investing responsibly (assuming you know the risks and can accept them), the next step IMO is typically learning hedging - using options or option strategies to solidify positions. Collars (zero cost) and put options are a good place to start your education and they can be put to use to both speculate (what you are effectively doing with short-position trading) or long-term oriented edging. Day trading equites can be lucrative but it is a difficult game to play - learning options (while more complex on speculation) can provide opportunities to solidify positions. Options trading is difficult grounds. I just think the payoff long term to knowing options is much greater than day-trading tactics (because of versatility)",
"title": ""
},
{
"docid": "13fe2693df54cb1419cc60e61a2343b4",
"text": "\"You have already indicted in another question, titled Which risk did I take winning this much?, that you did not understand (1) Why a previous trade made you as much money as it did; nor (2) How much you could have lost if things went a different way. You were, in that other question, talking about taking short position, without understanding (apparently) that a short position can create losses exceeding the value of your initial investment. Can one make money doing day trading? Yes, an educated investor may be able to prudently invest in short term positions making knowledgeable judgments about risk, and still make money. Can you make money doing day trading? Well, maybe. You have in the past, in what you described in a previous post as \"\"winning\"\". So even in your own eyes, you were effectively gambling, and got lucky. Perhaps the more relevant questions you can ask yourself are: Can you lose money doing day trading? And, most importantly, Are you more likely to lose money day trading, or consistently make money by taking on reasonable and educated risks?\"",
"title": ""
},
{
"docid": "8baf9db3683fc9c563fe8d65a3c4109d",
"text": "\"No, 90% of investors do not lose money. 90% or even larger percentage of \"\"traders\"\" lose money. Staying invested in stock market over the long term will almost always be profitable if you spread your investments across different companies or even the index but the key here is long term which is 10+ years in any emerging market and even longer in developed economies where yields will be a lot lower but their currencies will compensate over time if you are an international investor.\"",
"title": ""
},
{
"docid": "57b5f0d983c7a065b61c11d2854ade30",
"text": "\"You have heard the old adage \"\"Buy low, sell high\"\", right? That sounds so obvious that you'd have to wonder why they would ever bother coining such an expression. It should rank up there with \"\"Don't walk in front of a moving car\"\" on the Duh scale of advice. Well, your question demonstrates exactly why it isn't quite so obvious in the real world and that people need to be reminded of it. So, in your example, the stock prices are currently low (relative to what they have been). So per that adage, do you sell or buy when prices are low? Hint: It isn't sell. Yes. Your gut is going to tell you the exact opposite thanks to the fact that our brains are unfortunately wired to make us susceptible to the loss aversion fallacy. When the market has undergone a big drop is the WORST time to stop contributing (buying stocks). This example might help get your brain and gut to agree a little more easily: If you were talking about any other non-investment commodity, cars for instance. Your question equates to.. I really need a car, but the prices have been dropping like crazy lately. Maybe I should wait until the car dealers start raising their prices again before I buy one. Dollar Cost Averaging As littleadv suggested, if you have an automatic payroll deduction for your retirement account, you are getting the benefit of Dollar Cost Averaging. Because you are investing the same amount on a scheduled interval, you are buying more shares when they are cheap and fewer when they are expensive. It is like an automatic buy low strategy is built into the account. The alternative, which you are implying, is a market timing strategy. Under this strategy, instead of investing regularly you try to get in and out of investments right before they go up/drop. There are two MAJOR flaws with this approach: 1) Your brain will work against you (see above) and encourage you to do the exact opposite of what you should be doing. 2) Unless you are clairvoyant, this strategy isn't much better than gambling. If you are lucky it can work, but because of #1, the odds are stacked against you.\"",
"title": ""
},
{
"docid": "ec424b8304b09e414879c974e3e7db78",
"text": "\"You are conflating two different types of risk here. First, you want to invest money, and presumably you're not looking at the \"\"lowest risk, lowest returns\"\" end of the spectrum. This is an inherently risky activity. Second, you are in a principal-agent relationship with your advisor, and are exposed to the risk of your advisor not maximizing your profits. A lot has been written on principal-agent theory, and while incentive schemes exist, there is no optimal solution. In your case, you hope that your agent will start maximizing your profits if they are 100% correlated with his profits. While this idea is true (at least according to standard economic theory, you could find exceptions in behavioral economics and in reality), it also forces the agent to participate in the first risk. From the point of view of the agent, this does not make sense. He is looking to render services and receive income for it. An agent with integrity is certainly prepared to carry the risk of his own incompetence, just like Apple is prepared to replace your iPhone should it not start one day. But the agent is not prepared to carry additional risks such as the market risk, and should not be compelled to do so. It is your risk, a risk you personally take by deciding to play the investment gamble, and you cannot transfer it to somebody else. Of course, what makes the situation here more difficult than the iPhone example is that market-driven losses cannot be easily distinguished from incompetent-agent losses. So, there is no setup in which you carry the market risk only and your agent carries the incompetence risk only. But as much as you want a solution in which the agent carries all risk, you probably won't find an agent willing to sign such a contract. So you have to simply accept that both the market risk and the incompetence risk are inherent to being an investor. You can try to mitigate your own incompetence by having an advisor invest for you, but then you have to accept the risk of his incompetence. There is no way to depress the total incompetence risk to zero.\"",
"title": ""
},
{
"docid": "32a0d87b28f8b8554b0c9302b8b5f6ff",
"text": "\"No, an entrepreneur actually adds value, whereas stock ownership does not. Buying stocks is akin to gambling, except with different rules and an average positive return over time, whereas normal casino gambling always has a net negative result on average. To put it shortly: If it doesn't make a difference whether its you or John from across the corner doing the action, then its basically a speculation with \"\"investment\"\" as an alias. You're merely the purse. If you are involved in the running of the project, taking decisions, organizing, putting your time and creativity in, then you're an entrepreneur. In this case, its clear to see that different persons will have different results, so they matter as persons and not just as purses. Note that if you buy enough stock to actually have a say in the running of the company, then you're crossing the threshold there.\"",
"title": ""
},
{
"docid": "04717255289992a30cb660ae6fd4c2a6",
"text": "\"I think that pattern is impossible, since the attempt to apply the second half would seem to prevent executing the first. Could you rewrite that as \"\"After the stock rises to $X, start watching for a drop of $Y from peak price; if/when that happens, sell.\"\" Or does that not do what you want? (I'm not going to comment on whether the proposed programmed trading makes sense. Trying to manage things at this level of detail has always struck me as glorified guesswork.)\"",
"title": ""
},
{
"docid": "5dc72381612728883984b05dc207493a",
"text": "\"Eventually, you'll end up buying a stock at or near a high-water mark. You might end up waiting a few years before you see your \"\"guaranteed\"\" $100 profit, and you now have $5K to $10K tied up in the wait. The more frequently you trade, the faster your money gets trapped. There are two ways to avoid this problem: 1) Do it during strong bull markets. If everything keeps going up you don't need to worry about peaks...but then why would you keep cashing out for $1 gains? 2) Accurately predict the peaks. If you can see the future, why would you keep cashing out for $1 gains? Either way, this strategy will only make your broker happy, $8 at a time.\"",
"title": ""
},
{
"docid": "7c47d7a2b0d4192aa850717952892a9a",
"text": "I had a coworker whose stock picking skills were clearly in the 1% level. I had a few hundred shares of EMC, bought at $10. When my coworker bought at $80, I quietly sold as it spiked to $100. It then crashed, as did many high tech stocks, and my friend sold his shares close to the $4 bottom advising that the company would go under. So I backed up the truck at $5, which for me, at the time, meant 1000 shares. This was one of nearly 50 trades I made over a good 10 year period. He was loud enough to hear throughout the office, and his trades, whether buy or sell, were 100% wrong. Individual stocks are very tough, as other posters have offered. That, combined with taking advice from those who probably had no business giving it. For the record, I am semi-retired. Not from stock picks, but from budgeting 20% of income to savings, and being indexed (S&P) with 90% of the funds. If there are options on your stock, you might sell calls for a few years, but that's a long term prospect. I'd sell and take my losses. Lesson learned. I hope.",
"title": ""
},
{
"docid": "54b2d8e307104d0ed9651537bd06468e",
"text": "A lot of people here talk about shorting stocks, buying options, and messing around with leveraged ETFs. While these are excellent tools, that offer novel opportunities for the sophisticated investor, Don't mess around with these until you have been in the game for a few years. Even if you can make money consistently right out of the gate, don't do it. Why? Making money isn't your challenge, NOT LOSING money is your challenge. It's hard to measure the scope of the risk you are assuming with these strategies, much less manage it when things head south. So even if you've gotten lucky enough to have figured out how to make money, you surely haven't learned out how to hold on to it. I am certain that every beginner still hasn't figured out how to comprehend risk and manage losing positions. It's one of those things you only figure out after dealing with it. Stocks (with little to no margin) are a great place to learn how to lose because your risk of losing everything is drastically lower than with the aforementioned tools of the sophisticated investor. Despite what others may say you can make out really well just trading stocks. That being said, one of my favorite beginner strategies is buying stocks that dip for reasons that don't fundamentally affect the company's ability to make money in the mid term (2 quarters). Wallstreet loves these plays because it shakes out amateur investors (release bad news, push the stock down shorting it or selling your position, amateurs sell, which you buy at a discount to the 'fair price'.) A good example is Netflix back in 2007. There was a lawsuit because netflix was throttling movie deliveries to high traffic consumers. The stock dropped a good chunk overnight. A more recent example is petrobras after their huge bond sale and subsequent corruption scandal. A lot of people questioned Petrobras' long-term ability to maintain sufficient liquidity to pay back the loans, but the cashflow and long term projections are more than solid. A year later the stock was pushed further down because a lot of amateur Brazilians invest in Petrobras and they sold while the stock was artificially depressed due to a string of corruption scandals and poor, though temporary, economic conditions. One of my favorite plays back in 2008-2011 was First Solar on the run-up to earnings calls. Analysts would always come out of these meetings downgrading the stock and the forums were full of pikers and pumpers claiming heavy put positions. The stock would go down considerably, but would always pop around earnings. I've made huge returns on this move. Those were the good ole days. Start off just googling financial news and blogs and look for lawsuits and/or scandals. Manufacturing defects or recalls. Starting looking for companies that react predictably to certain events. Plot those events on your chart. If you don't know how to back-test events, learn it. Google Finance had a tool for that back in the day that was rudimentary but helpful for those starting out. Eventually though, moreso than learning any particular strategy, you should learn these three skills: 1) Tooling: to gather, manipulate, and visualize data on your own. These days automated trading also seems to be ever more important, even for the small fish. 2) Analytical Thinking learn to spot patterns of the three types: event based (lawsuits, arbitrage, earnings etc), technical (emas, price action, sup/res), or business-oriented (accounting, strategy, marketing). Don't just listen to what someone else says you should do at any particular moment, critical thinking is essential. 3) Emotions and Attitude: learn how to comprehend risk and manage your trigger finger. Your emotions are like a blade that you must sharpen every day if you want to stay in the game. Disclaimer: I stopped using this strategy in 2011, and moved to a pure technical trading regime. I've been out totally out of the game since 2015.",
"title": ""
},
{
"docid": "04d1732da452f4058421398db9e70dbb",
"text": "I bought 1000 shares of a $10 stock. When it doubled, I sold half, no need to be greedy. I watched the shares split 2 for one, and sold as it doubled and doubled again. In the end, I had $50,000 in cash pulled out and still had 100 shares. The shares are now worth $84K since they split 7 for one and trade near $120. Had I just kept the shares till now, no sales, I'd have 14,000 shares of Apple worth $1.68M dollars. $130K for an initial $10,000 investment is nothing to complain about, but yes, taking a profit can be the wrong thing. 25%? Was that all the potential the company had? There's one question to ask, not where is the price today compared to last year or two years ago, but what are the company's prospects. Is the reason I bought them still valid? Look at your investment each quarter as if you were making the decision that day. I agree, diversification is important, so the choice is only hold or sell, not to buy more of a good company, because there are others out there, and the one sane thing Cramer says that everyone should adhere to is to not put your eggs in one basket.",
"title": ""
},
{
"docid": "cb02486f708ef67f0e8eb36f152e8792",
"text": "\"I would normally take a cautious, \"\"it depends\"\" approach to answering a question like this, but instead I'm going to give you a blunt opinionated answer based solely on what I would do: Even the crap. Get rid of them and get into the boring low fee mutual funds. I was in a similar situation a few years ago, almost. My retirement accounts were already in funds but my brokerage account was all individual stocks. I decided I didn't really know what I was doing despite being up by 30+% (I recognize that it was mostly due to the market itself being up, I was lucky basically). The way I cashed out was not to sell all at once. I just set up trailing stops on all of them and waited until they hit the stops. The basic idea was that if the market kept going up, the point at which they got sold also went up (it was like a 10% trail I think), and once things started to turn for that stock, they would sell automatically. Sure I sold some at very temporary dips so I missed out on some gains but that's always a risk with a trailing stop and I really didn't care at that point. If I had to do it again, I might forget all that and just sell all at once. But I feel a lot better not being in individual stocks.\"",
"title": ""
},
{
"docid": "36a7e62ef126333a382f220a64bbd4fe",
"text": "\"First a quick terminology correction: I believe you're proposing selling 10,000 shares of the stock of a company, not \"\"10,000 stocks\"\". When you sell, you need to decide whether you're selling for a specific minimum price or just selling for whatever price you can get. If you set a specific lower limit on asking price, then if people aren't interested at that price it doesn't sell. Which may mean you sell only a few shares, or none if your asking price isn't considered reasonable. If you want to sell independent of price, then as you begin to flood the market with your shares, the price you get per additional share may decline until it finds a buyer. What that lower limit is will depend on what people think the stock is currently worth. This is one of the many complications I don't want to deal with, which is why I stick with index funds.\"",
"title": ""
}
] |
fiqa
|
27dac0c258f29d4df61994f2c885af9c
|
Does an owner of a bond etf get an income even if he sells before the day of distribution?
|
[
{
"docid": "360b618f715186825da5a27f9163b026",
"text": "Your ETF will return the interest as dividends. If you hold the ETF on the day before the Ex-Dividend date, you will get the dividend. If you sell before that, you will not. Note that at least one other answer to this question is wrong. You do NOT need to hold on the Record date. There is usually 2 days (or so) between the ex-date and the record date, which corresponds to the number of days it takes for your trade to settle. See the rules as published by the SEC: http://www.sec.gov/answers/dividen.htm",
"title": ""
},
{
"docid": "48c24049376a347959f8f744d9e66517",
"text": "Bond ETFs are traded like normal stock. It just so happens to be that the underlying fund (for which you own shares) is invested in bonds. Such funds will typically own many bonds and have them laddered so that they are constantly maturing. Such funds may also trade bonds on the OTC market. Note that with bond ETFs you're able to lose money as well as gain depending on the situation with the bond market. The issuer of the bond does not need to default in order for this to happen. The value of a bond (and thus the value of the bond fund which holds the bonds) is, much like a stock, determined based on factors like supply/demand, interest rates, credit ratings, news, etc.",
"title": ""
},
{
"docid": "b106aa78f608ac6f263c770c8b0d13f0",
"text": "There are two 'dates' relevant to your question: Ex-Dividend and Record. To find out these dates for a specific security visit Dividend.Com. You have to purchase the security prior to the Ex-Dividend date, hold it at least until the Record Date. After the Record Date you can sell the security and still receive the dividend for that quarter. ---- edit - - - - I was wrong. If you sell the security after the Ex-div date but before the date of record you still get the dividend. http://www.investopedia.com/articles/02/110802.asp",
"title": ""
}
] |
[
{
"docid": "ce25b1830452e713b8ff2b84a9d71f11",
"text": "\"Mutual funds generally make distributions once a year in December with the exact date (and the estimated amount) usually being made public in late October or November. Generally, the estimated amounts can get updated as time goes on, but the date does not change. Some funds (money market, bond funds, GNMA funds etc) distribute dividends on the last business day of each month, and the amounts are rarely made available beforehand. Capital gains are usually distributed once a year as per the general statement above. Some funds (e.g. S&P 500 index funds) distribute dividends towards the end of each quarter or on the last business day of the quarter, and capital gains once a year as per the general statement above. Some funds make semi-annual distributions but not necessarily at six-month intervals. Vanguard's Health Care Fund has distributed dividends and capital gains in March and December for as long as I have held it. VDIGX claims to make semi-annual distributions but made distributions three times in 2014 (March, June, December) and has made/will make two distributions this year already (March is done, June is pending -- the fund has gone ex-dividend with re-investment today and payment on 22nd). You can, as Chris Rea suggests, call the fund company directly, but in my experience, they are reluctant to divulge the date of the distribution (\"\"The fund manager has not made the date public as yet\"\") let alone an estimated amount. Even getting a \"\"Yes, the fund intends to make a distribution later this month\"\" was difficult to get from my \"\"Personal Representative\"\" in early March, and he had to put me on hold to talk to someone at the fund before he was willing to say so.\"",
"title": ""
},
{
"docid": "08c3f5e83dd7e845ab352290781bcd70",
"text": "Dividends are not paid immediately upon reception from the companies owned by an ETF. In the case of SPY, they have been paid inconsistently but now presumably quarterly.",
"title": ""
},
{
"docid": "d3758f89694c049210e7beac9efa2c3a",
"text": "The trend in ETFs is total return: where the ETF automatically reinvests dividends. This philosophy is undoubtedly influenced by that trend. The rich and retired receive nearly all income from interest, dividends, and capital gains; therefore, one who receives income exclusively from dividends and capital gains must fund by withdrawing dividends and/or liquidating holdings. For a total return ETF, the situation is even more limiting: income can only be funded by liquidation. The expected profit is lost for the dividend as well as liquidating since the dividend can merely be converted back into securities new or pre-existing. In this regard, dividends and investments are equal. One who withdraws dividends and liquidates holdings should be careful not to liquidate faster than the rate of growth.",
"title": ""
},
{
"docid": "c3f5aa8893ae0fea90232779fcb22b47",
"text": "Yes, if you want income and are willing to commit to hold a bond to maturity, you can hold the bond, get the scheduled payments, and get your principal returned at the end. US Savings Bonds are non-marketable (you cannot trade them, but can redeem early) bonds designed for this purpose. The value of a marketable bond will vary over its lifetime as interest rates change and the bond matures. If you buy a 30 year US Treasury bond at par value (100) on September 1, 2011, it yielded 3.51%. If rates fall, the value of your bond will increase over 100. If rates rise, the value will decrease below 100. How much the value changes depends on the type of bond and the demand for it. But if your goal is to buy and hold, you don't need to worry about it.",
"title": ""
},
{
"docid": "468f1945e30dd4d58e90a92d1a6d3953",
"text": "\"The way the post is worded, coca cola wouldn't count towards either, although it's not entirely clear. If the dividends are considered under capital gains (which isn't technically an appropriate term) he's earning only 500Million a year from his stake in coca cola. If he sold his shares, he'd receive capital gains of ~15Billion, which would probably outpace his operations business. The best graph would probably be something like \"\"net worth of operations vs net worth of equity in other companies\"\"\"",
"title": ""
},
{
"docid": "8e37a0bedf04922bb9fa43fd2c0e00b4",
"text": "The tax is only payable on the gain you make i.e the difference between the price you paid and the price you sold at. In your cse no tax is payable if you sell at the same price you bought at",
"title": ""
},
{
"docid": "4b673df4129fb2dab004b655c4a601aa",
"text": "No. As a rule, the dividends you see in the distribution table are what you'll receive before paying any taxes. Tax rates differ between qualified and unqualified/ordinary dividends, so the distribution can't include taxes because tax rates may differ between investors. In my case I hold it in an Israeli account but the tax treaty between our countries still specifies 25% withheld tax This is another example of why tax rates differ between investors. If I hold SPY too, my tax rate will be very different because I don't hold it in an account like yours, so the listed dividend couldn't include taxes.",
"title": ""
},
{
"docid": "3f2195b1e5cbd163326130ce19f688aa",
"text": "\"Not a bond holder, but when we get dividends we usually just buy up a benchmark index tracking ETF unless/until we're ready to rebalance our portfolio. Most of the trades in the day are earmarked with the reason \"\"spending cash\"\". I'd assume it's similar for bond holders and coupons.\"",
"title": ""
},
{
"docid": "95c2adec4356b3c197307f57a31ce4a5",
"text": "Brokerage firms must settle funds promptly, but there's no explicit definition for this in U.S. federal law. See for example, this article on settling trades in three days. Wikipedia also has a good write-up on T+3. It is common practice, however. It takes approximately three days for the funds to be available to me, in my Canadian brokerage account. That said, the software itself prevents me from using funds which are not available, and I'm rather surprised yours does not. You want to be careful not to be labelled a pattern day trader, if that is not your intention. Others can better fill you in on the consequences of this. I believe it will not apply to you unless you are using a margin account. All but certainly, the terms of service that you agreed to with this brokerage will specify the conditions under which they can lock you out of your account, and when they can charge interest. If they are selling your stock at times you have not authorised (via explicit instruction or via a stop-loss order), you should file a complaint with the S.E.C. and with sufficient documentation. You will need to ensure your cancel-stop-loss order actually went through, though, and the stock was sold anyway. It could simply be that it takes a full business day to cancel such an order.",
"title": ""
},
{
"docid": "2dc4fec57148f221da98f849fa2699b5",
"text": "\"....causes loses [sic] to others. Someone sells you a stock. The seller receives cash. You receive a stock certificate. This doesn't imply a loss by either party especially if the seller sold the stock for more than his purchase price. A day trading robot can make money off of the price changes of a stock only if there are buyers and sellers of the stock at certain prices. There are always two parties in any stock transaction: a buyer and a seller. The day trading robot can make money off of an investment for 20 years and you could still make money if the investment goes up over the 20 years. The day trading robot doesn't \"\"rob\"\" you of any profit.\"",
"title": ""
},
{
"docid": "a96d94c22d193385c82351f53d90af2a",
"text": "\"Your return from a bond fund corresponds to the return on the underlying bonds (minus fees) during your holding period. So you can buy AND sell at any time. Some funds charge a penalty of 2% or whatever if you sell your fund shares within 30 or 60 days of buying it. There are two basic ways to profit from a bond fund. 1) you get dividends from the interest paid on the bonds. 2) you have a capital gain (or loss) on the bonds themselves. 1) is likely to happen. MOST (not all) bonds pay interest on time, and on a regular basis. This component of returns is ALMOST guaranteed. 2) There are no guarantees on what the \"\"market\"\" will pay for bonds at any given time, so this component of bonds is NOT AT ALL guaranteed. Your \"\"total return is the sum of 1) and 2) (minus fees). Since 2) is uncertain, your \"\"total return\"\" is uncertain.\"",
"title": ""
},
{
"docid": "c7cb9fb148b3e388eb95cfe98ac96a8d",
"text": "Your understanding is incorrect. The date of record is when you have to own the stock by. The ex-dividend date is calculated so that transaction before that date settles in time to get you listed as owner by the date of record. If you buy the stock before the ex-dividend date, you get the dividend. If you buy it on or after the ex-dividend date, the seller gets the dividend.",
"title": ""
},
{
"docid": "24edd62c7ed2bda08884eda0e9dcf42b",
"text": "\"In the US, and in most other countries, dividends are considered income when paid, and capital gains/losses are considered income/loss when realized. This is called, in accounting, \"\"recognition\"\". We recognize income when cash reaches our pocket, for tax purposes. So for dividends - it is when they're paid, and for gains - when you actually sell. Assuming the price of that fund never changes, you have this math do to when you sell: Of course, the capital loss/gain may change by the time you actually sell and realize it, but assuming the only price change is due to the dividends payout - it's a wash.\"",
"title": ""
},
{
"docid": "5a9de080444de75c710b8e60527623c7",
"text": "\"I'm trying to understand how an ETF manager optimized it's own revenue. Here's an example that I'm trying to figure out. ETF firm has an agreement with GS for blocks of IBM. They have agreed on daily VWAP + 1% for execution price. Further, there is a commission schedule for 5 mils with GS. Come month end, ETF firm has to do a monthly rebalance. As such must buy 100,000 shares at IBM which goes for about $100 The commission for the trade is 100,000 * 5 mils = $500 in commission for that trade. I assume all of this is covered in the expense ratio. Such that if VWAP for the day was 100, then each share got executed to the ETF at 101 (VWAP+ %1) + .0005 (5 mils per share) = for a resultant 101.0005 cost basis The ETF then turns around and takes out (let's say) 1% as the expense ratio ($1.01005 per share) I think everything so far is pretty straight forward. Let me know if I missed something to this point. Now, this is what I'm trying to get my head around. ETF firm has a revenue sharing agreement as well as other \"\"relations\"\" with GS. One of which is 50% back on commissions as soft dollars. On top of that GS has a program where if you do a set amount of \"\"VWAP +\"\" trades you are eligible for their corporate well-being programs and other \"\"sponsorship\"\" of ETF's interests including helping to pay for marketing, rent, computers, etc. Does that happen? Do these disclosures exist somewhere?\"",
"title": ""
},
{
"docid": "efb66dcd4b165d602a86a88e6d70d4de",
"text": "You only have to hold the shares at the opening of the ex-dividend date to get the dividends. So you can actually sell the shares on ex-dividend date and still get the dividends. Ex-dividend date occurs before the record date and payment date, so you will get the dividend even if you sold before the record date.",
"title": ""
}
] |
fiqa
|
3d7e33ac88e432d073c8b68a894b6e2f
|
Table of how many years it takes to make a specified return on the stock market?
|
[
{
"docid": "35897c65549bc4b4a106fc62120d6160",
"text": "\"Well depends but \"\"on average\"\" the stock market has historically returned somewhere around 10% per year. Note, this can vary wildly from year to year see http://en.wikipedia.org/wiki/S%26P_500#Market_statistics So it would be roughly 2.8 years to get your 30% if you happen to get the average market return for those 3 years, but the chances of that happening exactly are slim to none. You could end up with +50% or -30% over that ~3 year period of time - so the calculation doesn't do you that much good for that short period of time, but if you are talking a span of 30 years then you could plan using that as a very rough ballpark. Good rule of thumb is you shouldn't put any money in the stock market you think you will need anytime in the next 5 years. Formula to figure out total gain would be Principal x (1+ rate of return) ^ years\"",
"title": ""
},
{
"docid": "502a5d7377b87fe0f66fffc821dd291c",
"text": "The Money Chimp site lets you choose two points in time to see the return. i.e. you give it the time (two dates) and it tells you the return. One can create a spreadsheet to look at multiple time periods and answer your question that way, but I've not seen it laid out that way in advance. For what it's worth, I am halfway to my retirement number. I can tell you, for example that at X%, I hit my number in Y years. 8.73% gets me 8/25/17 (kid off to college) 3.68% gets me 8/25/21 (kid graduates), so in a sense, we're after the same type of info. With the long term return being in the 10% range, you're going to get 3 years or so as average, but with a skewed bellish curve when run over time.",
"title": ""
},
{
"docid": "ebe39a744dafca7cc1109e902d75b7a2",
"text": "It depends on what stocks you invest in or whether you invest in an index, as all stocks are not created equally. If you prefer to invest directly into individual stocks and you choose ones that are financially health and trending upwards, you should be able to easily outperform any indexes and get your 30% return much quicker. But you always need to make sure that you have a stop loss placed on all of your stocks, because even the best performing companies can go through bad patches. The stop loss prevents you from losing all your capital if the share price suddenly starts going south and turns into a downtrend.",
"title": ""
}
] |
[
{
"docid": "92ee9cadaa14d9d89f6ca7d5aaa4a99e",
"text": "\"There are some assumptions which can be made in terms of the flexibility you have - I will start with the least flexible assumption and then move to more flexible assumptions. If you must put down a number 1, your go-to for this(\"\"Change the start period to 1\"\"), is pretty good, and it's used frequently for other divide-by-zero calculations like kda in a video game. The problem I have with '1' is that it doesn't allow you to handle various scales. Some problems are dealt with in thousands, some in fractions, and some in hundreds of millions. Therefore, you should change the start period to the smallest significantly measurable number you could reasonably have. Here, that would take your example 0 and 896 and give you an increase of 89,500%. It's not a great result, but it's the best you can hope for if you have to put down a number, and it allows you to keep some of the \"\"meaning in the change.\"\" If you absolutely must put something This is the assumption that most answers have taken - you can put down a symbol, a number with a notation, empty space, etc, but there is going to be a label somewhere called 'Growth' that will exist. I generally agree with what I've seen, particularly the answers from Benjamin Cuninghma and Nath. For the sake of preservation - those answers can be summarized as putting 'N/A' or '-', possibly with a footnote and asterisk. If you can avoid the measurement entirely The root of your question is \"\"What do my manager and investors expect to see?\"\" I think it's valuable to dig even further to \"\"What do my manager and investors really want to know?\"\". They want to know the state of their investment. Growth is often a good measurement of that state, but in cases where you are starting from zero or negative, it just doesn't tell you the right information. In these situations, you should avoid % growth, and instead talk in absolute terms which mention the time frame or starting state. For example:\"",
"title": ""
},
{
"docid": "1840c175462eafdd1a0a67584ec8a85a",
"text": "You are looking for the Internal Rate of Return. If you have a spreadsheet like Microsoft Excel you can simply put in a list of the transactions (every time money went in or out) and their dates, and the spreadsheet's XIRR function will calculate a percentage rate of return. Here's a simple example. Investment 1 was 100,000 which is now worth 104,930 so it's made about 5% per year. Investment 2 is much more complicated, money was going in and out, but the internal rate of return was 7% so money in that investment, on average, grew faster than money in the first investment.",
"title": ""
},
{
"docid": "100c16089b98c6da4bdec9e3d52ba91b",
"text": "\"The raw question is as follows: \"\"You will be recommending a purposed portfolio to an investment committee (my class). The committee runs a foundation that has an asset base of $4,000,000. The foundations' dual mandates are to (a) preserve capital and (b) to fund $200,000 worth of scholarships. The foundation has a third objective, which is to grow its asset base over time.\"\" The rest of the assignment lays out the format and headings for the sections of the presentation. Thanks, by the way - it's an 8 week accelerated course and I've been out sick for two weeks. I've been trying to teach myself this stuff, including the excel calculations for the past few weeks.\"",
"title": ""
},
{
"docid": "f40ce647ec1934ec570d35784baa2775",
"text": "James Roth provides a partial solution good for stock picking but let's speed up process a bit, already calculated historical standard deviations: Ibbotson, very good collection of research papers here, examples below Books",
"title": ""
},
{
"docid": "2136538e1c183dd41f933085eadd0b7f",
"text": "\"The mathematics site, WolframAlpha, provides such data. Here is a link to historic p/e data for Apple. You can chart other companies simply by typing \"\"p/e code\"\" into the search box. For example, \"\"p/e XOM\"\" will give you historic p/e data for Exxon. A drop-down list box allows you to select a reporting period : 2 years, 5 years, 10 years, all data. Below the chart you can read the minimum, maximum, and average p/e for the reporting period in addition to the dates on which the minimum and maximum were applicable.\"",
"title": ""
},
{
"docid": "6832d91bbae329fef6eced1aecf5ac9a",
"text": "Pub 527 my friend. It gets depreciated. Table 1-1 on page 5.",
"title": ""
},
{
"docid": "a346ee2542db4507de800e5de36fc933",
"text": "\"So, there is no truly \"\"correct\"\" way to calculate return. Professionals will often calculate many different rates of return depending on what they wish to understand about their portfolio. However, the two most common ways of calculating multi-period return though are time-weighted return and money-weighted return. I'll leave the details to this good Investopeadia article, but the big picture is time-weighted returns help you understand how the stock performed during the period in question independent of how you invested it it. Whereas money-weighted return helps you understand how you performed investing in the stock in question. From your question, it appears both methods would be useful in combination to help you evaluate your portfolio. Both methods should be fairly easy to calculate yourself in a spread sheet, but if you are interested there are plenty of examples of both in google docs on the web.\"",
"title": ""
},
{
"docid": "f968ac77c114449dadf53ee74f7830b8",
"text": "You can't get there from here. This isn't the right data. Consider the following five-year history: 2%, 16%, 32%, 14%, 1%. That would give a 13% average annual return. Now compare to -37%, 26%, 15%, 2%, 16%. That would give a 4% average annual return. Notice anything about those numbers? Two of them are in both series. This isn't an accident. The first set of five numbers are actual stock market returns from the last five years while the latter five start three years earlier. The critical thing is that five years of returns aren't enough. You'd need to know not just how you can handle a bull market but how you do in a bear market as well. Because there will be bear markets. Also consider whether average annual returns are what you want. Consider what actually happens in the second set of numbers: But if you had had a steady 4% return, you would have had a total return of 21%, not the 8% that would have really happened. The point being that calculating from averages gives misleading results. This gets even worse if you remove money from your principal for living expenses every year. The usual way to compensate for that is to do a 70% stock/30% bond mix (or 75%/25%) with five years of expenses in cash-equivalent savings. With cash-equivalents, you won't even keep up with inflation. The stock/bond mix might give you a 7% return after inflation. So the five years of expenses are more and more problematic as your nest egg shrinks. It's better to live off the interest if you can. You don't know how long you'll live or how the market will do. From there, it's just about how much risk you want to take. A current nest egg of twenty times expenses might be enough, but thirty times would be better. Since the 1970s, the stock market hasn't had a long bad patch relative to inflation. Maybe you could squeak through with ten. But if the 2020s are like the 1970s, you'd be in trouble.",
"title": ""
},
{
"docid": "abc2f84718703e157926e5b001527a6f",
"text": "\"Please note that the following Graham Rating below corresponds to five years: Earnings Stability (100% ⇒ 10 Years): 50.00% Benjamin Graham - once known as The Dean of Wall Street - was a scholar and financial analyst who mentored legendary investors such as Warren Buffett, William J. Ruane, Irving Kahn and Walter J. Schloss. Buffett describes Graham's book - The Intelligent Investor - as \"\"by far the best book about investing ever written\"\" (in its preface). Graham's first recommended strategy - for casual investors - was to invest in Index stocks. For more serious investors, Graham recommended three different categories of stocks - Defensive, Enterprising and NCAV - and 17 qualitative and quantitative rules for identifying them. For advanced investors, Graham described various \"\"special situations\"\". The first requires almost no analysis, and is easily accomplished today with a good S&P500 Index fund. The last requires more than the average level of ability and experience. Such stocks are also not amenable to impartial algorithmic analysis, and require a case-specific approach. But Defensive, Enterprising and NCAV stocks can be reliably detected by today's data-mining software, and offer a great avenue for accurate automated analysis and profitable investment. For example, given below are the actual Graham ratings for International Business Machines Corp (IBM), with no adjustments other than those for inflation. Defensive Graham investment requires that all ratings be 100% or more. Enterprising Graham investment requires minimum ratings of - N/A, 75%, 90%, 50%, 5%, N/A and 137%. International Business Machines Corp - Graham Ratings Sales | Size (100% ⇒ $500 Million): 18,558.60% Current Assets ÷ [2 x Current Liabilities]: 62.40% Net Current Assets ÷ Long Term Debt: 28.00% Earnings Stability (100% ⇒ 10 Years): 100.00% Dividend Record (100% ⇒ 20 Years): 100.00% Earnings Growth (100% ⇒ 30% Growth): 172.99% Graham Number ÷ Previous Close: 35.81% Not all stocks failing Graham's rules are necessarily bad investments. They may fall under \"\"special situations\"\". Graham's rules are also extremely selective. Graham designed and backtested his framework for over 50 years, to deliver the best possible long-term results. Even when stocks don't clear them, Graham's rules give a clear quantifiable measure of a stock's margin of safety. Thank you.\"",
"title": ""
},
{
"docid": "ae119a1854147b5b6ee88b6f3dd09dc4",
"text": "\"He is wrong. Using Total Return (Reinvesting Dividend), from the peak in December 1999, it only took 6 years to recover. You can check the data for free here. Make sure you choose \"\"Gross Index Level\"\". ACWI Index is Developed Markets + Emerging Markets. World Index is Developed Markets only.\"",
"title": ""
},
{
"docid": "d36523369ec95cd476b356b42b3d32a2",
"text": "See the Moneychimp site. From 1934 to 2006, the S&P returned an 'average' 12.81%. But the CAGR was 11.26%. I wrote an article Average Return vs Compound Annual Growth to address this issue. Interesting that over time only a few funds have managed to get anywhere near this return, but the low cost indexer can get the long term CAGR minus .05% or so, if they wish.",
"title": ""
},
{
"docid": "01d88eba80895040dd663fec951a0435",
"text": "R = I ^ P R = return (2 means double) I = (Intrest rate / 100) + 1 [1.104 = 10.4%] P = number of periods (7 years) 2 = 1.104 ^ 7 (you double your money in seven years with a yearly Intrest rate of 10.4%) I = R^(1/P) 1.104 = 2^(1/7) P = log(R) / log(I) 7 = log(2) / log(1.104)",
"title": ""
},
{
"docid": "cce033f385da61f67b0c492443451b1d",
"text": "\"It's easy for me to look at an IRA, no deposits or withdrawal in a year, and compare the return to some index. Once you start adding transactions, not so easy. Here's a method that answers your goal as closely as I can offer: SPY goes back to 1993. It's the most quoted EFT that replicates the S&P 500, and you specifically asked to compare how the investment would have gone if you were in such a fund. This is an important distinction, as I don't have to adjust for its .09% expense, as you would have been subject to it in this fund. Simply go to Yahoo, and start with the historical prices. Easy to do this on a spreadsheet. I'll assume you can find all your purchases inc dates & dollars invested. Look these up and treat those dollars as purchases of SPY. Once the list is done, go back and look up the dividends, issues quarterly, and on the dividend date, add the shares it would purchase based on that day's price. Of course, any withdrawals get accounted for the same way, take out the number of SPY shares it would have bought. Remember to include the commission on SPY, whatever your broker charges. If I've missed something, I'm sure we'll see someone point that out, I'd be happy to edit that in, to make this wiki-worthy. Edit - due to the nature of comments and the inability to edit, I'm adding this here. Perhaps I'm reading the question too pedantically, perhaps not. I'm reading it as \"\"if instead of doing whatever I did, I invested in an S&P index fund, how would I have performed?\"\" To measure one's return against a benchmark, the mechanics of the benchmarks calculation are not needed. In a comment I offer an example - if there were an ETF based on some type of black-box investing for which the investments were not disclosed at all, only day's end pricing, my answer above still applies exactly. The validity of such comparisons is a different question, but the fact that the formulation of the EFT doesn't come into play remains. In my comment below which I removed I hypothesized an ETF name, not intending it to come off as sarcastic. For the record, if one wishes to start JoesETF, I'm ok with it.\"",
"title": ""
},
{
"docid": "76e622fc225406dbd70fb144752364dc",
"text": "\"You could use any of various financial APIs (e.g., Yahoo finance) to get prices of some reference stock and bond index funds. That would be a reasonable approximation to market performance over a given time span. As for inflation data, just googling \"\"monthly inflation data\"\" gave me two pages with numbers that seem to agree and go back to 1914. If you want to double-check their numbers you could go to the source at the BLS. As for whether any existing analysis exists, I'm not sure exactly what you mean. I don't think you need to do much analysis to show that stock returns are different over different time periods.\"",
"title": ""
},
{
"docid": "8d2417fd1e8eb8a7ede06951fc8de9c8",
"text": "\"Yes. The definition of unreasonable shows as \"\"not guided by or based on good sense.\"\" 100% years require a high risk. Can your one stock double, or even go up three fold? Sure, but that would likely be a small part of your portfolio. Overall, long term, you are not likely to beat the market by such high numbers. That said, I had 2 years of returns well over 100%. 1998, and 1999. The S&P was up 26.7% and 19.5%, and I was very leverage in high tech stock options. As others mentioned, leverage was key. (Mark used the term 'gearing' which I think is leverage). When 2000 started crashing, I had taken enough off the table to end the year down 12% vs the S&P -10%, but this was down from a near 50% gain in Q1 of that year. As the crash continued, I was no longer leveraged and haven't been since. The last 12 years or so, I've happily lagged the S&P by a few basis points (.04-.02%). Also note, Buffet has returned an amazing 15.9%/yr on average for the last 30 years (vs the S&P 11.4%). 16% is far from 100%. The last 10 year, however, his return was a modest 8.6%, just .1% above the S&P.\"",
"title": ""
}
] |
fiqa
|
a5cb40bb97a3118c7ad8d4b16d795c45
|
Stock not available at home country nor at their local market - where should I buy it
|
[
{
"docid": "45fcc03a66afb144a4c38e299b8f4796",
"text": "\"Theoretically, it shouldn't matter which one you use. Your return should only depend on the stock returns in SGD and the ATS/SGD exchange rate (Austrian Schillings? is this an question from a textbook?). Whether you do the purchase \"\"through\"\" EUR or USD shouldn't matter as the fluctuations in either currency \"\"cancel\"\" when you do the two part exchange SGD/XXX then XXX/ATS. Now, in practice, the cost of exchanging currencies might be higher in one currency or the other. Likely a tiny, tiny amount higher in EUR. There is some risk as well as you will likely have to exchange the money and then wait a day or two to buy the stock, but the risk should be broadly similar between USD and EUR.\"",
"title": ""
}
] |
[
{
"docid": "db571656437f699d18b3d7941b386abd",
"text": "Any large stockbroker will offer trading in US securities. As a foreign national you will be required to register with the US tax authorities (IRS) by completing and filing a W-8BEN form and pay US withholding taxes on any dividend income you receive. US dividends are paid net of withholding taxes, so you do not need to file a US tax return. Capital gains are not subject to US taxes. Also, each year you are holding US securities, you will receive a form from the IRS which you are required to complete and return. You will also be required to complete and file forms for each of the exchanges you wish to received market price data from. Trading will be restricted to US trading hours, which I believe is 6 hours ahead of Denmark for the New York markets. You will simply submit an order to the desired market using your broker's online trading software or your broker's telephone dealing service. You can expect to pay significantly higher commissions for trading US securities when compared to domestic securities. You will also face potentially large foreign exchange fees when exchaning your funds from EUR to USD. All in all, you will probably be better off using your local market to trade US index or sector ETFs.",
"title": ""
},
{
"docid": "42a6227caae2ab12663e34c5bcc7f38b",
"text": "Check out WorldCap.org. They provide fundamental data for Hong Kong stocks in combination with an iPad app. Disclosure: I am affiliated with WorldCap.",
"title": ""
},
{
"docid": "b891f946fa4bcd62c8d9379a78d169d9",
"text": "I agree that a random page on the internet is not always a good source, but at the same time I will use Google or Yahoo Finance to look up US/EU equities, even though those sites are not authoritative and offer zero guarantees as to the accuracy of their data. In the same vein you could try a website devoted to warrants in your market. For example, I Googled toronto stock exchange warrants and the very first link took me to a site with all the information you mentioned. The authoritative source for the information would be the listing exchange, but I've spent five minutes on the TSX website and couldn't find even a fraction of the information about that warrant that I found on the non-authoritative site.",
"title": ""
},
{
"docid": "351caceff65bf83be90d557d5c8a94f5",
"text": "I stock is only worth what someone will pay for it. If you want to sell it you will get market price which is the bid.",
"title": ""
},
{
"docid": "f744364c976f38ef461e3449e043a277",
"text": "You seem to think that stock exchanges are much more than they actually are. But it's right there in the name: stock exchange. It's a place where people exchange (i.e. trade) stocks, no more and no less. All it does is enable the trading (and thereby price finding). Supposedly they went into mysterious bankruptcy then what will happen to the listed companies Absolutely nothing. They may have to use a different exchange if they're planning an IPO or stock buyback, that's all. and to the shareholder's stock who invested in companies that were listed in these markets ? Absolutley nothing. It still belongs to them. Trades that were in progress at the moment the exchange went down might be problematic, but usually the shutdown would happen in a manner that takes care of it, and ultimately the trade either went through or it didn't (and you still have the money). It might take some time to establish this. Let's suppose I am an investor and I bought stocks from a listed company in NYSE and NYSE went into bankruptcy, even though NYSE is a unique business, meaning it doesn't have to do anything with that firm which I invested in. How would I know the stock price of that firm Look at a different stock exchange. There are dozens even within the USA, hundreds internationally. and will I lose my purchased stocks ? Of course not, they will still be listed as yours at your broker. In general, what will happen after that ? People will use different stock exchanges, and some of them migth get overloaded from the additional volume. Expect some inconveniences but no huge problems.",
"title": ""
},
{
"docid": "c0882afa2daa5a742a7c8776b1dfbe50",
"text": "No, you shouldn't buy it. The advice here is to keep any existing holdings but not make new purchases of the stock.",
"title": ""
},
{
"docid": "3a5e26a54c14df9789647c1dea47ee96",
"text": "There are some brokers in the US who would be happy to open an account for non-US residents, allowing you to trade stocks at NYSE and other US Exchanges. Some of them, along with some facts: DriveWealth Has support in Portuguese Website TD Ameritrade Has support in Portuguese Website Interactive Brokers Account opening is not that straightforward Website",
"title": ""
},
{
"docid": "05d0b4242ad67dfe15d9e25e4266cc40",
"text": "One risk not mentioned is that foreign stock might be thinly traded on your local stock market, so you will find it harder to buy and sell, and you will be late to the game if there is some sudden change in the share price in the original country.",
"title": ""
},
{
"docid": "4f90586bfcfdc4185d30d01836631f40",
"text": "The easiest route for you to go down will be to consult wikipedia, which will provide a comprehensive list of all US stock exchanges (there are plenty more than the ones you list!). Then visit the websites for those that are of interest to you, where you will find a list of holiday dates along with the trading schedule for specific products and the settlement dates where relevant. In answer to the other part of your question, yes, a stock can trade on multiple exchanges. Typically (unless you instruct otherwise), your broker will route your order to the exchange where it can be matched at the most favorable price to you at that time.",
"title": ""
},
{
"docid": "6150cd134f4e7c7e266d5fe0ce92ef87",
"text": "The essential difference b/n ADR and a common share is that ADR do not have Voting rights. Common share has. There are some ADR that would in certain conditions get converted to common stock, but by and large most ADR's would remain ADR's without any voting rights. If you are an individual investor, this difference should not matter as rarely one would hold such a large number of shares to vote on General meeting on various issues. The other difference is that since many countries have regulations on who can buy common shares, for example in India an Non Resident cannot directly buy any share, hence he would buy ADR. Thus ADR would be priced more in the respective market if there is demand. For example Infosys Technologies, an India Company has ADR on NYSE. This is more expensive around 1.5 times the price of the common share available in India (at current exchange rate). Thus if you are able to invest with equal ease in HK (have broker / trading account etc), consider the taxation of the gains in HK as well the tax treatment in US for overseas gains then its recommended that you go for Common Stock in HK. Else it would make sense to buy in US.",
"title": ""
},
{
"docid": "d666c38057c10de0df25b0b819739a26",
"text": "It doesn't matter which exchange a share was purchased through (or if it was even purchased on an exchange at all--physical share certificates can be bought and sold outside of any exchange). A share is a share, and any share available for purchase in New York is available to be purchased in London. Buying all of a company's stock is not something that can generally be done through the stock market. The practical way to accomplish buying a company out is to purchase a controlling interest, or enough shares to have enough votes to bind the board to a specific course of action. Then vote to sell all outstanding shares to another company at a particular fixed price per share. Market capitalization is an inaccurate measure of the size of a company in the first place, but if you want to quantify it, you can take the number of outstanding shares (anywhere and everywhere) and multiply them by the price on any of the exchanges that sell it. That will give you the market capitalization in the currency that is used by whatever exchange you chose.",
"title": ""
},
{
"docid": "899f4d3246f1f739b5e7d07e75a5f20d",
"text": "yes, there does need to be demand. on heavily traded stocks, there is no reason to be concerned. on thinly traded equities, you will want to check the market depth before placing a sell. the company is likely not the one that is buying your shares on the open market.",
"title": ""
},
{
"docid": "90da52d0db0ff30eb04f78eb18a7a3d0",
"text": "While most all Canadian brokers allow us access to all the US stocks, the reverse is not true. But some US brokers DO allow trading on foreign exchanges. (e.g. Interactive Brokers at which I have an account). You have to look and be prepared to switch brokers. Americans cannot use Canadian brokers (and vice versa). Trading of shares happens where-ever two people get together - hence the pink sheets. These work well for Americans who want to buy-sell foreign stocks using USD without the hassle of FX conversions. You get the same economic exposure as if the actual stock were bought. But the exchanges are barely policed, and liquidity can dry up, and FX moves are not necessarily arbitraged away by 'the market'. You don't have the same safety as ADRs because there is no bank holding any stash of 'actual' stocks to backstop those traded on the pink sheets.",
"title": ""
},
{
"docid": "ad0238d88d414fea8b5afbebfdffccf9",
"text": "What I ended up doing was finding where each ticker of Novo was registered (what exchange), then individually looking up the foreign taxation rules of the containing country. Luckily, most companies only have a few tickers so this wasn't too hard in the end.",
"title": ""
},
{
"docid": "9a1ad7c42d95f740cc786d3707e3ce4d",
"text": "You might have to pay a premium for the stocks on the dividend tax–free exchanges. For example, HSBC on the NYSE yields 4.71% versus HSBC on the LSE which yields only 4.56%. Assuming the shares are truly identical, the only reason for this (aside from market fluctuations) is if the taxes are more favorable in the UK versus the US, thus increasing demand for HSBC on the LSE, raising the price, and reducing the yield. A difference of 0.15% in yield is pretty insignificant relative to a 30% versus 0% dividend tax. But a key question is, does your country have a foreign tax credit like the US does? If so you (usually) end up getting that 30% back, just delayed until you get your tax return, and the question of which exchange to buy on becomes not so clear cut. If your country doesn't have such a tax credit, then yes, you'll want to buy on an exchange where you won't get hit with the dividend tax. Note that I got this information from a great article I read several months back (site requires free registration to see it all unfortunately). They discuss the case of UN versus UL--both on the NYSE but ADRs for Unilever in the Netherlands and the UK, respectively. The logic is very similar to your situation.",
"title": ""
}
] |
fiqa
|
a549d0965d68ff39be8d2e676df89062
|
What is the probabiltiy of being assigned if the call expires in the money
|
[
{
"docid": "00771613db87e52247eb87c2df4d12f8",
"text": "If you are in the money at expiration you are going to get assigned to the person on the other side of the contract. This is an extremely high probability. The only randomness comes from before expiration. Where you may be assigned because a holder exercised the option before expiration, this can unbalance some of your strategies. But in exchange, you get all the premium that was still left on the option when they exercised. An in the money option, at expiration, has no premium. The value of your in the money option is Current Stock price - Strike Price, for a call. And Strike price - Current Stock price, for a put. Thats why there is no free lunch in this scenario.",
"title": ""
}
] |
[
{
"docid": "89ec2c32f8875d784be9200e9b3c8c6d",
"text": "\"I think the issue you are having is that the option value is not a \"\"flow\"\" but rather a liability that changes value over time. It is best to illustrate with a balance sheet. The $33 dollars would be the premium net of expense that you would receive from your brokerage for having shorted the options. This would be your asset. The liability is the right for the option owner (the person you sold it to) to exercise and purchase stock at a fixed price. At the moment you sold it, the \"\"Marked To Market\"\" (MTM) value of that option is $40. Hence you are at a net account value of $33-$40= $-7 which is the commission. Over time, as the price of that option changes the value of your account is simply $33 - 2*(option price)*(100) since each option contract is for 100 shares. In your example above, this implies that the option price is 20 cents. So if I were to redo the chart it would look like this If the next day the option value goes to 21 cents, your liability would now be 2*(0.21)*(100) = $42 dollars. In a sense, 2 dollars have been \"\"debited\"\" from your account to cover your potential liability. Since you also own the stock there will be a credit from that line item (not shown). At the expiry of your option, since you are selling covered calls, if you were to be exercised on, the loss on the option and the gain on the shares you own will net off. The final cost basis of the shares you sold will be adjusted by the premium you've received. You will simply be selling your shares at strike + premium per share (0.20 cents in this example)\"",
"title": ""
},
{
"docid": "8384d354271018c0de0dce360c7a96e0",
"text": "\"Consider the futures market. Traders buy and sell gold futures, but very few contracts, relatively speaking, result in delivery. The contracts are sold, and \"\"Open interest\"\" dwindles to near zero most months as the final date approaches. The seller buys back his short position, the buyer sells off his longs. When I own a call, and am 'winning,' say the option that cost me $1 is now worth $2, I'd rather sell that option for even $1.95 than to buy 100 shares of a $148 stock. The punchline is that very few option buyers actually hope to own the stock in the end. Just like the futures, open interest falls as expiration approaches.\"",
"title": ""
},
{
"docid": "71aea3629e778c4605518661a2149ac7",
"text": "So, this isn't always the case, but in the example provided the option is most likely in the money or near the money since the delta is nearly 1 - indicating that a $1 move in the underlying results in a $0.92 move in the option - this will happen when the expiration is very far out or the option is in the money. As expiration gets closer, movements in the underlying become more pronounced in the options because the probability of the stock price moving from its current position is lower. As the probability of the stock price moving goes down, the delta of in the money options approaches 100, eventually reaching 100 at expiration. Another way to word this is that the premium on in the money options shrinks as expiration approaches and the intrinsic value of the option increases as percentage of total value so that movements in the underlying stock price become a greater influence on the option price - hence a greater delta. Again, if the option is out of the money, this is not the case.",
"title": ""
},
{
"docid": "16b3871bfb883e3574f6ac2651f7aa83",
"text": "I do this often and have never had a problem. My broker is TD Ameritrade and they sent several emails (and even called and left a message) the week of expiry to remind me I had in the money options that would be expiring soon. Their policy is to automatically exercise all options that are at least $.01 in the money. One email was vaguely worded, but it implied that they could liquidate other positions to raise money to exercise the options. I would have called to clarify but I had no intention of exercising and knew I would sell them before expiry. In general though, much like with margin calls, you should avoid being in the position where the broker needs to (or can do) anything with your account. As a quick aside: I can't think of a scenario where you wouldn't be able to sell your options, but you probably are aware of the huge spreads that exist for many illiquid options. You'll be able to sell them, but if you're desperate, you may have to sell at the bid price, which can be significantly (25%?) lower than the ask. I've found this to be common for options of even very liquid underlyings. So personally, I find myself adjusting my limit price quite often near expiry. If the quote is, say, 3.00-3.60, I'll try to sell with a limit of 3.40, and hope someone takes my offer. If the price is not moving up and nobody is biting, move down to 3.30, 3.20, etc. In general you should definitely talk to your broker, like others have suggested. You may be able to request that they sell the options and not attempt to exercise them at the expense of other positions you have.",
"title": ""
},
{
"docid": "e1d0ccdbcd79490bd9195e82a5c6bd52",
"text": "No, something doesn't seem right here. There would be virtually no time value to the option 10 minutes before market close on the expiration day. What option is it, and what is the expiration? EDIT: It appears you were looking only at the ASK price. It was $2.05. However, the BID price was only $1.35 and the last transaction was $1.40. So the true value is right about $1.35 to $1.40 at this second. This is a pitfall that tends to occur when you trade options with almost no volume. For instance, the open interest in that option is only 1 contract (assuming that is yours). So the Bid and the Ask can often be very far apart as they are only being generated by computer traders or the result of outdated, irrelevant human orders.",
"title": ""
},
{
"docid": "fc8258418510d335f3378e71ed7ab30e",
"text": "An option is freely tradable, and all options (of the same kind) are equal. If your position is 0 and you sell 1 option, your new position in that option is -1. If the counterparty to your trade buys or sells more options to close, open, or even reopen their position afterwards, that doesn't matter to your position at all. Of course there's also the issue with American and European Options. European Options expire at their due date, but American Options expire at their due date or at any time before their due date if the holder decides they expire. With American Options, if a holder of an American Option decides to exercise the option, someone who is short the same option will be assigned as the counterparty (this is usually random). Expiry is after market close, so if one of your short American Options expires early, you will need to reopen the position the next day. Keep in mind dividends for slightly increased complexity. American and European Options do not in any way refer to the continents they are traded on, or to the location of the companies. These terms simply describe the expiry rules.",
"title": ""
},
{
"docid": "254b29225b915be822ea4a883a43a442",
"text": "\"There are, in fact, two balances kept for your account by most banks that have to comply with common convenience banking laws. The first is your actual balance; it is simply the sum total of all deposits and withdrawals that have cleared the account; that is, both your bank and the bank from which the deposit came or to which the payment will go have exchanged necessary proof of authorization from the payor, and have confirmed with each other that the money has actually been debited from the account of the payor, transferred between the banks and credited to the account of the payee. The second balance is the \"\"available balance\"\". This is the actual balance, plus any amount that the bank is \"\"floating\"\" you while a deposit clears, minus any amount that the bank has received notice of that you may have just authorized, but for which either full proof of authorization or the definite amount (or both) have not been confirmed. This is what's happening here. Your bank received notice that you intended to pay the train company $X. They put an \"\"authorization hold\"\" on that $X, deducting it from your available balance but not your actual balance. The bank then, for whatever reason, declined to process the actual transaction (insufficient funds, suspicion of theft/fraud), but kept the hold in place in case the transaction was re-attempted. Holds for debit purchases usually expire between 1 and 5 days after being placed if the hold is not subsequently \"\"settled\"\" by the merchant providing definite proof of amount and authorization before that time. The expiration time mainly depends on the policy of the bank holding your account. Holds can remain in place as long as thirty days for certain accounts or types of payment, again depending on bank policy. In certain circumstances, the bank can remove a hold on request. But it is the bank, and not the merchant, that you must contact to remove a hold or even inquire about one.\"",
"title": ""
},
{
"docid": "b75e930b98cb6c9e4b9a575ff5982ce1",
"text": "To Chris' comment, find out if the assignment commission is the same as the commission for an executed trade. If that does affect the profit, just let it expire. I've had spreads (buy a call, sell a higher strike call, same dates) so deep in the money, I just made sense to let both exercise at expiration. Don't panic if all legs ofthe trade don't show until Sunday or even Monday morning.",
"title": ""
},
{
"docid": "92bc54545894a84958a397e020d8c194",
"text": "\"Nowadays, some banks in some countries offer things like temporary virtual cards for online payments. They are issued either free of charge or at a negligible charge, immediately, via bank's web interface (access to which might either be free or not, this varies). You get a separate account for the newly-issued \"\"card\"\" (the \"\"card\"\" being just a set of numbers), you transfer some money there (same web-interface), you use it to make payment(s), you leave $0 on that \"\"card\"\" and within a day or a month, it expires. Somewhat convenient and your possible loss is limited tightly. Check if your local banks offer this kind of service.\"",
"title": ""
},
{
"docid": "37e4a50d30b9b0df113973cbb7a4e610",
"text": "The other answer covers the mechanics of how to buy/sell a future contract. You seem however to be under the impression that you can buy the contract at 1,581.90 today and sell at 1,588.85 on expiry date if the index does not move. This is true but there are two important caveats: In other words, it is not the case that your chance of making money by buying that contract is more than 50%...",
"title": ""
},
{
"docid": "1d01e1fea797ef94a46da74aca2097ac",
"text": "You can buy a put and exercise it. The ideal option in this case will have little time premium left and very near the money. Who lent you the shares? The person that sold you the option! In reality, when you exercise, assignment can be random, but everything is [supposedly] accounted for as the option seller had to put up margin collateral to sell the option.",
"title": ""
},
{
"docid": "0a4079725f2d6fbf8f1f84c9048db43f",
"text": "\"This chart concerns an option contract, not a stock. The method of analysis is to assume that the price of an option contract is normally distributed around some mean which is presumably the current price of the underlying asset. As the date of expiration of the contract gets closer the variation around the mean in the possible end price for the contract will decrease. Undoubtedly the publisher has measured typical deviations from the mean as a function of time until expiration from historical data. Based on this data, the program that computes the probability has the following inputs: (1) the mean (current asset price) (2) the time until expiration (3) the expected standard deviation based on (2) With this information the probability distribution that you see is generated (the green hump). This is a \"\"normal\"\" or Gaussian distribution. For a normal distribution the probability of a particular event is equal to the area under the curve to the right of the value line (in the example above the value chosen is 122.49). This area can be computed with the formula: This formula is called the probability density for x, where x is the value (122.49 in the example above). Tau (T) is the reciprocal of the variance (which can be computed from the standard deviation). Mu (μ) is the mean. The main assumption such a calculation makes is that the price of the asset will not change between now and the time of expiration. Obviously that is not true in most cases because the prices of stocks and bonds constantly fluctuate. A secondary assumption is that the distribution of the option price around the mean will a normal (or Gaussian) distribution. This is obviously a crude assumption and common sense would suggest it is not the most accurate distribution. In fact, various studies have shown that the Burr Distribution is actually a more accurate model for the distribution of option contract prices.\"",
"title": ""
},
{
"docid": "4564d6f769069cac51d5d90d0287226f",
"text": "as in, the person you made the agreement with can no longer fulfill the contract's requirements. It's the same thing as if they went bankrupt, you would have to pursue legal channels to recover your dues. Granted in an FX forward you would only have to deliver your part at expiration, so you could hold out if you *know* the counterparty is dead/bankrupt.",
"title": ""
},
{
"docid": "d015bb7fb08fc382d9aa62e25c1b767a",
"text": "It's unclear what you're asking. When I originally read your question, it seemed that you had closed out one options position and opened another. When I read your question the second time, it seemed that you were writing a second option while the first was still open. In the second case, you have one covered and one naked position. The covered call will expire worthless, the naked call will expire in the money. How your broker will resolve that is a question best left for them, but my expectation is that they will assign the non-worthless calls. Whereas, if both options expired in the money, you would be assigned and you would have to come up with the additional shares (and again, that depends on how your broker works). In general, for both cases, your net is the premiums you received, plus the difference between strike price and the price that you paid for the stock, minus any cost to close out the position. So whether you make a profit is very much dependent on how much you received for your premiums. Scenario #1: close first call, write second: Scenario #2: write covered + naked, one expires worthless Scenario #3: write covered + naked, both expire in the money Disclaimer: the SEC does not consider me a financial/investment advisor, so this is not financial/investment advice",
"title": ""
},
{
"docid": "3393f7c349cd30df4749a2c59947f9ae",
"text": "To add to JoeTaxpayer's answer, the cost of providing (term) life insurance for one year increases with the age of the insured. Thus, if you buy a 30-year term policy with level premiums (the premium is the same for 30 years) then, during the earlier years, you pay more than the cost to the insurance company for providing the benefit. In later years, you pay somewhat less than the cost of providing the insurance. The excess premiums that the insurance company charged in earlier years and the earnings from investing that money covers the difference between the premium paid in later years and the true cost of providing the coverage. If after 20 years you decide that you no longer need the protection (children have grown up and now have jobs etc) and you cancel the policy, you will have overpaid for the protection that you got. The insurance company will not give you backsies on the overpayment. As an alternative, you might want to consider a term life insurance policy in which the premiums increase each year (or increase every 5 years) and thus better approximate the actual cost to the insurance company. One advantage is that you pay less in early life and pay more in later years (when hopefully your income will have increased and you can afford to pay more). Thus, you can get a policy with a larger face value (150K for your wife and 400K for yourself is really quite small) with annual premium of $550 now and more in later years. Also if you decide to cancel the policy after 20 years, you will not have overpaid for the level of coverage provided. Finally, in addition to a policy with larger face value, I recommend that you include the mortgage (if any) on your house in the amount that you decide is enough for your family to live on and to send the kids to college, etc., or get a separate (term life insurance) policy to cover the mortgage on your home. Many mortgage contracts have clauses to the effect that the entire principal owed becomes immediately due if either of the borrowers dies. Yes, the widow or widower can get a replacement mortgage, or prove to the lender that the monthly payments will continue as before, (or pay off the mortgage from that $150K or $400K which will leave a heck of a lot less for the family to survive on) etc., but in the middle of dealing with all the hassles created by a death in the family, this is one headache that can be taken care of now. The advantage of including the mortgage amount in a single policy that will support the family when you are gone is that you get a bit of a break; the sum of the annual premiums on ten policies for $100K is more than the premiums for a single $1M policy. There is also the consideration that the principal owed on the mortgage declines over the years (very slowly at first, though) and so there will be more money available for living expenses in later years. Alternatively, consider a special term life insurance policy geared towards mortgage coverage. The face value of this policy reduces each year to match the amount still due on the mortgage. Note that you may already have such a policy in place because the lender has insisted on you getting such a policy as a condition for issuing the loan. In this case, keep in mind that not only is the lender the beneficiary of such a policy, but if you bought the policy through the lender, you are providing extra profit to the lender; you can get a similar policy at lower premiums on the open market than the policy that your lender has so thoughtfully provided you. I bought mine from a source that caters to employees of nonprofit organizations and public sector employees; your mileage may vary.",
"title": ""
}
] |
fiqa
|
361eab6c859548136f56a445b57b22af
|
Why divide by ask rate to get the spread?
|
[
{
"docid": "9ec10b3f7e1202acfe037a2259d8ce4d",
"text": "\"Mathematically it's arbitrary - you could just as easily use the bid or the midpoint as the denominator, so long as you're consistent when comparing securities. So there's not a fundamental reason to use the ask. The best argument I can come up with is that most analysis is done from the buy side, so looking at liquidity costs (meaning how much does the value drop instantaneously purely because of the bid-ask spread) when you buy a security would be more relevant by using the ask (purchase price) as the basis. Meaning, if a stock has a bid-ask range of $95-$100, if you buy the stock at $100 (the ask), you immediately \"\"lose\"\" 5% (5/100) of its value since you can only sell it for $95.\"",
"title": ""
}
] |
[
{
"docid": "aba856be4280e28f88d44a0ed5966ced",
"text": "A bid is an offer to buy something on an order book, so for example you may post an offer to buy one share, at $5. An ask is an offer to sell something on an order book, at a set price. For example you may post an offer to sell shares at $6. A trade happens when there are bids/asks that overlap each other, or are at the same price, so there is always a spread of at least one of the smallest currency unit the exchange allows. Betting that the price of an asset will go down, traditionally by borrowing some of that asset and then selling it, hoping to buy it back at a lower price and pocket the difference (minus interest). So, let's say as per your example you borrow 100 shares of company 'X', expecting the price of them to go down. You take your shares to the market and sell them - you make a market sell order (a market 'ask'). This matches against a bid and you receive a price of $5 per share. Now, let's pretend that you change your mind and you think the price is going to go up, you instantly regret your decision. In order to pay back the shares, you now need to buy back your shares as $6 - which is the price off the ask offers on the order book. Because of this spread, you have lost money. You sold at a low price and bought at a high price, meaning it costs you more money to repay your borrowed shares. So, when you are shorting you need the spread to be as tight as possible.",
"title": ""
},
{
"docid": "8b85c5d4437839baccbbc65186d8eb96",
"text": "If you do this, you own a stock worth $1, with a basis of $2. The loss doesn't get realized until the shares are sold. Of course, we hope you see the stock increase above that price, else, why do this?",
"title": ""
},
{
"docid": "2ea51041cbb14ef2276388529ab024ee",
"text": "Simply because forex brokers earn money from the spread that they offer you. Spread is the difference between buyers and sellers. If the buy price is at 1.1000 and the sell price is at 1.1002 then the spread is 2 pips. Now think that this broker is getting spread from its liquidity cheaper (for example 1 pip spread). As you can understand this broker makes a profit of 1 pip for each trade you place... Now multiply 1 pip X huge volume, and then you will understand why most forex brokers don't charge commissions.",
"title": ""
},
{
"docid": "6e6390bc4bd318df463271b969ab2ba9",
"text": "This has never really adequately explained it for me, and I've tried reading up on it all over the place. For a long time I thought that in a trade, the market maker pockets the spread *for that trade*, but that's not the case. The only sensible explanation I've found (which I'm not going to give in full...) is that the market maker will provide liquidity by buying and selling trades they have no actual view on (short or long), and if the spread is higher, that contributes directly to the amount they make over time when they open and close positions they've made. It would be great to see a single definitive example somewhere that shows how a market maker makes money.",
"title": ""
},
{
"docid": "f8ffca6f177412197c30e9a59db75767",
"text": "I did a historical analysis a few years back of all well-known candlestick patterns against my database of 5 years worth of 1-minute resolution data of all FTSE100 shares. There wasn't a single pattern that showed even a 1% gain with 60% reliability. Unfortunately I don't have spread data other than for a handful of days where I recorded live prices rather than minutely summaries, but my suspicion is that most of the time you wouldn't even earn back the spread on such a trade.",
"title": ""
},
{
"docid": "0aa5871a440a2964382aae362de10884",
"text": "\"First, what structure does your index fund have? If it is an open-end mutual fund, there are no bid/ask spread as the structure of this security is that it is priced once a day and transactions are done with that price. If it is an exchange-traded fund, then the question becomes how well are authorized participants taking advantage of the spread to make the fund track the index well? This is where you have to get into the Creation and Redemption unit construct of the exchange-traded fund where there are \"\"in-kind\"\" transactions done to either create new shares of the fund or redeem out shares of the fund. In either case, you are making some serious assumptions about the structure of the fund that don't make sense given how these are built. Index funds have lower expense ratios and are thus cheaper than other mutual funds that may take on more costs. If you want suggested reading on this, look at the investing books of John C. Bogle who studied some of this rather extensively, in addition to being one of the first to create an index fund that became known as \"\"Bogle's Folly,\"\" where a couple of key ones would be \"\"Common Sense on Mutual Funds: New Imperatives for the Intelligent Investor\"\" and \"\"Bogle on Mutual Funds: New Perspectives for the Intelligent Investor.\"\" In the case of an open-end fund, there has to be a portion of the fund in cash to handle transaction costs of running the fund as there are management fees to come from running the fund in addition to dividends from the stocks that have to be carefully re-invested and other matters that make this quite easy to note. Vanguard 500 Index Investor portfolio(VFINX) has .38% in cash as an example here where you could look at any open-end mutual fund's portfolio and notice that there may well be some in cash as part of how the fund is managed. It’s the Execution, Stupid would be one of a few articles that looks at the idea of \"\"tracking error\"\" or how well does an index fund actually track the index where it can be noted that in some cases, there can be a little bit of active management in the fund. Just as a minor side note, when I lived in the US I did invest in index funds and found them to be a good investment. I'd still recommend them though I'd argue that while some want to see these as really simple investments, there can be details that make them quite interesting to my mind. How is its price set then? The price is computed by taking the sum value of all the assets of the fund minus the liabilities and divided by the number of outstanding shares. The price of the assets would include the closing price on the stock rather than a bid or ask, similar pricing for bonds held by the fund, derivatives and cash equivalents. Similarly, the liabilities would be costs a fund has to pay that may not have been paid yet such as management fees, brokerage costs, etc. Is it a weighted average of all the underlying stock spreads, or does it stand on its own and stems from the usual supply & demand laws ? There isn't any spread used in determining the \"\"Net Asset Value\"\" for the fund. The fund prices are determined after the market is closed and so a closing price can be used for stocks. The liabilities could include the costs to run the fund as part of the accounting in the fund, that most items have to come down to either being an asset, something with a positive value, or a liability, something with a negative value. Something to consider also is the size of the fund. With over $7,000,000,000 in assets, a .01% amount is still $700,000 which is quite a large amount in some ways.\"",
"title": ""
},
{
"docid": "8e59a5631dd56e3ef6ee6e5ed64fb044",
"text": "There are several ways that the issuers profit from CFDs. If the broker has trades on both sides (buy and sell) they can net the volumes off against each other and profit off the spread whilst using the posted margins to cover p&l from both sides. Because settlement for most securities is not on the same day that the order is placed they can also buy the security with no intention of taking delivery and simply sell it off at the end of day to pass delivery on to someone else. Here again they profit from the spread and that their volumes give them really low commissions so their costs are much lower than the value of the spread. If they have to do this rather than netting the position out the spreads will be wider. Sometimes that may be forced to buy the security outright but that is rare and the spreads will be even wider so that they can make a decent profit.",
"title": ""
},
{
"docid": "c11fd96f7cb96361369a66de5e534f63",
"text": "The main reason is that you move from the linear payoff structure to a non-linear one. This is called convexity in finance. With options you can design a payoff structure in almost any way to want it to be. For example you can say that you only want the upside but not the downside, so you buy a call option. It is obvious that this comes at a price, the option premium. Or equivalently you buy the underlying and for risk management reasons buy a put option on top of it as an insurance. The price of the put could be seen as the insurance premium. You can of course combine options in more complicated ways so that you e.g. profit as long as the underlying moves strongly enough in either direction. This is called a straddle.",
"title": ""
},
{
"docid": "985975023a13cbcb386766fa4e23c83d",
"text": "See this link...I was also looking an answer to the same questions. This site explains with an example http://www.independent-stock-investing.com/PE-Ratio.html",
"title": ""
},
{
"docid": "3cf92c95663f3b8b22cae34423e103f1",
"text": "Assuming you plan to buy a whole number of shares and have a maximum dollar value you intend to invest, it may be better to wait for the split if the figures don't quite work out nicely. For example, if you are going to invest $1,000 and the stock pre-split is $400 and the split is 2 for 1, then you'd buy 2 shares before the split unless you have an extra $200 to add. Meanwhile, after the split you could buy 5 shares at $200 so that you invest all that you intend. Aside from that case, it doesn't really make a difference since the split is similar to getting 2 nickels for a dime which in each case is still a total value of 10 cents.",
"title": ""
},
{
"docid": "e13f4a4d7d6907b7bab5ecbf0bcd8a2a",
"text": "Actually, total return is the most important which isn't necessarily just price change as this doesn't account for dividends that may be re-invested. Thus, the price change isn't necessarily that useful in terms of knowing what you end up with as an ending balance for an investment. Secondly, the price change itself may be deceptively large as if the stock initial price was low, e.g. a few dollars or less adjusting for stock splits as most big companies will split the stock once the price is high enough, then the percentages can be quite large years later. Something else to consider is the percentage change would be based on what as the initial base. The price at the start of the chart or something else? Carefully consider what you want the initial starting point to be in determining price shifts here as one could take either end and claim a rationale for using it. Most people want to look at the price to get an idea of what would X shares cost to purchase rather than look at the percentage change from day to day.",
"title": ""
},
{
"docid": "9f9560e91a513fd2d65cc22ffd0ef481",
"text": "G spread - you have a 5.5 year bond, you take your yield minus the yield on the 5.5y point (interpolated) of the benchmark sovereign curve. Think of G = Government. I Spread - same as G Spread but you use the relevant Swap Curve. E.g. USD bond, compare against the USD Swaps curve. I = interpolated. Z Spread - stands for zero volatility curve spread. You strip the swaps curve to get zero rates (i.e. Zero coupon rates for each tenor), then find the constant spread on top of each part of the curve's zero rates to arrive at your bond's yield. In G and I Spread, you're basically discounting the bond's cash flows using one rate (i.e. The interpolated yield on the curve). With Z Spread, you're discounting using the entire portion of the curve that's relevant to your bond's maturity.",
"title": ""
},
{
"docid": "50c29401d0ad5c19a05ba7f906e56cbe",
"text": "I was typing up a long response and lost it to a backspace.. so, I apologize but I don't intend on rewriting it all. You'll have to use a method called bootstrapping to get the forward rates. Essentially you're looking at the spot rate today, and the forward rates, then filling in what must be the rate to make them equal out in the end. Sorry I'm not more help!",
"title": ""
},
{
"docid": "690e876a256760bd7a439c63fab5b45f",
"text": "As you probably know, a credit spread involves buying a call (or put) at one strike and selling another call (or put) at another with the same maturity, so you're dealing with two orders. Your broker will likely have to fill this order themselves, meaning that they'll have to look at the existing bid/asks for the different strikes and wait until the difference matches (or exceeds) your limit order. Obviously they can't place limit orders on the legs individually since they can't guarantee that they will both be executed. They also don't care what the individual prices are; they just care what the difference is. It's possible that they have computer systems that examine existing bids and asks that would fill your order, but it's still done by the broker, not the exchange. The exchange never sees your actual limit order; they will just see the market orders placed by your broker.",
"title": ""
},
{
"docid": "8d589182b01015240f2be382c8bbf3cf",
"text": "\"This is a misconception. One of the explanations is that if you buy at the ask price and want to sell it right away, you can only sell at the bid price. This is incorrect. There are no two separate bid and ask prices. The price you buy (your \"\"bid\"\") is the same price someone else sells (their \"\"sell\"\"). The same goes when you sell - the price you sell at is the price someone else buys. There's no spread with stocks. Emphasized it on purpose, because many people (especially those who gamble on stock exchange without knowing what they're doing) don't understand how the stock market works. On the stock exchange, the transaction price is the match between the bid price and the ask price. Thus, on any given transaction, bid always equals ask. There's no spread. There is spread with commodities (if you buy it directly, especially), contracts, mutual funds and other kinds of brokered transactions that go through a third party. The difference (spread) is that third party's fee for assuming part of the risk in the transaction, and is indeed added to your cost (indirectly, in the way you described). These transactions don't go directly between a seller and a buyer. For example, there's no buyer when you redeem some of your mutual fund - the fund pays you money. So the fund assumes certain risk, which is why there's a spread in the prices to invest and to redeem. Similarly with commodities: when you buy a gold bar - you buy it from a dealer, who needs to keep a stock. Thus, the dealer will not buy from you at the same price: there's a premium on sale and a discount on buy, which is a spread, to compensate the dealer for the risk of keeping a stock.\"",
"title": ""
}
] |
fiqa
|
9469766a6c866e6af06797f2f205d9bb
|
Stock Certificate In two names
|
[
{
"docid": "7cde03f97710a3fc905a26ab7193e665",
"text": "The DOW is just an index, which is simply a group of stocks meeting the criteria for inclusion. In the case of the DOW, it's the 30 US stocks with the largest market capitalization, but other indices include many lesser stocks (such as the S&P500 or the Russell 2000). The fact that Holobeam is no longer a constituent of the DOW30 probably shouldn't be taken in and of itself as a signal to sell the stock. As far as I can tell, HOOB stock is still trading on the Nasdaq exchange. However, it is extremely ill-liquid, which means that there are very few people willing to buy or sell it. Whether or not this would work to your advantage is almost entirely down to luck - it depends whether there is a keen buyer out there at the time you try to sell.",
"title": ""
},
{
"docid": "43ebac4a47c1dd39672ccb1576d136ca",
"text": "I'd call it pretty worrisome. HOOB is trading over the counter, in fact, on the pink sheets, so it has been delisted from the major exchanges. It appears that it lacks recent financial disclosures. You'll have to investigate to see if you think it's worth keeping, but trading is thin.",
"title": ""
},
{
"docid": "8f985d79299c6beb32d7fdba5e2368aa",
"text": "\"The common way to frame the \"\"should I sell\"\" question is ask yourself \"\"would you buy it today at the current price\"\". If you wouldn't, sell it. Is sounds like this may be a paper certificate. You will have to research how to present the certificate to a broker to trade it, or if the company has a direct shareholder program. I have periodically been offered to sell \"\"odd lots\"\" to shareholder programs which, if one exists, may be less hassle than other options. As a part of this, your mother's estate administrator should decide if the estate is selling it's interest, or giving it's interest to heirs before the sale.\"",
"title": ""
}
] |
[
{
"docid": "c6c91d59a4fc2f74edce1e2045913676",
"text": "Yes, depending on what you're trying to achieve. If its just a symbolic gift - you can use a service like this. There are several companies providing this service, look them up, but the prices are fairly the same. You'll end up getting a real stock certificate, but it will cost a lot of overhead (around $40 to get the certificate, and then another $40 to deposit it into a brokerage account if you want to sell it on a stock exchange). So although the certificate is real and the person whose name on it is a full-blown shareholder, it doesn't actually have much value (unless you buy a Google or Apple stock, where the price is much much higher than the fees). Take into account that it takes around 2 months for the certificate to be issued and mailed to you, so time accordingly. Otherwise, you can open a custodial brokerage account, and use it to buy stocks for the minor. Both ways are secure and legal, each for its own purpose and with its own fees.",
"title": ""
},
{
"docid": "d1df126b583f8892263974d2baa159ab",
"text": "Possibles: stock offering, secondary placement, increase authorized number of shares, shelf registration.",
"title": ""
},
{
"docid": "ec2cecd148f5a36061685e5c592c6bf3",
"text": "I found the following on a stock to mutual conversion for insurance firms for Ohio. Pulling from that link, Any domestic stock life insurance corporation, incorporated under a general law, may become a mutual life insurance corporation, and to that end may carry out a plan for the acquisition of shares of its capital stock, provided such plan: (A) Has been adopted by a vote of a majority of the directors of such corporation; (B) Has been approved by a vote of stockholders representing a majority of the capital stock then outstanding at a meeting of stockholders called for the purpose; (C) Has been approved by a majority of the policyholders voting at a meeting of policyholders called for the purpose, each of whom is insured in a sum of at least one thousand dollars and whose insurance shall then be in force and shall have been in force for at least one year prior to such meeting. and Any stockholder who has assented to the plan or who has been concluded by the vote of the assenting stockholders, and any stockholder who has objected and made demand in writing for the fair cash value of his shares subsequent to which an agreement has been reached fixing such fair cash value, but who fails to surrender his certificates for cancellation upon payment of the amount to which he is entitled, may be ordered to do so by a decree of the court of common pleas for the county in which the principal office of such corporation is located after notice and hearing in an action instituted by the corporation for that purpose, and such decree may provide that, upon the failure of the stockholder to surrender such certificates for cancellation, the decree shall stand in lieu of such surrender and cancellation. Since they successfully became a mutual insurance company, I would guess that those stocks were acquired back by the company, and are leftover from the conversion. They would not represent an ownership in the company, but might have value to a collector.",
"title": ""
},
{
"docid": "69997fc43a30d7d136f11e2c6cccf3ba",
"text": "Initially, Each company has 10k shares. Company B has $500k money and possibly other assets. Every company has stated purpose. It can't randomly buy shares in some other firm. Company A issued 5k new shares, which gives it $500k money. Listed companies can't make private placements without regulatory approvals. They have to put this in open market via Public issue or rights issue. Company B does the same thing, issuing 5k shares for $500k money. Company A bought those 5k shares using the $500k it just got There is no logical reason for shareholder of Company B to raise 5K from Company A for the said consideration. This would have to increase.",
"title": ""
},
{
"docid": "3bf4513d6e76ed2e63e58c4b9760adbe",
"text": "On NASDAQ the ^ is used to denote other securities and / to denote warrents for the underlying company. Yahoo maybe using some other designators for same.",
"title": ""
},
{
"docid": "297f5c1fde7a5eb34c626fd519b68de3",
"text": "Generally, when I run across this kind of situation, I look for the Investor Relations section of the corporate website for a 'Stock Information' (or similar) tab or link. This usually contains information explaining the different shares classes, how they relate (if at all), voting and/or dividend rights, and taxation differences for the different classes. However, I have trouble finding such a page on a central BYD corporate investor relations page. I did find this page detailing the HK1211 shares: http://www.byd.com/investor/base_information.html. I don't know what or why, but something tells me this is an older page. Searching on, I also found this page which looks newer and clarifies that the difference you are seeing is between 'A' and 'H' shares. http://www.byd.cn/BYDEnglish/basic/article.jsp?articleId=1524676. (I'm guessing but I'd think somewhere in the announcements on this byd.cn site, you may find more details of any structural differences between share classes -- I just didn't want to page through them all.)",
"title": ""
},
{
"docid": "99d8dbc7258bcc02dbd72eb71e62cbbe",
"text": "There isn't a single universal way to reference a stock, there are 4 major identifiers with many different flavours of exchange ticker (see xkcd:Standards) I believe CUSIPs and ISINs represent a specific security rather than a specific listed instrument. This means you can have two listed instruments with one ISIN but different SEDOLs because they are listed in different places. The difference is subtle but causes problems with settlement Specifically on your question (sorry I got sidetracked) take a look at CQS Symbol convention to see what everything means",
"title": ""
},
{
"docid": "d3800d99e7cae7e87075b3ade9f720e1",
"text": "\"Yes you can. One additional \"\"advantage\"\" of getting the physical certificate is you can use it to transfer your account from one brokerage to another. You get the certificates in the mail and then just send them to the new broker. Why anyone would want to go through this extra work (and usually added expense) rather than a direct transfer is beyond me but it is one additional \"\"advantage\"\" of physical certificates.\"",
"title": ""
},
{
"docid": "5b9bddfbc13053744ab668020e549954",
"text": "Yes that is the case for the public company approach, but I was referring to the transaction approach: Firm A and Firm B both have $100 in EBITDA. Firm A has $50 in cash, Firm B has $100 in cash. Firm A sells for $500, Firm B sells for $600. If we didn't subtract cash before calculating the multiple: Firm A: 5x Firm B: 6x If we DO subtract cash before calculating the multiple: Firm A: 4.5x Firm B: 5x So yea, subtracting cash does skew the multiple.",
"title": ""
},
{
"docid": "ff877f1b75ec383bd26eeb7c552b25cd",
"text": "Yes, this can and does certainly happen. When two companies each own stock in each other, it's called a cross holding. I learned about cross holdings in reference to Japanese companies (see Wikipedia - Keiretsu) but the phenomenon is certainly not exclusive to that jurisdiction. Here are a few additional references:",
"title": ""
},
{
"docid": "0c9e754e3769d7ad1a16dbc3e6c90ba5",
"text": "It seems like you want to compare the company's values not necessarily the stock price. Why not get the total outstanding shares and the stock price, generate the market cap. Then you could compare changes to market cap rather than just share price.",
"title": ""
},
{
"docid": "e6c723d9270816257b82bf1b4ecf93d7",
"text": "\"If I buy the one from NSY, is it the \"\"real\"\" Sinopec? No - you are buying an American Depository Receipt. Essentially some American bank or other entity holds a bunch of Sinopec stock and issues certificates to the American exchange that American investors can trade. This insulates the American investors from the cost of international transactions. The price of these ADRs should mimic the price of the underlying stock (including changes the currency exchange rate) otherwise an arbitrage opportunity would exist. Other than that, the main difference between holding the ADR and the actual stock is that ADRs do not have voting rights. So if that is not important to you then for all intents and purposes trading the ADR would be the same as trading the underlying stock.\"",
"title": ""
},
{
"docid": "8912f02ac787a6e6f08a83f0916b5ded",
"text": "authorized 100,000,000 shares They cannot issue shares more than that so 102M isn't possible. Common stock - $.01 par value, authorized 100,000,000 shares, issued 51,970,721 and 51,575,743 shares If you look at the right 2 columns it become clear what it means. You missed the $ symbol and on the top (In thousands, except share amounts) ouststanding share 51,970,721 -> 520 On Sept 30, 2014 outstanding shares * 0.01 and rounded off to arrive at 520. ouststanding share 51,575,743 -> 516 On June 30, 2014 outstanding shares * 0.01 and rounded off to arrive at 516.",
"title": ""
},
{
"docid": "10ab38de2067dd00c2d7de765196fcd2",
"text": "There is a company that will sell you single paper shares of stock for many companies and handle framing. But you pay a large premium over the stock price. Disney stopped doing paper share certificates a while ago, but you should be able to buy some of the old ones on eBay if you want.",
"title": ""
},
{
"docid": "4d6f7aaab66362044861af30f6dad102",
"text": "I find the reg, at last. https://www.sec.gov/cgi-bin/browse-edgar?company=Cornerstone+Strategic+Value+Fund&owner=exclude&action=getcompany Yes, its a common stock.",
"title": ""
}
] |
fiqa
|
2ae778312bb149aaf8a075a138f78fd2
|
Risk of buying stock
|
[
{
"docid": "86ff6579e63cd4a148ef9b2ffddcda77",
"text": "I'd recommend investing in a mutual fund that diversifies your purchase across a number of stocks (and bonds, depending on the fund). Vanguard has some of the lowest fees around, and have a large number of funds to choose from. Take a look at their offerings for a data point if nothing else.",
"title": ""
},
{
"docid": "7b8ed905b9c569a0a2ae420c5f9b1496",
"text": "If you buy stock in established companies, it is vey unlikely that they will lose all their value. Spreading your money across multiple stocks -- diversifying -- reduces that risk because it is extremely unlikely that they all lose all their value at once. Spreading them across multiple industries and adding bonds to the mix increases diversification. Of course the trade-off is that if one of the stocks skyrockets you don't benefit as much as if you had been lucky enough to put all your money in that one stock. You need to decide for yourself how much risk you are willing to tolerate in exchange for the chance of gains. Other answers on this site have dealt with this in more detail.",
"title": ""
},
{
"docid": "7da0708a8b135ad64f3f50ce0300ce98",
"text": "When you buy shares, you are literally buying a share of the company. You become a part-owner of it. Companies are not required to pay dividends in any given year. It's up to them to decide each year how much to pay out. The value of the shares goes up and down depending on how much the markets consider the company is worth. If the company is successful, the price of the shares goes up. If it's unsuccessful, the price goes down. You have no control over that. If the company fails completely and goes bankrupt, then the shares are worthless. Dilution is where the company decides to sell more shares. If they are being sold at market value, then you haven't really lost anything. But if they are sold below cost (perhaps as an incentive to certain staff), then the value of the company per share is now less. So your shares may be worth a bit less than they were. You would get to vote at the AGM on such schemes. But unless you own a significant proportion of the shares in the company, your vote will probably make no difference. In practice, you can't protect yourself. Buying shares is a gamble. All you can do is decide what to gamble on.",
"title": ""
}
] |
[
{
"docid": "b65bae7fed9652724ef5ee2590cb7cf7",
"text": "This is a very good question! The biggest difference is that when you put money in a savings bank you are a lender that is protected by the government, and when you buy stocks you become an owner. As a lender, whether the bank makes or loses money on the loans it makes, they still maintain your balance and pay you interest, and your principal balance is guaranteed by the government (in the USA). The bank is the party that is primarily at risk if their business does not perform well. As an owner, you participate fully in the company's gains and losses, but you also put your money at risk, since if the company loses money, you do too. Because of this, many people prefer to buy funds made up of many stocks, so they are not at risk of one company performing very poorly or going bankrupt. When you buy stock you become a part owner and share in the profitability of the company, often through a dividend. You should also be aware that stocks often have years where they do very poorly as well as years when they do very well. However, over a long period of time (10 years or more), they have historically done better in outpacing inflation than any other type of investment. For this reason, I would recommend that you only invest in the stock market if you expect to be able to leave the money there for 10 years or more, ideally, and for 5 years at the very least. Otherwise, you may need to take the money out at a bad time. I would also recommend that you only invest in stocks if you already have an emergency fund, and don't have consumer debt. There isn't much point in putting your money at risk to get a return if you can get a risk-free return by paying off debt, or if you would have to pull your money back out if your car broke down or you lost your job.",
"title": ""
},
{
"docid": "9e36f460efbde449926cc80af6cefe0a",
"text": "Say I am an employee of Facebook and I will be able to sell stares at enough of a profit to pay of my mortgage and have enough money left to cover my living costs for many years. I also believe that there is a 95% chance that the stock price will go up in the next few years. Do I take a 5% risk, when I can transform my life without taking any risk? (The USA tax system as explained by JoeTaxpayer increases the risk.) So you have a person being very logical and selling stocks that they believe will go up in value by more than any other investment they could have. It is called risk control. (Lot of people will know the above; therefore some people will delay buying stock until Lock Up expiration day hoping the price will be lower on that day. So the price may not go down.)",
"title": ""
},
{
"docid": "5f505ea025ad3b724d57c8c6297ce71a",
"text": "When you buy a stock, the worst case scenario is that it drops to 0. Therefore, the most you can lose when buying a stock is 100% of your investment. When you short a stock, however, there's no limit on how high the stock can go. If you short a stock at 10, and it goes up to 30, then you've lost 200% on your investment. Therefore shorting stocks is riskier than buying stocks, since you can lose more than 100% of your investment when shorting. because the price might go up, but it will never be as big of a change as a regular price drop i suppose... That is not true. Stocks can sometimes go up significantly (50-100% or more) in a very short amount of time on a positive news release (such as an earnings or a buyout announcement). A famous example occurred in 2008, when Volkswagen stock quintupled (went up 400%) in less than 2 days on some corporate news: Porsche, for some reason, wants to control Volkswagen, and by building up its stake has driven up the price. Hedge funds, figuring the share price would fall as soon as Porsche got control and stopped buying, sold a lot of VW shares short. Then last weekend, Porsche disclosed that it owned 42.6 percent of the stock and had acquired options for another 31.5 percent. It said it wanted to go to 75 percent. The result: instant short-squeeze. The German state of Lower Saxony owns a 20 percent stake in VW, which it said it would not sell. That left precious few shares available for anyone else. The shorts scrambled to cover, and the price leaped from about €200, or about $265, to above €1,000.",
"title": ""
},
{
"docid": "f24297fb61becba24d76ac71c8ec800e",
"text": "\"This is an old post I feel requires some more love for completeness. Though several responses have mentioned the inherent risks that currency speculation, leverage, and frequent trading of stocks or currencies bring about, more information, and possibly a combination of answers, is necessary to fully answer this question. My answer should probably not be the answer, just some additional information to help aid your (and others') decision(s). Firstly, as a retail investor, don't trade forex. Period. Major currency pairs arguably make up the most efficient market in the world, and as a layman, that puts you at a severe disadvantage. You mentioned you were a student—since you have something else to do other than trade currencies, implicitly you cannot spend all of your time researching, monitoring, and investigating the various (infinite) drivers of currency return. Since major financial institutions such as banks, broker-dealers, hedge-funds, brokerages, inter-dealer-brokers, mutual funds, ETF companies, etc..., do have highly intelligent people researching, monitoring, and investigating the various drivers of currency return at all times, you're unlikely to win against the opposing trader. Not impossible to win, just improbable; over time, that probability will rob you clean. Secondly, investing in individual businesses can be a worthwhile endeavor and, especially as a young student, one that could pay dividends (pun intended!) for a very long time. That being said, what I mentioned above also holds true for many large-capitalization equities—there are thousands, maybe millions, of very intelligent people who do nothing other than research a few individual stocks and are often paid quite handsomely to do so. As with forex, you will often be at a severe informational disadvantage when trading. So, view any purchase of a stock as a very long-term commitment—at least five years. And if you're going to invest in a stock, you must review the company's financial history—that means poring through 10-K/Q for several years (I typically examine a minimum ten years of financial statements) and reading the notes to the financial statements. Read the yearly MD&A (quarterly is usually too volatile to be useful for long term investors) – management discussion and analysis – but remember, management pays themselves with your money. I assure you: management will always place a cherry on top, even if that cherry does not exist. If you are a shareholder, any expense the company pays is partially an expense of yours—never forget that no matter how small a position, you have partial ownership of the business in which you're invested. Thirdly, I need to address the stark contrast and often (but not always!) deep conflict between the concepts of investment and speculation. According to Seth Klarman, written on page 21 in his famous Margin of Safety, \"\"both investments and speculations can be bought and sold. Both typically fluctuate in price and can thus appear to generate investment returns. But there is one critical difference: investments throw off cash flow for the benefit of the owners; speculations do not. The return to the owners of speculations depends exclusively on the vagaries of the resale market.\"\" This seems simple and it is; but do not underestimate the profound distinction Mr. Klarman makes here. (and ask yourself—will forex pay you cash flows while you have a position on?) A simple litmus test prior to purchasing a stock might help to differentiate between investment and speculation: at what price are you willing to sell, and why? I typically require the answer to be at least 50% higher than the current salable price (so that I have a margin of safety) and that I will never sell unless there is a material operating change, accounting fraud, or more generally, regime change within the industry in which my company operates. Furthermore, I then research what types of operating changes will alter my opinion and how severe they need to be prior to a liquidation. I then write this in a journal to keep myself honest. This is the personal aspect to investing, the kind of thing you learn only by doing yourself—and it takes a lifetime to master. You can try various methodologies (there are tons of books) but overall just be cautious. Money lost does not return on its own. I've just scratched the surface of a 200,000 page investing book you need to read if you'd like to do this professionally or as a hobbyist. If this seems like too much or you want to wait until you've more time to research, consider index investing strategies (I won't delve into these here). And because I'm an investment professional: please do not interpret anything you've read here as personal advice or as a solicitation to buy or sell any securities or types of securities, whatsoever. This has been provided for general informational purposes only. Contact a financial advisor to review your personal circumstances such as time horizon, risk tolerance, liquidity needs, and asset allocation strategies. Again, nothing written herein should be construed as individual advice.\"",
"title": ""
},
{
"docid": "661faa4d48f96d63ec1a4467fefc9842",
"text": "The catch is that you're doing a form of leveraged investing. In other words, you're gambling on the stock market using money that you've borrowed. While it's not as dangerous as say, getting money from a loan shark to play blackjack in Vegas, there is always the chance that markets can collapse and your investment's value will drop rapidly. The amount of risk really depends on what specific investments you choose and how diversified they are - if you buy only Canadian stocks then you're at risk of losing a lot if something happened to our economy. But if your Canadian equities only amount to 3.6% of your total (which is Canada's share of the world market), and you're holding stocks in many different countries then the diversification will reduce your overall risk. The reason I mention that is because many people using the Smith Maneuver are only buying Canadian high-yield dividend stocks, so that they can use the dividends to accelerate the Smith Maneuver process (use the dividends to pay down the mortgage, then borrow more and invest it). They prefer Canadian equities because of preferential tax treatment of the dividend income (in non-registered accounts). But if something happened to those Canadian companies, they stand to lose much of the investment value and suddenly they have the extra debt (the amount borrowed from a HELOC, or from a re-advanceable mortgage) without enough value in the investments to offset it. This could mean that they will not be able to pay off the mortgage by the time they retire!",
"title": ""
},
{
"docid": "b7b84c856eb772803ebfa337eef126f3",
"text": "\"Yes, you're still exposed to currency risk when you purchase the stock on company B's exchange. I'm assuming you're buying the shares on B's stock exchange through an ADR, GDR, or similar instrument. The risk occurs as a result of the process through which the ADR is created. In its simplest form, the process works like this: I'll illustrate this with an example. I've separated the conversion rate into the exchange rate and a generic \"\"ADR conversion rate\"\" which includes all other factors the bank takes into account when deciding how many ADR shares to sell. The fact that the units line up is a nice check to make sure the calculation is logically correct. My example starts with these assumptions: I made up the generic ADR conversion rate; it will remain constant throughout this example. This is the simplified version of the calculation of the ADR share price from the European share price: Let's assume that the euro appreciates against the US dollar, and is now worth 1.4 USD (this is a major appreciation, but it makes a good example): The currency appreciation alone raised the share price of the ADR, even though the price of the share on the European exchange was unchanged. Now let's look at what happens if the euro appreciates further to 1.5 USD/EUR, but the company's share price on the European exchange falls: Even though the euro appreciated, the decline in the share price on the European exchange offset the currency risk in this case, leaving the ADR's share price on the US exchange unchanged. Finally, what happens if the euro experiences a major depreciation and the company's share price decreases significantly in the European market? This is a realistic situation that has occurred several times during the European sovereign debt crisis. Assuming this occurred immediately after the first example, European shareholders in the company experienced a (43.50 - 50) / 50 = -13% return, but American holders of the ADR experienced a (15.95 - 21.5093) / 21.5093 = -25.9% return. The currency shock was the primary cause of this magnified loss. Another point to keep in mind is that the foreign company itself may be exposed to currency risk if it conducts a lot of business in market with different currencies. Ideally the company has hedged against this, but if you invest in a foreign company through an ADR (or a GDR or another similar instrument), you may take on whatever risk the company hasn't hedged in addition to the currency risk that's present in the ADR/GDR conversion process. Here are a few articles that discuss currency risk specifically in the context of ADR's: (1), (2). Nestle, a Swiss company that is traded on US exchanges through an ADR, even addresses this issue in their FAQ for investors. There are other risks associated with instruments like ADR's and cross-listed companies, but normally arbitrageurs will remove these discontinuities quickly. Especially for cross-listed companies, this should keep the prices of highly liquid securities relatively synchronized.\"",
"title": ""
},
{
"docid": "90bdd7f66a5eab95999751e639d22c58",
"text": "It's important to distinguish between speculation and investing. Buying something because you hope to make money on market fluctuations is speculation. Buying something and expecting to make money because your money is providing actual economic value is investing. If Person A buys 100 shares of a stock with the intent of selling them in a few hours, and Person B buys 100 shares of the same stock with the intent of holding on to it for a year, then obviously at that point they both have the same risk. The difference comes over the course of the year. First, Person B is going to be making money from the economic value the company provides over the whole year, while the only way Person A can make money is from market fluctuation (the economic value the company provides over the course of an hour is unlikely to be significant). Person B is exposed to the risk of buying the stock, but that's counterbalanced by the profit from holding the stock for a year, while Person A just has the risk. Second, if Person A is buying a new stock every hour, then they're going to have thousands of transactions. So even though Person B assumed just as much risk as Person A for that one transaction, Person A has more total risk.",
"title": ""
},
{
"docid": "60c9eac57d227944f7dd9dfc37899a80",
"text": "\"First, to mention one thing - better analysis calls for analyzing a range of outcomes, not just one; assigning a probability on each, and comparing the expected values. Then moderating the choice based on risk tolerance. But now, just look at the outcome or scenario of 3% and time frame of 2 days. Let's assume your investable capital is exactly $1000 (multiply everything by 5 for $5,000, etc.). A. Buy stock: the value goes to 103; your investment goes to $1030; net return is $30, minus let's say $20 commission (you should compare these between brokers; I use one that charges 9.99 plus a trivial government fee). B. Buy an call option at 100 for $0.40 per share, with an expiration 30 days away (December 23). This is a more complicated. To evaluate this, you need to estimate the movement of the value of a 100 call, $0 in and out of the money, 30 days remaining, to the value of a 100 call, $3 in the money, 28 days remaining. That movement will vary based on the volatility of the underlying stock, an advanced topic; but there are techniques to estimate that, which become simple to use after you get the hang of it. At any rate, let's say that the expected movement of the option price in this scenario is from $0.40 to $3.20. Since you bought 2500 share options for $1000, the gain would be 2500 times 2.8 = 7000. C. Buy an call option at 102 for $0.125 per share, with an expiration 30 days away (December 23). To evaluate this, you need to estimate the movement of the value of a 102 call, $2 out of the money, 30 days remaining, to the value of a 102 call, $1 in the money, 28 days remaining. That movement will vary based on the volatility of the underlying stock, an advanced topic; but there are techniques to estimate that, which become simple to use after you get the hang of it. At any rate, let's say that the expected movement of the option price in this scenario is from $0.125 to $ 1.50. Since you bought 8000 share options for $1000, the gain would be 8000 times 1.375 = 11000. D. Same thing but starting with a 98 call. E. Same thing but starting with a 101 call expiring 60 days out. F., ... Etc. - other option choices. Again, getting the numbers right for the above is an advanced topic, one reason why brokerages warn you that options are risky (if you do your math wrong, you can lose. Even doing that math right, with a bad outcome, loses). Anyway you need to \"\"score\"\" as many options as needed to find the optimal point. But back to the first paragraph, you should then run the whole analysis on a 2% gain. Or 5%. Or 5% in 4 days instead of 2 days. Do as many as are fruitful. Assess likelihoods. Then pull the trigger and buy it. Try these techniques in simulation before diving in! Please! One last point, you don't HAVE to understand how to evaluate projected option price movements if you have software that does that for you. I'll punt on that process, except to mention it. Get the general idea? Edit P.S. I forgot to mention that brokers need love for handling Options too. Check those commission rates in your analysis as well.\"",
"title": ""
},
{
"docid": "7216604d3f8715b51196cd358b2b6426",
"text": "\"JoeTaxpayer's answer adequately explained leverage and some of your risks. Your risks also include: The firm's risk is that you will figure out a way to leave them with a negative account that contributes to another customer's profit and yet you disappear in a way that makes the negative account impossible to collect. Another risk is that you are not who you say you are, or that the money you invest is not yours. These are called \"\"know your customer\"\" risks.\"",
"title": ""
},
{
"docid": "d251b12843b918fca40d78875369fc1a",
"text": "Risks:",
"title": ""
},
{
"docid": "cfe07a5e0fcc828bbcbcfe452ecd4d1b",
"text": "The risk situation of the put option is the same whether you own the stock or not. You risk $5 and stand to gain 0 to $250 in the period before expiration (say $50 if the stock reaches $200 and you sell). Holding the stock or not changes nothing about that. What is different is the consideration as to whether or not to buy a put when you own the stock. Without an option, you are holding a $250 asset (the stock), and risking that money. Should you sell and miss opportunity for say $300? Or hold and risk loss of say $50 of your $250? So you have $250 at risk, but can lock in a sale price of $245 for say a month by buying a put, giving you opportunity for the $300 price in that month. You're turning a risk of losing $250 (or maybe only $50 more realistically) into a risk of losing only $5 (versus the price your stock would get today).",
"title": ""
},
{
"docid": "738f4f01cacfac6815ef39b5068ee1ea",
"text": "I don't know too much about the kelly criterion, but going by the other answers it sounds like it could be quite risky depending how you use it. I have been taught the first thing you do in trading is protect your existing capital and any profits you have made, and for this reason I prefer and use Position Sizing (PS). The concept with PS is that you only risk a small % of your capital on every trade, usually not more than 1%, however if you want to be very aggressive then not more than 2%. I use 1% of my capital for every trade. So if you are trading with an account of $40,000 and your risk R on every trade is 1%, then R = $400. As an example, say you decide to buy a stock at $10 and you work out your initial stop to be at $9.50, then our maximum risk R of $400 is divided by the stop distance of $0.50 to get your PS = $400/$0.50 = 800 shares. If the price then drops after your purchase, your maximum loss (subject to no slippage) would be $400. If the price moves up you would raise your stop until your potential loss becomes smaller and smaller and then becomes a gain once your stop moves above your initial purchase price. The aim is to make your gains be larger than your losses. So if your average loss is kept to 1R or less then you should aim to get your average gains to 2R, 3R or more. This would be considered a good trading system where you will make regular profits even with a win ratio of 50%.",
"title": ""
},
{
"docid": "0c8c18e08c9bce38d5731ba6c59f07bc",
"text": "\"Diversification tends to protect you from big losses. But it also tends to \"\"protect\"\" you from big gains. In any industry, some companies provide good products and services and prosper while others have problems and fail. (Or maybe the winners are just lucky or they paid off the right politicians, whatever, not the point here.) If you put all your money in one stock and they do well, you could make a bundle. But if you pick a loser, you could lose your entire investment. If you buy a little stock in each of many companies, then some will go up and some will go down, and your returns will be an average of how everyone in the industry is doing. Suppose I offered to bet you a large sum of money that if I roll a die, it will come up 6. You might be reluctant to take that bet, because you can't predict what number will come up on one roll of a die. But suppose I offered to bet you a large sum of money that a die will come up 6, 100 times in a row. You might well take that bet, because the chance that it will turn up 6 time after time after time is very low. You reduce risk by spreading your bets. Anyone who's bought stock has surely had times when he said, \"\"Oh man! If only I'd bought X ten years ago I'd be a millionaire now!\"\" But quite a few have also said, \"\"If only I'd sold X ten years ago I wouldn't have lost all this money!\"\" I recently bought a stock a stock that within a few months rose to 10 times what I paid for it ... and then a few months later the company went bankrupt and the stock was worth nothing. I knew the company was on a roller coaster when I bought the stock, I was gambling that they'd pull through and I'd make money. I guessed wrong. Fortunately I gambled an amount that I was willing to lose.\"",
"title": ""
},
{
"docid": "766ba9a0a0e7c1d6325b6344da388fe8",
"text": "If you buy a stock and it goes up, you can sell it and make money. But if you buy a stock and it goes down, you can lose money.",
"title": ""
},
{
"docid": "2060ae87bb14779c9e19c81ca9df9be6",
"text": "Unless you are buying millions of dollars worth of a stock at a time, your transaction is a drop in the bucket, unlikely to have any noticable effect on the stock price. As Ian says, it's more likely that you are just remembering the times when the price dropped after you bought. If you keep careful track, I suspect you will find that the price goes up more often than it goes down, or at least, that the stocks you buy go up as often as the average stock on the market goes up. If you actually kept records and found that's not true, the most likely explanation is bad luck. Or that someone has placed a voodoo curse on you. I suppose one could imagine other scenarios. Like, if you regularly buy stock based on recommendations by well-known market pundits, you could expect to see a temporary increase in price as thousands or millions of people who hear this recommendation rush to buy, and then a few days or weeks later people move on to the next recommendation, the market setttles down, and the price reverts to a more normal level. In that case, if you're on the tail end of the buying rush, you could end up paying a premium. I'm just speculating here, I haven't done a study to find if this actually happens, but it sounds plausible to me.",
"title": ""
}
] |
fiqa
|
60348e9fa48cd808bbfe98a282c34b2e
|
Can paying down a mortgage be considered an “investment”?
|
[
{
"docid": "b2f64b01661f14f9e1080f97219715e8",
"text": "I think it is just semantics, but this example demonstrates what they mean by that: If you put $100 in a CD today, it will grow and you will be able to take out a greater amount plus the original principal at a later time. If you put $100 extra on your house payment today, you may save some money in the long run, but you won't have an asset that you wouldn't otherwise have at the end of the term that you can draw on without selling the property. But of course, you can't live on the street, so you need another house. So ultimately you can't easily realize the investment. If you get super technical, you could probably rationalize it as an investment, just like you could call clipping coupons investing, but it all comes down to what your financial goals are. What the advisers are trying to tell you is that you shouldn't consider paying down your mortgage early as an acceptable substitute for socking away some money for retirement or other future expenses. House payments for a house you live in should be considered expenses, in my opinion. So my view is that paying off a note early is just a way of cutting expenses.",
"title": ""
},
{
"docid": "67743b26348dc72f16ff444884f2996d",
"text": "Paying down your mortgage saves lots of interest. With a long term mortgage you end up paying twice us much to the bank than the sales price of the house. Even low mortgage interests are higher than short term bonds. The saving of those interest are as much an investment as the interest you get from a bond. However, before paying off a mortgage other higher interest loans should be paid off. Also it should be considered if the mortgage interest create a tax reduction in the comparison with any other options.",
"title": ""
},
{
"docid": "1e6372bb007a7316716de34aa3fe6a50",
"text": "Your mortgage represents a negative cash flow of $X for N months. The typical mortgage prepayment doesn't reduce your next payment, but does reduce the length of the mortgage. If you look at the amortization table of a 30 year loan, you might see a payment of $1000 but only $50 going to principal. So if on day one you send an extra $51 or so to the bank, you find that in 30 years you just saved that $1000 payment. In effect, it was a long term bond or CD, yielding the post tax rate of the mortgage. Say your loan were 7%. At 7%, money doubles every 10 years or so. 30 years is 3 doubles or 8X. If I were to offer you $1000 and ask for $7500 in 30 years, you might accept it, with an agreement to buy me out if you refinanced. For me, that would be an investment. Just like buying a bond. In fact, there is a real return, as you see the cash flow at the end. The payments 'not made' are your payback. Those who insist it's not an investment are correct in the strict sense of the word's definition, but pedantic for the fact in practice, the prepayment is a choice to be considered alongside other investment choices. When I have a mortgage, I am the mortgagor, the bank, the mortgagee. Same as a company issuing a bond, the Bank holds my bond and I'm making payments to them. They hold my bond as an investment. There is no question of that. In fact, they package these and sell them as CMOs, groups of mortgages. A pre-payment is me buying back the last coupon on my mortgage. I fail to see the distinction between me 'buying back' $10K in future coupons on my own loan or me investing $10K in someone else's loans. The real question for me is whether this makes sense when rates are so low. At 4%, I'd say it's a matter of prioritizing any high rate debt and any other investments that might yield more. But even so, it's an investment yielding 4%. Over the years, I've developed the priorities of where to put new money - The priorities are debatable. I have my opinion, and my reasons to back them up. In general, it's a balance between risk and return. In my opinion, there's something wrong with ignoring a dollar for dollar match on the 401(k) in most circumstances. Others seem to prefer being 100% debt free before saving at all. There's a balance that might be different for each individual. As I started, the mortgage is a fixed return, with no chance to just get it back if needed. If your cash savings is pretty high, and the choice is a .001% CD or prepay a 4% mortgage, I'd use some funds to pay it down. But not to the point you have no liquid reserves.",
"title": ""
},
{
"docid": "9248076f224bf912dd249edaccb5dffc",
"text": "Let's start from the premise that the mortgage is something you will have anyway because you need it to live (as opposed to say getting a bigger mortgage initially in the expectation of paying it down faster than scheduled). In that case I think paying down a mortgage certainly is an investment; one with a well-defined interest rate and maturity that depends on the precise terms of the mortgage. For example I have a (UK) mortgage that's fixed for the next two years at about 5%, and allows overpayments of £500 per month, which can be withdrawn at any time. So I treat those overpayments as equivalent to savings with quite a nice interest rate, especially since mortgage interest isn't tax deductible and so I actually get the full benefit of that interest rate.",
"title": ""
},
{
"docid": "699785d1cb3f24db24145681487e024e",
"text": "\"From what I've read, paying down your mortgage -- above and beyond what you'd normally pay -- is indeed an investment but a very poor form of investment. In other words, you could take that extra money you'd apply towards your mortgage and put it in something that has a much higher rate of return than a house. As an extreme example, consider: if I took $6k extra I would have paid toward my mortgage in a single year, and bought a nice performing stock, I could see returns of 2x or 3x. Now, that implies I know which stock to pick, etcetera.. I found a \"\"mortgage or investment\"\" calculator which could be of use as well: http://www.planningtips.com/cgi-bin/prepay_v_invest.pl (scroll to bottom to see the summary and whether or not prepay or invest wins for the numbers you plugged in)\"",
"title": ""
},
{
"docid": "25fc3e20df1b7c116a2912db82641b70",
"text": "\"If by \"\"investment\"\" you mean something that pays you money that you can spend, then no. But if you view \"\"investment\"\" as something that improves your balance sheet / net worth by reducing debt and reducing how much money you're throwing away in interest each month, then the answer is definitely yes, paying down debt is a good investment to improve your overall financial condition. However, your home mortgage might not be the first place to start looking for pay-downs to save money. Credit cards typically have much higher interest rates than mortgages, so you would save more money by working on eliminating your credit card debt first. I believe Suze Orman said something like: If you found an investment that paid you 25% interest, would you take it? Of course you would! Paying down high interest debt reduces the amount of interest you have to pay next month. Your same amount of income will be able to go farther, do more because you'll be paying less in interest. Pay off your credit card debt first (and keep it off), then pay down your mortgage. A few hundred dollars in extra principal paid in the first few years of a 30 year mortgage can remove years of interest payments from the mortgage term. Whether you plan to keep your home for decades or you plan to move in 10 years, having less debt puts you in a stronger financial position.\"",
"title": ""
},
{
"docid": "2139d24685a800e9d6c9b24094764ec4",
"text": "I think there are a few facets to this, namely: Overall, I wouldn't concentrate on paying off the house if I didn't have any other money parked and invested, but I'd still try to get rid of the mortgage ASAP as it'll give you more money that you can invest, too. At the end of the day, if you save out paying $20k in interest, that's almost $20k you can invest. Yes, I realise there's a time component to this as well and you might well get a better return overall if you invested the $20k now that in 5 years' time. But I'd still rather pay off the house.",
"title": ""
},
{
"docid": "927156ceebd0a9e555a0b778082af7a4",
"text": "Something you invest in has the ability to grow in value. So examples of investments would be buying stocks, bonds, currencies, commodities. Buying your house or a piece of real estate can be considered an investment because the house/property will hopefully be worth more as time passes. So the act of paying down a mortgage really isn't an investment.",
"title": ""
},
{
"docid": "ea3ea3129f15b84ea28c22db042b4d55",
"text": "\"It very much comes down to question of semantics and your particular situation. Some people do not view a house (and most upgrades) as an investment, but rather an expense. I certainly agree that this is probably the case if you pay someone else to make the repairs and upgrades. However, if you are a serious DIYer, that may not be the case. Of course, if the house is a money pit and/or you were unfortunate to buy when prices where ridiculously high, you'll have a hard time making any money on this \"\"investment.\"\" To continue this game of semantics, you may also consider the value you extract from your home while you are living in it. On to the mortgage itself. Chances are that it is a long term, relatively low rate loan and that the interest is deductible. So, there are some disadvantages to paying it down early, even without early payment penalties. Paying down early on the principal is a disadvantage from a tax perspective. How much of a disadvantage hinges on the rate. Now, a debt is a liability on your personal balance sheet. It drags down any returns you may have from investing. However, a home lone is not generally subject to the cardinal rule of paying off your high interest debt before investing. It should not be relatively high and it pays for something necessary. It may be that any credit card debt you have may have paid for something considered necessary. However, with the relatively high interest rates, you have to question just how necessary any credit card debt really is. Not to mention that there is no tax advantage. So, it comes down to the fact that a home loan should be relatively low interest, paying for something you must have and that you hopefully have some tax advantage from the interest you pay on it.\"",
"title": ""
},
{
"docid": "559bcb23af398eac7d3065409eed3ab5",
"text": "If your mortgage interest is tax-deductible, it's generally a bad idea to pay down the principal on the mortgage because you'd be losing the tax deduction. You could instead invest it in a tax-free municipal bond fund, especially if you're in a high tax bracket (including state and local marginal tax rates). For example, if you have a 5% rate mortgage on your home, you could invest in a 3.5% municipal bond and still come out ahead when you apply the tax deduction to your income at a 44% (33% federal + 7% state + 4% city in NYC) marginal tax rate.",
"title": ""
}
] |
[
{
"docid": "613922ad4af2b6f8dad0417ea4fd4d0c",
"text": "The common opinion is an oversimplification at best. The problem with buying a house using cash is that it may leave you cash-poor, forcing you to take out a home equity loan at some point... which may be at a higher rate than the mortgage would have been. On the other hand, knowing that you have no obligation to a lender is quite nice, and many folks prefer eliminating that source of stress. IF you can get a mortgage at a sufficiently low rate, using it to leverage an investment is not a bad strategy. Average historical return on the stock market is around 8%, so any mortgage rate lower than that is a relatively good bet and a rate MUCH lower (as now) is that much better a bet. There is, of course, some risk involved and the obligation to make mortgage payments, and your actual return is reduced by what you're paying on the mortage... but it's still a pretty good deal. As far as investment vehicles: The same answers apply as always. You want a rate of return higher than what you're paying on the mortgage, preferably market rate of return or better. CDs won't do it, as you've found. You're going to have to increase the risk to increase the return. That does mean picking and maintaining a diversified balance of investments and investment types. Working with index funds makes diversifying within a type easy, but you're probably going to want both stocks and bonds, rebalancing between them when they drift too far from your desired mix. My own investments are a specific mix with one each of bond fund, large cap fund, small cap fund, REIT, and international fund. Bonds are the biggest part of that, since they're lowest risk, but the others play a greater part in producing returns on the investments. The exact mix that would be optimal for you depends on your risk tolerance (I'm classified as a moderately aggressive investor), the time horizon you're looking at before you may be forced to pull money back out of the investments, and some matters of personal taste. I've been averaging about 10%, but I had the luxury of being able to ride out the depression and indeed invest during it. Against that, my mortgage is under 4% interest rate, and is for less than 80% of the purchase price so I didn't need to pay the surcharge for mortgage insurance. In fact, I borrowed only half the cost of the house and paid the rest in cash, specifically because leveraging does involve some risk and this was the level of risk I was comfortable with. I also set the duration of the loan so it will be paid off at about the same time I expect to retire. Again, that's very much a personal judgement. If you need specific advice, it's worth finding a financial counselor and having them help you run the numbers. Do NOT go with someone associated with an investment house; they're going to be biased toward whatever produces the most income for them. Select someone who is strictly an advisor; they may cost you a bit more but they're more likely to give you useful advice. Don't take my word for any of this. I know enough to know how little I know. But hopefully I've given you some insight into what the issues are and what questions you need to ask, and answer, before making your decisions.",
"title": ""
},
{
"docid": "50150ac90b2de391daae4d1c1855ce12",
"text": "\"A home is an investment, but the value it returns isn't primarily financial ($$) - they are consumption (a place to live). This gives it different characteristics than other investments (e.g. increasing the amount invested by buying a more expensive home doesn't do much to assist your financial well-being and future income, and isn't necessarily the \"\"responsible\"\" thing to do). You may get some capital gains, typically in line with inflation, sometimes less, sometimes more, but those aren't the most reliable, and it's difficult to realize them (it involves selling your house and moving). Its main value as a hedge is a hedge against rising rent. But if you're still working full-time and can expect cost-of-living increases, that hedge may not be as valuable to you as it would to, say, someone living on a fixed income. But as for treating it as a \"\"low-risk investment\"\"? That's very problematic. Real low-risk investments are things like government bonds, where you can't lose principal. Unless you're going to live into your house until the day you die, the real estate crash should have disabused you of any notion that housing values never go down. Rather, your house is a single, indivisible, undiversified, illiquid investment. Imagine, if you will, going to your brokerage and borrowing a hundred thousand dollars or more on margin to invest in a single real estate investment trust... then take away whatever diversification the trust offered by holding multiple properties. Also, you can't sell any of it until you move away, and the transaction fee will take something like 3%. Still sound \"\"safe\"\"? Moreover, it's exactly the wrong kind of risk. Your house's value is tied to what people are willing to pay for housing where your house is, which is usually subject to the whims of the local economy. This means that in a recession and housing bust in the local economy, you can lose your job and have your mortgage go underwater at the same time. It totally makes sense to treat your house as an investment to some extent, and it makes double sense for a financial adviser to consider it as part of your investment recommendations. \"\"Safety\"\" is not the way you should be thinking of it, though.\"",
"title": ""
},
{
"docid": "309cfe3599915bf4a193f66e589a27ef",
"text": "\"You need to do a bit more research and as @littleadv often wisely advises, consult a professional, in this case a tax layer or CPA. You are not allowed to just pull money out of a property and write off the interest. From Deducting Mortgage Interest FAQs If you own rental property and borrow against it to buy a home, the interest does not qualify as mortgage interest because the loan is not secured by the home itself. Interest paid on that loan can't be deducted as a rental expense either, because the funds were not used for the rental property. The interest expense is actually considered personal interest, which is no longer deductible. This is not exactly your situation of course, but it illustrates the restriction that will apply to you. Elsewhere in the article, it references how, if used for a business, the interest deduction still will not apply to the rental, but to the business via schedule C. In your case, it's worse, you can never deduct interest used to fund a tax free bond, or to invest in such a tax favored product. Putting the facts aside, I often use the line \"\"don't let the tax tail wag the investing dog.\"\" Borrowing in order to reduce taxes is rarely a wise move. If you look at the interest on the 90K vs 290K, you'll see you are paying, in effect, 5.12% on the extra 200K, due the higher rate on the entire sum. Elsewhere on this board, there are members who would say that given the choice to invest or pay off a 4% mortgage, paying it off is guaranteed, and the wiser thing to do. I think there's a fine line and might not be so quick to pay that loan off, an after-tax 3% cost of borrowing is barely higher than inflation. But to borrow at over 5% to invest in an annuity product whose terms you didn't disclose, does seem right to me. Borrow to invest in the next property? That's another story.\"",
"title": ""
},
{
"docid": "8a9db923f5454f64bb4e44d06c74908f",
"text": "\"The loan is the loan, the down payment is not part of the loan. The principle amount owed on the loan at the beginning of the loan is the amount of the loan. If your loan amount is $390,000 then that's below the \"\"jumbo\"\" classification. Your down payment is irrelevant. Lenders may want or require 20% (or any other amount) down so the loan will meet certain \"\"loan to value\"\" ratio requirements. In the case of real estate the lenders in general want a 20% down side cushion before you're \"\"upside down\"\" (owe more than the home is worth). This is not unique to homes and is common in many secured lending instruments; like cars for example.\"",
"title": ""
},
{
"docid": "de3681aa8e65e5c239e2c4be5ab8adc7",
"text": "Your question boils down to saving for a house or saving for retirement. Why not do both? If you invest in a Roth 401k or Roth IRA you can withdraw any contributions that are at least 5 years old without penalty (assuming you're willing to put off purchasing a little longer than your original 2-3 years). If you qualify as a first time home buyer (i.e. you haven't owned a home in at least 2 years) you can withdraw investment earnings as well if your distribution is earmarked towards the down payment and is no more than $10000. Although you won't be penalized for using investment earnings for a down payment you will still have to pay taxes on them. So this may be more appealing to someone that has enough contributions to avoid dipping into the investment earnings. The only other downside is that contributions to a Roth investment are not tax deductible like Traditional IRA and 401k contributions are. Instead, they grow tax free and distributions are tax free when you reach retirement age.",
"title": ""
},
{
"docid": "7f398ad2294afdfaf8c2e0f39a65b251",
"text": "The underlying investment is usually somewhat independent of your mortgage, since it encompasses a bundle of mortgages, and not only yours. It works similarly to a fund. When, you pay off the old mortgage while re-financing, the fund receives the outstanding debt in from of cash, which can be used to buy new mortgages.",
"title": ""
},
{
"docid": "64d3ed9bdd8bc785d306c43ab39bcb18",
"text": "\"No one has addressed the fact that your loan interest and property taxes are \"\"deductible\"\" on your taxes? So, for the first 2/3 years of your loan, you will should be able to deduct each year's mortgage payment off your gross income. This in turn reduces the income bracket for your tax calculation.... I have saved 1000's a year this way, while seeing my home value climb, and have never lost a down payment. I would consider trying to use 1/2 your savings to buy a property that is desirable to live in and being able to take the yearly deduction off your taxes. As far as home insurance, most people I know have renter's insurance, and homeowner's insurance is not that steep. Chances are a year from now if you change your mind and wish to sell, unless you're in a severely deflated area, you will reclaim at minimum your down payment.\"",
"title": ""
},
{
"docid": "3a711c6ea10e7580f81eba8a3cee20fd",
"text": "So let's talk about the nation scale which is what the equation savings = investments is referring to. In that context, does an investment merely mean the purchase of a financial asset or an investment in some physical asset or productive capital? I like to think of investment as building a factory, developing land, or spending money on R&D. But in the economic sense, merely transforming cash into a financial asset like treasuries is also considered investment, correct? As a matter of fact, just merely leaving cash in a deposit account can technically be counted towards investment? Am I understanding this correctly or am I fundamentally missing something?",
"title": ""
},
{
"docid": "460d9b7f54847c2d1d61cf029e7a866c",
"text": "\"If this is an issue of opportunity cost then there is a benefit. Mortgage interest rates are extremely low, low enough that they can effectively be used to indirectly fund investments. If one stores equity in a house, ie \"\"pays it off\"\", then that wealth returns only the rate of growth of the house less expenditures. If one borrows against the house to fund investments, then the above stated returns which on average exceed the mortgage interest rate can be augmented by the investments, yielding a greater return. The tax benefit is more of a cherry on top. If one is using this as a justification to spend then it is frivolity.\"",
"title": ""
},
{
"docid": "f2b857dc7e119160aeab8bb78001daa0",
"text": "Generally, paying down your mortgage is a bad idea. Mortgages have very low interest rates and the interest is tax deductable. If you have a high interest mortgage, or PMI, you might consider it, but otherwise, your money is better off in some sort of index fund. On the other hand, if your choices are paying down a mortgage or blowing your money on hookers and booze, by all means do the mortgage. Typical priorities are: Dave Ramsey has a more detailed plan.",
"title": ""
},
{
"docid": "80acffb45c8498b0f661c11609063965",
"text": "\"Paying the mortgage down is no different than investing in a long term taxable fixed instrument. In this economy, 4.7% isn't bad, but longer term, the stock market should return higher. When you have the kid(s), is your wife planing to work? If not, I'd first suggest going pre-tax on the IRAs, and when she's not working, convert to Roth. I'd advise against starting the 529 accounts until your child(ren) is actually born. As far as managed funds are concerned, I hear \"\"expenses.\"\" Why not learn about lower cost funds, index mutual funds or ETFs? I'd not do too much different aside from this, until the kids are born.\"",
"title": ""
},
{
"docid": "ade1a70a1ee0761e9bad174726ff779e",
"text": "\"I've heard that the bank may agree to a \"\"one time adjustment\"\" to lower the payments on Mortgage #2 because of paying a very large payment. Is this something that really happens? It's to the banks advantage to reduce the payments in that situation. If they were willing to loan you money previously, they should still be willing. If they keep the payments the same, then you'll pay off the loan faster. Just playing with a spreadsheet, paying off a third of the mortgage amount would eliminate the back half of the payments or reduces payments by around two fifths (leaving off any escrow or insurance). If you can afford the payments, I'd lean towards leaving them at the current level and paying off the loan early. But you know your circumstances better than we do. If you are underfunded elsewhere, shore things up. Fully fund your 401k and IRA. Fill out your emergency fund. Buy that new appliance that you don't quite need yet but will soon. If you are paying PMI, you should reduce the principal down to the point where you no longer have to do so. That's usually more than 20% equity (or less than an 80% loan). There is an argument for investing the remainder in securities (stocks and bonds). If you itemize, you can deduct the interest on your mortgage. And then you can deduct other things, like local and state taxes. If you're getting a higher return from securities than you'd pay on the mortgage, it can be a good investment. Five or ten years from now, when your interest drops closer to the itemization threshold, you can cash out and pay off more of the mortgage than you could now. The problem is that this might not be the best time for that. The Buffett Indicator is currently higher than it was before the 2007-9 market crash. That suggests that stocks aren't the best place for a medium term investment right now. I'd pay down the mortgage. You know the return on that. No matter what happens with the market, it will save you on interest. I'd keep the payments where they are now unless they are straining your budget unduly. Pay off your thirty year mortgage in fifteen years.\"",
"title": ""
},
{
"docid": "593cbd452c7286b4358b8973a7511d16",
"text": "\"First off, the \"\"mortgage interest is tax deductible\"\" argument is a red herring. What \"\"tax deductible\"\" sounds like it means is \"\"if I pay $100 on X, I can pay $100 less on my taxes\"\". If that were true, you're still not saving any money overall, so it doesn't help you any in the immediate term, and it's actually a bad idea long-term because that mortgage interest compounds, but you don't pay compound interest on taxes. But that's not what it actually means. What it actually means is that you can deduct some percentage of that $100, (usually not all of it,) from your gross income, (not from the final amount of tax you pay,) which reduces your top-line \"\"income subject to taxation.\"\" Unless you're just barely over the line of a tax bracket, spending money on something \"\"tax deductible\"\" is rarely a net gain. Having gotten that out of the way, pay down the mortgage first. It's a very simple matter of numbers: Anything you pay on a long-term debt is money you would have paid anyway, but it eliminates interest on that payment (and all compoundings thereof) from the equation for the entire duration of the loan. So--ignoring for the moment the possibility of extreme situations like default and bank failure--you can consider it to be essentially a guaranteed, risk-free investment that will pay you dividends equal to the rate of interest on the loan, for the entire duration of the loan. The mortgage is 3.9%, presumably for 30 years. The car loan is 1.9% for a lot less than that. Not sure how long; let's just pull a number out of a hat and say \"\"5 years.\"\" If you were given the option to invest at a guaranteed 3.9% for 30 years, or a guaranteed 1.9% for 5 years, which would you choose? It's a no-brainer when you look at it that way.\"",
"title": ""
},
{
"docid": "284604237f881a6bf0cf221aeff73626",
"text": "\"If you don't want to take any risk and you want your money to be liquid, then the best place to \"\"invest\"\" such money is in an insured bank deposit, such as a high interest savings account. However, you aren't likely to find a savings account interest rate that comes close to that charged by your mortgage, so the better decision from a numbers perspective is to pay down more on your mortgage or other debt. Paying down your debt has almost no risk, but has a better payoff than simply saving the money in a bank account. However, if you choose to pay down more debt, I suggest you still keep aside enough cash to have an adequate emergency fund. Since you want safety and liquidity, don't expect high returns from such money.\"",
"title": ""
},
{
"docid": "a2c8ee8ee3ef896bb3dc414204aa9de5",
"text": "Citibank just sent me a $100 check. Here's how I got it:",
"title": ""
}
] |
fiqa
|
c6da976170e592c514e3adcc2d32d926
|
Retirement & asset allocation of $30K for 30 year old single guy
|
[
{
"docid": "15494e74be9bc86dd2485cbda946271b",
"text": "I would definitely recommend putting some of this in an IRA. You can't put all $30K in an IRA immediately though, as the contribution limit is $5500/year for 2014, but until April 15 you can still contribute $5500 for 2013 as well. At your income level I would absolutely recommend a Roth IRA, as your income will very likely be higher in retirement, given that your income will almost certainly rise after you get your Ph.D. Your suggested asset allocation (70% stocks, 30% bonds) sounds appropriate; if anything you might want to go even higher on stocks assuming you won't mind seeing the value drop significantly. If you don't want to put a lot of energy into investment choices, I suggest a target retirement date fund. As far as I am aware, Vanguard offers the lowest expenses for these types of funds, e.g. this 2050 fund.",
"title": ""
},
{
"docid": "78bcb03dd265259fb20c14f4e05e8ea1",
"text": "IMHO bonds are not a good investment at this present time, nor generally. Appreciate for a moment that the yield of an investment is DIRECTLY related to the face/trading value. If a thing (bond/stock) trades for $100 and yields 3%, it pays $3. In the case of a bond, the bond doesn't pay a % amount, it pays a $ amount. Meaning it pays $3. SO, for the yield to rise, what has to happen to the trading price? It has to decrease. As of 2013/14 bonds are trading at historically LOW yields. The logical implication of this is if a bond pays a fixed $ amount, the trading price of the bond has to have increased. So if you buy bonds now, you will see a decrease in its face value over the long term. You may find the first tool I built at Simple Stock Search useful as you research potential investments.",
"title": ""
},
{
"docid": "1bf0ea6249344325dfb4fe3bbd68350f",
"text": "If you want to invest in stocks, bonds and mutual funds I would suggest you take a portion of your inheritance and use it to learn how to invest in this asset class wisely. Take courses on investing and trading (two different things) in paper assets and start trading on a fantasy exchange to test and hone your investment skills before risking any of your money. Personally I don't find bonds to have a meaningful rate of return and I prefer stocks that have a dividend over those that don't. Parking some of your money in an IRA is a good strategy for when you do not see opportunities to purchase cashflow-positive assets right away; this allows you to wait and deploy your capital when the opportunity presents itself and to educate yourself on what a good opportunity looks like.",
"title": ""
}
] |
[
{
"docid": "08b7eac4258132d5822ce91ed957babb",
"text": "I think not. I think a discussion of optimum mix is pretty independent of age. While a 20 year old may have 40 years till retirement, a 60 year old retiree has to plan for 30 years or more of spending. I'd bet that no two posters here would give the same optimum mix for a given age, why would anyone expect the Wall Street firms to come up with something better than your own gut suggests?",
"title": ""
},
{
"docid": "81341205d92d2676c4870d6c0ab9d92d",
"text": "I have a $2500 Roth IRA that I set up 40 years ago...it is worth about $2600. I keep it around for this exact talking point. Compound interest at .1% is outstripped by inflation. I have put away $18k a year in a 401 for 30 years now. It is worth just under $800k. The bankers took the excess with their 2% fee and the GFC. Its all in Vanguard now I cleared +$5m in medium and high end residential real estate in the same period. The first 18 years was sleeping on floors and having cardboard boxes as furniture. Sad really.",
"title": ""
},
{
"docid": "4f4622ab3f6c1ad091de3f50fc108f36",
"text": "\"What percent of my salary should I save? is tightly coupled with its companion, What size “nest egg” should my husband and I have, and by what age? Interestingly, Mr.Christer's answer, 10%, is the number that plugs into the equation that I reference. Jay's 25X rule is part of this. We start with the assumption that one's required income at retirement will be 80% of their pre-retirement income. That's high by some observations, low by others. A quick look at the expenses that go away in retirement - The above can total 35-40% It would be great if it ended there, but there are costs that go up. The above extra spending is tough to nail down, after all, you knew what you spent, and what's going away, but the new items? Crapshoot. (For non-native speakers - this refers to a game with dice, meaning a random event) Again, referencing Mr Christer's answer \"\"financial planners whom you could pay to give you a very accurate number,\"\" I'm going to disagree with that soundbyte. Consider, when retirement is 30 years away, you don't know much If I can offer an analogy. I once had the pleasure of hearing Jim Lovell (The astronaut played by Tom Hanks in Apollo 13) give a speech. He said that for the first 99% of the trip to the moon, they simply aimed ahead of their target, never directly at the moon. In this manner, I suggest that with so many variables, accuracy is impossible, it's a moving target. Start young, take the 10% MrC offered, and keep saving. Every few years, stop and see if you are on target, if not, bump the number a bit. Better to turn 50 and find that after a good decade you've reached your number and can drop your savings to a minimum, perhaps just to capture a 401(k) match, than to turn 50 and realize you've undersaved and need to bump to an unsustainable level. Imagine planning ahead in 1999. You've seen 2 great decades of returns, and even realizing that 18%/yr couldn't continue, you plan for a below average 7%, this would double your 1999 balance in 10 years. Instead you saw zero return. For a decade. In sum, when each variable has an accuracy of +/-50% you are not going to combine them all and get a number with even 10% accuracy (as if MrC were wrong, but the pro would tell you 11% is right for you?). This is as absurd as packaging up a bunch of C rated debt, and thinking that enough of this paper would yield a final product that was AAA.\"",
"title": ""
},
{
"docid": "b623b6274302c11d05991d92406e35c8",
"text": "\"I didn't even have access to a 401(k) at age 24. You're starting early and that's good. You're frugal and that's good too. Retirement savings is really intended to be a set it and forget it kind of arrangement. You check in on it once a year, maybe adjust your contributions. While I applaud your financial conservatism, you're really hamstringing your retirement if you're too conservative. At age 24 you have a solid 30 years before retirement will even approach your radar and another 10 years after that before you have to plan your disbursements. The daily, monthly, quarterly movements of your retirement account will have literally zero impact on your life. There will be money market type savings accounts, bond funds, equity funds, and lifecycle funds. The lifecycle fund rolls your contributions to favor bonds and other \"\"safer\"\" investments as you age. The funds available in retirement accounts will all carry something called an expense ratio. This is the amount of money that the fund manager keeps for maintaining the fund. Be mindful of the expense ratios even more than the published performance of the fund. A low fee fund will typically have an expense ratio around 0.10%, or $1 per $1,000 per year in expense. There will be more exotic funds targeting this or that segment, they can carry expense ratios nearing 1% and some even higher. It's smart to take advantage of your employer's match. Personally, at age 24, at a minimum I would contribute the match to a low-fee S&P index fund.\"",
"title": ""
},
{
"docid": "57d4f1523f9fd61903f121d578b425fb",
"text": "I recommend saving for retirement first to leverage compound interest over a long time horizon. The historical real return on the stock market has been about 7%. Assuming returns stay at 7% in the future (big assumption, but don't have any better numbers to go off of), then $8,000 saved today will be worth $119,795 in 40 years (1.07^40*8000). Having a sizable retirement portfolio will give you peace of mind as you progress through life and make other expenditures. If you buy assets that pay you money and appreciate, you will be in a better financial position than if you buy assets that require significant cash outflows (i.e. property taxes, interest you pay to the bank, etc.) or assets that ultimately depreciate to zero (a car). As a young person, you are well positioned to pay yourself (not the bank or the car dealership) and leverage compound interest over a long time horizon.",
"title": ""
},
{
"docid": "ac29167b6acc16b82e5569c9733522b7",
"text": "\"Defined benefit pensions are generally seen as valuable, and hard to replace by investing on your own. So my default assumption would be to keep that pension, unless you think there's a significant risk the pension fund will become insolvent, in which case the earlier you can get out the better. Obviously, you need to look at the numbers. What is a realistic return you could get by investing that 115K? To compare like with like, what \"\"real\"\" investment returns (after subtracting inflation) are needed for it to provide you with $10800 income/year after age 60? Also, consider that the defined benefit insulates you from multiple kinds of risk: Remember that most of your assets are outside the pension and subject to all these risks already. Do you want to add to that risk by taking this money out of your pension? One intermediate strategy to look at - again for the purposes of comparison - is to take the money now, invest it for 10 years without withdrawing anything, then buy an annuity at age 60. If you're single, Canadian annuity rates for age 60 appear to be between 4-5% without index linking - it may not even be possible to get an index-linked annuity. Even without the index-linking you'd need to grow the $115K to about $240K in 10 years, implying taking enough risks to get a return of 7.6% per year, and you wouldn't have index-linking so your income would gradually drop in real terms.\"",
"title": ""
},
{
"docid": "019436e3750e0037cce98d04021422c0",
"text": "the whole room basically jumped on me I really have an issue with this. Someone providing advice should offer data, and guidance. Not bully you or attack you. You offer 3 choices. And I see intelligent answers advising you against #1. But I don't believe these are the only choices. My 401(k) has an S&P fund, a short term bond fund, and about 8 other choices including foreign, small cap, etc. I may be mistaken, but I thought regulations forced more choices. From the 2 choices, S&P and short term bond, I can create a stock bond mix to my liking. With respect to the 2 answers here, I agree, 100% might not be wise, but 50% stock may be too little. Moving to such a conservative mix too young, and you'll see lower returns. I like your plan to shift more conservative as you approach retirement. Edit - in response to the disclosure of the fees - 1.18% for Aggressive, .96% for Moderate I wrote an article 5 years back, Are you 401(k)o'ed in which I discuss the level of fees that result in my suggestion to not deposit above the match. Clearly, any fee above .90% would quickly erode the average tax benefit one might expect. I also recommend you watch a PBS Frontline episode titled The Retirement Gamble It makes the point as well as I can, if not better. The benefit of a 401(k) aside from the match (which you should never pass up) is the ability to take advantage of the difference in your marginal tax rate at retirement vs when earned. For the typical taxpayer, this means working and taking those deposits at the 25% bracket, and in retirement, withdrawing at 15%. When you invest in a fund with a fee above 1%, you can see it will wipe out the difference over time. An investor can pay .05% for the VOO ETF, paying as much over an investing lifetime, say 50 years, as you will pay in just over 2 years. They jumped on you? People pushing funds with these fees should be in jail, not offering financial advice.",
"title": ""
},
{
"docid": "da10572fda17f9b00552bc3a606b43a9",
"text": "Getting to know business associates, family members, and friends of your those 30 high net-worth clients would be a good way to go. I feel mid-career folks are an untapped market. Consider the present value of any younger clients before you dismiss them because they are below the threshold. A 30 year old professional with only $100k may be more valuable than a 75 year old with $250k. Good luck.",
"title": ""
},
{
"docid": "dd95be1f34ff8792c8faad39fb544908",
"text": "I would focus first on maxing out your RRSPs (or 401k) each year, and once you've done that, try to put another 10% of your income away into unregistered long term growth savings. Let's say you're 30 and you've been doing that since you graduated 7 years ago, and maybe you averaged 8% p.a. return and an average of $50k per year salary (as a round number). I would say you should have 60k to 120k in straight up investments around age 30. If that's the case, you're probably well on your way to a very comfortable retirement.",
"title": ""
},
{
"docid": "69dd9dbb23a5fbb80ce41d7c0fa951cb",
"text": "\"Making these difficult portfolio decisions for you is the point of Target-Date Retirement Funds. You pick a date at which you're going to start needing to withdraw the money, and the company managing the fund slowly turns down the aggressiveness of the fund as the target date approaches. Typically you would pick the target date to be around, say, your 65th birthday. Many mutual fund companies offer a variety of funds to suit your needs. Your desire to never \"\"have to recover\"\" indicates that you have not yet done quite enough reading on the subject of investing. (Or possibly that your sources have been misleading you.) A basic understanding of investing includes the knowledge that markets go up and down, and that no portfolio will always go up. Some \"\"recovery\"\" will always be necessary; having a less aggressive portfolio will never shield you completely from losing money, it just makes loss less likely. The important thing is to only invest money that you can afford to lose in the short-term (with the understanding that you'll make it back in the long term). Money that you'll need in the short-term should be kept in the absolute safest investment vehicles, such as a savings account, a money market account, short-term certificates of deposit, or short-term US government bonds.\"",
"title": ""
},
{
"docid": "617ff2128972845335f0183e4689c6af",
"text": "Pete, 25 years of inflation looks like 100% to me with back of napkin math. $220K will feel like $110K. In today's dollars, can you live on $110K? (Plus whatever Social Security you'll get)? My concern from what you wrote, if I'm reading it correctly, is that you have this great income, but relatively low savings until now. From the recent question Building financial independence I offered a guide to savings as it compares to income. Even shifted 5 years for a later start, and scaled for a 70-75% replacement ratio, you should be at 2X (or $440K) by now. That's not a criticism, but an observation that you've been spending at a nice clip so far. The result is less saving, of course, but also a need for a higher replacement ratio. Last, a 10% return for the next 25 years may be optimistic. I'm not forecasting doom or gloom, just a more reasonable rate of return, and wouldn't plan to see higher than 7-8% for purposes of planning. If I am wrong, (and if so, we can both laugh all the way to the bank) you can always scale back savings in 10-15 years. Or retire earlier. Note: Pete's question asks about a 40 year old working till 65, but the comment below has him 48 and planning to work until 62. 14 years of $45K deposits total less than $700K. Even at 10%, it wouldn't grow to much more than $2M, let alone $5M.",
"title": ""
},
{
"docid": "df4eb1f3883678b9cb8397aa325b41e2",
"text": "\"I'm going to discuss this, in general, as specific investment advice isn't allowed here. What type of account is the $60K in now? I mean - Is it in a 401(k), IRA or regular account/CD/money market? You are still working? Does your company offer any kind of matched 401(k)? If so, take advantage of that right up the level they'll match. If not, are you currently depositing to pretax IRAs? You can't just deposit that $60K into an IRA if it isn't already, but you can put $11k/yr ($5 for you, $6K for hubby if you make $11K or more this year.) Now, disclaimer, I am anti-annuity. Like many who are pro or con on issues, this is my nature. The one type of annuity I actually like is the Immediate Annuity. The link is not for an end company, it shows quotes from many and is meant as an example. Today, a 65 yr old man can get $600/mo with a $100K purchase. This is 7.2%, in an economy in which rates are sub 3%. You give up principal in exchange for this higher annual return. This is a viable solution for the just-retired person whose money will run out when looking at a 4-5% withdrawal but 1% CD rate. In general, these products are no more complex that what I just described, unlike annuities sold to younger fold which combine high fees with returns that are so complex to describe that most agents can't keep their story straight. Aside from the immediate flavor, all other annuities are partial sold (there's a quote among finance folk - \"\"annuities are sold, not bought\"\") based on their tax deferral features. I don't suspect you are in a tax bracket where that feature has any value to you. At 48/54, with at least 10 years ahead of you, I'd research 'diversification' and 'asset allocation'. Even $60K is enough to proper invest these funds until you retire and then decide what's right for you. Beginners' Guide to Asset Allocation, Diversification, and Rebalancing is an interesting introduction, and it's written by the SEC, so your tax dollars paid for it. Some months ago, I wrote Diversifying to Reduce Risk, which falls short of a complete discussion of asset allocation, but it does illustrate the power of being in a stock/bond mix. The ups and downs were reduced significantly compared to the all stock portfolio. (for follow up or to help others reply to you, a bit more detail on the current investments, and how you are devastated, eg was there a huge loss from what you had a few years ago?) Edit - The original poster hasn't returned. Posted the question and left. It's unfortunate as this was someone who would benefit from the dialog, and the answers here can help others in a similar position, but I feel more discussion is in order for the OP. Last, I caught a downvote on my reply today. I take no offense, but curious which part of my answer the DVer disagreed with.\"",
"title": ""
},
{
"docid": "481dbbdc25cd20c96fb2cc46074382b3",
"text": "You can invest more that 20,000 in Infrastructure bonds, however the tax benefit is only on 20,000. Further the interest earned is taxable. The best guaranteed post tax returns is on PPF. So invest a substantial sum in this. As your age group low you can afford to take risk and hence could also look at investing in ELSS [Mutual Fund]. A note on each of these investments: LIC: If you have taken any of the endowment / Money Back plan, remember the returns are very low around 5-6%. It would make more sense to buy a pure term plan at fraction of the cost and invest the remaining premium into even PPF or FD that would give you more return. NSC/Postal Savings: They are a good option, however the interest is taxable. There is a locking of 6 years. PPF: The locking is large 15 years although one can do partial withdrawals after 7 years. The interest is not taxable. ULIP: These are market linked plans with Insurance and balance invested into markets. The charges for initial few years is quite high, plus the returns are not comparable to the normal Mutual Funds. Invest in this only if one needs less paper and doesn't want to track things separately. ELSS/Mutual Fund: These offer good market returns, but there is a risk of market. As you are young you can afford to take the risk. Most of the ELSS have given average results that are still higher than FD or PPF. Pension Plan: This is a good way to accumulate for retirement. Invest some small amount in this and do not take any insurance on it. Go for pure equity as you can still take the risk. This ensures that you have a kit for retirement. Check out the terms and conditions as to how you need to purchase annuity at the term end etc.",
"title": ""
},
{
"docid": "8133d6a9ecbe9ede5f95a4d892211277",
"text": "Your plan sounds quite sound to me. I think that between the choices of [$800 for Loans, $300 for Retirement] and [$1100 for loans], both are good choices and you aren't going to go wrong either way. Some of the factors you might want to consider: I like your retirement savings choices - I myself use the admiral version of VOO, plus a slightly specialized but still large ETF that allows me to do a bit of shifting. Having something that's at least a bit counter-market can be helpful for balancing (so something that will be going up some when the market overall is down some); I wouldn't necessarily do bonds at your age, but international markets are good for that, or a stock ETF that's more stable than the overall market. If you're using Vanguard, look at the minimums for buying Admiral shares (usually a few grand) and aim to get those if possible, as they have significantly lower fees - though VOO seems to pretty much tie the admiral version (VFIAX) so in that case it may not matter so much. As far as the target retirement funds, you can certainly do those, but I prefer not to; they have somewhat higher (though for Vanguard not crazy high) expense ratios. Realistically you can do the same yourself quite easily.",
"title": ""
},
{
"docid": "e134c8e2dc970331adafc60acda2ed44",
"text": "\"Welcome to the 'what should otherwise be a simple choice turns into a huge analysis' debate. If the choice were actually simple, we've have one 'golden answer' here and close others as duplicate. But, new questions continue to bring up different scenarios that impact the choice. 4 years ago, I wrote an article in which I discussed The Density of Your IRA. In that article, I acknowledge that, with no other tax favored savings, you can pack more value into the Roth. In hindsight, I failed to add some key points. First, let's go back to what I'd describe as my main thesis: A retired couple hits the top of the 15% bracket with an income of $96,700. (I include just the standard deduction and exemptions.) The tax on this gross sum is $10,452.50 for an 'average' rate of 10.8%. The tax, paid or avoided, upon deposit, is one's marginal rate. But, at retirement, the withdrawals first go through the zero bracket (i.e. the STD deduction and exemptions), then 10%, then 15%. The above is the simplest snapshot. I am retired, and our return this year included Sch A, itemized deductions. Property tax, mort interest, insurance, donations added up fast, and from a gross income (IRA withdrawal) well into the 25% bracket, the effective/average rate was reported as 7.3%. If we had saved in Roth accounts, it would have been subject to 25%. I'd suggest that it's this phenomenon, the \"\"save at marginal 25%, but withdraw at average sub-11%\"\" effect that account for much of the resulting tax savings that the IRA provides. The way you are asking this, you've been focusing on one aspect, I believe. The 'density' issue. That assumes the investor has no 401(k) option. If I were building a spreadsheet to address this, I'd be sure to consider the fact that in a taxable account, long term gains are taxed at 15% for higher earners (I take the liberty to ignore that wealthier taxpayers will pay a maximum 20% tax on long-term capital gains. This higher rate applies when your adjusted gross income falls into the top 39.6% tax bracket.) And those in the 10 or 15% bracket pay 0%. With median household income at $56K in 2016, and the 15% bracket top at $76K, this suggests that most people (gov data shows $75K is 80th percentile) have an effective unlimited Roth. So long as they invest in a way that avoids short term gains, they can rebalance often enough to realize LT gains and pay zero tax. It's likely the $80K+ earner does have access to a 401(k) or other higher deposit account. If they don't, I'd still favor pretax IRAs, with $11K for the couple still 10% or so of their earnings. It would be a shame to lose that zero bracket of that first $20K withdrawal at retirement. Again working backwards, the $78K withdrawal would take nearly $2M in pretax savings to generate. All in today's dollars.\"",
"title": ""
}
] |
fiqa
|
4f25a1ea9a6cddadec2d77de5b85381d
|
I am an American citizen but have never lived in the US. Do I need to fill a W8-BEN or a W-9?
|
[
{
"docid": "911df199ca187b4ee1e9ef008adcf0a7",
"text": "Yes, you do. You also need to file a tax return every year, and if you have more than $50k of total savings you need to declare this every year.",
"title": ""
},
{
"docid": "3d1e1dcc1720a7572a82eaa13e92c8cb",
"text": "\"Your employer can require a W8-BEN or W-9 if you are a contractor, and in some special cases. I believe this bank managing your stock options can as well; it's to prove you don't have \"\"foreign status\"\". See the IRS's W-9 instructions for details.\"",
"title": ""
}
] |
[
{
"docid": "39140129163ccabe75a9d6dcb033e4c4",
"text": "First, the SSN isn't an issue. She will need to apply for an ITIN together with tax filing, in order to file taxes as Married Filing Jointly anyway. I think you (or both of you in the joint case) probably qualify for the Foreign Earned Income Exclusion, if you've been outside the US for almost the whole year, in which cases both of you should have all of your income excluded anyway, so I'm not sure why you're getting that one is better. As for Self-Employment Tax, I suspect that she doesn't have to pay it in either case, because there is a sentence in your linked page for Nonresident Spouse Treated as a Resident that says However, you may still be treated as a nonresident alien for the purpose of withholding Social Security and Medicare tax. and since Self-Employment Tax is just Social Security and Medicare tax in another form, she shouldn't have to pay it if treated as resident, if she didn't have to pay it as nonresident. From the law, I believe Nonresident Spouse Treated as a Resident is described in IRC 6013(g), which says the person is treated as a resident for the purposes of chapters 1 and 24, but self-employment tax is from chapter 2, so I don't think self-employment tax is affected by this election.",
"title": ""
},
{
"docid": "85794d485be3d23157e21a9378a3e00f",
"text": "To start with, I should mention that many tax preparation companies will give you any number of free consultations on tax issues — they will only charge you if you use their services to file a tax form, such as an amended return. I know that H&R Block has international tax specialists who are familiar with the issues facing F-1 students, so they might be the right people to talk about your specific situation. According to TurboTax support, you should prepare a completely new 1040NR, then submit that with a 1040X. GWU’s tax department says you can submit late 8843, so you should probably do that if you need to claim non-resident status for tax purposes.",
"title": ""
},
{
"docid": "f41ce7e0d2fa9c6ff52ac387f7808299",
"text": "The committee folks told us Did they also give you advice on your medication? Maybe if they told you to take this medicine or that you'd do that? What is it with people taking tax advice from random people? The committee told you that one person should take income belonging to others because they don't know how to explain to you which form to fill. Essentially, they told you to commit a fraud because forms are hard. I now think about the tax implications, that makes me pretty nervous. Rightly so. Am I going to have to pay tax on $3000 of income, even though my actual winning is only $1000? From the IRS standpoint - yes. Can I take in the $3000 as income with $2000 out as expenses to independent contractors somehow? That's the only solution. You'll have to get their W8's, and issue 1099 to each of them for the amounts you're going to pay them. Essentially you volunteered to do what the award committee was supposed to be doing, on your own dime. Note that if you already got the $3K but haven't paid them yet - you'll pay taxes on $3K for the year 2015, but the expense will be for the year 2016. Except guess what: it may land your international students friends in trouble. They're allowed to win prizes. But they're not allowed to work. Being independent contractor is considered work. While I'm sure if USCIS comes knocking, you'll be kind enough to testify on their behalf, the problem might be that the USCIS won't come knocking. They'll just look at their tax returns and deny their visas/extensions. Bottom line, next time ask a professional (EA/CPA licensed in your State) before taking advice from random people who just want the headache of figuring out new forms to go away.",
"title": ""
},
{
"docid": "ed944c03c1e7096cb07630e758530dac",
"text": "Both states will want to tax you. Your tax home is where you maintain a domicile, are registered to vote, etc. and you will probably want to keep this as MA since you state that MA is your permanent residence and you are staying in a rented place in PA. But be careful about voter registration; that is one of the items that can be used to determine your state of residence. OK, so if you and your spouse are MA residents, you should file jointly as residents in MA and as nonresidents in PA. Do the calculations on the nonresident return first, and then the calculations on the resident return. Typically, on a nonresident tax return, the calculations are effectively the following: Report all your income (usually AGI from the Federal return). Call this $X. Compute the PA state tax due on $X. Note that you follow the rules for nonresidents in doing this, not the calculations used by PA residents. Call the amount of tax you computed as $Y. What part of the total income $X is attributable to PA sources? If this amount is $Z, then you owe PA $Y times (Z/X). On the resident return in MA, you will likely get some credit for the taxes paid to PA, and this will reduce your MA tax burden. Usually the maximum credit is limited to the lesser of actual tax paid to PA and what you would have had to pay MA for the same income. As far as withholding is concerned, your employer in PA will withhold PA taxes as if you are a PA resident, but you can adjust the amount via the PA equivalent of IRS Form W4 so as to account for any additional tax that might be due because you will be filing as a nonresident. Else you can pay estimated taxes via the PA equivalent of IRS Form 1040ES. Similarly, your wife can adjust her withholding to account for the MA taxes that you will owe on the joint income, or you can pay estimated taxes to MA too. Note that it is unlikely that your employer in Pennsylvania will withhold Massachusetts taxes (and send them to Massachusetts) for you, e.g. if it is a ma-and-pa store, but there may be special deals available if your employer does business in both states, i.e. is a MA-and-PA store.",
"title": ""
},
{
"docid": "5ee9f8d91bf9c6edf84fc8a1577ed745",
"text": "Instead of SSN, foreign person should get a ITIN from the IRS. Instead of W9 a foreigner should fill W8-BEN. Foreigner might also be required to file 1040NR/NR-EZ tax report, and depending on tax treaties also be liable for US taxes.",
"title": ""
},
{
"docid": "4d8e6721496b0d8ad288f2a00eb81a13",
"text": "It matters because that is the requirement for the 83(b) selection to be valid. Since the context is 83(b) election, I assume you got stocks/options as compensation and didn't pay for them the FMV, thus it should have been included in your income for that year. If you didn't include the election letter - I can only guess that you also didn't include the income. Hence - you lost your election. If you did include the income and paid the tax accordingly, or if no tax was due (you actually paid the FMV), you may try amending the return and attaching the letter, but I'd suggest talking to a professional before doing it on your own. Make sure to keep a proof (USPS certified mailing receipt) of mailing the letter within the 30 days window.",
"title": ""
},
{
"docid": "810d4842bdc077402c3b1d10247a8e7f",
"text": "If your gross income is only $3000, then you don't need to file: https://www.irs.gov/pub/irs-pdf/p501.pdf That said, pay careful attention to: https://www.irs.gov/individuals/international-taxpayers/taxpayers-living-abroad You should be reporting ALL income, without regard to WHERE you earned it, on your US taxes. Not doing so could indeed get you in trouble if you are audited. Your level of worry depends on how much of the tax law you are willing to dodge, and how lucky you feel.",
"title": ""
},
{
"docid": "28d9aa347dd6586e63001086f0a889da",
"text": "California is very aggressive when it comes to determining residency. While you have a legitimate defense, I suggest talking with a California-licensed CPA or EA practicing in California, which are experienced in dealing with the FTB residency audits.",
"title": ""
},
{
"docid": "0c159c05d0ec801c60acb224e0deb4cd",
"text": "Where you earn your money makes no difference to the IRS. Citizen/permanent resident means you pay income tax. To make matters worse given your situation it's virtually certain you have unreported foreign bank accounts--something that's also an important issue.",
"title": ""
},
{
"docid": "96442c0ad9df594fa1714e366dfa44f5",
"text": "According to the instructions to the form - yes, you do need an ITIN. Line 6. .... If you do not have an SSN and are not eligible to get one, you must get an individual taxpayer identification number (ITIN). To apply for an ITIN, file Form W-7 with the IRS. It usually takes 4-6 weeks to get an ITIN.",
"title": ""
},
{
"docid": "96503ad0863d795ad2f0d81405f41c31",
"text": "75k is short of the 'highly compensated' category. Most US citizens in that pay range would consider paying someone to do their taxes as an unnecessary expense. Tax shelters usually don't come into play for this level of income. However, there are certain things which provide deductions. Some things that make it better to pay someone: Use the free online tax forms to sandbox your returns. If all you're concerned about is ensuring you pay your taxes correctly, this is the most cost efficient route. If you want to minimize your tax burden, consult with a CPA. Be sure to get one who is familiar with resident aliens from your country and the relevant tax treaties. The estimate you're looking at may be the withholding, of which you may be eligible for a refund for some part of that withholding. Tax treaties likely make sure that you get credit on each side for the money paid in the other. For example, as a US citizen, if I go to Europe and work and pay taxes there, I can deduct the taxes paid in Europe from my tax burden in the US. If I've already paid more to the EU than I would have paid on the same amount earned in the US, then my tax burden in the US is zero. By the same token, if I have not paid up to my US burden, then I owe the balance to the US. But this is way better than paying taxes to your home country and to the host country where you earned the money.",
"title": ""
},
{
"docid": "3045b1ad7e9c1c05dfbe5e0f484b250c",
"text": "According to the Form W-8BEN instructions for Part II, Line 10: Line 10. Line 10 must be used only if you are claiming treaty benefits that require that you meet conditions not covered by the representations you make on line 9 and Part III. For example, persons claiming treaty benefits on royalties must complete this line if the treaty contains different withholding rates for different types of royalties. In tax treaties, some of the benefits apply to every resident of a foreign country. Other benefits only apply to certain groups of people. Line 10 is where you affirm that you meet whatever special conditions are necessary in the treaty to obtain the benefit. If you are claiming that Article 15 of the U.S.-India Tax Treaty, you could use Line 10 to do this. It is important to remember that this form goes to the company paying you; it does not actually get sent to the IRS. Therefore, you can ask the company themselves if filling out Line 9 only will result in them withholding nothing, or if they would need you to fill out Line 10.",
"title": ""
},
{
"docid": "27fcc343ed9d01eac9eb28343ef02044",
"text": "\"The IRS W-8BEN form (PDF link), titled \"\"Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding\"\", certifies that you are not an American for tax purposes, so they won't withhold tax on your U.S. income. You're also to use W-8BEN to identify your country of residence and corresponding tax identification number for tax treaty purposes. For instance, if you live in the U.K., which has a tax treaty with the U.S., your W-8BEN would indicate to the U.S. that you are not an American, and that your U.S. income is to be taxed by the U.K. instead of tax withheld in the U.S. I've filled in that form a couple of times when opening stock trading accounts here in Canada. It was requested by the broker because in all likelihood I'd end up purchasing U.S.-listed stocks that would pay dividends. The W-8BEN is needed in order to reduce the U.S. withholding taxes on those dividends. So I would say that the ad revenue provider is requesting you file one so they don't need to withhold full U.S. taxes on your ad revenue. Detailed instructions on the W-8BEN form are also available from the IRS: Instruction W-8BEN (PDF link). On the subject of ad revenue, Google also has some information about W8-BEN: Why can't I submit a W8-BEN form as an individual?\"",
"title": ""
},
{
"docid": "115d0a051dd222f63829ad5e3d860058",
"text": "You should not form a company in the U.S. simply to get the identification number required for a W-8BEN form. By establishing a U.S.-based company, you'd be signing yourself up for a lot of additional hassle! You don't need that. You're a European business, not a U.S. business. Selling into the U.S. does not require you to have a U.S. company. (You may want to consider what form of business you ought to have in your home country, however.) Anyway, to address your immediate concern, you should just get an EIN only. See businessready.ca - what is a W8-BEN?. Quote: [...] There are other reasons to fill out the W8-BEN but for most of you it is to make sure they don’t hold back 30% of your payment which, for a small company, is a big deal. [...] How do I get one of these EIN US taxpayer identification numbers? EIN stands for Employer Identification Number and is your permanent number and can be used for most of your business needs (e.g. applying for business licenses, filing taxes when applicable, etc). You can apply by filling out the Form SS-4 but the easier, preferred way is online. However, I also found at IRS.gov - Online EIN: Frequently Asked Questions the following relevant tidbit: Q. Are any entity types excluded from applying for an EIN over the Internet? A. [...] If you were incorporated outside of the United States or the U.S. territories, you cannot apply for an EIN online. Please call us at (267) 941-1099 (this is not a toll free number) between the hours of 6:00 a.m. to 11:00 p.m. Eastern Time. So, I suggest you call the IRS and describe your situation: You are a European-based business (sole proprietor?) selling products to a U.S.-based client and would like to request an EIN so you can supply your client with a W-8BEN. The IRS should be able to advise you of the correct course of action. Disclaimer: I am not a lawyer. Consider seeking professional advice.",
"title": ""
},
{
"docid": "2a3c1c044fd73117134604a3c4204aa3",
"text": "Jeff Bezos; just like Jobs, Ellison, Zuckerberg, will never understand the plight of their employees. Their main goal is how much wealth and power they can consolidate for themselves. The Tech industry in general is a pretty horrible industry; huge profits very little return to the economy. Unless we vote in better politicians, we will always have to remind tech CEOs that charity begins at home.",
"title": ""
}
] |
fiqa
|
e34e38764fa37b7cce30ddfd6740a9a9
|
How do I screen for stocks that are near to their 52 weeks low
|
[
{
"docid": "81eea8857109ec0260c922f2c9a4e4c3",
"text": "There is a great 3rd party application out there that I use (I am a broker) along with my internal analysts and other 3rd party sources. VectorVest has a LOT of technical information, but is very easy to use. It will run any kind of screen you like, including low 52 week numbers. (No, I don't get anything for recommending them.)",
"title": ""
},
{
"docid": "8313daf3ed3b50a118993059f1fd633f",
"text": "\"Although is not online, I use a standalone version from http://jstock.sourceforge.net It got drag-n-drop boxes, to let me design my own indicators. However, it only contain technical analysis information, not fundamental analysis information. It does come with tutorial http://jstock.sourceforge.net/help_stock_indicator_editor.html#indicator-example, on how to to build an indicator, to screen \"\"Stock which Its Price Hits Their 14 Days Maximum\"\"\"",
"title": ""
},
{
"docid": "22dc921860ef192ab6313f1ccfe7a1a2",
"text": "The screener at FinViz.com will let you screen for stocks at their 52-week low.",
"title": ""
},
{
"docid": "ac305c586c01762a2f7fedcdf4e4420e",
"text": "You can use Google Finance Stock Screener for screening US stocks. Apparently it doesn't have the specific criterion (Last Price % diff from 52 week low) you are (were!) looking for. I believe using its api you can get it, although it won't exactly be a very direct solution.",
"title": ""
}
] |
[
{
"docid": "6ad82bda077546c30c1a05b67d88ed0d",
"text": "Consider trailing stop losses maybe 5% below your profit target, if you want a simplistic answer.",
"title": ""
},
{
"docid": "3b9ae35eb128a2fcc6a93a1cd48c9cae",
"text": "The indication is based on the average Buy-Hold-Sell rating of a group of fundamental analysts. The individual analysts provide a Buy, Hold or Sell recommendation based on where the current price of the stock is compared to the perceived value of the stock by the analyst. Note that this perceived value is based on many assumptions by the analyst and their biased view of the stock. That is why different fundamental analysts provide different values and different recommendations on the same stock. So basically if the stock's price is below the analyst's perceived value it will be given a Buy recommendation, if the price is equal with the perceived value it will be given a Hold recommendation and if the price is more than the perceived value it will be given a Sell recommendation. As the others have said this information IMHO is useless.",
"title": ""
},
{
"docid": "bb2125f617de0d2ef9c2669b5daee3e3",
"text": "\"There are a number of ways to measure such things and they are generally called \"\"sentiment indicators\"\". The ones that I have seen \"\"work\"\", in the sense that they show relatively high readings near market tops and relatively low readings near market bottoms. The problem is that there are no thresholds that work consistently. For example, at one market top a sentiment indicator may read 62. At the next market top that same indicator might read 55. So what threshold do you use next time? Maybe the top will come at 53, or maybe it will not come until 65. There was a time when I could have listed examples for you with the names of the indicators and what they signaled and when. But I gave up on such things years ago after seeing such wide variation. I have been at this a long time (30+ years), and I have not found anything that works as well as we would like at identifying a top in real time. The best I have found (although it does give false signals) is a drop in price coupled with a bearish divergence in breadth. The latter is described in \"\"Stan Weinstein's Secrets For Profiting in Bull and Bear Markets\"\". Market bottoms are a little less difficult to identify in real time. One thing I would suggest if you think that there is some way to get a significant edge in investing, is to look at the results of Mark Hulbert's monitoring of newsletters. Virtually all of them rise and fall with the market and almost none are able to beat buy and hold of the Wilshire 5000 over the long term.\"",
"title": ""
},
{
"docid": "e604008e0fef242d90c196819044e530",
"text": "Powers makes a good point: trading costs may eat up a significant portion of your ROI. A fee as little as 2% can consume more than 50% of your long-term ROI! A rule of thumb is keep your fees to less than 1%. One way to do that is to buy stock in companies that have a DRIP with a Share Purchase Plan (SPP). Often the SPP allows investors to purchase shares for low fees or free. Once you have the ability to purchase shares for (virtually) free, you can use InvestMete. Roughly, you send more money to the companies whose share prices are near their 52-week low, and less money to those who are near their 52-week high. Getting back to your original question...",
"title": ""
},
{
"docid": "48e17e51600b5ac1eb0edcb144985bf8",
"text": "\"Option 1 is out. There are no \"\"safe returns\"\" that make much money. Besides, if a correction does come along how will you know when to invest? There is no signal that says when the bottom is reached, and you emotions could keep you from acting. Option 2 (dollar cost averaging) is prudent and comforting. There are always some bargains about. You could start with an energy ETF or a few \"\"big oil\"\" company stocks right now.\"",
"title": ""
},
{
"docid": "e8346166ad4430c242e3026cd03fbdfc",
"text": "you need to use easy programming language to imply onto a scan where you enter Scan all stocks display if volume < (less than) 100",
"title": ""
},
{
"docid": "679be605950dfa4c18994648a37208cd",
"text": "So, first -- good job on making a thorough checklist of things to look into. And onto your questions -- is this a worthwhile process? Even independent of specific investing goals, learning how to research is valuable. If you decided to forgo investing in stocks directly, and chose to only invest in index funds, the same type of research skills would be useful. (Not to mention that such discipline would come in handy in other fields as well.) What other 80/20 'low hanging fruit' knowledge have I missed? While it may not count as 'low hanging fruit', one thing that stands out to me is there's no mention of what competition a company has in its field. For example, a company may be doing well today, but you may see signs that it's consistently losing ground to its competition. While that alone may not dissuade you from investing, it may give you something to consider. Is what I've got so far any good? or am I totally missing the point. Your cheat sheet seems pretty good to me. But a lot depends on what your goals are. If you're doing this solely for your education and experience, I would say you've done well. If you're looking to invest in a company that is involved in a field you're passionate about, you're on the right track. But you should probably consider expanding your cheat sheet to include things that are not 'low hanging fruit' but still matter to you. However, I'd echo the comments that have already been made and suggest that if this is for retirement investments, take the skills you've developed in creating your cheat sheet and apply that work towards finding a set of index funds that meet your criteria. Otherwise happy hunting!",
"title": ""
},
{
"docid": "a99bc6c33eeaaadfb126a6526747c7ed",
"text": "\"Spend your first 50 euros on research materials. Warren Buffett got started as a boy by reading every book in the Library of Congress on investing and stock market analysis. You can research the company filings for Canadian companies at http://www.sedar.com, U.S companies at http://www.edgar.com, and European companies at https://www.gov.uk/government/organisations/companies-house. Find conflicting arguments and strategies and decide for yourself which ones are right. The Motley Fool http://www.fool.ca offers articles on good stocks to add to your portfolio and why, as well as why not. They provide a balanced judgement instead of just hype. They also sell advice through their newsletter. In Canada the Globe & Mail runs a daily column on screening stocks. Every day they present a different stock-picking strategy and the filters used to reach their end list. They then show how much that portfolio would have increased or decreased as well as talking about some of the good & bad points of the stocks in the list. It's interesting to see over time a very few stocks show up on multiple lists for different strategies. These ones in my opinion are the stocks to be investing in. While the Globe's stock picks focus on Canadian and US exchanges, you might find the strategies worthwhile. You can subscribe to the digital version at http://www.theglobeandmail.com Once you have your analytical tools ready, pick any bank or stock house that offers a free practice account. Use that account and their screening tools to try out your strategies and see if you can make money picking stocks. My personal stock-picking strategy is to look for companies with: - a long uninterrupted history of paying dividends, - that are regularly increased, - and do not exceed the net profit per share of the company - and whose share price has a long history of increasing These are called unicorn companies, because there are so very few of them. Another great read is, \"\"Do Stocks Outperform Treasury Bills?\"\" by Hendrik Bessembinder. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2900447 In this paper the author looks at the entire history of the U.S. stock universe and finds that less than 4% of stocks are responsible for 100% of the wealth creation in the U.S. stock market. He discusses his strategies for picking the winners, but it also suggests that if you don't want to do any research, you could pick pretty much any stock at random, short it, and wait. I avoid mutual funds because they are a winner only for the fellas selling them. A great description on why the mutual fund industry is skewed against the investor can be found in a book called \"\"The RRSP Secret\"\" by Greg Habstritt. \"\"Unshakeable\"\" by Tony Robbins also discusses why mutual funds are not the best way to invest in stocks. The investor puts up 100% of the money, takes 100% of the risk, and gets at best 30% of the return. Rich people don't invest like that.\"",
"title": ""
},
{
"docid": "276a0ba22ec11912d9467d96d8545424",
"text": "That's why I said you can do a weighted average and take into account other factors. The initial average calculation is just a simple, high level average to compare betas across different listings. For a more precise calculation you would have to weigh different factors.",
"title": ""
},
{
"docid": "06b62c09e55c622ec61569b475874023",
"text": "The study of technical analysis is generally used (sometimes successfully) to time the markets. There are many aspects to technical analysis, but the simplest form is to look for uptrends and downtrends in the charts. Generally higher highs and higher lows is considered an uptrend. And lower lows and lower highs is considered a downtrend. A trend follower would go with the trend, for example see a dip to the trend-line and buy on the rebound. A simple strategy for this is shown in the chart below: I would be buying this stock when the price hits or gets very close to the trendline and then it bounces back above it. I would then have sold this stock once it has broken through below the trendline. This may also be an appropriate time if you were looking to short this stock. Other indicators could also be used in combination for additional confirmation of what is happening to the price. Another type of trader is called a bottom fisher. A bottom fisher would wait until a break above the downtrend line (second chart) and buy after confirmation of a higher high and possibly a higher low (as this could be the start of a new uptrend). There are many more strategies dealing with the study of technical analysis, and if you are interested you would need to find and learn about ones that suit your investment styles, whether you prefer short term trading or longer term investing, and your appetite for risk. You can develop strategies using various indicators and then paper trade or backtest these strategies. You can also manually backtest a strategy in most charting packages. You can go back in time on the chart so that the right side of the chart shows a date in the past (say one year ago or 10 years ago), then you can click forward one day at a time (or one week at a time if using weekly charts). With your indicators on the chart you can do virtual trades to buy or sell whenever a signal is given as you move forward in time. This way you may be able to check years of data in a day to see if your strategy works. Whatever you do, you need to document your strategies in writing in a written trading or investment plan together with a risk management strategy. You should always follow the rules in your written plan to avoid you making decisions based on emotions. By backtesting or paper trading your strategies it will give you confidence that they will work over the long term. There is a lot of work involved at the start, but once you have developed a documented strategy that has been thoroughly backtested, it will take you minimal time to successfully manage your investments. In my shorter term trading (positions held from a couple of days to a few weeks) I spend about half an hour per night to manage my trades and am up about 50% over the last 7 months. For my longer term investing (positions held from months to years) I spend about an hour per week and have been averaging over 25% over the last 4 years. Technical Analysis does work for those who have a documented plan, have approached it in a systematic way and use risk management to protect their existing and future capital. Most people who say that is doesn't work either have not used it themselves or have used it ad-hock without putting in the initial time and work to develop a documented and systematic approach to their trading or investing.",
"title": ""
},
{
"docid": "7cfb787181731c3db190ce83e73934f7",
"text": "You can't. If there was a reliable way to identify an undervalued stock, then people would immediately buy it, its price would rise and it wouldn't be undervalued any more.",
"title": ""
},
{
"docid": "3e0cc51cddecc1fe58524e39c9897ba2",
"text": "It would involve manual effort, but there is just a handful of exclusions, buy the fund you want, plug into a tool like Morningstar Instant X Ray, find out your $10k position includes $567.89 of defense contractor Lockheed Martin, and sell short $567.89 of Lockheed Martin. Check you're in sync periodically (the fund or index balance may change); when you sell the fund close your shorts too.",
"title": ""
},
{
"docid": "20a7eb90fb4fb80f4664b2eeed2ac630",
"text": "First, I want to point out that your question contains an assumption. Does anyone make significant money trading low volume stocks? I'm not sure this is the case - I've never heard of a hedge fund trading in the pink sheets, for example. Second, if your assumption is valid, here are a few ideas how it might work: Accumulate slowly, exit slowly. This won't work for short-term swings, but if you feel like a low-volume stock will be a longer-term winner, you can accumulate a sizable portion in small enough chunks not to swing the price (and then slowly unwind your position when the price has increased sufficiently). Create additional buyers/sellers. Your frustration may be one of the reasons low-volume stock is so full of scammers pumping and dumping (read any investing message board to see examples of this). If you can scare holders of the stock into selling, you can buy significant portions without driving the stock price up. Similarly, if you can convince people to buy the stock, you can unload without destroying the price. This is (of course) morally and legally dubious, so I would not recommend this practice.",
"title": ""
},
{
"docid": "6ccdf4de95322365d42b60b0d8817169",
"text": "\"The following is only an overview and does not contain all of the in-depth reasons why you should look more deeply. When you look at a stock's financials in depth you are looking for warning signs. These may warn of many things but one important thing to look for is ratio and growth rate manipulation. Using several different accounting methods it is possible to make a final report reflect a PE ratio (or any other ratio) that is inconsistent with the realities of the company's position. Earnings manipulation (in the way that Enron in particular manipulated them) is more widespread than you might think as \"\"earnings smoothing\"\" is a common way of keeping earnings in line (or smooth) in a recession or a boom. The reason that PE ratio looks so good could well be because professional investors have avoided the stock as there appear to be \"\"interesting\"\" (but legal) accounting decisions that are of concern. Another issue that you don't consider is growth. earnings may look good in the current reporting period but may have been stagnant or falling when considered over multiple periods. The low price may indicate falling revenues, earnings and market share that you would not be aware of when taking only your criteria into account. Understanding a firm will also give you an insight into how future news might affect the company. If the company has a lot of debt and market interest rates rise or fall how will that effect their debt, if another company brings out a competing product next week how will it effect the company? How will it effect their bottom line? How much do they rely on a single product line? How likely is it that their flagship product will become obsolete? How would that effect the company? Looking deeply into a company's financial statements will allow you to see any issues in their accounting practices and give you a feel for how they are preforming over time, it will also let you look into their cost of capital and investment decisions. Looking deeply into their products, company structure and how news will effect them will give you an understanding of potential issues that could threaten your investment before they occur. When looking for value you shouldn't just look at part of the value of the company; you wouldn't just look at sales of a single T-shirt range at Wallmart when deciding whether to invest in them. It is exactly the same argument for why you should look at the whole of the company's state when choosing to invest rather than a few small metrics.\"",
"title": ""
},
{
"docid": "b0450d67e8cbf88413d3c97a3f56ac2f",
"text": "You need a source of delisted historical data. Such data is typically only available from paid sources. According to my records 20 Feb 2006 was not a trading day - it was Preisdent's Day and the US exchanges were closed. The prior trading date to this was 17 Feb 2006 where the stock had the following data: Open: 14.40 High 14.46 Low 14.16 Close 14.32 Volume 1339800 (consolidated volume) Source: Symbol NVE-201312 within Premium Data US delisted stocks historical data set available from http://www.premiumdata.net/products/premiumdata/ushistorical.php Disclosure: I am a co-owner of Norgate / Premium Data.",
"title": ""
}
] |
fiqa
|
3ccc93740d778fd71ceb499fa2e6dd44
|
Index fund that tracks gold and other commodities
|
[
{
"docid": "37a1e67549592b0ff3bda0dcc97552a7",
"text": "I don't know answers that would be specific to Canada but one of the main ETF funds that tracks gold prices is GLD (SPDR Gold Trust) another is IAU (iShares Gold Trust). Also, there are several ETF's that combine different precious metals together and can be traded. You can find a fairly decent list here on the Stock Encylopedia site.",
"title": ""
},
{
"docid": "57d797626b2e0d05edba51b247c132be",
"text": "Barclays offers an iPath ETN (not quite an ETF), DJP, which tracks the total return of the Dow Jones-AIG Commodity Index.",
"title": ""
}
] |
[
{
"docid": "3ffd7588e47bdcfbf842058ec577af8f",
"text": "\"Answering this question is weird, because it is not really precise in what you mean. Do you want all stocks in the US? Do you want a selection of stocks according to parameters? Do you just want a cool looking graph? However, your possible misuse of the word derivative piqued my interest. Your reference to gold and silver seems to indicate that you do not know what a derivative actually is. Or what it would do in a portfolio. The straightforward way to \"\"see\"\" an efficient frontier is to do the following. For a set of stocks (in this case six \"\"randomly\"\" selected ones): library(quantmod) library(fPortfolio) library(PerformanceAnalytics) getSymbols(c(\"\"STZ\"\", \"\"RAI\"\", \"\"AMZN\"\", \"\"MSFT\"\", \"\"TWX\"\", \"\"RHT\"\"), from = \"\"2012-06-01\"\", to = \"\"2017-06-01\"\") returns <- NULL tickerlist <- c(\"\"STZ\"\", \"\"RAI\"\", \"\"AMZN\"\", \"\"MSFT\"\", \"\"TWX\"\", \"\"RHT\"\") for (ticker in tickerlist){ returns <- cbind(returns, monthlyReturn(Ad(eval(as.symbol(ticker))))) } colnames(returns) <- tickerlist returns <- as.timeSeries(returns) frontier <- portfolioFrontier(returns) png(\"\"frontier.png\"\", width = 800, height = 600) plot(frontier, which = \"\"all\"\") dev.off() minvariancePortfolio(returns, constraints = \"\"LongOnly\"\") Portfolio Weights: STZ RAI AMZN MSFT TWX RHT 0.1140 0.3912 0.0000 0.1421 0.1476 0.2051 Covariance Risk Budgets: STZ RAI AMZN MSFT TWX RHT 0.1140 0.3912 0.0000 0.1421 0.1476 0.2051 Target Returns and Risks: mean Cov CVaR VaR 0.0232 0.0354 0.0455 0.0360 https://imgur.com/QIxDdEI The minimum variance portfolio of these six assets has a mean return is 0.0232 and variance is 0.0360. AMZN does not get any weight in the portfolio. It kind of means that the other assets span it and it does not provide any additional diversification benefit. Let us add two ETFs that track gold and silver to the mix, and see how little difference it makes: getSymbols(c(\"\"GLD\"\", \"\"SLV\"\"), from = \"\"2012-06-01\"\", to = \"\"2017-06-01\"\") returns <- NULL tickerlist <- c(\"\"STZ\"\", \"\"RAI\"\", \"\"AMZN\"\", \"\"MSFT\"\", \"\"TWX\"\", \"\"RHT\"\", \"\"GLD\"\", \"\"SLV\"\") for (ticker in tickerlist){ returns <- cbind(returns, monthlyReturn(Ad(eval(as.symbol(ticker))))) } colnames(returns) <- tickerlist returns <- as.timeSeries(returns) frontier <- portfolioFrontier(returns) png(\"\"weights.png\"\", width = 800, height = 600) weightsPlot(frontier) dev.off() # Optimal weights out <- minvariancePortfolio(returns, constraints = \"\"LongOnly\"\") wghts <- getWeights(out) portret1 <- returns%*%wghts portret1 <- cbind(monthprc, portret1)[,3] colnames(portret1) <- \"\"Optimal portfolio\"\" # Equal weights wghts <- rep(1/8, 8) portret2 <- returns%*%wghts portret2 <- cbind(monthprc, portret2)[,3] colnames(portret2) <- \"\"Equal weights portfolio\"\" png(\"\"performance_both.png\"\", width = 800, height = 600) par(mfrow=c(2,2)) chart.CumReturns(portret1, ylim = c(0, 2)) chart.CumReturns(portret2, ylim = c(0, 2)) chart.Drawdown(portret1, main = \"\"Drawdown\"\", ylim = c(-0.06, 0)) chart.Drawdown(portret2, main = \"\"Drawdown\"\", ylim = c(-0.06, 0)) dev.off() https://imgur.com/sBHGz7s Adding gold changes the minimum variance mean return to 0.0116 and the variance stays about the same 0.0332. You can see how the weights change at different return and variance profiles in the picture. The takeaway is that adding gold decreases the return but does not do a lot for the risk of the portfolio. You also notice that silver does not get included in the minimum variance efficient portfolio (and neither does AMZN). https://imgur.com/rXPbXau We can also compare the optimal weights to an equally weighted portfolio and see that the latter would have performed better but had much larger drawdowns. Which is because it has a higher volatility, which might be undesirable. --- Everything below here is false, but illustrative. So what about the derivative part? Let us assume you bought an out of the money call option with a strike of 50 on MSFT at the beginning of the time series and held it to the end. We need to decide on the the annualized cost-of-carry rate, the annualized rate of interest, the time to maturity is measured in years, the annualized volatility of the underlying security is proxied by the historical volatility. library(fOptions) monthprc <- Ad(MSFT)[endpoints(MSFT, \"\"months\"\")] T <- length(monthprc) # 60 months, 5 years vol <- sd(returns$MSFT)*sqrt(12) # annualized volatility optprc <- matrix(NA, 60, 1) for (t in 1:60) { s <- as.numeric(monthprc[t]) optval <- GBSOption(TypeFlag = \"\"c\"\", S = s, X = 50, Time = (T - t) / 12, r = 0.001, b = 0.001, sigma = vol) optprc[t] <- optval@price } monthprc <- cbind(monthprc, optprc) colnames(monthprc) <- c(\"\"MSFT\"\", \"\"MSFTCall50\"\") MSFTCall50rets <- monthlyReturn(monthprc[,2]) colnames(MSFTCall50rets) <- \"\"MSFTCall50rets\"\" returns <- merge(returns, MSFTCall50rets) wghts <- rep(1/9, 9) portret3 <- returns%*%wghts portret3 <- cbind(monthprc, portret3)[,3] colnames(portret3) <- \"\"Equal weights derivative portfolio\"\" png(\"\"performance_deriv.png\"\", width = 800, height = 600) par(mfrow=c(2,2)) chart.CumReturns(portret2, ylim = c(0, 4.5)) chart.CumReturns(portret3, ylim = c(0, 4.5)) chart.Drawdown(portret2, main = \"\"Drawdown\"\", ylim = c(-0.09, 0)) chart.Drawdown(portret3, main = \"\"Drawdown\"\", ylim = c(-0.09, 0)) dev.off() https://imgur.com/SZ1xrYx Even though we have a massively profitable instrument in the derivative. The portfolio analysis does not include it because of the high volatility. However, if we just use equal weighting and essentially take a massive position in the out of the money call (which would not be possible in real life), we get huge drawdowns and volatility, but the returns are almost two fold. But nobody will sell you a five year call. Others can correct any mistakes or misunderstandings in the above. It hopefully gives a starting point. Read more at: https://en.wikipedia.org/wiki/Modern_portfolio_theory https://en.wikipedia.org/wiki/Option_(finance) The imgur album: https://imgur.com/a/LoBEY\"",
"title": ""
},
{
"docid": "7ab8da72c085bedff94ecbf207642e2a",
"text": "The S&P 500 represents a broadly diversified basket of stocks. Silver is a single metal. If all else is equal, more diversification means less volatility. A better comparison would be the S&P 500 vs. a commodities index, or silver vs. some individual stock.",
"title": ""
},
{
"docid": "2865984a64db25a71c7b3f2c57f1afc5",
"text": "\"Your plan already answers your own question in the best possible way: If you want to be able to make the most possible profit from a large downward move in a stock (in this case, a stock that tracks gold), with a limited, defined risk if there is an upward move, the optimal strategy is to buy a put option. There are a few Exchange Traded Funds (ETFs) that track the price of gold. think of them as stocks that behave like gold, essentially. Two good examples that have options are GLD and IAU. (When you talk about gold, you'll hear a lot about futures. Forget them, for now. They do the same essential thing for your purposes, but introduce more complexity than you need.) The way to profit from a downward move without protection against an upward move is by shorting the stock. Shorting stock is like the opposite of buying it. You make the amount of money the stock goes down by, or lose the amount it goes up by. But, since stocks can go up by an infinite amount, your possible loss is unlimited. If you want to profit on a large downward move without an unlimited loss if you're wrong and it goes up, you need something that makes money as the stock drops, but can only lose so much if it goes up. (If you want to be guaranteed to lose nothing, your best investment option is buying US Treasuries, and you're technically still exposed to the risk that US defaults on its debt, although if you're a US resident, you'll likely have bigger problems than your portfolio in that situation.) Buying a put option has the exact asymmetrical exposure you want. You pay a limited premium to buy it, and at expiration you essentially make the full amount that the stock has declined below the strike price, less what you paid for the option. That last part is important - because you pay a premium for the option, if it's down just a little, you might still lose some or all of what you paid for it, which is what you give up in exchange for it limiting your maximum loss. But wait, you might say. When I buy an option, I can lose all of my money, cant I? Yes, you can. Here's the key to understanding the way options limit risk as compared to the corresponding way to get \"\"normal\"\" exposure through getting long, or in your case, short, the stock: If you use the number of options that represent the number of shares you would have bought, you will have much, much less total money at risk. If you spend the same \"\"bag 'o cash\"\" on options as you would have spent on stock, you will have exposure to way more shares, and have the same amount of money at risk as if you bought the stock, but will be much more likely to lose it. The first way limits the total money at risk for a similar level of exposure; the second way gets you exposure to a much larger amount of the stock for the same money, increasing your risk. So the best answer to your described need is already in the question: Buy a put. I'd probably look at GLD to buy it on, simply because it's generally a little more liquid than IAU. And if you're new to options, consider the following: \"\"Paper trade\"\" first. Either just keep track of fake buys and sells on a spreadsheet, or use one of the many online services where you can track investments - they don't know or care if they're real or not. Check out www.888options.com. They are an excellent learning resource that isn't trying to sell you anything - their only reason to exist is to promote options education. If you do put on a trade, don't forget that the most frustrating pitfall with buying options is this: You can be basically right, and still lose some or all of what you invest. This happens two ways, so think about them both before you trade: If the stock goes in the direction you think, but not enough to make back your premium, you can still lose. So you need to make sure you know how far down the stock has to be to make back your premium. At expiration, it's simple: You need it to be below the strike price by more than what you paid for the option. With options, timing is everything. If the stock goes down a ton, or even to zero - free gold! - but only after your option expires, you were essentially right, but lose all your money. So, while you don't want to buy an option that's longer than you need, since the premium is higher, if you're not sure if an expiration is long enough out, it isn't - you need the next one. EDIT to address update: (I'm not sure \"\"not long enough\"\" was the problem here, but...) If the question is just how to ensure there is a limited, defined amount you can lose (even if you want the possible loss to be much less than you can potentially make, the put strategy described already does that - if the stock you use is at $100, and you buy a put with a 100 strike for $5, you can make up to $95. (This occurs if the stock goes to zero, meaning you could buy it for nothing, and sell it for $100, netting $95 after the $5 you paid). But you can only lose $5. So the put strategy covers you. If the goal is to have no real risk of loss, there's no way to have any real gain above what's sometimes called the \"\"risk-free-rate\"\". For simplicity's sake, think of that as what you'd get from US treasuries, as mentioned above. If the goal is to make money whether the stock (or gold) goes either up or down, that's possible, but note that you still have (a fairly high) risk of loss, which occurs if it fails to move either up or down by enough. That strategy, in its most common form, is called a straddle, which basically means you buy a call and a put with the same strike price. Using the same $100 example, you could buy the 100-strike calls for $5, and the 100-strike puts for $5. Now you've spent $10 total, and you make money if the stock is up or down by more than $10 at expiration (over 110, or under 90). But if it's between 90 and 100, you lose money, as one of your options will be worthless, and the other is worth less than the $10 total you paid for them both.\"",
"title": ""
},
{
"docid": "da970b33c88bfcf180ba2e428bd05130",
"text": "\"There are gold index funds. I'm not sure what you mean by \"\"real gold\"\". If you mean you want to buy physical gold, you don't need to. The gold index funds will track the price of gold and will keep you from filling your basement up with gold bars. Gold index funds will buy gold and then issue shares for the gold they hold. You can then buy and sell these just like you would buy and sell any share. GLD and IAU are the ticker symbols of some of these funds. I think it is also worth pointing out that historically gold has a been a poor investment.\"",
"title": ""
},
{
"docid": "438545110087a3379434531a7350b942",
"text": "\"To be honest, I think a lot of people on this site are doing you a disservice by taking your idea as seriously as they are. Not only is this a horrible idea, but I think you have some alarming misunderstandings about what it means to save for retirement. First off, precious metals are not an \"\"investment\"\"; they are store of value. The old saying that a gold coin would buy a suit 300 years ago and will still buy a suit today is pretty accurate. Buying precious metals and expecting them to \"\"appreciate\"\" in the future because they are \"\"undervalued\"\" is just flat-out speculation and really doesn't belong in a well-planned retirement account, unless it's a very small part for the purposes of diversification. So the upshot to all of this is the most likely outcome is you get zero return after inflation (maybe you'll get lucky or maybe you'll be very unlucky). Next you would say that sure, you're giving up some expected return for a reduction in risk. But, you've done away with diversification which is the most effective way to minimize risk... And I'm not sure what scenario you're imagining that the stock market or any other reasonable investment doesn't make any returns. If you invest in a market wide index fund, then the expected return is going to be roughly in proportion with productivity gains. To say that there will be no appreciation of the stock market over the next 40 years is to say that technological progress will stop and/or we will have large-scale economic disruptions that will wipe out 40 years of progress. If that happens, I would say it's highly questionable whether silver will actually be worth anything at all. I'd rather have food, property, and firearms. So, to answer your question, practically any other retirement savings plan would be better than the one that you currently outlined, but the best plan is just to put your money in a very low-cost index fund at Vanguard and let it sit until you retire. The expense ratios are so stupidly small, that it's not going to meaningfully affect your return.\"",
"title": ""
},
{
"docid": "6ca55b8facce5ce4bdb899ce505e1d9c",
"text": "I think you need a diversified portfolio, and index funds can be a part of that. Make sure that you understand the composition of your funds and that they are in fact invested in different investments.",
"title": ""
},
{
"docid": "b016057f1e2b5c76ab5e8a27555da1bc",
"text": "I don't think so. The market would need to be either very big or be key pillar of the commodities market which won't happen. Now if they force domestic consumers (Sinopec) to start using this for hedging than maybe.",
"title": ""
},
{
"docid": "0943e45e3c60536cea418a843e1c6250",
"text": "There are at least a couple of ways you could view this to my mind: Make an Excel spreadsheet and use the IRR function to compute the rate of return you are having based on money being added. Re-invested distributions in a mutual fund aren't really an additional investment as the Net Asset Value of the fund will drop by the amount of the distribution aside from market fluctuation. This is presuming you want a raw percentage that could be tricky to compare to other funds without doing more than a bit of work in a way. Look at what is the fund's returns compared to both the category and the index it is tracking. The tracking error is likely worth noting as some index funds could lag the index by a sizable margin and thus may not be that great. At the same time there may exist cases where an index fund isn't quite measuring up that well. The Small-Growth Indexing Anomaly would be the William Bernstein article from 2001 that has some facts and figures for this that may be useful.",
"title": ""
},
{
"docid": "a5c24dda372ef6aacc271ce6f77061ca",
"text": "I would recommend that go through some forums where commodities topics be discussed so that if you have some issues related any point in commodities investment you will easily get your question sort out.",
"title": ""
},
{
"docid": "7d3ad473454d6b6e90a3e42310e00a8c",
"text": "Bloomberg Commodity Index is one you check out. [link](https://www.bloomberg.com/quote/BCOM:IND) Oil does have a heavier weighting though (around 20% through Brent and WTI iirc) so while things like aluminium, gold, corn etc are up for the year BCOM is down YTD. Still a decent broad-based index for you to consider.",
"title": ""
},
{
"docid": "d2ee45566bdfe71aa642ed965b2bc49e",
"text": "\"There are some index funds out there like this - generally they are called \"\"equal weight\"\" funds. For example, the Rydex S&P Equal-Weight ETF. Rydex also has several other equal weight sector funds\"",
"title": ""
},
{
"docid": "82f557e3bc6679dec9faab7b6e58cc05",
"text": "Vanguard offers an index fund. Their FTSE Social Index Fund. For more information on it, go here.",
"title": ""
},
{
"docid": "71e043e167ce5c8f12c06fbd1e32f7b6",
"text": "\"I was able to find a fairly decent index that trades very close to 1/10th the actual price of gold by the ounce. The difference may be accounted to the indexes operating cost, as it is very low, about 0.1%. The index is the ETFS Gold Trust index (SGOL). By using the SGOL index, along with a Standard Brokerage investment account, I was able to set up an investment that appropriately tracked my gold \"\"shares\"\" as 10x their weight in ounces, the share cost as 1/10th the value of a gold ounce at the time of purchase, and the original cost at time of purchase as the cost basis. There tends to be a 0.1% loss every time I enter a transaction, I'm assuming due to the index value difference against the actual spot value of the price of gold for any day, probably due to their operating costs. This solution should work pretty well, as this particular index closely follows the gold price, and should reflect an investment in gold over a long term very well. It is not 100% accurate, but it is accurate enough that you don't lose 2-3% every time you enter a new transaction, which would skew long-term results with regular purchases by a fair amount.\"",
"title": ""
},
{
"docid": "9c84d0cd8ba4ce0d23663e0591844911",
"text": "Gold is a risky and volatile investment. If you want an investment that's inflation-proof, you should buy index-linked government bonds in the currency that you plan to be spending the money in, assuming that government controls its own currency and has a good credit rating.",
"title": ""
},
{
"docid": "6a7ad0dfe6e58a699a893680ecdf1566",
"text": "\"They may be confused. The combination of \"\"my wife received stock when younger\"\" and \"\"her father just died\"\" leaves questions. A completed gift, when she was a kid, means she has a basis (cost) same as the original owner of that stock. This may need to be researched. The other choice is that she gets a price based on the date of dad's death, a stepped up basis, if it was his, but she got it when he passed. No offense to them, but brokers are not always qualified to offer tax advice. How/when exactly did she get to own the stock. Upon second reading it appears I answered this from a tax perspective. You seem to have issues of ownership. What exactly does the broker tell you? In whose name is the statement for the account holding these shares? Scott, saw your update. For the accounts I have for my 13 year old, I am custodian, but the tax ID is her social security number. When 21, she doesn't need my permission to sell anything, just valid ID. What exactly does the broker tell her?\"",
"title": ""
}
] |
fiqa
|
58704b1ddaaa1784c5f31429276da7d8
|
Shareholder in US based company
|
[
{
"docid": "2878ec0d7cae7c79c35bb2ea7c3d6c0a",
"text": "Companies need to go public before you can buy their shares on a public stock exchange, but all companies have shares, even if there's only one share. And anyone who owns those shares can give them to whoever they like (there are generally restrictions on selling shares in unlisted companies to unsophisticated investors, but not on giving them away).",
"title": ""
}
] |
[
{
"docid": "41d5bfb7a9d47b8e32ca6736772ca243",
"text": "\"Yes and no. There are different classes of shares - Some have voting rights, some *don't*. Some take precedence over others in a bankruptcy. Some get larger dividends. \"\"Common\"\" isn't really a useful description of your stake in the company. You *do* have a \"\"stake\"\" in the company, but not all shares are equal.\"",
"title": ""
},
{
"docid": "ec3d14f8d9e15d3aab6f98d3a9cf46fd",
"text": "If you are tax-resident in the US, then you must report income from sources within and without the United States. Your foreign income generally must be reported to the IRS. You will generally be eligible for a credit for foreign income taxes paid, via Form 1116. The question of the stock transfer is more complicated, but revolves around the beneficial owner. If the stocks are yours but held by your brother, it is possible that you are the beneficial owner and you will have to report any income. There is no tax for bringing the money into the US. As a US tax resident, you are already subject to income tax on the gain from the sale in India. However, if the investment is held by a separate entity in India, which is not a US domestic entity or tax resident, then there is a separate analysis. Paying a dividend to you of the sale proceeds (or part of the proceeds) would be taxable. Your sale of the entity containing the investments would be taxable. There are look-through provisions if the entity is insufficiently foreign (de facto US, such as a Subpart-F CFC). There are ways to structure that transaction that are not taxable, such as making it a bona fide loan (which is enforceable and you must pay back on reasonable terms). But if you are holding property directly, not through a foreign separate entity, then the sale triggers US tax; the transfer into the US is not meaningful for your taxes, except for reporting foreign accounts. Please review Publication 519 for general information on taxation of resident aliens.",
"title": ""
},
{
"docid": "e0a23b436069fb1ebdb4e83095041424",
"text": "\"You should contact the company and the broker about the ownership. Do you remember ever selling your position? When you look back at your tax returns/1099-B forms - can you identify the sale? It should have been reported to you, and you should have reported it to the IRS. If not - then you're probably still the owner. As to K-1 - the income reported doesn't have to be distributed to you. Partnership is a pass-through entity, and cannot \"\"accumulate\"\" earnings for tax purposes, everything is deemed distributed. If, however, it is not actually distributed - you're still taxed on the income, but it is added to your basis in the partnership and you get the tax \"\"back\"\" when you sell your position. However, you pay income tax on the income based on the kind of the income, and on the sale - at capital gains rates. So the amounts added to your position will reduce your capital gains tax, but may be taxed at ordinary rates. Get a professional advice on the issue and what to do next, talk to a EA/CPA licensed in New York.\"",
"title": ""
},
{
"docid": "a7c3c50983b90a530bd4e87bf65bf070",
"text": "Where can publicly traded profits go but to shareholders via dividends? They can be retained by the company.",
"title": ""
},
{
"docid": "9abd5ec370b082cf841e039c527ee01a",
"text": "\"Is it equity, or debt? Understanding the exact nature of one's investment (equity vs. debt) is critical. When one invests money in a company (presumably incorporated or limited) by buying some or all of it — as opposed to lending money to the company — then one ends up owning equity (shares or stock) in the company. In such a situation, one is a shareholder — not a creditor. As a shareholder, one is not generally owed a money debt just by having acquired an ownership stake in the company. Shareholders with company equity generally don't get to treat money received from the company as repayment of a loan — unless they also made a loan to the company and the payment is designated by the company as a loan repayment. Rather, shareholders can receive cash from a company through one of the following sources: \"\"Loan repayment\"\" isn't one of those options; it's only an option if one made a loan in the first place. Anyway, each of those ways of receiving money based on one's shares in a company has distinct tax implications, not just for the shareholder but for the company as well. You should consult with a tax professional about the most effective way for you to repatriate money from your investment. Considering the company is established overseas, you may want to find somebody with the appropriate expertise.\"",
"title": ""
},
{
"docid": "f732bdd6254aa7f83b1bfdb31ddc9704",
"text": "*Disclaimer: I am a tax accountant , but I am not your professional accountant or advocate (unless you have been in my office and signed a contract). This communication is not intended as tax advice, and no tax accountant / client relationship results. *Please consult your own tax accountant for tax advise.** A foreign citizen may form a limited liability company. In contrast, all profit distributions (called dividends) made by a C corporation are subject to double taxation. (Under US tax law, a nonresident alien may own shares in a C corporation, but may not own any shares in an S corporation.) For this reason, many foreign citizens form a limited liability company (LLC) instead of a C corporation A foreign citizen may be a corporate officer and/or director, but may not work/take part in any business decisions in the United States or receive a salary or compensation for services provided in the United States unless the foreign citizen has a work permit (either a green card or a special visa) issued by the United States. Basically, you should be looking at benefiting only from dividends/pass-through income but not salaries or compensations.",
"title": ""
},
{
"docid": "29072a5d38bc60ace3fc0fbba2e862b9",
"text": "You're asking whether the shares you sold while being a US tax resident are taxable in the US. The answer is yes, they are. How you acquired them or what were the circumstances of the sale is irrelevant. When you acquired them is relevant to the determination of the tax treatment - short or long term capital gains. You report this transaction on your Schedule D, follow the instructions. Make sure you can substantiate the cost basis properly based on how much you paid for the shares you sold (the taxable income recognized to you at vest).",
"title": ""
},
{
"docid": "f6cafb8253a880df1e4cecfe0f1ae1c1",
"text": "\"If you swap the word \"\"shareholder\"\" for \"\"investor\"\" I think it helps clarify things. If you owned 51% of the company you'd get to say what to do with the cash, would you not? Managers are smart and successful, but ultimately just employees. Companies are beholden to their shareholders. In a more practical sense, I would think the board (representing shareholders) and the upper management would have to come up with a plan. But shareholders have the ultimate say.\"",
"title": ""
},
{
"docid": "8678ed4f912e6edb926d4ad3c93d5ea7",
"text": "Shareholders have voting rights, and directors have fiduciary obligations to shareholders. Sure, shareholders have rights to the dividends, but stock confers decisionmaking powers. I'm not really sure what your answer to this is, or how you are differentiating the concept of ownership from this.",
"title": ""
},
{
"docid": "a66c0f9f1dfa22db98a58fdb5c9bbbe5",
"text": "The key there is Large companies. The vast majority of companies in the US are small businesses with little or no international presence, and are taxed at the full 35%. Their very large competitors, however, have the ability to flout US corporate taxes, and therefore keep more of their profits - whether in terms of retained earnings or higher dividends to shareholders.",
"title": ""
},
{
"docid": "0ada391b851e4f03449e58bdfff9259c",
"text": "\"Many thanks for thedetailed response, appreciate it. But I am still not clear on the distinction between a public company and the equity holders. Isn't a public company = shareholders + equity holders? Or do you mean \"\"company\"\" = shareholders+equity holders + debt holders?\"",
"title": ""
},
{
"docid": "e0654e7730a0c6596f36a97d8f2e0cc7",
"text": "You actually have a few options. First, you can do a share split and then sell an equal number of shares from both you and your wife to maintain parity. Second, you can have the company issue additional shares/convert shares and then have the company sell the appropriate percentage to the third party while the rest is distributed to you and your wife. Third, you can have the company issue a separate class of stock. For example there are companies that have voting stock and non-voting stock. Depending on your goal, you could just issue non-voting stock and sell that. Best bet is to contact a lawyer who specializes in this type of work and have them recommend a course of action. One caveat that has not been mentioned is that what/how you do this will also depend on the type of corporation that you have created.",
"title": ""
},
{
"docid": "29d55ab26f576d446bf5ddcd88929106",
"text": "Congratulations! You own a (very small) slice of Apple. As a stockholder, you have a vote on important decisions that the company makes. Each year Apple has a stockholder meeting in Cupertino that you are invited to. If you are unable to attend and vote, you can vote by proxy, which simply means that you register your vote before the meeting. You just missed this year's meeting, which was held on February 26, 2016. They elected people to the board of directors, chose an accounting firm, and voted on some other proposals. Votes are based on the number of shares you own; since you only own one share, your vote is very small compared to some of the other stockholders. Besides voting, you are entitled to receive profit from the company, if the company chooses to pay this out in the form of dividends. Apple's dividend for the last several quarters has been $0.52 per share, which means that you will likely receive 4 small checks from Apple each year. The value of the share of stock that you have changes daily. Today, it is worth about $100. You can sell this stock whenever you like; however, since you have a paper certificate, in order to sell this stock on the stock market, you would need to give your certificate to a stock broker before they can sell it for you. The broker will charge a fee to sell it for you. Apple has a website for stockholders at investor.apple.com with some more information about owning Apple stock. One of the things you'll find here is information on how to update your contact information, which you will want to do if you move, so that Apple can continue to send you your proxy materials and dividend checks.",
"title": ""
},
{
"docid": "f3275902f1c0f9720de7ffcf33556f77",
"text": "\"The shares are \"\"imputed income\"\" / payment in kind. You worked in the UK, but are you a \"\"US Person\"\"? If not, you should go back to payroll with this query as this income is taxable in the UK. It is important you find out on what basis they were issued. The company will have answers. Where they aquired at a discount to fair market value ? Where they purchased with a salary deduction as part of a scheme ? Where they acquired by conversion of employee stock options ? If you sell the shares, or are paid dividends, then there will be tax withheld.\"",
"title": ""
},
{
"docid": "3a5924e2b6bf5ea265b7048bd0454db5",
"text": "\"If a company earns $1 Million in net profit (let's say all cash, which is not entirely realistic), it can do one of three things with it: On the balance sheet - profits that have not been distributed show up as \"\"retained earnings\"\". When dividends are paid, Retained Earnings and cash are reduced. None of the other options change the fact that it is still \"\"profit\"\" - they all just affect the balance sheet, not the income statement: Note that when a company issues dividends, it reduces its per-share value since cash is leaving the door with nothing in return. In Apple's case, since a significant amount of its profit was earned in other countries (where it was not taxed by the US), it would pay a significant amount in US corporate tax by bringing it back to the US by investing it or paying dividends. They are betting that at some point, the US will change the rules to make it more favorable to \"\"repatriate\"\" the money and reduce their tax significantly.\"",
"title": ""
}
] |
fiqa
|
3e33816e90d8aa16c648744d38f1fef3
|
Difference between full and mini futures contract
|
[
{
"docid": "2b5eaed08c1cfa0ee6679393252ffd58",
"text": "Both of these are futures contracts on the Ibovespa Brasil Sao Paulo Stock Exchange Index; the mini being exactly that, a mini version (or portion) of the regular futures contract. The mini counterpart makes trading the index more affordable to individual investors and hence increase liquidity.",
"title": ""
}
] |
[
{
"docid": "2846ddf3e9b5d55910d764f574f65e36",
"text": "ES1 is the Bloomberg symbol for the CME E-mini S&P 500 front-month continuous contract. ES2, ES3, etc. will likewise yield the 2nd and 3rd months. Which exact futures contract this symbol refers to will change about once a month.",
"title": ""
},
{
"docid": "2fa651968b3a4f892eda43d1753a3401",
"text": "In India the only way to short a stock is using F&O which I personally find to be sufficient for any shorting needs. However, Futures can be generally sold for upto 3 months but options have more choices which are even upto 5 years you can buy a put of a longer duration and when you want to do buy-back, you can directly sell the same option by squaring-off the trade before expiry date. You generally get approximately the same profit as shorting but you get to limit your risk.",
"title": ""
},
{
"docid": "6d312df32e59cafd30d39ede730a4e1b",
"text": "Standard options are contracts for 100 shares. If the option is for $0.75/share and you are buying the contract for 100 shares the price would be $75 plus commission. Some brokers have mini options available which is a contract for 10 shares. I don't know if all brokers offer this option and it is not available on all stocks. The difference between the 1 week and 180 day price is based on anticipated price changes over the given time. Most people would expect more volatility over a 6 month period than a 1 week period thus the demand for a higher premium for the longer option.",
"title": ""
},
{
"docid": "f5e070140e741eeb2fd1c0040fe4f624",
"text": "\"The difference between TMUSP and TMUS is that the \"\"with P\"\" ticker is for a TMobile Preferred Stock offering. The \"\"without P\"\" ticker is for TMobile common stock. The difference between the apparent percentage yields is due to Yahoo! Stock misreporting the dividend on the preferred stock for the common stock, which has not paid a dividend (thanks Brick for pointing this out!) Preferred stock holders get paid first in the event of liquidation, in most scenarios they get paid first. They sometimes get better returns. They typically lack voting rights, and after a grace period, they may be recalled by the company at a fixed price (set when they were issued). Common stock holders can vote to alter the board of directors, and are the epitome of the typical \"\"I own a trivial fraction of the company\"\" model that most people think of when owning stocks. As the common stock is valued at much less, it appears that the percent yield is much higher, but in reality, it's 0%.\"",
"title": ""
},
{
"docid": "5fcb01be87adba5a18e45a7a6627ed28",
"text": "The futures market allows you to take delivery at the lowest cost. Most people don't deal in 100oz gold bars and 5000oz of 1000oz silver bars though, especially at the retail level. That said, when you are at the retail level, often times you will find reputable Internet dealers offering the lowest cost of ownership. Keep in mind brand name though when you're doing this. Reputable refiners/mints will often see higher premiums versus generic, and this does matter to some extent. Quantity and weights also matter in terms of pricing; the more you buy the lower the premium.",
"title": ""
},
{
"docid": "8384d354271018c0de0dce360c7a96e0",
"text": "\"Consider the futures market. Traders buy and sell gold futures, but very few contracts, relatively speaking, result in delivery. The contracts are sold, and \"\"Open interest\"\" dwindles to near zero most months as the final date approaches. The seller buys back his short position, the buyer sells off his longs. When I own a call, and am 'winning,' say the option that cost me $1 is now worth $2, I'd rather sell that option for even $1.95 than to buy 100 shares of a $148 stock. The punchline is that very few option buyers actually hope to own the stock in the end. Just like the futures, open interest falls as expiration approaches.\"",
"title": ""
},
{
"docid": "79d5438b0c557a93e7157a96506906bf",
"text": "I work on a buy-side firm, so I know how these small data issues can drive us crazy. Hope my answer below can help you: Reason for price difference: 1. Vendor and data source Basically, data providers such as Google and Yahoo redistribute EOD data by aggregating data from their vendors. Although the raw data is taken from the same exchanges, different vendors tend to collect them through different trading platforms. For example, Yahoo, is getting stock data from Hemscott (which was acquired by Morningstar), which is not the most accurate source of EOD stocks. Google gets data from Deutsche Börse. To make the process more complicated, each vendor can choose to get EOD data from another EOD data provider or the exchange itself, or they can produce their own open, high, low, close and volume from the actual trade tick-data, and these data may come from any exchanges. 2. Price Adjustment For equities data, the re-distributor usually adjusts the raw data by applying certain customized procedures. This includes adjustment for corporate actions, such as dividends and splits. For futures data, rolling is required, and back-ward and for-warding rolling can be chosen. Different adjustment methods can lead to different price display. 3. Extended trading hours Along with the growth of electronic trading, many market tends to trade during extended hours, such as pre-open and post-close trading periods. Futures and FX markets even trade around the clock. This leads to another freedom in price reporting: whether to include the price movement during the extended trading hours. Conclusion To cross-verify the true price, we should always check the price from the Exchange where the asset is actually traded. Given the convenience of getting EOD data nowadays, this task should be easy to achieve. In fact, for professional traders and investors alike, they will never reply price on free providers such as Yahoo and Google, they will most likely choose Bloomberg, Reuters, etc. However, for personal use, Yahoo and Google should both be good choices, and the difference is small enough to ignore.",
"title": ""
},
{
"docid": "69c26266b591d45539af389fbdf5a8fc",
"text": "\"Very interesting. I'm actually glad you mentioned term structure models, because that's something I'm interested in. But I don't think the distinction you draw between \"\"equilibrium\"\" and \"\"arbitrage free\"\" models makes sense with Black-Scholes. My understanding was that the discrepancy between equilibrium and arbitrage-free term structure models arises because term structure models lack market completeness. In other words, when the market is incomplete (as it is with interest rates), you'll have a continuum of bond prices that are compatible with no arbitrage, and the exact price will depend on the market price for risk. However, in Black-Scholes, the market price for risk term basically falls out of the equation because of market completeness. Or in other words, since we have market completeness, there's a *unique* martingale measure that gives the price for the option. So when you have market completeness, there should be no difference between an equilibrium and a no-arbitrage model - they're one and the same.\"",
"title": ""
},
{
"docid": "a15ac15ca148e17f5a75a459168f7c48",
"text": "a) Contracts are for future delivery of said underlying. So if you are trading CL (crude oil) futures and don't sell before delivery date, you will be contacted about where you want the oil to be delivered (a warehouse presumably). 1 contract is the equivalent of 1000 barrels. b) 600 contracts depends entirely on what you are trading and how you are trading. If you are trading ES (S&P 500 e-Mini), you can do the 600 contracts in less than a second. c) No fees does not make particular sense. It's entirely possible that you are not trading anything, it's just a fake platform so they can judge your performance. d) The catch typically is that when it's time to pay you, they will avoid you or worst case, disappear. e) Trading is a full-time job, especially for the first 4-5 years when you're only learning the basics. Remember, in futures trading you are trading against all the other professionals who do only this 24/7 for decades. If you are only risking your time with the reward being learning and possibly money, it seems like a good deal. There's typically a catch with these things - like you would have to pay for your data which is very expensive or withdrawing funds is possible only months later.",
"title": ""
},
{
"docid": "6798b2dc3f9c4a3f181e781dc794fc76",
"text": "Brokers usually have this kind of information, you can take a look at interactive brokers for instance: http://www.interactivebrokers.co.uk/contract_info/v3.6/index.php?action=Details&site=GEN&conid=90384435 You are interested in the initial margin which in this case is $6,075. So you need that amount to buy/sell 1 future. In the contract specification you see the contract is made for 100 ounces. At the current price ($1,800/oz), that would be a total of $180,000. It is equivalent to saying you are getting 30x leverage. If you buy 1 future and the price goes from $1,800 to $1,850, the contract would go from $180,000 to $185,000. You make $5,000 or a 82% return. I am pretty sure you can imagine what happens if the market goes against you. Futures are great! (when your timing is perfect).",
"title": ""
},
{
"docid": "758503f6ed2ede9e61b36115d5228922",
"text": "See http://blogs.reuters.com/felix-salmon/2011/04/30/why-the-sec-should-look-at-levered-etfs/?dlvrit=60132, http://symmetricinfo.org/2011/04/are-investors-in-levered-short-treasury-etfs-a-disaster-waiting-to-happen-pt1/, and the articles linked from it: The issue with holding a levered ETF past 1 day is that investors expose themselves to path dependency in the underlying.... The reason for the difference in payouts comes from the fact that the manager of the levered ETF promises you a multiple of the daily returns of the underlying. To be able to promise you these daily returns, the ETF manager has to buy/sell some of the underlying every day to position himself to have a constant leverage ratio the next day. The short video below explains this process in detail for a 2x long ETF, but the same result holds for a 2x short ETF: the manager has to buy more of the underlying on a day when the underlying increases in value and sell more of the underlying when the underlying goes down in value .",
"title": ""
},
{
"docid": "8331c07f3c8f33cb5083b8dd9bff0e5e",
"text": "The owner of a long futures contract does not receive dividends, hence this is a disadvantage compared to owning the underlying stock. If the dividend is increased, and the future price would not change, there is an arbitrage possibility. For the sake of simplicity, assume that the stock suddenly starts paying a dividend, and that the risk free rate is zero (so interest does not play a role). One can expect that the future price is (rougly) equal to the stock price before the dividend announcment. If the future price would not change, an investor could buy the stock, and short a futures contract on the stock. At expiration he has to deliver the stock for the price set in the contract, which is under the assumptions here equal to the price he bought the stock for. But because he owned the stock, he receives the announced dividend. Hence he can make a risk-free profit consisting of the divivends. If interest do play a role, the argument is similar.",
"title": ""
},
{
"docid": "c4146082e5f8044c92c427f46a333df1",
"text": "In India, as suggested above, short/long position can be taken either in F&O or Spot market. The F&O segment short/long can be kept open for appx. 3 months by taking position on the far contract. In intra-day/Spot market, usually the position has to be squared at the end of day or the broker will square it during expiry (forcibly). However, having said that, it is a broker specific feature, as per National Stock Exchange (NSE) or Bombay Stock Exchange (BSE) any transaction has to be settled at the end of T+2 days (T being the trade day). Some brokers allow intra-day positions to be open for T+1 or T+2 days as long as the margin is provided. This is a broker specific discretion as the actual settlement is on T+2 (or in some cases as the exchange specifies). So, in general, to short a stock for a longer time, F&O segment should be used.",
"title": ""
},
{
"docid": "1d4e862ef7728b54f1e9bb19530c9621",
"text": "The amount stated is the total amount of money the customer will be paying to the company. How much profit that will translate into is dependent on the type of contract. Some types of contracts: Cost plus fixed fee: they are paid what it costs to complete the contract plus a fee on top of that. That fee represents their profits. The costs will include salary, benefits, overhead, equipment, supplies. Firm fixed price: They perform the service, and they get paid a fixed amount. If their costs are higher than they forecast, then they may lose money. If they can be more efficient than they forecast, then they make more money. Time and materials: They are paid for completing each sub-task based on the number of hours it takes to complete each sub task, plus materials. This is used to hire a company to maintain a fleet of trucks. If the trucks are used a lot they will need more standard maintenance, plus additional repairs based on the type of use. They pay X for labor and Y for materials for an oil change, but A for labor and B for materials for a complete engine rebuild. There are many variations on these themes. Some put the risk on the customer, some on the company. How and when the company is paid is based on the terms of the contract. Some pay X% a month, others pay based on meeting milestones. Some pay based on the number of tasks completed in each time period. Some contracts run for a specific period of time, others have an initial period plus option years. The article may or may not specify if the quoted amount is the minimum amount of the contract or the maximum amount. The impact on the stock price is much more complex. Much more needs to be known about the structure of the contract, and who will be providing the service to determine if there will be profits. Some companies will bid to lose money, if it will serve as a bridge to another contract or to fill a gap that will allow them to delay layoffs.",
"title": ""
},
{
"docid": "387b52a367205df5e715143e7f4a4040",
"text": "Difference between a limit and market order is largely a trade-off between price certainty and timing certainty. If you think the security is already well priced, the downside of a limit order is the price may never hit your limit and keep trading away from you. You'll either spend a lot of time amending your order or sitting around wishing you'd amended your order. The downside of a market order is you don't know the execution price ahead of time. This is typically more of a issue with illiquid instruments where even smaller orders may have price impact. For small trades in more liquid securities your realized price will often resemble the last traded price. Hope that helps. Both have a purpose, and the best tool for the job will depend on your circumstances.",
"title": ""
}
] |
fiqa
|
10eb0852a06df9c95c0aedb378be0441
|
Where can I get a list of all Stocks that were acquired or went bankrupt
|
[
{
"docid": "e111be12cb763891c38fb22c6932711f",
"text": "\"Where can I download all stock symbols of all companies \"\"currently listed\"\" and \"\"delisted\"\" as of today? That's incredibly similar . You can also do it with a Bloomberg terminal but there's no need to pay to do this because he data changes so slowly.\"",
"title": ""
}
] |
[
{
"docid": "202d5276e7d82b2d954b6fef63b10874",
"text": "Clawback Provision. Stock grants and options were either canceled or forfeited if they'd already been paid out. None of the execs became destitute because of it but the action was significant. Does anybody know how this compares to other cases of clawback?",
"title": ""
},
{
"docid": "e50fbda863f078d02e1be7577f198d04",
"text": "http://www.euroinvestor.com/exchanges/nasdaq/macromedia-inc/41408/history will work as DumbCoder states, but didn't contain LEHMQ (Lehman Brother's holding company). You can use Yahoo for companies that have declared bankruptcy, such as Lehman Brothers: http://finance.yahoo.com/q/hp?s=LEHMQ&a=08&b=01&c=2008&d=08&e=30&f=2008&g=d but you have to know the symbol of the holding company.",
"title": ""
},
{
"docid": "da3bb20b815bd711a1d70bb82fd9fd3f",
"text": "In general you cannot. Once the security is no longer listed on the exchange - it doesn't have to provide information to the exchange and regulators (unless it wants to be re-listed). That's one of the reasons companies go private - to keep their (financial and other) information private. If it was listed in 1999, and is no longer listed now - you can dig through SEC archives for the information. You can try and reach out to the company's investors' relations contact and see if they can help you with the specific information you're looking for.",
"title": ""
},
{
"docid": "900880c11c86edca4ff624f8f1f53405",
"text": "I've used Wikinvest before and think that's close to what you're looking for - but in Wiki-style rather than forums. Otherwise, I agree with CrimsonX that The Motley Fool is a good place to check out.",
"title": ""
},
{
"docid": "47d2401e8c9dcd835a24ea517a73bda6",
"text": "I've seen this tool. I'm just having a hard time finding where I can just get a list of all the companies. For example, you can get up to 100 results at a time, if I just search latest filings for 10-K. This isn't really an efficient way to go about what I want.",
"title": ""
},
{
"docid": "d6785de13ddb0dbb31dddee8e6ca16c9",
"text": "Reuters has a service you can subscribe to that will give you lots of Financial information that is not readily available in common feeds. One of the things you can find is the listing/delist dates of stocks. There are tools to build custom reports. That would be a report you could write. You can probably get the data for free through their rss feeds and on their website, but the custom reports is a paid feature. FWIW re-listing(listings that have been delisted but return to a status that they can be listed again) is pretty rare. And I can not think of too many(any actually) penny stocks that have grown to be listed on a major exchange.",
"title": ""
},
{
"docid": "d362c8bc0990303daf411cf46087887b",
"text": "\"My problem with your argument is that you don't have one. I'm sorry you cannot grasp the difference between mortgage backed securities and company stock or the difference between a short sale and buying a credit default swap. You keep spouting unrelated \"\"facts\"\" as if the mean something. Did big banks short sale FB? Who knows? Did they buy FB CDOs? No they didn't. There is no such thing. Did they buy credit default swaps? No.\"",
"title": ""
},
{
"docid": "62018e52ddd02eed1e4c34166f6a7ae2",
"text": "\"There are several such \"\"lists.\"\" The one that is maintained by the company is called the shareholder registry. That is a list that the company has given to it by the brokerage firms. It is a start, but not a full list, because many individual shareholders hold their stock with say Merrill Lynch, in \"\"street name\"\" or anonymously. A more useful list is the one of institutional ownership maintained by the SEC. Basically, \"\"large\"\" holders (of more than 5 percent of the stock) have to register their holdings with the SEC. More to the point, large holders of stocks, the Vanguards, Fidelitys, etc. over a certain size, have to file ALL their holdings of stock with the SEC. These are the people you want to contact if you want to start a proxy fight. The most comprehensive list is held by the Depositary Trust Company. People try to get that list only in rare instances.\"",
"title": ""
},
{
"docid": "cf82fdf941800ef384dc15c5f5ba0df1",
"text": "I'm surprised that [Theranos](https://www.vanityfair.com/news/2017/05/theranos-board-response-deposition-court-documents) isn't at or near the top. It went from $9 billion valuation to more or less worthless, all based on technological claims that never lived up to their claims, and with an all-star Board of Advisors. It's pretty much the definition of a hype bubble with an epic collapse. I suppose it's not as immediate a catastrophic failure as some of the ones on the list, but the size of the failure and collapse dwarfs most of them.",
"title": ""
},
{
"docid": "c02eb5b892813e13c4810bef3b337252",
"text": "Presumably you mean to ask what happens if State Street files chapter 7 bankruptcy, since not all bankruptcy proceedings end in liquidation. SPY is a well known ticker, I can't imagine that there wouldn't be an eager bank willing to pay to pick up that ticker and immediately acquire all the assets related to it. The most likely scenario is that another bank would assume control of the ticker and assets, and the shares would continue trading as they always have. A less likely scenario is that no other financial institution wanted to acquire SPY, and the shares would be liquidated and the proceeds would go to the owners of shares of the ETF. Since the underlying assets are in companies that have actual value, the shares shouldn't trade at much of a discount prior to liquidation. Additionally, if there is a black swan event, there will probably be losses on the underlying assets, so it might even be helpful if the SPY fund was tied up in legal proceedings while everyone gets their heads straight in the market.",
"title": ""
},
{
"docid": "7bc709e0c92e4abf2f119a1a3f385d46",
"text": "You can go to the required company's website and check out their investor section. Here is an example from GE and Apple.",
"title": ""
},
{
"docid": "20f359098fd69ea33661b6f8f5533514",
"text": "Google Portfolio does the job: https://www.google.com/finance/portfolio You can add transaction data, view fundamentals and much more.",
"title": ""
},
{
"docid": "39e680ba097f0ffc975fb39a29e5dcd0",
"text": "Check the answers to this Stackoverflow question https://stackoverflow.com/questions/754593/source-of-historical-stock-data a number of potential sources are listed",
"title": ""
},
{
"docid": "5e2f5699a504ea2e548d65c08031701e",
"text": "What drives the stock of bankrupt companies? The company's potential residual assets. When a company goes bankrupt it is required to sell its assets to pay off its debts. The funds raised from selling assets go to the following entities: The usual order of debt repayment, in terms of the lender, will be the government, financial institutions, other creditors (i.e. suppliers and utility companies), bondholders, preferred shareholders and, finally, common shareholders. Depending on the amount of debt and the value of a company's assets, the common shareholders may receive some left over from liquidated assets. This would drive the stock price of a bankrupt company.",
"title": ""
},
{
"docid": "db2f63f6fc2c53219ecac35428d7ce7d",
"text": "You need a source of delisted historical data. Such data is typically only available from paid sources. According to my records, Lawson Software Inc listed on the NASDAQ on 7 Dec 2001 and delisted on 6 Jul 2011. Its final traded price was $11.23. It was taken over by Infor who bid $11.25 per share. Source: Symbol LWSN-201107 within Premium Data US delisted stocks historical data set available from http://www.premiumdata.net/products/premiumdata/ushistorical.php Disclosure: I am a co-owner of Norgate / Premium Data.",
"title": ""
}
] |
fiqa
|
d5f8ffe54d029a4ee958f43ec96d8b25
|
How can an Indian citizen get exposure to global markets?
|
[
{
"docid": "f3932cc2002b359f9b9105bc0e28a203",
"text": "You can invest upto $200K per year abroad, and yes, you can buy Google as a stock. Consider opening an international account with a broker like interactive brokers (www.interactivebrokers.co.in) which allows you to fund the account from your local Indian account, and then on, buy shares of companies listed abroad.",
"title": ""
},
{
"docid": "3b33e80a1bc5ef0a22b1be95eee44ba0",
"text": "It isn't just ETFs, you have normal mutual funds in India which invest internationally. This could be convenient if you don't already have a depository account and a stockbroker. Here's a list of such funds, along with some performance data: Value Research - Equity: International: Long-term Performance. However, you should also be aware that in India, domestic equity and equity fund investing is tax-free in the long-term (longer than one year), but this exemption doesn't apply to international investments. Ref: Invest Around the World.",
"title": ""
},
{
"docid": "e0f0da2c0e5a4bfa04bda19efad7eb01",
"text": "There are some ETF's on the Indian market that invest in broad indexes in other countries Here's an article discussing this Be aware that such investments carry an additional risk you do not have when investing in your local market, which is 'currency risk' If for example you invest in a ETF that represents the US S&P500 index, and the US dollar weakens relative to the indian rupee, you could see the value if your investment in the US market go down, even if the index itself is 'up' (but not as much as the change in currency values). A lot of investment advisors recommend that you have at least 75% of your investments in things which are denominated in your local currency (well technically, the same currency as your liabilities), and no more than 25% invested internationally. In large part the reason for this advice is to reduce your exposure to currency risk.",
"title": ""
},
{
"docid": "3244cb5dd6f3993ed5ce0f950901c5ab",
"text": "Other than the possibility of minimal entry price being prohibitively high, there's no reason why you couldn't participate in any global trading whatsoever. Most ETFs, and indeed, stockbrokers allows both accounts opening, and trading via the Internet, without regard to physical location. With that said, I'd strongly advice you to do a proper research, and reality check both on your risk/reward profile, and on the vehicles to invest in. As Fools write, money you'll need in the next 6 months have no place on the stockmarket. Be prepared, that you can indeed loose all of your investment, regardless of the chosen vehicle.",
"title": ""
}
] |
[
{
"docid": "a96857cf8f4229f9687b18538caa3dcc",
"text": "\"Are most big US based financial institutions and banks in such a close relationship with USCIS (United States Citizenship And Immigration Services) so they can easily request the information about market traders? Yes. They must be in order to enforce the laws required by the sanctions. What online broker would you suggest that probably won't focus on that dual citizenship matter? \"\"Dual\"\" citizenship isn't actually relevant here. Nearly anyone in the world can invest in US banks except for those few countries that the US has imposed sanctions against. Since you are a citizen of one of those countries, you are ineligible to participate. The fact that you are also a US citizen isn't relevant in this case. I believe the reasoning behind this is that the US doesn't encourage dual citizenship: The U.S. Government does not encourage dual nationality. While recognizing the existence of dual nationality and permitting Americans to have other nationalities, the U.S. Government also recognizes the problems which it may cause. Claims of other countries upon U.S. dual-nationals often place them in situations where their obligations to one country are in conflict with the laws of the other. In addition, their dual nationality may hamper efforts of the U.S. Government to provide consular protection to them when they are abroad, especially when they are in the country of their second nationality. If I had to guess, I'd say the thinking there is that if you (and enough other people that are citizens of that country) want to participate in something in the US that sanctions forbid, you (collectively) could try to persuade that country's government to change its actions so that the sanctions are lifted. Alternatively, you could renounce your citizenship in the other country. Either of those actions would help further the cause that the US perceives to be correct. What it basically boils down to is that even though you are a US citizen, your rights can be limited due to having another citizenship in a country that is not favorable in the current political climate. Thus there are pros and cons to having dual citizenship.\"",
"title": ""
},
{
"docid": "5390ccf80d5ca97b63c0c6cb1002ce4d",
"text": "Yes many people operate accounts in usa from outside usa. You need a brokerage account opened in the name of your sister and then her username and password. Remember that brokerages may check the location of login and may ask security questions before login. So when your sister opens her account , please get the security questions. Also note that usa markets open ( 7.00 pm or 8.00 pm IST depending on daylight savings in usa). So this means when they close at 4:00 pm ET, it will be 1:30 or 2:30 am in India. This means it will affect your sleeping hours if you intend to day trade. Also understand that there are some day trading restrictions and balances associate. Normally brokerages need 25,000 $ for you to be a day trader. Finally CFA is not a qualification to be a trader and desire to become a trader doesn't make one a trader. TO give an analogy , just because you want to be a cricketer doesn't make you one. It needs a lot of practice and discipline.Also since in bangladesh , you will always convert the usa amount to bangladeshi currency and think of profits and losses in those terms. This might actually be bad.",
"title": ""
},
{
"docid": "2a02ac17db8eb9028d002db2277cc1d7",
"text": "It is very important to note the strength and reputation of the country's regulatory agency. You cannot assume the standards of say the SEC (US Securities and Exchange Commission) apply in other countries (even well-developed ones). These regulations force companies to disclose certain information to inform and protect investors. The standards for such practices vary internationally.",
"title": ""
},
{
"docid": "b4b354080dc85234776d08425d237976",
"text": "Your definition of 'outside your country' might need some redefinition, as there are three different things going on here . . . Your financial adviser appears to be highlighting the currency risk associated with point three. However, consider these risk scenarios . . . A) Your country enters a period of severe financial difficulty, and money markets shut down. Your brokerage becomes insolvent, and your investments are lost. In this scenario the fact of whether your investments were in an overseas index such as the S&P, or were purchased from an account denominated in a different currency, would be irrelevant. The only thing that would have mitigated this scenario is an account with an overseas broker. B) Your country's stock market enters a sustained and deep bear market, decimating the value of shares in its companies. In this scenario the fact of whether your investments were made in from a brokerage overseas, or were purchased from an account denominated in a different currency, would be irrelevant. The only thing that would have mitigate this scenario is investment in shares and indices outside your home country. Your adviser has a good point; as long as you intend to enjoy your retirement in your home country then it might be advisable to remove currency risk by holding an account in Rupees. However, you might like to consider reducing the other forms of risk by holding non-Indian securities to create a globally diversified portfolio, and also placing some of your capital in an account with a broker outside your home country (this may be very difficult to do in practice).",
"title": ""
},
{
"docid": "29c773c8f73383cc694b0fada66b967a",
"text": "\"In India the Short is what is called in other markets call as \"\"Naked Short\"\" [I think I got the right term]. It means that you can only short sell intra day and by the end of the day you have to buy back the shares [at whatever price, if you don't; the exchange will do it by force the next day]. In other markets the Intra day shorts are not allowed and one can short for several days by borrowing shares from someone else [arranged by broker] India has a futures market, so you can sell/buy something today with the execution date of one month. This is typically a fixed day of the month [I think last Thursday]\"",
"title": ""
},
{
"docid": "838c715b7d504db807ab5448b6489856",
"text": "I think examining the effects and potential implications of China's involvement with the stock market may be productive. Some interesting examples would be the failed market circuit breakers and the restrictions of short-selling in 2016. Not sure that this would qualify as a real topic, but may give you food for thought.",
"title": ""
},
{
"docid": "5a6445afd55be4313404548fa7c1db6c",
"text": "Good point. One of my former clients is an Indian immigrant who moved here to have the opportunity to create a better life. He was really passionate about affiliate marketing and created an empire here. Anyone who immigrates like that is dedicated and is more likely to succeed. I don't know nearly as many native born Indians as Koreans or Chinese come to think of it.",
"title": ""
},
{
"docid": "ba94b1b00e70a6501fe7dbcae3af0781",
"text": "The UK has historically aggressive financial law, inherited from Dutch friendship, influence, and acquisitions by conquest. The law is so open that nearly anyone can invest through the UK without much difficulty, and citizens have nearly no restrictions on where to invest. A UK citizen can either open an account in the US with paperwork hassles or at home with access to all world markets and less paperwork. Here is the UK version of my broker, Interactive Brokers. Their costs are the lowest, but you will be charged a minimum fee if you do not trade enough, and their minimum opening balance can be prohibitively high for some. If you do buy US products, be sure to file your W-8BEN.",
"title": ""
},
{
"docid": "667142e58e3a4136c97ef47012d4e625",
"text": "\"Exposure is the amount of money that you are at risk of losing on a given position (i.e. on a UST 10 year bond), portfolio of positions, strategy (selling covered calls for example), or counterparty, usually represented as a percentage of your total assets. Interbank exposure is the exposure of banks to other banks either through owning debt or stock, or by having open positions with the other banks as counterparties. Leveraging occurs when the value of your position is more than the value of what you are trading in. One example of this is borrowing money (i.e. creating debt for yourself) to buy bonds. The amount of your own funds that you are using to pay for the position is \"\"leveraged\"\" by the debt so that you are risking more than 100% of your capital if, for example, the bond became worthless). Another example would be buying futures \"\"on margin\"\" where you only put up the margin value of the trade and not the full cost. The problem with these leveraged positions is what happens if a credit event (default etc.) happens. Since a large amount of the leverage is being \"\"passed on\"\" as banks are issuing debt to buy other banks' debt who are issuing debt to buy debt there is a risk that a single failure could cause an unravelling of these leveraged positions and, since the prices of the bonds will be falling resulting in these leveraged positions losing money, it will cause a cascade of losses and defaults. If a leveraged position becomes worth less than the amount of real (rather than borrowed or margined) money that was put up to take the position then it is almost inevitable that the firm in that position will default on the requirements for the leverage. When that firm defaults it sparks all of the firms who own that debt to go through the same problems that it did, hence the contagion.\"",
"title": ""
},
{
"docid": "b56622ebc3733c8796be7e12c241770e",
"text": "Yes, and heres some pretty scary stats. Global debt went from about 200% of GPD in 2007 to 325% of GDP today. Global Debt is about 2.5x more than the value of global broad money (all the money in the world). The value of the derivatives market has increased to 6x the value of all global debt. Meaning a global market of packaging and trading debt exists that is 6x the value of the debt being traded, and 15x the value of all the money in the world.",
"title": ""
},
{
"docid": "b016057f1e2b5c76ab5e8a27555da1bc",
"text": "I don't think so. The market would need to be either very big or be key pillar of the commodities market which won't happen. Now if they force domestic consumers (Sinopec) to start using this for hedging than maybe.",
"title": ""
},
{
"docid": "a42527eda7326131233542acb2a672f6",
"text": "While you would reduce risk by diversifying into other stock ETFs across the world, Developed Market returns (and Emerging Markets to a lesser extent) are generally highly correlated with another (correlation of ~0.85-0.90). This implies that they all go up in bull-markets and go down together in bear markets. You are better off diversifying into other asset-classes given your risk tolerance (such as government bonds, as you have mentioned). Alternatively, you can target a portfolio owning all of the assets in the universe (assuming you're trading in Frankfurt, a combination of something similar to H4ZJ and XBAG, but with higher volumes and/or lower fees)! A good starting resource would be the Bogleheads Wiki: https://www.bogleheads.org/wiki/Asset_allocation",
"title": ""
},
{
"docid": "c43f778629b7a4480d5674d0cd5ff366",
"text": "Before this agreement, every country had laws on tax-ability of income [including Global incomes]. Quite a few individuals would get away and did not report such income and pay tax if due. In fact quite a few Multi National banks actively created products that helped US Citizens to move money outside and skip reporting. U.S. in order to step up this effort enacted FATCA; essentially as a compliance mechanism, it started with US Head quartered banks operating globally and made reporting mandatory. It stepped up efforts with other countries to ensure foreign banks also enhance reporting of US nationals. See the benefits, quite a few countries joined up together and as part of OECD, came up with CRS. Thus going forward it will enable tax authorities in member countries to exchange financials impacting taxes. The scope is also for Companies / Organization as quite a few Companies hide away income outside the domiciled country. I have heard a rumor that due to the upcoming Common Reporting Standard the details of bank accounts, including all transactions, will be reported all around the industrialized world and want to know if this is true. Yes this is true and it is not a rumor. The exact amount of data and type of data will be agreed between member countries. However a broad framework exists on what needs to be shared. Is it really true that the Common Reporting Standard is going to cause things like this to happen? It is very important to note; There is no new Tax Legislation. Even without FATCA/CRS, a honest tax payer was bound to pay legitimate tax due as per the existing tax provisions of the country along with the provisions of DTAA [Dual Tax Avoidance Agreements]. The CRS only enables monitoring and compliance. So if one was already tax compliant, there is nothing to worry. If one was exploiting the loop hole; how will authorities know ... well this will be curbed going forward. As a note, Canada and Australia will start CRS reporting from 2018.",
"title": ""
},
{
"docid": "33699ea0773d2f8560dc187dfcf52425",
"text": "India does allow Resident Indians to open USD accounts. Most leading National and Private Banks offer this. You can receive funds and send funds subject to some norms.",
"title": ""
},
{
"docid": "e1be62ce02096d39859cc6bb774405f7",
"text": "The fee representing the expense ratio is charged as long as you hold the investment. It is deducted daily from the fund assets, and thus reduces the price per share (NAV per share) that is calculated each day after the markets close. The investment fee is charged only when you make an investment in the fund. So, invest in the fund in one swell foop (all $5500 or $6500 for older people, all invested in a single transaction) rather than make monthly investments into the fund (hold the money in a money-market within your Roth IRA if need be). But, do check if there are back-end loads or 12b1 fees associated with the fund. The former often disappear after a few years; the latter are another permanent drain on performance. Also, please check whether reinvestment of dividends and capital gains incur the $75 transaction fee.",
"title": ""
}
] |
fiqa
|
ed1f19e28113705a0cb86c989daa4d3c
|
Using stock options to lower income tax in the USA?
|
[
{
"docid": "b29640c8014917d91e8d24c91f1d8522",
"text": "You're talking about NQO - non-qualified stock options. Even assuming the whole scheme is going to work, the way NQO are taxed is that the difference between the fair market value and the strike price is considered income to you and is taxed as salary. You'll save nothing, and will add a huge headache and additional costs of IPO and SEC regulations.",
"title": ""
}
] |
[
{
"docid": "a57f8a7e43f68fa77372db1607017ea4",
"text": "But investing into your own company is already a tax deductible event. Expenditures like Research & Development, employee compensation, and acquiring new equipment are all things that reduce taxable income. https://www.usatoday.com/story/money/markets/2016/05/20/third-cash-owned-5-us-companies/84640704/ > Apple (AAPL), Microsoft (MSFT), Alphabet (GOOGL), Cisco Systems (CSCO) and Oracle (ORCL) are sitting on $504 billion, or 30%, of the $1.7 trillion in cash and cash equivalents held by U.S. non-financial companies in 2015, according to an analysis released Friday by ratings agency Moody's Investors Service. That's even more cash concentration than in previous years, as these five companies held 27% of cash in 2014 and 25% in 2013. Apple alone is holding more cash and investments than eight of the 10 entire industry sectors. 1/3 of all dollars created by the US Federal Reserve banking system (physically minted or otherwise) is collectively held by 5 companies. Companies exist to accumulate wealth and will seek to avoid unnecessary expenditures, which includes taxes. The corporate income tax rate is 35%. For individuals, the top income tax bracket (for every dollar of income above $400,000) is 39.6%. I argue that dropping the top individual income tax bracket down to 34% will not materially affect these companies (paying 35% income tax) from continuing to just sit on a ludicrous sum of wealth.",
"title": ""
},
{
"docid": "bc4f14329bcfa724201199f9e476f193",
"text": "\"You have multiple issues buried within this question. First, we don't know your tax bracket. For my answer, I'll assume 25%. This simply means that in 2016, you'll have a taxable $37,650 or higher. The interesting thing is that losses and gains are treated differently. A 25%er's long term gain is taxed at 15%, yet losses, up to $3000, can offset ordinary income. This sets the stage for strategic tax loss harvesting. In the linked article, I offered a look at how the strategy would have resulted in the awful 2000-2009 decade producing a slight gain (1%, not great, of course) vs the near 10% loss the S&P suffered over that time. This was by taking losses in down years, and capturing long term gains when positive (and not using a carried loss). Back to you - a 15%er's long term gain tax is zero. So using a gain to offset a loss makes little sense. Just as creating a loss to offset the gain. The bottom line? Enjoy the loss, up to $3000 against your income, and only take gains when there's no loss. This advice is all superseded by my rule \"\"Don't let the tax tail wag the investing dog.\"\" For individual stocks, I would never suggest a transaction for tax purposes. You keep good stocks, you sell bad ones. Sell a stock to take a short term loss only to have it recover in the 30 day waiting period just once, and you'll learn that lesson. Learn it here for free, don't make that mistake at your own expense.\"",
"title": ""
},
{
"docid": "e4a93aa71ea93cf43c6833fd969880cb",
"text": "If you make 100K in the U.S., you are most definitely NOT paying 25.7% tax federally. Only money that you made over 37.5K is even charged at 25% AND you didn't even factor in that you get deductions which decrease your effective tax rate. Where are you pulling your numbers?",
"title": ""
},
{
"docid": "9dabce99288cdc12648af5ffe804b5c2",
"text": "The top long-term capital gains tax rate will rise to 20% effective 1 Jan, 2011, unless Congress decides to do something about it before then. (Will they? Who knows!! There's been talk about it, but, well, it's Congress. They don't even know what they're going to do.) Anyway. The rules about when you can sell stock are mostly concerned with when you can realize a capital loss: if you sell a stock at a loss and then re-buy it for tax purposes within 30 days, it's a wash sale and not eligible for a deduction. However, I don't believe this applies to any stocks once you realize a gain - once you've realized the gain and paid your tax for it, it's all yours, locked in at whatever rate. Your replacement stock will be subject to short-term capital gains for the next year afterwards, and you might need to be careful with identifying the holding period on different lots of your stock, but I don't believe there will be any particular trouble. Please do not rely entirely on my advice and consult also with your tax preparer or lawyer. :) And the IRS documentation: Special Addendum for Nov/Dec 2012! Spoiler alert! Congress did indeed act: they extended the rates, but only temporarily, so now we're looking at tax hikes starting in 2013 instead, only the new top rate++ will be something like 23.8% on account of an extra 3.8% medicare tax on passive earnings (brought to you via Obamacare legislation). But the year and the rates' specifics aside, same thing still applies. And the Republican house and Democratic senate/President are still duking it out. Have fun. ++ 3.8% surtax applies to the lesser of (a) net investment income (b) income over $200,000 ($250k if married). 20% tax rate applies to people in the 15% income tax bracket for ordinary income or higher. Additional tax discounts for property held over 5 years may be available. Consult tax law and your favorite tax professional and prepare to be confused.",
"title": ""
},
{
"docid": "a29180a712ea495058ea51adf0648e0b",
"text": "Oh it definitely makes sense on a state level and from my experience working taxes I would say it is much more prevalent to the extent I would have to bet every Fortune 1000 company does it. You can completely eliminate State Income Tax in many states (although states are rapidly closing the loopholes) which at corporate tax rates for most states between 6 and 8% this turns into a lot of money.",
"title": ""
},
{
"docid": "61c13cf9a0b369acedef93cf0ee9c8cc",
"text": "If so, are there ways to reduce the amount of taxes owed? Given that it's currently December, I suppose I could sell half of what I want now, and the other half in January and it would split the tax burden over 2 years instead, but beyond that, are there any strategies for tax reduction in this scenario? One possibility is to also sell stocks that have gone down since you bought them. Of course, you would only do this if you have changed your mind about the stock's prospects since you bought it -- that is, it has gone down and you no longer think it will go up enough to be worth holding it. When you sell stocks, any losses you take can offset any gains, so if you sell one stock for a gain of $10,000 and another for a loss of $5,000, you will only be taxed on your net gain of $5,000. Even if you think your down stock could go back up, you could sell it to realize the loss, and then buy it back later at the lower price (as long as you're not worried it will go up in the meantime). However, you need to wait at least 30 days before rebuying the stock to avoid wash sale rules. This practice is known as tax loss harvesting.",
"title": ""
},
{
"docid": "fa4477615bdc6b15ed541c628b8f46f1",
"text": "Welcome to the real world :-) There really aren't all that many ways for ordinary employees to lower taxes. You could put more in your 401k, buy a house (for the mortgage interest deduction, which lets you deduct some other things instead of taking standard deduction), or move to a different state to get rid of the state tax.",
"title": ""
},
{
"docid": "797b16b3563fe6ae859003ee4dcf5569",
"text": "Restricted Stock Units are different from stock options because instead of buying them at a particular strike price, you receive the actual shares of stock. They are taxed as ordinary income at the time that the restriction is lifted (you don't have to sell them to be taxed). Usually, you can choose to have a percentage of the stock withheld to cover tax withholding or pay for the withholding out of pocket (so you can retain all of your shares).",
"title": ""
},
{
"docid": "619d9bf8f60fc3b352242259405401bb",
"text": "No. Black Scholes includes a number of variables to calculate the value of the derivative but taxation isn't one of them. Whether you are trading options or futures, the dividend itelf may be part of the equation, but not the tax on said dividend.",
"title": ""
},
{
"docid": "177dba10aa106984233079276be83d24",
"text": "\"Hence why keeping the capital gains tax rate down is not such a bad idea. Sure, it may benefit \"\"rich\"\" people, but it will also allow RESPONSIBLE low and middle class income families to reinvest their capital gains and accumulate more wealth.\"",
"title": ""
},
{
"docid": "7af6de2300ef6bb4adbd025f53c0dfad",
"text": "\"Do you have other income that you are not considering? Interest and dividends would be an example, but there are all sorts of options. Also with your witholding is it set up such that your employers have any idea of your tax bracket ultimately based on your combined incomes? Usually what they do is take out money assuming you will be in the tax bracket of any given paycheck spread out over the course of a year. For example, for federal I had an option to select (in an online form that fills out my W4 for me) \"\"married: withold at higher single rate\"\" and did to try and cover this fact. Eventually I may end up having to calculate my own witholding to fix a too-low problem like yours.\"",
"title": ""
},
{
"docid": "29af954b3b5d2f33d38175d849fcf8ac",
"text": "You should get a 1099-MISC for the $5000 you got. And your broker should send you a 1099-B for the $5500 sale of Google stock. These are two totally separate things as far as the US IRS is concerned. 1) You made $5000 in wages. You will pay income tax on this as well as FICA and other state and local taxes. 2) You will report that you paid $5000 for stock, and sold it for $5500 without holding it for one year. Since this was short term, you will pay tax on the $500 in income you made. These numbers will go on different parts of your tax form. Essentially in your case, you'll have to pay regular income tax rates on the whole $5500, but that's only because short term capital gains are treated as income. There's always the possibility that could change (unlikely). It also helps to think of them separately because if you held the stock for a year, you would pay different tax on that $500. Regardless, you report them in different ways on your taxes.",
"title": ""
},
{
"docid": "ab4e8f980720ba23c8a6f3b80ca1a3cf",
"text": "Note that you're asking about withholding, not about taxing. Withholding doesn't mean this is exactly the tax you'll pay: it means they're withholding a certain amount to make sure you pay taxes on it, but the tax bill at the end of the year is the same regardless of how you choose to do the withholding. Your tax bill may be higher or lower than the withholding amount. As far as tax rate, that will be the same regardless - you're just moving the money from one place to the other. The only difference would be that your tax is based on total shares under the plan - meaning that if you buy 1k shares, for example, at $10, so $1,500 discounted income, if you go the payroll route you get (say) $375 withheld. If you go the share route, you either get $375 worth of stock (so 38 shares) withheld (and then you would lose out on selling that stock, meaning you don't get quite as much out of it at the end) or you would ask them to actually buy rather more shares to make up for it, meaning you'd have a slightly higher total gain. That would involve a slightly higher tax at the end of it, of course. Option 1: Buy and then sell $10000 worth, share-based withholding. Assuming 15% profit, and $10/share at both points, then buy/sell 1000 shares, $1500 in profit to take into account, 38 shares' worth (=$380) withheld. You put in $8500, you get back $9620, net $1120. Option 2: Buy and then sell $13500 worth, share based withholding. Same assumptions. You make about $2000 in pre-tax profit, meaning you owe about $500 in tax withholding. Put in $11475, get back $13000, net $1525. Owe 35% more tax at the end of the year, but you have the full $1500 to spend on whatever you are doing with it. Option 3: Buy and then sell $1000 worth, paycheck withholding. You get the full $10000-$8500 = $1500 up front, but your next paycheck is $375 lighter. Same taxes as Option 1 at the end of the year.",
"title": ""
},
{
"docid": "8d9f37b88061af0d87608c619c63a7ab",
"text": "Hundreds of millions of stock options isn't hundreds of millions of income yet though. And once they cash out they do get taxed as income so it's effectively the same. If we taxed the stock options it would be double taxation. I know it's ridiculous how much money they make still though something has to be done but just pointing that out.",
"title": ""
},
{
"docid": "72175f90adc2e004c434fd308c1d2327",
"text": "That is a weird one. Typically one never needs to layout cash to exercise an option. One would only choose to use option 1, if one is seeking to buy the options. This would occur if an employee was leaving a company, would no longer be eligible for the ISO (and thereby forfeit any option grant), and does not want to exercise the options. However, what is not weird is the way income tax works, you are taxed on your income in the US. I assume you are talking about the US here. So if you exercise 10K shares, if under either option, you will be taxed on the profit from those share. Profit = (actual price - strike price) * shares - fees",
"title": ""
}
] |
fiqa
|
343fe879fe52cd643db2ee5021a7cf1d
|
Can I withdraw cash from selling investments before the settlement date?
|
[
{
"docid": "e1869cf15c6b9a97003f6139f6dfb8f0",
"text": "No, you cannot withdraw the money until settlement day. Some brokers will allow you to trade with unsettled funds, but you cannot withdraw it until it is settled. Think about it, when you buy stock you have to pay for them by T+3, so if you sell you actually don't receive the funds until T+3.",
"title": ""
},
{
"docid": "05206e3fc916ec4bb82e8b3111591c6b",
"text": "\"Depends on your account. If you have a margin account, then you can \"\"withdraw\"\" the margin, and it will get paid off/settled on T+3. However if it's a cash account then you will most likely need to wait. Call your broker and ask, each broker has different rules.\"",
"title": ""
}
] |
[
{
"docid": "32778590fecaad9af44b55729a0b9ea3",
"text": "I have been careful here to cover both shares in companies and in ETFs (Exchange Traded Funds). Some information such as around corporate actions and AGMs is only applicable for company shares and not ETFs. The shares that you own are registered to you through the broker that you bought them via but are verified by independent fund administrators and brokerage reconciliation processes. This means that there is independent verification that the broker has those shares and that they are ring fenced as being yours. The important point in this is that the broker cannot sell them for their own profit or otherwise use them for their own benefit, such as for collateral against margin etc.. 1) Since the broker is keeping the shares for you they are still acting as an intermediary. In order to prove that you own the shares and have the right to sell them you need to transfer the registration to another broker in order to sell them through that broker. This typically, but not always, involves some kind of fee and the broker that you transfer to will need to be able to hold and deal in those shares. Not all brokers have access to all markets. 2) You can sell your shares through a different broker to the one you bought them through but you will need to transfer your ownership to the other broker and that broker will need to have access to that market. 3) You will normally, depending on your broker, get an email or other message on settlement which can be around two days after your purchase. You should also be able to see them in your online account UI before settlement. You usually don't get any messages from the issuing entity for the instrument until AGM time when you may get invited to the AGM if you hold enough stock. All other corporate actions should be handled for you by your broker. It is rare that settlement does not go through on well regulated markets, such as European, Hong Kong, Japanese, and US markets but this is more common on other markets. In particular I have seen quite a lot of trades reversed on the Istanbul market (XIST) recently. That is not to say that XIST is unsafe its just that I happen to have seen a few trades reversed recently.",
"title": ""
},
{
"docid": "8f5a0c7900330a7e68a346097022cf31",
"text": "\"I have a Roth IRA with Scottrade, and they allow me to write cash secured puts, as well as covered calls. I can also purchase calls or puts, if I choose. When I write a cash secured put, it automatically deducts the amount required to purchase the shares at the strike price from my \"\"cash available for transactions\"\".\"",
"title": ""
},
{
"docid": "5dc72381612728883984b05dc207493a",
"text": "\"Eventually, you'll end up buying a stock at or near a high-water mark. You might end up waiting a few years before you see your \"\"guaranteed\"\" $100 profit, and you now have $5K to $10K tied up in the wait. The more frequently you trade, the faster your money gets trapped. There are two ways to avoid this problem: 1) Do it during strong bull markets. If everything keeps going up you don't need to worry about peaks...but then why would you keep cashing out for $1 gains? 2) Accurately predict the peaks. If you can see the future, why would you keep cashing out for $1 gains? Either way, this strategy will only make your broker happy, $8 at a time.\"",
"title": ""
},
{
"docid": "4f912f5d1f133a5faf79a635365990fb",
"text": "\"Because it takes 3 business days for the actual transfer of stock to occur after you buy or sell to the next owner, your cash is tied up until that happens. This is called the settlement period. Therefore, brokers offer \"\"margin\"\", which is a form of credit, or loan, to allow you to keep trading while the settlement period occurs, and in other situations unrelated to the presented question. To do this you need a \"\"margin account\"\", you currently have a \"\"cash account\"\". The caveat of having a retail margin account (distinct from a professional margin account) is that there is a limited amount of same-day trades you can make if you have less than $25,000 in the account. This is called the Pattern Day Trader (PDT) rule. You don't need $25k to day trade, you will just wish you had it, as it is easy to get your account frozen or downgraded to a cash account. The way around THAT is to have multiple margin accounts at different brokerages. This will greatly increase the number of same day trades you can make. Many brokers that offer a \"\"solution\"\" to PDT to people that don't have 25k to invest, are offering professional trading accounts, which have additional fees for data, which is free for retail trading accounts. This problem has nothing to do with: So be careful of the advice you get on the internet. It is mostly white noise. Feel free to verify\"",
"title": ""
},
{
"docid": "d9b7a9e4e0ca3011841150d8457efa6a",
"text": "The rules are quite different. There is no special home purchase penalty-free withdrawal. In the case that your account has been open for five years, you can withdraw the principal (but not the earnings) without penalty. You may want to talk to a professional for further details. The real question is: why do you want to borrow against your future to finance your present? Your down payment funds should come from another source than your retirement. Retirement funds should only be touched in the direst financial straights.",
"title": ""
},
{
"docid": "16b3871bfb883e3574f6ac2651f7aa83",
"text": "I do this often and have never had a problem. My broker is TD Ameritrade and they sent several emails (and even called and left a message) the week of expiry to remind me I had in the money options that would be expiring soon. Their policy is to automatically exercise all options that are at least $.01 in the money. One email was vaguely worded, but it implied that they could liquidate other positions to raise money to exercise the options. I would have called to clarify but I had no intention of exercising and knew I would sell them before expiry. In general though, much like with margin calls, you should avoid being in the position where the broker needs to (or can do) anything with your account. As a quick aside: I can't think of a scenario where you wouldn't be able to sell your options, but you probably are aware of the huge spreads that exist for many illiquid options. You'll be able to sell them, but if you're desperate, you may have to sell at the bid price, which can be significantly (25%?) lower than the ask. I've found this to be common for options of even very liquid underlyings. So personally, I find myself adjusting my limit price quite often near expiry. If the quote is, say, 3.00-3.60, I'll try to sell with a limit of 3.40, and hope someone takes my offer. If the price is not moving up and nobody is biting, move down to 3.30, 3.20, etc. In general you should definitely talk to your broker, like others have suggested. You may be able to request that they sell the options and not attempt to exercise them at the expense of other positions you have.",
"title": ""
},
{
"docid": "c38fdb9c7f76677a4614faf0eaf2598a",
"text": "\"You avoid pattern day trader status by trading e-mini futures through a futures broker. The PDT rules do not apply in the futures markets. Some of the markets that are available include representatives covering the major indices i.e the YM (DJIA), ES (S&P 500) and NQ (Nasdaq 100) and many more markets. You can take as many round-turn trades as you care to...as many or as few times a day as you like. E-mini futures contracts trade in sessions with \"\"transition\"\" times between sessions. -- Sessions begin Sunday evenings at 6 PM EST and are open through Monday evening at 5 PM EST...The next session begins at 6 pm Monday night running through Tuesday at 5 PM EST...etc...until Friday's session close at 5 PM EST. Just as with stocks, you can either buy first then sell (open and close a position) or short-sell (sell first then cover by buying). You profit (or lose) on a round turn trade in the same manor as you would if trading stocks, options, ETFs etc. The e-mini futures are different than the main futures markets that you may have seen traders working in the \"\"pits\"\" in Chicago...E-mini futures are totally electronic (no floor traders) and do not involve any potential delivery of the 'product'...They just require the closing of positions to end a transaction. A main difference is you need to maintain very little cash in your account in order to trade...$1000 or less per trade, per e-mini contract...You can trade just 1 contract at a time or as many contracts as you have the cash in your account to cover. \"\"Settlement\"\" is immediate upon closing out any position that you may have put on...No waiting for clearing before your next trade. If you want to hold an e-mini contract position over 2 or more sessions, you need to have about $5000 per contract in your account to cover the minimum margin requirement that comes into play during the transition between sessions... With the e-minis you are speculating on gaining from the difference between when you 'put-on' and \"\"close-out\"\" a position in order to profit. For example, if you think the DJIA is about to rise 20 points, you can buy 1 contract. If you were correct in your assessment and sold your contract after the e-mini rose 20 points, you profited $100. (For the DJIA e-mini, each 1 point 'tick' is valued at $5.00)\"",
"title": ""
},
{
"docid": "557a6cad91cdbb47585518cd2448d807",
"text": "If they short the contract, that means, in 5 months, they will owe if the price goes up (receive if the price goes down) the difference between the price they sold the future at, and the 3-month Eurodollar interbank rate, times the value of the contract, times 5. If they're long, they receive if the price goes up (owe if the price goes down), but otherwise unchanged. Cash settlement means they don't actually need to make/receive a three month loan to settle the future, if they held it to expiration - they just pay or receive the difference. This way, there's no credit risk beyond the clearinghouse. The final settlement price of an expiring three-month Eurodollar futures (GE) contract is equal to 100 minus the three-month Eurodollar interbank time deposit rate.",
"title": ""
},
{
"docid": "29051a1f78e6280e783af10934bd5ac1",
"text": "Purchases and sales from the same trade date will both settle on the same settlement date. They don't have to pay for their purchases until later either. Because HFT typically make many offsetting trades -- buying, selling, buying, selling, buying, selling, etc -- when the purchases and sales settle, the amount they pay for their purchases will roughly cancel with the amount they receive for their sales (the difference being their profit or loss). Margin accounts and just having extra cash around can increase their ability to have trades that do not perfectly offset. In practice, the HFT's broker will take a smaller amount of cash (e.g. $1 million) as a deposit of capital, and will then allow the HFT to trade a larger amount of stock value long or short (e.g. $10 million, for 10:1 leverage). That $1 million needs to be enough to cover the net profit/loss when the trades settle, and the broker will monitor this to ensure that deposit will be enough.",
"title": ""
},
{
"docid": "0a0abff4a29bb7980683feabb76108a1",
"text": "\"While @JB's \"\"yes\"\" is correct, a few more points to consider: There is no tax penalty for withdrawing any time from a taxable investment, that is, one not using specific tax protections like 401k/IRA or ESA or HSA. But you do pay tax on any income or gain distributions you receive from a taxable investment in a fund (except interest on tax-exempt aka \"\"municipal\"\" bonds), and any net capital gains you realize when selling (or technically redeeming for non-ETF funds). Just like you do for dividends and interest and gains on non-fund taxable investments. Many funds have a sales charge or \"\"load\"\" which means you will very likely lose money if you sell quickly typically within at least several months and usually a year or more, and even some no-load funds, to discourage rapid trading that makes their management more difficult (and costly), have a \"\"contingent sales charge\"\" if you sell after less than a stated period like 3 months or 6 months. For funds that largely or entirely invest in equities or longer term bonds, the share value/price is practically certain to fluctuate up and down, and if you sell during a \"\"down\"\" period you will lose money; if \"\"liquid\"\" means you want to take out money anytime without waiting for the market to move, you might want funds focussing on short-term bonds, especially government bonds, and \"\"money market\"\" funds which hold only very short bonds (usually duration under 90 days), which have much more stable prices (but lower returns over the longer term).\"",
"title": ""
},
{
"docid": "b49360f5452c74aba4b3d5242a832bdf",
"text": "You should not have to wait 3 days to sell the stock after purchase. If you are trading with a cash account you will have to wait for the sale to settle (3 business days) before you can use those funds to purchase other stock. If you meet the definition of a pattern day trader which is 4 or more day trades in 5 business days then your brokerage will require you to have a minimum of $25,000 in funds and a margin account.",
"title": ""
},
{
"docid": "c75297b62f73553ec352cda7a9fff1b6",
"text": "\"I've done exactly what you say at one of my brokers. With the restriction that I have to deposit the money in the \"\"right\"\" way, and I don't do it too often. The broker is meant to be a trading firm and not a currency exchange house after all. I usually do the exchange the opposite of you, so I do USD -> GBP, but that shouldn't make any difference. I put \"\"right\"\" in quotes not to indicate there is anything illegal going on, but to indicate the broker does put restrictions on transferring out for some forms of deposits. So the key is to not ACH the money in, nor send a check, nor bill pay it, but rather to wire it in. A wire deposit with them has no holds and no time limits on withdrawal locations. My US bank originates a wire, I trade at spot in the opposite direction of you (USD -> GBP), wait 2 days for the trade to settle, then wire the money out to my UK bank. Commissions and fees for this process are low. All told, I pay about $20 USD per xfer and get spot rates, though it does take approx 3 trading days for the whole process (assuming you don't try to wait for a target rate but rather take market rate.)\"",
"title": ""
},
{
"docid": "6bf38299a224a2ca9d6a6c7ecb4498dd",
"text": "\"This is the sad state of US stock markets and Regulation T. Yes, while options have cleared & settled for t+1 (trade +1 day) for years and now actually clear \"\"instantly\"\" on some exchanges, stocks still clear & settle in t+3. There really is no excuse for it. If you are in a margin account, regulations permit the trading of unsettled funds without affecting margin requirements, so your funds in effect are available immediately after trading but aren't considered margin loans. Some strict brokers will even restrict the amount of uncleared margin funds you can trade with (Scottrade used to be hyper safe and was the only online discount broker that did this years ago); others will allow you to withdraw a large percentage of your funds immediately (I think E*Trade lets you withdraw up to 90% of unsettled funds immediately). If you are in a cash account, you are authorized to buy with unsettled funds, but you can't sell purchases made on unsettled funds until such funds clear, or you'll be barred for 90 days from trading as your letter threatened; besides, most brokers don't allow this. You certainly aren't allowed to withdraw unsettled funds (by your broker) in such an account as it would technically constitute a loan for which you aren't even liable since you've agreed to no loan contract, a margin agreement. I can't be sure if that actually violates Reg T, but when I am, I'll edit. While it is true that all marketable options are cleared through one central entity, the Options Clearing Corporation, with stocks, clearing & settling still occurs between brokers, netting their transactions between each other electronically. All financial products could clear & settle immediately imo, and I'd rather not start a firestorm by giving my opinion why not. Don't even get me started on the bond market... As to the actual process, it's called \"\"clearing & settling\"\". The general process (which can generally be applied to all financial instruments from cash deposits to derivatives trading) is: The reason why all of the old financial companies were grouped on Wall St. is because they'd have runners physically carting all of the certificates from building to building. Then, they discovered netting so slowed down the process to balance the accounts and only cart the net amounts of certificates they owed each other. This is how we get the term \"\"bankers hours\"\" where financial firms would close to the public early to account for the days trading. While this is all really done instantly behind your back at your broker, they've conveniently kept the short hours.\"",
"title": ""
},
{
"docid": "6ad39f83aacc8997b0def6e760c28763",
"text": "You have to call Interactive Brokers for this. This is what you should do, they might even have a web chat. These are very broker specific idiosyncrasies, because although margin rules are standardized to an extent, when they start charging you for interest and giving you margin until settlement may not be standardized. I mean, I can call them and tell you what they said for the 100 rep.",
"title": ""
},
{
"docid": "3958b9cb8e53f34f5db3249b09a9fa1e",
"text": "No, this isn't possible, especially not when you're trading a highly liquid stock like Apple. When you put in your buy order at $210, any other traders that have open limit sell orders with the correct parameters, e.g. price and volume, will have their order(s) filled. This will occur before you can put in your own sell order and purchase your own shares because the other orders are listed on the order book first. In the US, many tax-sheltered accounts like IRA's have specific rules against self-dealing, which includes buying and selling assets with yourself, so such a transaction would be prohibited by definition. Although I'm not entirely sure if this applies to stocks, the limitation described in the first paragraph still applies regardless. If this were possible, rest assured that high-frequency traders would take advantage of this tactic to manipulate share prices. (I've heard critics say that this does occur, but I haven't researched it myself or seen any data about it)",
"title": ""
}
] |
fiqa
|
dc3a68c99fc670eed5e2ff98095691e8
|
What is a good price to “Roll” a Covered Call?
|
[
{
"docid": "6c2e04274655409ddf47850f0e9982e1",
"text": "There is no reason to roll an option if the current market value is lower than the strike sold. Out-of-the-money strikes (as is the $12 strike) are all time value which is decaying constantly and that is to our advantage. If share price remains below the strike, the option will expire worthless, you will still have your shares and free to sell another option the Monday after expiration Friday. If share price is > $12 on expiration Friday and you want to keep those shares, you can roll out or out-and-up depending on your outlook for the stock. Good luck, Alan",
"title": ""
},
{
"docid": "e4b0148f3cdecb6df7692dbccf3fa8ad",
"text": "An expiration 2 years out will have Sqr(2) (yes the square root of 2!) times the premium of the 1 year expiration. So if the option a year out sell for $1.00, two is only $1.41. And if the stock trades for $10, but the strike is $12, why aren't you just waiting for expiration to write the next one?",
"title": ""
},
{
"docid": "77332582fb99c0b0808d27b9c3c0182b",
"text": "If the call is in the money and you believe the reason for the price jump was an overreaction with a pullback on the horizon or you anticipate downward movement for other reasons, I will roll (sometimes for a strike closer to at the money) as long as the trade results in a net credit! You already have the statistical edge trading covered calls over everyone who purchased stock at the same point in time. This is because covered calls reduce your cost basis and increase your probability of profit. For people reading this who are not interested in the math behind probability of profit(POP) for covered calls, you should be aware of why POP is higher for covered calls (CC). With CCs you win when the stock price stays the same, you win when it goes down slightly, you win when the stock goes up. You have two more ways to win than someone who just buys stock, therefore a higher probability of making a buck! Another option: If your stock is going to be called at a loss, or the strike you want to roll to results in a net debit, or your cash funds are short of owning 100x shares and you are familiar with the stock, try writing a naked put for the price you want to buy at. At experation, if the naked put is exercised, your basis is reduced by the premium of the put you sold, and you can write a covered call against the stock you now own. If it expires worthless you keep the premium. This is also another way to increase your POP.",
"title": ""
}
] |
[
{
"docid": "f4ea07c1d545d71f26856ad9d46c4ed8",
"text": "Outside of software that can calculate the returns: You could calculate your possible returns on that leap spread as you ordinarily would, then place the return results of that and the return results for the covered call position side by side for any given price level of the stock you calculate, and net them out. (Netting out the dollar amounts, not percentage returns.) Not a great answer, but there ya go. Software like OptionVue is expensive",
"title": ""
},
{
"docid": "fcc31591b34e898d6a5aa473f7b6a16e",
"text": "One answer in four days tells you this is a niche, else there should be many replies by now. The bible is McMillan on Options Note - I link to the 1996 edition which starts at 39 cents, the latest revision will set you back $30 used. The word bible says it all, it offers a great course in options, everything you need to know. You don't get a special account for option trading. You just apply to your regular broker, so depending what you wish to do, the amount starts at You sell calls against stock you own in your IRA. You see, selling covered calls always runs the risk of having your stock called away, and you'd have a gain, I'd hope. By doing this within the IRA, you avoid that. Options can be, but are not always, speculative. Covered calls just change the shape of your return curve. i.e. you lower your cost by the option premium, but create a fixed maximum gain. I've created covered calls on the purchase of a stock or after holding a while depending on the stock. Here's the one I have now: MU 1000 shares bought at $8700, sold the $7.50 call (jan12) for $3000. Now, this means my cost is $5700, but I have to let it go for $7500, a 32% return if called. (This was bought in mid 2010, BTW.) On the flip side, a drop of up to 35% over the time will still keep me at break even. The call seemed overpriced when I sold it. Stock is still at $7.20, so I'm close to maximum gain. This whole deal was less risky than just owning one risky stock. I just wrote a post on this trade Micron Covered Call, using today's numbers for those actually looking to understand this as new position. (The article was updated after the expiration. The trade resulted in a 42% profit after 491 days of holding the position, with the stock called away.) On the other hand, buying calls, lots of them, during the tech bubble was the best and worst thing I did. One set of trades' value increased by a factor of 50, and in a few weeks blew up on me, ended at 'only' triple. I left the bubble much better off than I went in, but the peak was beautiful, I'd give my little toe to have stayed right there. From 99Q2 to 00Q2, net worth was up by 3X our gross salary. Half of that (i.e. 1.5X) was gone after the crash. For many, they left the bubble far far worse than before it started. I purposely set things up so no more than a certain amount was at risk at any given time, knowing a burst would come, just not when. If nothing else, it was a learning experience. You sell calls against stock you own in your IRA. You see, selling covered calls always runs the risk of having your stock called away, and you'd have a gain, I'd hope. By doing this within the IRA, you avoid that. Options can be, but are not always, speculative. Covered calls just change the shape of your return curve. i.e. you lower your cost by the option premium, but create a fixed maximum gain. I've created covered calls on the purchase of a stock or after holding a while depending on the stock. Here's the one I have now: MU 1000 shares bought at $8700, sold the $7.50 call (jan12) for $3000. Now, this means my cost is $5700, but I have to let it go for $7500, a 32% return if called. (This was bought in mid 2010, BTW.) On the flip side, a drop of up to 35% over the time will still keep me at break even. The call seemed overpriced when I sold it. Stock is still at $7.20, so I'm close to maximum gain. This whole deal was less risky than just owning one risky stock. I just wrote a post on this trade Micron Covered Call, using today's numbers for those actually looking to understand this as new position. (The article was updated after the expiration. The trade resulted in a 42% profit after 491 days of holding the position, with the stock called away.) On the other hand, buying calls, lots of them, during the tech bubble was the best and worst thing I did. One set of trades' value increased by a factor of 50, and in a few weeks blew up on me, ended at 'only' triple. I left the bubble much better off than I went in, but the peak was beautiful, I'd give my little toe to have stayed right there. From 99Q2 to 00Q2, net worth was up by 3X our gross salary. Half of that (i.e. 1.5X) was gone after the crash. For many, they left the bubble far far worse than before it started. I purposely set things up so no more than a certain amount was at risk at any given time, knowing a burst would come, just not when. If nothing else, it was a learning experience.",
"title": ""
},
{
"docid": "01bc163dafeb74461141b9a95710d206",
"text": "\"A covered call risks the disparity between the purchase price and the potential forced or \"\"called\"\" sale price less the premium received. So buy a stock for $10.00 believing it will drop you or not rise above $14.00 for a given period of days. You sell a call for a $1.00 agreeing to sell your stock for $14.00 and your wrong...the stock rises and at 14.00 or above during the option period the person who paid you the $1.00 premium gets the stock for a net effective price of $15.00. You have a gain of 5$. Your hypothecated loss is unlimited in that the stock could go to $1mil a share. That loss is an opportunity loss you still had a modest profit in actual $. The naked call is a different beast. you get the 1.00 in commission to sell a stock you don't own but must pay for that right. so lets say you net .75 in commission per share after your sell the option. as long as the stock trades below $14.00 during the period of the option you sold your golden. It rises above the strike price you must now buy that stock at market to fill the order when the counter party choses to exercise the option which results in a REAL loss of 100% of the stocks market price less the .75 a share you made. in the scenarios a 1000 shares that for up $30.00 a share over the strike price make you $5,000 in a covered call and lose you $29,250 in a naked call.Naked calls are speculative. Covered calls are strategic.\"",
"title": ""
},
{
"docid": "95990e2deb47c699cd1bc4ea73f3996b",
"text": "As other uses have pointed out, your example is unusual in that is does not include any time value or volatility value in the quoted premiums, the premiums you quote are only intrinsic values. For well in-the-money options, the intrinsic value will certainly be the vast majority of the premium, but not the sole component. Having said that, the answer would clearly be that the buyer should buy the $40 call at a premium of $10. The reason is that the buyer will pay less for the option and therefore risk less money, or buy more options for the same amount of money. Since the buyer is assuming that the price will rise, the return that will be realised will be the same in gross terms, but higher in relative terms for the buyer of the $40 call. For example, if the underlying price goes to $60, then the buyer of the $40 call would (potentially) double their money when the premium goes from $10 to $20, while the buyer of the $30 call would realise a (potential) 50% profit when the premium goes from $20 to $30. Considering the situation beyond your scenario, things are more difficult if the bet goes wrong. If the underlying prices expires at under $40, then the buyer of the $40 call will be better off in gross terms but may be worse off in relative terms (if it expires above $30). If the underlying price expires between $40 and $50, then the buy of the $30 will be better off in relative term, having lost a smaller percentage of their money.",
"title": ""
},
{
"docid": "2a4af13688937e441ad07c8be39e1109",
"text": "So far the answer is: observe the general direction of the market, using special tools if needed or you have them available (.e.g. Bollinger bands to help you understand the current trend) at the right time per above, do the roll with stop loss in place (meaning roll at a pre-determined max loss), and also a trailing stop loss if the roll works in your favor, to capture the profits on the roll. This trade was a learning experience. I sold the option at $20 thinking I'd get back in later in the day with the further out option at a good price, as the market goes back and forth. The underlying went up and never came back. I finally gritted my teeth and bought the new option at 23.10 (when it would have cost me about 20.20 before), i.e. a miss/loss of $3 on $20. The underlying continued to rise, from that point (hasn't been back), and now the option price is $29. Of course one needs to make sure the Implied Volatility of the option being left and the option going to is good/fair, and if not, either roll further out in time, nearer in time, our up / down the strike prices, to find the right target option. After doing that, one might do the strategy above, i.e. any good trade mgmt type strategy: seek to make a good decision, acknowledge when you were wrong (with stop loss), and act. Or, if you're right, cash in smartly (i.e. trailing stops).",
"title": ""
},
{
"docid": "60c9eac57d227944f7dd9dfc37899a80",
"text": "\"First, to mention one thing - better analysis calls for analyzing a range of outcomes, not just one; assigning a probability on each, and comparing the expected values. Then moderating the choice based on risk tolerance. But now, just look at the outcome or scenario of 3% and time frame of 2 days. Let's assume your investable capital is exactly $1000 (multiply everything by 5 for $5,000, etc.). A. Buy stock: the value goes to 103; your investment goes to $1030; net return is $30, minus let's say $20 commission (you should compare these between brokers; I use one that charges 9.99 plus a trivial government fee). B. Buy an call option at 100 for $0.40 per share, with an expiration 30 days away (December 23). This is a more complicated. To evaluate this, you need to estimate the movement of the value of a 100 call, $0 in and out of the money, 30 days remaining, to the value of a 100 call, $3 in the money, 28 days remaining. That movement will vary based on the volatility of the underlying stock, an advanced topic; but there are techniques to estimate that, which become simple to use after you get the hang of it. At any rate, let's say that the expected movement of the option price in this scenario is from $0.40 to $3.20. Since you bought 2500 share options for $1000, the gain would be 2500 times 2.8 = 7000. C. Buy an call option at 102 for $0.125 per share, with an expiration 30 days away (December 23). To evaluate this, you need to estimate the movement of the value of a 102 call, $2 out of the money, 30 days remaining, to the value of a 102 call, $1 in the money, 28 days remaining. That movement will vary based on the volatility of the underlying stock, an advanced topic; but there are techniques to estimate that, which become simple to use after you get the hang of it. At any rate, let's say that the expected movement of the option price in this scenario is from $0.125 to $ 1.50. Since you bought 8000 share options for $1000, the gain would be 8000 times 1.375 = 11000. D. Same thing but starting with a 98 call. E. Same thing but starting with a 101 call expiring 60 days out. F., ... Etc. - other option choices. Again, getting the numbers right for the above is an advanced topic, one reason why brokerages warn you that options are risky (if you do your math wrong, you can lose. Even doing that math right, with a bad outcome, loses). Anyway you need to \"\"score\"\" as many options as needed to find the optimal point. But back to the first paragraph, you should then run the whole analysis on a 2% gain. Or 5%. Or 5% in 4 days instead of 2 days. Do as many as are fruitful. Assess likelihoods. Then pull the trigger and buy it. Try these techniques in simulation before diving in! Please! One last point, you don't HAVE to understand how to evaluate projected option price movements if you have software that does that for you. I'll punt on that process, except to mention it. Get the general idea? Edit P.S. I forgot to mention that brokers need love for handling Options too. Check those commission rates in your analysis as well.\"",
"title": ""
},
{
"docid": "3738d4730492b2c16c3e0de5fa4b797b",
"text": "You have to look at the real price of the share to calculate the value of the spread. 42$ at the start, 46$ at the end. Think of it this way: When price was 42$ the call 45$ was out of the money, worth 100$ of time value only=100 the call 40$ was in the money and worth 200$ of intrinsic + 100 time value=300 the difference was 200$ Now that price is 46$ the call 45$ is worth 100$ in the money, real or intrinsic value the call 40$ is worth 600$ in the money, real or intrinsic value the difference is 500$ NOTE: 1. Commission fees are not included. 2. Time value of 100$ on both calls when price is 42$ is incorrect and for teaching purpose only.",
"title": ""
},
{
"docid": "ceee56ce06dd928fa024bac82149b0aa",
"text": "\"EDIT quid keenly identified the 1:7 reverse split In May 2017. In a 1:7 reverse split, your shares are worth 7 times as much per share but you have 1/7 the amount of shares. A share worth $3.78 now was worth (all else being equal) $0.54 a month ago. So a call with a $2.50 strike a month ago was well out-of-the-money, and would now be the equivalent of a call with a $17.50 strike. A $17.50 call with a $3.78 underlying (or a $2.50 call with a $0.54 underlying) would reasonably be worth only 5 cents. So I now suspect that the quote is a stale quote that existed pre-split and hasn't been adjusted by the provider. OLD ANSWER I can find no valid reason why those calls would be so cheap. The stock price has been trending down from its onset in 2000, so either no one expects it to be above $2.50 in a month or it's so illiquid that there's not any real data to evaluate the options. They did pay some massive (30%) dividends in 2010 and 2012, they've been hemorrhaging cash for the past 4 years at least, and I have found at least on \"\"strong sell\"\" rating, so there's not much to be optimistic about. NASDAQ does not list any options for the stock, so it must be an OTC trade. With an ask size of 10 you could buy calls on 1,000 shares for $0.05, so if you can afford to lose $50 and want to take a flyer you can give it a shot, but I suspect it's not a valid quote and is something that's been manufactured by the option broker.\"",
"title": ""
},
{
"docid": "b91c2a5e1ef4d44ef284683e67465e84",
"text": "Yes, as long as you write a call against your stock with a strike price greater than or equal to the previous day's closing price, with 30 or more days till experation there will be no effect on the holding period of your stock. Like you mentioned, unqualified covered calls suspend the holding period of your stock. For example you sell a deep in the money call (sometimes called the last write) on a stock you have held for 5 years, the covered call is classified as unqualified, the holding period is suspened and the gain or loss on the stock will be treated as short-term. Selling out of the money calls or trading in an IRA account keeps things simple. The details below have been summarized from an article I found at investorsguide.com. The article also talks about the implications of rolling a call forward and tax situations where it may be advantageous to write unqualified covered calls (basically when you have a large deferred long term loss). http://www.investorguide.com/article/12618/qualified-covered-calls-special-rules-wo/ Two criterion must be met for a covered call to be considered a qualified covered call (QCC). 1) days to expiration must be greater than 30 2) strike price must be greater than or equal to the first available in the money strike price below the previous day's closing price for a particular stock. Additionally, if the previous day's closing price is $25 or less, the strike price of the call being sold must be greater than 85% of yesterday's closing price. 2a) If the previous day's closing price is greater than 60.01 and less than or equal to $150, days to experation is between 60-90, as long as the strike price of the call is greater than 85% of the previous days close and less than 10 points in the money, you can write a covered call two strikes in the money 2c) If the previous day's closing price is greater than $150 and days till expiration is greater than 90, you can write a covered call two strikes in the money.",
"title": ""
},
{
"docid": "c5f9b74392d8746fd27848370364e09b",
"text": "This is a Short Diagonal Calender Put Spread Generally, you're writing that long dated one at the money, and buying the short dated one out of the money. The maximum amount that can be made is if the stock breaks out strongly to the upside, and you keep the upfront credit minus whatever small amount it took to buy the April puts back. You can also make money if it breaks strongly to the downside, but only if the credit when you opened your positions was more than $10. Example: Now say the stock falls to $500 by the time of that march expiration. You'd make $90/share on the march put, and lose $100/share on the April put (or a little more; but that deep in the money, there won't be much premium on it). That's a loss of $10/share, or -$1000. So: I make a point of pointing this out because in that article I linked to the fact that your upfront credit needs to be greater than the strike spread in order to profit to the downside is not clearly mentioned.",
"title": ""
},
{
"docid": "5d259edeee629b44ab345346a0717829",
"text": "\"When you buy a put option, you're buying the right to sell stock at the \"\"strike\"\" price. To understand why you have to pay separately for that, consider the other side of the transaction. If I agree to trade stock for money at above market rates, I need to make up the difference somewhere or face bankruptcy. That risk of loss is what the option price is about. You might assume that means the market expects the price of AMD to fall to 8.01 from it's current price of 8.06 by the option expiration date. But that would also mean call options below the market price is worthless. But that's not quite true; people who price options need to factor in volatility, since things change with time. The price MIGHT fall, and traders need to account for that risk. So 1.99 roughly represents the probability of AMD rising to 10. There's probably some technical analysis one can do to the chain, but I don't see any abnormality of AMD here.\"",
"title": ""
},
{
"docid": "d3de9e9bca0a07a1d3001ebb0cf33d1a",
"text": "Specific stock advice isn't permitted on these boards. I'm discussing the process of a call spread with the Apple Jan 13 calls as an example. In effect, you have $10 to 'bet.' Each bet you'd construct offers a different return (odds). For example, If you bought the $750 call at $37.25, you'd need to look to find what strike has a bid of $27 or higher. The $790 is bid $27.75. So this particular spread is a 4 to 1 bet the stock will close in January over $790, with a $760 break even. You can pull the number from Yahoo to a spreadsheet to make your own chart of spread costs, but I'll give one more example. You think it will go over $850, and that strike is now ask $18.85. The highest strike currently listed is $930, and it's bid $10.35. So this spread cost is $850, and a close over $930 returns $8000 or over 9 to 1. Again, this is not advice, just an analysis of how spreads work. Note, any anomalies in the pricing above is the effect of a particular strike having no trades today, not every strike is active so 'last trade' can be days old. Note: My answer adds to AlexR's response in that once you used the word bet and showed a desire to make a risky move, options are the answer. You acknowledged you understand the basic concept, but given the contract size of 100 shares, these suggestions are ways to bet under your $1000 limit and profit from the gain in the underlying stock you hope to see.",
"title": ""
},
{
"docid": "4650cb6a9fd26ed2e990dcb3e26b60da",
"text": "\"There's no free lunch. Here are some positions that should be economically equivalent (same risk and reward) in a theoretically-pure universe with no regulations or transaction costs: You're proposing to buy the call. If you look at the equivalent, stock plus protective put, you can quickly see the \"\"catch\"\"; the protective put is expensive. That same expense is embedded in the call option. See put-call parity on Wikipedia for more: http://en.wikipedia.org/wiki/Put%E2%80%93call_parity You could easily pay 10% a year or more for the protection, which could easily eat up most of your returns, if you consider that average returns on a stock index might be about 10% (nominal, not real). Another way to look at it is that buying the long call and selling a put, which is a synthetic long position in the stock, would give you the put premium. So by not selling the put, you should be worse off than owning the stock - worse than the synthetic long - by about the value of the put premium. Or yet another way to look at it is that you're repeatedly paying time value on the long call option as you roll it. In practical world instead of theory world, I think you'd probably get a noticeable hit to returns just from bid-ask and commissions, even without the cost of the protection. Options cost more. Digressing a bit, some practical complications of equivalency between different combinations of options and underlying are: Anyway, roughly speaking, any position without the \"\"downside risk\"\" is going to have an annual loss built in due to the cost of the protection. Occasionally the options market can do something weird due to supply/demand or liquidity issues but mostly the parity relationships hold, or hold closely enough that you can't profit once expenses are considered. Update: one note, I'm talking about \"\"vanilla\"\" options as traded in the US here, I guess there are some somewhat different products elsewhere; I'm not sure exactly which derivatives you mean. All derivatives have a cost though or nobody would take the other side of the trade.\"",
"title": ""
},
{
"docid": "2fec6683380e14b8eb39ce4db93a54db",
"text": "A specific strategy to make money on a potentially moderately decreasing stock price on a dividend paying stock is to write covered calls. There is a category on Money.SE about covered call writing, but in summary, a covered call is a contract to sell the shares at a set price within a defined time range; you gain a premium (called the time value) which, when I've done it, can be up to an additional 1%-3% return on the position. With this strategy you're collecting dividends and come out with the best return if the stock price stays in the middle: if the price does not shoot up high enough that your option is called, you still own the stock and made extra return; if the price drops moderately, you may still be positive.",
"title": ""
},
{
"docid": "86c8b880726a6d9d088b0f3a56861f70",
"text": "\"Simple answer: Yes A better question to ask might be \"\"Should I invest all my savings to buy 4 shares of a single stock.\"\" My answer to that would be \"\"probably not\"\". If this is your first venture into the world of owning publicly traded companies, then you're better off starting with some sort of mutual fund or ETF. This will start your portfolio with some amount of diversification so you don't have all your eggs in one basket. If you really want to get into the world of picking individual stocks, a good rule of thumb to follow is to invest $1 in some sort of indexed fund for every $1 you invest in an individual stock. This gives you some diversification while still enabling you to scratch that itch of owning a part of Apple or whatever other company you think is going in the right direction.\"",
"title": ""
}
] |
fiqa
|
0eec793fc6dc1c33ba5cd0615cc636f7
|
What is the maximum number of options I can buy if the price is $0.01?
|
[
{
"docid": "226e5ba7613ad60dd0eb804dd6301e61",
"text": "Options trading at $.01 have the same position limits as other options. Self regulatory organizations set the position limits for options which can be 250,000 contracts on one side of the book, as an example. Weeklies that are expiring soon have lots of liquidity while trading at $0.01, you can see this in Bank of America stock if interested",
"title": ""
}
] |
[
{
"docid": "5647ff51faca34bb74459ad4f3d56779",
"text": "\"fennec has a very good answer but i feel it provides too much information. So i'll just try to explain what that sentence says. Put option is the right to sell a stock. \"\"16 puts on Cisco at 71 cents\"\", means John comes to Jim and says, i'll give you 71 cent now, if you allow me to sell one share of Cisco to you at $16 at some point in the future ( on expiration date). NYT quote says 1000 puts that means 1000 contracts - he bought a right to sell 100,000 shares of Cisco on some day at $16/share. Call option - same idea: right to buy a stock.\"",
"title": ""
},
{
"docid": "9423efe84c7fc3bad04c93871b20eaf2",
"text": "\"I place a trade, a limit order on a thinly traded stock. I want to buy 1000 shares at $10. The current price is $10.50. Someone places a market order for 500 shares. Another trader has a limit order for $10.10 for 400 shares. His order fills, and I get 100 at my price. I wait another day to see if I get any more shares. This is just an example of how it can work. I can place my order as \"\"all or none\"\" if I wish to avoid this.\"",
"title": ""
},
{
"docid": "0572d6c64b6fb716f3f5bc637d43c6c4",
"text": "If you have $10000 and wish to buy 1000 shares of a $10 stock, you risk borrowing on margin if you go over a bit. For some people, that's a non-issue. Some folk with an account worth say, $250K don't mind going over now and then or even let the margin account run $100K on a regular basis. But your question is about market orders. A limit order above the market price will fast-fill at the market anyway. When I buy a stock, it's longer term usually. A dime on a $30 share price won't affect my buy decision, so market is ok for me.",
"title": ""
},
{
"docid": "593f6298656a2b96117729003a4e30dd",
"text": "You bought 1 share of Google at $67.05 while it has a current trading price of $1204.11. Now, if you bought a widget for under $70 and it currently sells for over $1200 that is quite the increase, no? Be careful of what prices you enter into a portfolio tool as some people may be able to use options to have a strike price different than the current trading price by a sizable difference. Take the gain of $1122.06 on an initial cost of $82.05 for seeing where the 1367% is coming. User error on the portfolio will lead to misleading statistics I think as you meant to put in something else, right?",
"title": ""
},
{
"docid": "ef30a432d7454e3ff4e13d625cde1ce5",
"text": "\"As @ApplePie pointed out in their answer, at any given time there is a finite amount of stock available in a company. One subtlety you may be missing is that there is always a price associated with an offer to buy shares. That is, you don't put in an order simply to buy 1 share of ABC, you put in an order to buy 1 share of ABC for $10. If no one is willing to sell a share of ABC for $10, then your order will go unfilled. This happens millions of times a day as traders try to figure the cheapest price they can get for a stock. Practically speaking, there is always a price at which people are willing to sell their shares. You can put in a market order for 1 share of ABC, which says essentially \"\"I want one share of ABC, and I will pay whatever the market deems to be the price\"\". Your broker will find you 1 share, but you may be very unhappy about the price you have to pay! While it's very rare for a market to have nobody willing to sell at any price, it occasionally happens that no one is willing to buy at any price. This causes a market crash, as in the 2007-2008 financial crisis, when suddenly everyone became very suspicious of how much debt the major banks actually held, and for a few days, very few traders were willing to buy bank stocks at any price.\"",
"title": ""
},
{
"docid": "1e9cebde4465fbb20cb434e8b71958d4",
"text": "First, a margin account is required to trade options. If you buy a put, you have the right to deliver 100 shares at a fixed price, 50 can be yours, 50, you'll buy at the market. If you sell a put, you are obligated to buy the shares if put to you. All options are for 100 shares, I am unaware of any partial contract for fewer shares. Not sure what you mean by leveraging the position, can you spell it out more clearly?",
"title": ""
},
{
"docid": "5771743ff63660295d09ab422941f4d1",
"text": "Let's consider that transaction cost is 0(zero) for calculation. In the scenario you have stated, maximum profit that could be made is 55$, however risk is unlimited. Hedging can also be used to limit your losses, let's consider this scenario. Stock ABC trading @ 100$, I'll buy the stock ABC @ 100$ and buy a put option of ABC @ strike price 90$ for a premium of 5$ with an expiration date of 1 month. Possible outcomes I end up in a loss in 3 out of 4 scenarios, however my loss is limited to 15$, whereas profit is unlimited.",
"title": ""
},
{
"docid": "b6a62a2fce4ea7b69f9998722e5496b0",
"text": "\"I think for this a picture is worth a thousand words. This is a \"\"depth chart\"\" that I pulled from google images, specifically because it doesn't name any security. On the left you have all of the \"\"bids\"\" to buy this security, on the right you have the \"\"asks\"\" to sell the security. In the middle you have the bid/ask spread, this is the space between the highest bid and the lowest ask. As you can see you are free to place you order to the market to buy for 232, and someone else is free to place their order to the market to sell for 234. When the bid and the ask match there's a transaction for the maximum number of available shares. Alternatively, someone can place a market order to buy or sell and they'll just take the current market price. Retail investors don't really get access to this kind of chart from their brokers because for the most part the information isn't terribly relevant at the retail level.\"",
"title": ""
},
{
"docid": "5723b51fad1696ea8ec96f47b9e7c810",
"text": "A limit order is simply an order to buy at a maximum price or sell at a minimum price. For example, if the price is $100 and you want to sell if the price rises to $110, then you can simply put a limit order to sell at $110. The order will be placed in the market and when the price reaches $110 your order will be executed. If the price gaps at the open to $111, then you would end up selling for $111. In other words you will get a minimum of $110 per share. A stop limit order is where you put a stop loss order, which when it gets triggered, will place a limit order in the market for you. For example, you want to limit your losses by placing a stop loss order if the price drops to $90. If you chose a market order with your stop loss as soon as the price hits $90 your stop loss would be triggered and the shares would sell at the next available price, usually at $90, but could be less if the market gaps down past $90. If on the other hand you placed a limit order at $89.50 with your stop loss, when the stop loss order gets triggered at $90 your limit order will be placed into the market to sell at $89.50. So you would get a minimum of $89.50 per share, however, if the market gaps down below $89.50 your order will be placed onto the market but it won't sell, unless the price goes back to or above $89.50. Hope this helps.",
"title": ""
},
{
"docid": "e404451f53a6f064448e7dc1079355d0",
"text": "It really centers on the probability of your position falling to $0 and your level of comfort if that were to happen. There are a plethora of situations that could cause an option contract to become worthless. The application of leverage to a position also increases the risk. Zero risk would be an FDIC insured savings account, high risk would be buying options on margin, and there's a very wide grey area in between. I agree that the whole process of assigning a risk level is dubious at best. As you say, it seems using past data could help assign a risk level, look to beta values if you believe in that. The problem here is the main disclaimer in use is that past performance cannot be relied upon for future gains. As an aside, if the US government files bankruptcy you'll have a whole host of more immediate problems than the value of your t-bills. At that point dollars would have been a risky investment.",
"title": ""
},
{
"docid": "9d963b9d333cb1ac5e02fe08018a6873",
"text": "\"I am not familiar with this broker, but I believe this is what is going on: When entering combination orders (in this case the purchase of stocks and the writing of a call), it does not make sense to set a limit price on the two \"\"legs\"\" of the order separately. In that case it may be possible that one order gets executed, but the other not, for example. Instead you can specify the total amount you are willing to pay (net debit) or receive (net credit) per item. For this particular choice of a \"\"buy and write\"\" strategy, a net credit does not make sense as JoeTaxpayer has explained. Hence if you would choose this option, the order would never get executed. For some combinations of options it does make sense however. It is perhaps also good to see where the max gain numbers come from. In the first case, the gain would be maximal if the stock rises to the strike of the call or higher. In that case you would be payed out $2,50 * 100 = $250, but you have paid $1,41*100 for the combination, hence this leaves a profit of $109 (disregarding transaction fees). In the other case you would have been paid $1,41 for the position. Hence in that case the total profit would be ($1,41+$2,50)*100 = $391. But as said, such an order would not be executed. By the way, note that in your screenshot the bid is at 0, so writing a call would not earn you anything at all.\"",
"title": ""
},
{
"docid": "62af35c4ecb114423187a3a55c8bba0d",
"text": "I normally just do a buy limit at the price I want to buy it at. Then it executes when it's that price or lower, but there's still a chance you might purchase some shares at a larger price. But since we're small fry and using brokerages, there's not much we can do about it.",
"title": ""
},
{
"docid": "ecf1aeea53d53095dbeae6a76870d590",
"text": "\"In real life, you'd see spreads like AMZN 04/13/2017 910.00 C 4.90 +1.67 Bid: 4.75 Ask: 5.20 (with AMZN @ $897 right now) and the fill you'd get on the buy side would be closer to the ask. i.e. I'd offer $5.00 and hope that it filled. Filling a $4 bid when ask is $8 isn't likely unless the stock blipped down enough for your price to fill. Options are a lot like day trading, in most cases. Most members here will agree that day trading isn't investing, it's gambling. Long term, the S&P has been up 10%/yr. But any given day, the noise of the market is a 50/50 zero sum game. Most long term stock 'investors' do well. Those who get in and out, not so much. There are aspects to options that are appealing. As you've seen, the return can be high, even IRL, but your loss can be 100% as well. Let me share with you a blurred line - I wrote \"\"Betting on Apple at 9 to 2\"\" in which I described an option strategy that ran 2 years and would return $10,000 on a $2200 bet. A similar bet that ended a year ago yielded a 100% loss. I don't post there very often, as I keep that trading to a minimum. There are warnings for those who want to start trading options -\"",
"title": ""
},
{
"docid": "9dd61f4b88dc34661b578a4696c6a5b5",
"text": "\"After learning about things that happened in the \"\"flash crash\"\" I always use limit orders. In an extremely rare instance if you place a market order when there is a some glitch, for example some large trader adds a zero at the end of their volume, you could get an awful price. If I want to buy at the market price, I just set the limit about 1% above the market price. If I want to sell, I set the limit 1% below the market price. I should point out that your trade is not executed at the limit price. If your limit price on a buy order is higher than the lowest offer, you still get filled at the lowest offer. If before your order is submitted someone fills all offers up to your limit price, you will get your limit price. If someone, perhaps by accident, fills all orders up to twice your limit price, you won't end up making the purchase. I have executed many purchases this way and never been filled at my limit price.\"",
"title": ""
},
{
"docid": "1343c7ed17d2c9d9ea47022e828c951c",
"text": "Not sure of the question here if by IPO(initial public offering) you mean private company then: A company can invest its excess money into other companies, to earn returns. Also a company that is private can attract private investment if the sector is doing well on publicly traded markets. Finally a company can diversify away risk, by holding shares of a company that would benefit in the event of a disruption in their own industry.",
"title": ""
}
] |
fiqa
|
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